THE SUNDAY ROAST: The ASX small caps that lit a fire under Stockhead’s experts this week
It feels like the bottom is in for gold, but we probably need to see a couple more sets of US inflation figures heading in the right direction, just to be sure.
Regardless, there’s definitely a yellowish tinge to our experts’ tips this week.
President and CEO of Sprott US Holdings
The legendary diamond-handed holder doesn’t care – like many Oz investors – that Predictive Discovery (ASX:PDI) mines gold in West Africa.
Two years ago it was 0.7c a share, before bagging a 4.2Moz resource and growing more than 900% to today’s 7c. And it has another 10 rigs now grinding away.
“This 4Moz discovery [is] by all indications going to grow,” Rule says. “It’s been attractive to me for enough time that I have a full allocation. If I didn’t have a full position, I would be on the bid.”
He’s also ridden Bellevue (ASX:BGL) through one of the fastest and highest-grade gold discoveries in the world.
It’s set to enter production from a defined, high grade 3.1Moz resource as soon as the second half 2023. When it does, it will be one of the lowest cost gold mines in Australia, producing at $1,079/oz – i.e. massive profits at a current gold price of ~$2,600/oz.
“Will they be able to bring the mine in on time, and on budget?” Rule says.
“Given the track record of the people involved, my suspicion is the answer is yes. And if it occurs, either the market cap expands substantially, or this thing gets taken over very, very quickly.”
Emerald Resources (ASX:EMR) owns the $120m Okvau gold mine in Cambodia, which opened in 2021. So far it has been a winner, delivering over 100,000oz in FY22.
“I was nervous about their ability to build a mine in a remote, frontier surrounding,” Rule says. “They are now on time, on budget, and well ahead of anticipated capacity.”
The Emerald team are serial developers, Rule says. With more than $100m free cashflow next year from Cambodia, “they will be able to build a 3, 4 or 5 mine company over the next five years.”
Director, RM Corporate Finance
Le Page has an interest in Tribune Resources (ASX:TBR), which has fallen victim to declining gold sentiment as well as a slowdown in production.
But it can “potentially pull something in the realm of 40Koz per annum” from its East Kundana project, and is developing a 100Koz per annum project in the Philippines.
More importantly, from a value perspective, it’s holding around 110,000 ounces of gold bullion. Guy’s done the maths so you don’t have to – based on $2450/oz, that makes TBR worth, right now, about $5 per share.
On Thursday, it was trading at $3.42. So you’re potentially getting in the order of 100-140k per year of gold for… nothing?
“If someone can show me a better value equation in a listed gold stock I will walk to China,” Le Page promises.
Glenmore Asset Management portfolio manager
Gregory’s watching the funds management sector. Particularly, listed fund managers.
“Equities have been sold off so aggressively this year, and there’s been a material de-risking which means a lot of the stocks in the sector have seen their prices fall,” Gregory says.
GQG Partners Inc (ASX:GQG) has “a very cheap valuation with a P/E of around 12x”, Gregory says. “All of its key funds have strong track records of outperformance since inception.”
Gregory also notes that since its IPO last year “the stock price has underperformed quite a bit but from an underlying operational perspective, the company has performed very well, generating strong relative returns and positive net inflows”.
“This is during a period where many of its peers have been seeing net outflows.”
Pinnacle Investment Management Group (ASX:PIN) is an ASX veteran, with a management team that is “well known and proven”, Gregory says.
“It’s always been a high beta stock that in periods where the stock market is sold off – the stock price at Pinnacle gets sold off quite aggressively and the last 12 months have been no different in that regard.
“The stock price after reaching $18 has essentially halved as the stocks de-rated in line with many of its high growth, high P/E peers.”
MA Financial Group (ASX:MAF) is a more diversified financial services group but Gregory says the majority of its earnings come from its asset management business.
Specifically, “real estate, credit and the hospitality sectors”.
“The interesting thing about those sectors is, whilst there is some impact from the slowing economy, they don’t have that situation where the funds are listed on the stock market and the funds fall in sync with the stock market, so slightly more defensiveness.”
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.