Experts give us their top stock picks for 2021
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As 2020 comes to what many would consider a welcome close, Stockhead has reached out to its pool of contributing experts for their view on what they hope 2021 will bring. Today’s question is: What are your top stock picks for 2021?
Greenland Minerals Ltd (ASX:GGG): Potentially world’s largest REE project with NPB >US$2.0B. Strategic location, Shenghe (shareholders) likely developer and mining licence grant imminent.
Fenix Resources Ltd (ASX:FEX): Project NPV (8) approximately $430m (77 cps) and currently trading at 25 cents.
Paladin Energy Ltd (ASX:PDN): Restart of Langer Heinrich mine should provide excellent leverage to recovery in uranium prices.
Tribune Resources Ltd (ASX:TBR): Value of cash, stockpiles, bullion and liquid investments over $7.00 per share! Resource growth in Ghana (projected to +3Moz) and Philippines (+1Moz) to drive growth outside of East Kundana JV with Northern Star Resources Ltd (ASX:NST).
Beam Communications (ASX:BCC): In the communications space and has partnered with IRIDIUM ($5BN NASDAQ). FY20 revenues $14.9M and $3M EBITDA, before the rollout of its feature product, ZOLEO. We expect a large re-rate as recurring revenues start to become a large component of EBITDA.
Roto-Gro International (ASX:RGI): Playing both the cannabis and vertical farming space. According to Cision, vertical farming is expected to reach $11.7bn with 20.1% CAGR. We are seeing Silicon Valley invest heavily in the space and Roto-Gro is the only stock on the ASX that has exposure.
Tymlez (ASX:TYM): The company has now built an enterprise-grade, decentralised marketplace for the tracing and trading of green energy, including carbon. The recent MOU with TGOOD, we feel hasn’t been factored into the stock price and we see contractual revenues as a big reflection point in 2021, leading into a large re-rate.
Sabre Resources (ASX:SBR): The stock has just completed a $4.8M capital raise and in 1Q2021 will drill a number of priority targets right near Penny West (WA). We see inflation driving commodities higher, especially gold & silver and SBR is set to benefit.
Lobe Sciences (CSE:LOBE): Psilocybin is “the next cannabis” and a Biden victory, including the decriminalisation of the extract used in magic mushrooms, will see a large revision. Mental health is estimated to cost the economy $300BN over the next five years and at $10M market cap, LOBE is set to have a major re-rate in 2021.
Mandrake Resources (ASX:MAN): Great exploration potential in the same region as Chalice, Metalicity and Nex Metals, already found some very high grade ore, further exploration in 2021.
Evolution Mining (ASX:EVN): – a very low cost miner.
Chalice Mining (ASX:CHN): Already found a lot of very high grade ore with potential to find more.
|FEX||Fenix Resources Ltd||0.215||$99.6M||54||162||2||378|
|PDN||Paladin Energy Ltd||0.24||$497.1M||70||153||6||153|
|TBR||Tribune Res Ltd||5.56||$301.7M||-14||-16||-8||-8|
|RGI||Roto-Gro Intl Ltd||0.055||$12.1M||38||0||-23||-54|
|MAN||Mandrake Res Ltd||0.076||$25.3M||-10||262||-7||407|
|EVN||Evolution Mining Ltd||5.08||$8.6B||-7||-5||6||43|
|CHN||Chalice Mining Ltd||3.68||$1.2B||0||264||3||1652|
|DEV||Devex Resources Ltd||0.19||$55.1M||-33||73||-14||175|
|CTM||Centaurus Metals Ltd||0.78||$250.9M||42||152||17||333|
|RZI||Raiz Invest Limited||0.91||$67.5M||1||41||-7||9|
|CCP||Credit Corp Group||24.62||$1.6B||-1||47||1||-21|
|KME||Kip McGrath Edu.Cntr||1.45||$73.9M||-7||43||-4||12|
|LYC||Lynas Rare Earths||3.8||$3.5B||12||101||3||60|
|EOS||Electro Optic Sys.||5.9||$882.5M||-10||12||-5||-18|
|BET||Betmakers Tech Group||0.74||$424.1M||40||68||22||448|
|TTB||Total Brain Ltd||0.315||$33.6M||-11||-10||5||-54|
|EEG||Empire Energy Ltd||0.36||$116.6M||-5||29||6||-17|
|PGY||Pilot Energy Ltd||0.028||$3.9M||-7||40||-18||40|
|AJQ||Armour Energy Ltd||0.061||$73.2M||15||190||-5||20|
|UWL||Uniti Group Ltd||1.71||$1.1B||10||3||15||16|
|EML||EML Payments Ltd||4.03||$1.5B||11||7||-2||-8|
LSX has exposure to two, multi-million ounce gold projects in the development bracket which puts them on re-rate watch. Both in Indonesia, which isn’t everyone’s cup of tea but what you get is a discounted entry to two situations with the right partners which under-scores ability to deliver the project and enhances funding potential (Indonesia is bankable, often overlooked).
