'So I tells this guy, look, there's no way that's gonna work, you gotta LIFT the thing first, THEN you get ready to apply the - no, wait, this is the good bit, the fire can wait - I tell this guy. Hang on, where was I, oh yeah - so, first right... and get this, while I'm tellin' him, right, she's over with this MEAN look on her face...' Picture: Getty Images
Experts
Enough about uranium stocks. We get it.
Besides, this month’s commodity du jour is copper – finally. After what seems years of attempted liftoffs, the spark has finally caught and it’s come as no surprise at all to see China’s involvement.
News out of the Middle Kingdom, the biggest copper consumer of the electrification metal, is that operators have been struggling to secure enough copper concentrates to keep their smelters full.
Dr Copper, the global bellwether, starts thinking about a Maldives holiday when the price gets above $US4/lb. Midweek it hit $US4.12/lb and Goldman Sachs has it nudging $US5.45/lb by the end of the first quarter next year.
If you were paying attention a month ago, you’d be raising a glass or two to Garimpeiro for highlighting 29Metals (up by 80% to 50.5c since) and Caravel Minerals (up 25% to 19.5c since).
This week he’s going for some proper deep value with a little West African play, Noronex (ASX:NRX). Share price – 1.1c (midweek); market cap – $5.1 million.
A tiddler, but swimming in some deep waters. Well, the Kalahari Copper Belt, actually, which runs from northern Botswana down in to central Namibia. The Botswana side is home to Sandfire’s 50,000tpa Motheo copper mine and China giant’s MMG’s 60,000tpa Khoemacau copper mine.
Noronex is on the Namibia side but eyeing a 300km strike length of the same prospective rocks. Elephant country indeed…
And just in case copper again fails to fire, there’s a Namibian – you guessed it – uranium leg to the Noronex story.
“If you are in the uranium exploration hunt, Namibia is as good as it gets,” Garimpeiro points out. Noronex will be sharing a region with some of the best-known ASX names in the space – Bannerman (ASX:BMN), Paladin (ASX:PDN) and Deep Yellow (ASX:DYL).
It’s just struck a deal to earn up to an 80% interest in claims that sit about 3km north of Bannerman’s 207 million pound Etango project, subject to due diligence.
Drill targets have been identified and the company is now waiting on the issue of an environmental clearance certificate. If that goes well, it will be working claims with “similar host rocks and geology to Etango”.
Electrification play with a clean energy hedge? As they say in the classics, timing is everything.
Portfolio manager, Spheria Asset Management
Burns isn’t buying into the hype of AI and data centre stocks.
He compared it to recent bubbles in the Australian market over the past decade. Think vocational education, BNPL in 2021, and more recently lithium stocks.
That’s not to say he isn’t an AI fan.
“I think it’s real, there’s real change for many businesses,” he told attendees at the 2024 Pinnacle Insights Series event. “But the capitalisation in many areas and particularly in data centres in Australia, we think is massively overhyped.”
Burns prefers the physical stuff. It’s helped Spheria’s Australian Microcap Fund returned 14.1% per annum since inception in 2016, after all.
He gave attendees two of its best stock picks, starting with the very un-AI Harvey Norman Holdings (ASX:HVN – $4.99, $6.2bn MC).
“Going back 12 months, it was all about sticky inflation and the mortgage cliff, and retail was on the nose. Yes, there has been pressure on consumers, but many retail stocks, including Harvey Norman, have been sold off very, very aggressively.”
Burns said Harvey Norman has strong free cash flow generation, a $4 billion property portfolio, and is trading on a very attractive valuation of only around 6x EBIT.
“Last year the stock went down to about $3.50, which gave a market capitalisation of about $5 billion. It owns $4 billion of property, tangible property in Australia and internationally, so we’re paying a billion dollars for the retailer.
“And it was making about $300 million of EBIT, so if you sold property off, you’re paying about three times earnings for that.”
“…It’s up materially from the bottom. So that’s the process where you can look through a psychological downturn and see where real value is.”
He also thinks Supply Network (ASX:SNL – $18.40, $772m MC) “is one of the best performing small caps in Australia over the last 10 years, and almost no one has heard of it”.
SNL supplies truck and bus parts to independent mechanics who then fix trucks.
“It doesn’t sound very glamorous, but it’s a great business,” Burns said.
“It has a passionate management team, and it remains clearly undiscovered.”
“The return metrics are phenomenal. There’s only been some nominal acquisitions in 10 to 15 years, and the return on capital has grown from the mid 20% range to up to 50% today.”
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.
