Tim Boreham’s 20 ASX stocks that are primed to run in 2023 – Part I
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Tim Boreham is one of Australia’s best-known small-cap share analysts and business journalists. He has more than 30 years of experience writing for major business publications.
After a rickety year dominated by the interest rate rises we had to have, your fearless columnist is dusting off his dartboard and calibrating his crystal ball for another stab at share tipping glory.
Sadly, his crop of 2022 tips proved as wayward as the pundits predicting a Trumpian red wave in the US mid-terms, a reverse Danslide in Victoria, the return of El Nino or Kiev falling in a matter of weeks.
In a pandemic of mishaps, your columnist’s tips included Universal Biosensors (ASX:UBI), South Harz Potash (ASX:SHP) and Radiopharm Theranostics (ASX:RAD), which all lost about 70 per cent of their value.
Just as he avoided the train-wreck crypto sector, he also failed to latch on to the ever-upwards lithium theme.
But we won’t go to water in 2023 – and that’s a (non-core) promise.
Speaking of the essential liquid, the US based wastewater treatment mob Fluence (FLC) is an on-trend stock as far as ESG investing goes, but the shares have largely been unloved despite the company’s progress in securing global sales.
Fluence has a suite of patented and old-school treatment techniques, with a focus on build-own-operate contracts and other recurring revenue.
Fluence reported September (third) quarter revenue of $US29 million, 33 per cent higher with calendar year to date turnover of $US93 million, 39 per cent higher.
The company also lost $US7.2 million in the quarter and has launched a high falutin’ operational improvement program based on excising 10 per cent of its cost base ($US3 million).
With $US5 million of cash versus a $110 million market cap, Fluence does not look extravagantly valued, but we would like to see more of the top line growth flow to profits.
Still on water, Duxton Water (D2O) invests in permanent water rights (mainly in the Murray Darling Basin) which it then leases to farmers.
Given the soggy conditions, investing in water rights sounds like carrying coal to Newcastle.
But in the longer term, demand has become more inelastic because growers are shifting from annual crops such as cotton and cereals to higher-value permanent users, such as almonds, stone fruits and vineyards.
Duxton has enough visibility on its revenues to forecast a 7.1 cent total dividend in 2022-23, as well as a 3.7c interim payout in 2024 (a yield of just over 4 per cent).
We also selected the stock last year and were rewarded with an eight per cent gain.
It would be remiss of us not to include the decarbonisation commodity du jour – uranium – and from the pantheon of ASX explorers we select this Canadian focused play 92 Energy (ASX:92E).
92 Energy is certainly hunting in the right place: ten kilometres away from Cigar Lake, the world’s richest uranium mine, in the fecund Athabasca Basin.
On only its fourth drill holes, the company encountered grades a 42-metre intersection averaging 0.62 per cent uranium oxide, including a six metre sub-interval at 2.17 per cent.
In lesser jurisdictions uranium is measured in parts per million and 250 ppm might be a decent grade. The aforementioned 2.17 per cent equates to 21,600 ppm.
With only 220 metres of a 1.8-kilometre target strike length tested, 92 Energy has a long way to go (and a lot of opportunity).
Otherwise, we predict a golden year for bullion as interest rate increases ease and investors latch on to the yellow metals eternal inflation-busting appeal.
Gold bugs could always buy an ETF (see below). But from the ‘deep value’ resources file we stumble on Battery Minerals (ASX:BAT), which is now inaptly monikered given it sold its graphite assets in Mozambique to focus on gold exploration in western Victoria.
Battery is now focused on its Stavely-Stawell project, a mere ten kilometres from the operating, five-million-ounce Stawell Gold Mine.
A drilling campaign will test historic work at the prospect that produced rock chips grading up to 430 grams per tonne.
Meanwhile Battery’s current (and promised) cash is worth more than the company’s $6 million market cap.
Similarly, Breaker Resources (ASX:BRB) was all about lithium but sold its stake in its WA prospect, Manna, to joint venture partner Global Lithium Resources for a cool $88 million.
That left Breaker to zero in on its promising Lake Roe Gold Project near Kalgoorlie, just down the road from Northern Star Resources’ four million ounce-plus Carosue Dam project and Ramelius Resources’ 1Moz-plus Rebecca Gold Project.
Post the Manna sale, Breaker has $80 million of cash compared with a market cap of just over $100m.
And down the road from Breaker Resources, the team behind Staveley and Integra Minerals are at it again with E79 Gold Mines (ASX:E79).
Has 355 square kilometres of tenure in the Laverton tectonic zone, which historically produces 30 million ounces – and 540 square kilometres in the equally fecund Murchison Goldfield.
E79 has $6 million of cash and $10m market cap, so once again investors aren’t getting too carried away.
Turning to battery metals, St George Mining (ASX:SGQ) is hoping to slay ‘em with its Mt Alexander project nickel-copper sulphide project in WA.
Lo and behold, the outer reaches of the mt Alexander ground also contains lithium. This month the company entered a memorandum of understanding with Chinese energy tech house SVOLT to develop and acquire lithium assets.
SVOLT is also taking a $5 million placement in St George.
St George shares have doubled over the last three months but given the company’s still modest $50 million market cap, we reckon there’s more fire in the belly.
The Perth based Vysarn (ASX:VYS) is the only pure-play hydro-geological driller and it provides other end to end services such as pumping and aquifer management.
Vysarn’s resources-focused rota of clients includes BHP, Fortescue Metals and Gina Rinehart’s Roy Hill.
Vysarn recovered from a shaky pandemic period to record a $4.1 million pre-tax profit in 2021-’22, 270 per cent higher, on a 79 per cent revenue surge to $46.3m.
Management guides to a $5.1 million profit this year, with the lure of a maiden div in the 2023-’24 year.
The $32 million market cap has net debt of around $4.2 million but boasts strong cash flow, so we say ‘Vy-not?’ as an investment proposition.