ADVISOR WATCHLIST
Tony Killer
Senior Investment Advisor – Equities tkiller @ burrell . com . au ( 07 ) 4153 4499
Beach Energy ( BPT ). I continue to see value in buying Beach Energy at current levels . The recent acquisition of the Senex Cooper Basin assets for $ 87.5m cash looks a low risk play given the two companies were joint venture partners in many tenements and Beach can see immediate synergy benefits of approximately $ 5m pa . Beach have spent the past decade building critical infrastructure to many parts of these tenements so it also makes further well development decisions an internal matter . I have always seen Senex as a potential takeover target for Beach , so buying just the overlapping tenements is probably a better outcome for both Beach and Senex shareholders . Beach shareholders should watch with interest the current drilling of the Ironbark exploration well offshore NW Western Australia . Before the results of that well are known in early 2021 we should hear about the Enterprise well offshore Victoria and also a Final Investment Decision on the Waitsia Stage 2 development .
Champion Iron ( CIA ) is a company I mentioned a few Bourse ’ s ago as it moves towards making a Final Investment Decision on the doubling of iron ore production at its Bloom Lake project in Canada . The company continues to accumulate impressive cash earnings due to the price of iron ore which has helped reduce the risk of Stage 2 . I have no doubt they will proceed “ formally ” with Stage 2 before the end of December , particularly as they have already allocated and largely spent $ 120m on long lead items . The market here in Australia has been slow to appreciate the potential of the Canadian operations and the Australian management team , however the recent quick move from $ 3 to $ 4 suggests that this may not be the case for much longer . I don ’ t anticipate China / Australia trade tensions to result in a reduction in demand for iron ore here in Australia , but if it does happen Champion Iron is unlikely to be negatively impacted .
Listed Investment Companies . Clients looking for more diversified portfolio exposure could take a second look at Australian United Investments ( AUI ), Diversified United Investments ( DUI ) and MFF Capital ( MFF ) depending upon their preference for Australian or International exposure . The large holdings of CSL shares within both AUI and particularly DUI are of particular note given the recent uptick in CSL ’ s share price this month . All three offerings are trading at or below asset backing .
Medical Developments International ( MVP ) and Nanosonics ( NAN ) are two companies I continue to find attractive for those wanting to take on extra risk but have the comfort of having commercial products , cash in the bank and profitable revenue from which to launch from . Medical Developments recent appointment of an experienced CEO and a new Director has been welcomed by the market and I look forward to seeing how they influence the growth ambitions of the company . The “ green whistle ” ( Penthrox ) is what MVP is well known for however I see exciting potential commercial arrangements with the Constant Flow Technology that has been developed in conjunction with the CSIRO for manufacturing of various generic drugs that are in Trials .
Auswide Bank ( ABA ) is not on my buy list , however I would like to acknowledge the fact that they reported a very strong first quarterly result and existing investors would be well advised to have a read . The market is very interested in firstly bad debts from banks and secondly the level of loans that are still in what we will call deferral mode due to the Covid-19 loan assistance that was commenced in March 2020 . Auswide now has only 3.3 % of its loan book in this category , versus a high of almost 9 %. This compares very favourably when compared with both the mid tier banks like BOQ , Bendigo or the big four .
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