Barry Fitzgerald

Gold. It’s never been more expensive to buy, at least in Aussie Dollars.

Yesterday it was sitting at an all-time AUD high of $3155 oz. That’s up 6.26% for the past month, and 22.63% for the past 12 months. Put it down to a combination of geopolitics and a sadly flagging AUD.

It all makes 1 million ounces bought for the knockdown price of $8 million look pretty good, which is exactly what 2021 IPO Larvotto Resources (ASX:LRV) is now sitting on, just shy of its second anniversary since listing.

It’s just acquired the Hillgrove gold-antimony mine near Armidale in NSW. That’s 90,000 tonnes of antimony on the side, btw, nothing to be sneezed at if you’re familiar with the critical metal’s uses in fire retardants, batteries, plastics, and growing high tech applications.

Garimpeiro smells a bargain. Both for LRV, which acquired a resource – and processing infrastructure – that Red River had spent some $200m shoring up before it was derailed by a “fall of ground” at its main undertaking, the Thalanga zinc-copper-lead operation Northern Queensland.

And for Larvotto shareholders. The company was trading mid-week at 10.5c a share for a market cap of $23 million – after shares associated with the acquisition are taken into account. That’s ‘barely moved’ on the acquisition of an additional 1 million ounces of the hottest metal right now.

In fact, Garimpeiro suggests that kind of disinterest renders Larvotto’s other three exploration assets – copper/gold/cobalt at Mt Isa, some New Zealand gold, and gold/nickel/PGEs in WA – as basically “free” projects. All are the subject of drilling programs, with assays pending.

Of course, there’s a bit of work to be done at the former Hillgrove mine. LRV needs a case to bring it back in to full production, but it might not be too difficult to convince the button pushers when what exploration/resource extension work Red River was able to do produced results such as 4.5m at 29.5g/t gold (and 0.3% antimony).

As Fitz notes, “super high grade gold with increasing depths can be a feature of gold-antimony systems”.

LRV is following up six priority exploration targets Red River was planning to get cracking on.

Garimpeiro’s verdict? “Set for a re-rating.”

Johannes Faul
Director of equity research, Morningstar

It’s that time of the month when we turn to Morningstar for its Best Stock Ideas list. It’s all about highlighting companies which are ideally positioned at attractive discounts vs the equity team’s assessed fair values.

Sounds sensible enough to us. So where are the “attractive discounts” on the ASX this month?

“ASX retailers,” Faul told Stockhead. Not so great the past 12 months or so, due to rising costs and interest rates. But that’s knocked them down to reasonable entry points as those cost pressures look like easing.

“Steep declines in global food commodity prices bode well for fast-food restaurants,” Faul says. “We also expect e-commerce growth to start to gain traction in fiscal 2024.”

Fast-food and e-commerce? That makes for a couple of standout picks. Namely, these:

Domino’s Pizza Enterprises (ASX:DMP): Clearly ticking the “not great 2023” box, Domino’s had a March Quarter and H1 entire to forget.

High cost inflation forced management to increase their pricing, but as Faul notes, “the increase was such that demand dropped off and clipped their earnings”.

However, if it can manage higher costs from wages and ingredients, and continue to roll out stores, Faul is confident DMP will “continue to be a growth company”.

At the same time, obviously, Johannes says Domino’s wants to grow the store network ‘quite dramatically’ over the next 10 years. A key part of that success is CEO Dom Meij’s ability to ensure franchises remain lucrative for owners and still deliver the top-lines sales growth that the company earns royalties from.

“DMP’s fair value is $68 per share, which basically means there’s a lot of upside, in our opinion, at its current share prices,” Faul says.

“We believe the market is overly discounting Domino’s significant long-term growth potential. This is a high-quality company with long-term growth outlook and we still see a bright future and those shares are undervalued at the moment.”

Kogan (ASX:KGN): Kogan is another under-appreciated stock, according to Faul.

“Basically what we’re expecting to happen with Kogan is for their sales growth to reignite.

“They went through a period of extraordinary sales growth during the lockdowns and that unwound following the reopening of the economy. And now, we’re still seeing their sales declining year-on-year, but that momentum is slowly turning around.

“So, what we’ve seen in the last quarter is that their sales growth, while still negative, is not as bad as it was, if you like.”

Johannes says Morningstar believe that KGN can grow sales coming into fiscal 2024 “and that will be the catalyst for their EBIT margins, for the profit margins to come back to where they were before COVID”.

“Revenue is also supported by growing Kogan First subscriptions platform.”

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

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