SUNDAY ROAST: The stocks that lit a fire under our experts this week
“Cause for some genuine excitement” are five words you rarely hear from Garimpeiro, a near 40-year veteran at covering the resources game.
He’s happy to roll them out for North Queensland explorer Sunshine Metals (ASX:SHN) though, after a recent eye-opening proof-of-concept exploration hit at its Liontown project near Charters Tower back of 17m at 22.1g/t gold from 67m.
It came off the back of some impressive detective work in a particular setting where previous explorers had focussed on zinc-lead mineralisation.
Mining at Liontown actually started out in the early 1900s as a gold operation producing some 20m ounces, before WWII saw the focus shift to high-grade zinc and lead.
The target has always been a massive volcanogenic massive sulphide (VMS) deposit, where various metals were dumped by ancient volcanic vents on the then seabed into different zones. Gold and copper typically concentrate in the central or “feeder” zone.
Sunshine boss Damien Keys told Garimpeiro that “by diving in to Liontown’s geochemistry, the company had got a fix on where the hottest fluids in the system had come through”. And the rest is… well, eureka. Or, as they call it in the business, “bonanza gold”.
“When the first hole came back with 17m grading 22g.1/t gold I would be lying if I said I wasn’t pretty pumped,’’ Keys said. “We think previous explorers missed an opportunity which is fantastic for us.’’
So how much potential “opportunity” is Keys talking about here?
“We have begun mapping out where the structure is heading and it looks like we can make a case to have at least two more of these zones we think are entering the system,’’ he said.
Sunshine was pretty pleased as it was when it picked up the Liontown ground earlier this year in a $3.25 million deal with the administrators of Red River. That first big hit propelled it from a $12m market cap (1.1c) to settle around $30m (2.5c) last Thursday.
Keys reckons that’s just getting to what should be considered the company’s base value.
“We see a really bright future given the value proposition we have got in the tenements with a nice solid resource base, plenty of growth potential and obvious line of sight to where we are going to next to grow this resource,’’ he said.
“I am pretty excited for 2024. It will be a big year for us I think.’’
Academies Australasia Group (ASX:AKG – 29.5c, MC $39m): This Higher Education and VET provider generates most of its revenue from international students, with 17 licensed colleges throughout Australia, and one in Singapore.
Taylor Collison has a Speculative Buy recommendation out on it, with a 40c price target in 12 months, noting that continued return of international students to Australia will provide educational providers like AKG with a major tailwind.
“We believe AKG is in a strong position to capture the continued influx of international students given its compelling course range, strong agent relationships; and a high-quality product,” it said.
A newly leased Goulburn Street premises, means greater student capacity and course offering.
“The majority of courses to be delivered at Goulburn Street are high margin, and given AKG’s relatively fixed cost base, should generate operating leverage as enrolment numbers grow,” said the broker.
It believes AKG has built a valuable position which is not reflected in its current market capitalisation.
“To realise this embedded value, it is conceivable that AKG enters into a part sale and joint venture agreement with a global sector participant. Any transaction would likely occur at a material premium to that ascribed by AKG’s current equity value,” said Taylor.
MaxiPARTS (ASX:MXI – $2.36, $112.5m MC): Taylor Collison has slapped an Outperform rating on this supplier of aftermarket truck and trailer parts, with a $3.40 price target versus a $2.50 current price.
Along with parts interpreting and procurement, MXI runs a fully integrated distribution network that Taylor Collison notes allows it to hold stock close to its customers.
It started trading on the ASX in May 2013, but has been operating for more than 30 years, making several strategic acquisitions and expanding its footprint across Australia.
In June, it snapped up Förch Australia, a wholesaler of automotive supplies and workshop consumables. And in November, it acquired IP, which supplies general and heavy-duty truck and trailer parts to the mining and transport industry across WA.
Data shows that the commercial vehicle aftermarket in Australia is worth more than $2bn per annum.
According to Taylor, MXI trades at an appealing 10.1x for FY25 EPS, which is a 47% discount to its nearest listed competitor.
Further, Taylor Collison believes that MXI could be a candidate for a buyback in the next 18-24 months if the valuation multiple remains depressed.
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.