Nusantara Resources (ASX:NUS): One of our gold exposures referred to above which is listed on ASX. The rest you can only get access to via LSX.
Northern Star Resources (ASX:NST) and Evolution Mining (EVN:ASX) – take your pick: If you aren’t confident on project or people specific risk, make sure you have some of these producers going into 2021.
Devex Resources (ASX:DEV): Nickel/PGE exploration exposure in WA not far from Julimar, and copper-gold exposure in NSW.
Chalice Mines (ASX:CHN): Julimar nickel/PGE discovery will only get bigger, plus exposure to Victorian gold exploration.
Minotaur Exploration (ASX:MEP): Strong Queensland base metals and gold exposure, plus exposure to the Great White Kaolin Project in South Australia with Andromeda Metals.
Centaurus Metals (ASX:CTM): Emerging world-class Jaguar nickel sulphide project in Brazil will continue to increase in size and confidence.
Liontown Resources (ASX:LTR): Kathleen Valley lithium project IN WA will grow and continue to be derisked, along with exploration exposure to Julimar region in WA.
Raiz (ASX:RZI): Recent market strength has renewed public interest in investing and Raiz’s micro investing platforms is gaining outstanding market traction and producing for shareholders a strong recurring revenue stream which is doubly attracting given the massive scalability of its fully online platform.
Quickstep (ASX:QHL): As an advanced materials manufacturer, we believe QHL is significantly undervalued at a market cap of $60m given it enjoys profitable revenues of over $80m p.a. and has no debt. Given its strong base of aerospace clients (Boeing, Northrop Grumman, Lockheed Martin) we think it is long overdue a strong sharemarket run.
Readcloud (ASX:RCL): We’ve been invested in digital academic textbook provider Readcloud since its listing in 2018 and it is only recently experiencing investor interest. The underlying thematics seem obvious – schools moving from physical textbooks to digital – and RCL is providing that functionality. Revenues are increasing year on year (up 55% to $7.5m in FY20) so pleasingly, the numbers the company are reporting back our investment theory.
Credit Corp (ASX:CCP): Currently our largest position. Core business is purchasing debt ledgers from business for cents on the dollar and engaging with customers to help with cash re-payments and financial health. Exceptionally well-run business in a very tough cyclical industry. Cash collections from customers has held up well through Covid and set to benefit from the cyclical recovery with opportunity to consolidate market share in Australia as key listed peers Collection House (ASX:CLH) and Pioneer Credit (ASX:PNC) have had internal issues to deal with and may be capital constrained. CCP has begun expanding into the US with early metrics quite promising in a market substantially larger than Australia’s.
Jumbo Interactive (ASX:JIN): Another large position we have added to recently. Wrote a post a couple of weeks ago with a brief overview of why I like it. A software business that provides products to re-sell lottery tickets, there are a few ways for JIN to do well; normalisation of large jackpots over 2H21, further growth in the number of charity lottery customers and initial contract wins for back-end lottery SAAS offering with governments globally. Like CCP, a key competitor Intralot (listed in Greece) is capital constrained with the business saddled with debt around 10x EBITDA and unlikely to match JIN’s ability to invest in R&D and sales over the next few years.
Kip McGrath (ASX:KME): A smaller position given the market cap, but positioned well to grow post-Covid. A provider of tutoring services, the core face-to-face product is slowly transitioning to online lessons which offer much better unit economics (my best guess is something like $4 per student per lesson for a face-to-face and $16 per student per lesson for online). Key competitor Cluey recently listed with a nearly $100m market cap and is guiding to do $15m in revenue this year, while KME is guiding to do nearly double that and trades cheaper. Worth noting that some of KME’s revenue is franchised, but I think the market underestimates how quickly the business is transitioning online and has the benefit of a brand-name built over decades.
The sovereign stimulus unleashed on global economies in response to the coronavirus pandemic sets the stage for global growth stocks to flourish in 2021 with themes around a vaccine-led economic recovery.
