Guy le Page

Guy’s hearing rumblings coming out of the Cigar Social Climate Change sceptic committee again and he assures us it had nothing to do with the monthly Curry and Cognac night. (Although the Jean Fillioux 50-year paired spectacularly with the nasi biryani.)

No, these rumblings are of the “yet another uranium boom” type. That’s on top of the recent uranium boom which has seen prices hold up above US$74/lb.

But still the US remains heavily reliant on Russian enriched uranium. In fact, about a third of the USA’s enriched product comes from Russia. Le Page says he has heard “noises” that the White House is keen to end that arrangement.

What he needs right now is a good value explorer that gives exposure to near-term production. Maybe one like Aura Energy (ASX:AEE), with its 85% owned Tigris Project situated in northern Mauritania in West Africa. It’s currently trading at a very approachable 28c with a MC of $161m.

A March 2023 Definitive Feasibility Study outlined a 2Mtpa operation over a 17-year mine life with the capacity to scale to 3.5Mlb per annum.

Total capital cost? US$177 million.

And remember, something in Le Page’s gut is telling him the current US$74/lb is potentially just a takeoff point. Better pass the Alvear Pedro Ximénez just to make sure it’s not the biryani talking…

One caveat though. Well, two – it’s in Mauritania, and there are 87 million options exercisable at 5.2 cents which fall due in June next year.

More on that here…

James Gerrish

Portfolio manager, Market Matters

The ‘Christmas Rally’ is “off and running”, Gerrish says, “with another test of 7500 (for the ASX200) a distinct possibility over the coming weeks.”

Gerrish says “cracks were already appearing in the economy” before borrowers had to deal with Tuesday’s hike, and there won’t be another meaningful RBA meeting until at least February.

With economic contraction comes rate cuts, and Gerrish and co are positioning for 2024 with growth/rate sensitive names. In terms of standout sectors, they’re bullish on Tech and Real Estate, figure Healthcare carries good risk/reward outcomes, and Neutral on Consumer Discretionary, Commercial Services, and Consumer Staples.

Let’s drill down into those bullish sectors then.

Goodman Group (ASX:GMG – $22.33, $42bn MC): Goodman’s into industrial property investment, funds management, property development and property services. Its portfolio includes business parks, industrial estates, office parks and warehouse/distribution centres.

James says this is a quality business – they “just bought back into it”, adding it to their Active Growth Portfolio.

Why? To “increase our real estate exposure in anticipation of an eventual decline in bond yields”.

“It’s a top-quality stock pivoting into an attractive new area with low gearing and a huge war chest to buy assets if/when they become attractive over coming years.”

Centuria Capital (ASX:CNI – $1.24, $1bn MC): The “classic high-leverage, high risk play on interest rates,” James says. “And it clearly suffered as they’ve risen over the last two years.”

“We like CNI as an aggressive play on bond yields, especially as it is forecast to yield ~9% over the coming year.”

MM holds hold CNI in its Active Income and Emerging Companies Portfolios.

Dexus Group (ASX:DXS – $6.92, $7.5bn MC): Gerrish reckons DXS, with a $61bn real estate and infrastructure portfolio, offers that fantastically meme-worthy attribute – “deep value”.

“It arguably occupies the most unloved seat in the sector,” he says. “Its strong bounce over the last fortnight ($6.31 – $6.99) illustrates what it’s capable of if we see some love return to the sector.

“We like DXS as a recovery play on real estate, especially as it is forecast to yield ~7.8% over the coming year. We hold DXS in our Active Income Portfolio.”

APA Group (ASX:APA – $8.38, $10.6bn MC): Not in the real-estate sector, this infrastructure company (energy) has still been weighed down by some stock-specific factors and rising bond yields have also been a major impediment. Gerrish says MM feels “it screens well around $8.”

He likes it as “a defensive bond-like play into 2024”. It’s forecast to yield ~6.8% over the coming year and as such, gets a guernsey in MM’s Active Income Portfolio.

And one for the true believers – South32 (ASX:S32 – $3.11, $14.5bn MC): This is wait and see play. S32 fell another -4.3% on Wednesday, posting fresh two-year lows in the process. The diversified miner’s 1Q production numbers disappointed last month, and the stock’s drifted lower ever since.

“It will eventually be a great turnaround story, but it still feels too early,” Gerrish says. “And it’s not particularly cheap compared to its peers trading on an Est P/E of 11.2x for 2024 when BHP on a slightly lower multiple.”

But it’s hard to ignore a ~43% decline forever. MM is neutral towards S32 around the $3.10 area but Gerrish says “a further foray under $3 wouldn’t surprise”.

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.