Altium Ltd (ASX:ALU): Develop and sell computer software for the design of key components in electronic products, as well as a marketplace for the sale of printed circuit board components.
CSL Ltd (ASX:CSL): A global biotech that manufactures and delivers biopharmaceutical products. The company has been contracted by the Australian government to manufacture Covid-19 vaccines.
Lynas Rare Earths (ASX:LYC): An Australian explorer, developer, and processor of rare earth minerals. Rare earth minerals are a key metal for the manufacture of many electronic devices. China produces ~90% of rare earth metals which could make it a key political metal in 2021.
Electro Optic Systems Holdings Ltd (ASX:EOS): An Australian technology company operating in the aerospace and defence industries through the development and manufacturing of telescopes, laser satellite tracking systems, and optic fire control systems.
Readcloud (ASX:RCL): An edtech platform that provides a digital textbook experience for high school students in Australia. RCL forecasts continued high user growth in 2021 as schools accelerate their transition to digital platforms with optionality for an online learning environment.
(*Disclaimer – Warner has a personal beneficial interest in RCL.)
We are supportive of all the issuer sponsored stocks that we cover as we are very selective about which companies we take on. However, there are several which we believe have the potential to deliver considerable upside in 2021:
BetMakers Technology Group (ASX:BET): Poised to be a key player in the development of the fixed odds wagering sector in the US which, if it follows the path laid by fixed odds sports betting in the US and the more mature Australian fixed odds wagering market, should experience rapid growth in 2021 and beyond.
Pointerra (ASX:3DP): There is an explosion of geospatial data that needs to be captured, processed, stored, manipulated and analysed and Pointerra delivers a fast, cost effective and efficient platform for digital asset management. In 2020, the company demonstrated it was rapidly gathering contract momentum with US poles and wire companies. We expect continued strong growth in this sector in 2021 with greater demand for efficiencies in the management of assets continues. The company has also earmarked the defence sector as a target for its Data as a Service, Data Processing as a Service and Analytics as a Service offerings, and we will be looking for progress on that front during the course of the year.
Total Brain (ASX:TTB): Poised to enjoy revenue growth from the rollout of its technology in the GRIT program being rolled out by IBM to US veterans. Mental health will continue to be a key focus within US government departments and corporates in 2021 and Total Brain’s platform and database plays to that focus. Demonstrated revenue momentum should lead to a share price rerating in the course of the year.
Empire Energy Group (ASX:EEG) and Armour Energy (ASX:AJQ): On the resources front, we are focused on companies that are major beneficiaries of the Federal Government’s “gas led” energy policy. Empire Energy Group and Armour Energy deliver exposure to this. EEG is an oil and gas explorer in the NT (with production in the US) and has had very encouraging results from its first drill with shallower and liquids rich shows. AJQ’s North West Queensland and Northern Territory portfolio is underpinned by financial carry from STO and identification of the northern region (particularly NT) as a new, major source of gas supply. Both company are likely to benefit from in-ground activity on a regional basis with look through potential from industry work programmes (drill and test) in CY21. In addition AJQ delivers complimentary holdings in and around Wallumbilla in Queensland where it owns a gas production growth option (in a rising gas market) and storage optionality as a two-headed opportunity in both production and trading.
Pilot Energy (ASX:PGY): Within context, is a high-risk exposure delivering a multi-optioned play with Western Australia’s Cliff Head oil growth (in a rising oil price market) and emerging but transformational renewables opportunity. This opportunity is somewhat conceptual but the company could deliver significant, tangible value definition across CY21.
Uniti Group (ASX:UWL): Which, following the acquisitions of Opticomm and Telstra Velocity has become the dominant competitor to the NBN fiber network. We think the stock is on the cusp of being re rated to an infrastructure multiple rather than a telco one.
Healthia (ASX:HLA): Is a podiatry and physiotherapy group which recently acquired The Optical Company for $43 million, which diversifies HLA into the highly fragmented and defensive optometry sector. with forecast revenue of $180 million and EBITDA of $35million in FY22, We believe the stock is on the radar of fund managers based on scale and a market capitalisation of about $100 million. We expect a significant re-rating of its earnings multiple in the next few months as Australia’s economy opens up.
EML Payments (ASX:EML): is a global prepaid company that actually makes profits. This year EML on track for $20B of transactions processed and $60M EBITDA. We think EML will benefit both from shift to electronic payments and the Covid vaccine which will remove the gift card headwinds in its Mall segment.
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.