ADVISOR WATCHLIST
prior to the drilling of WE-3 , 4 and 5 . Given the proximity to the Dampier to Bunbury gas and two equally impressive discoveries in neighbouring tenements by Beach and Mitsui at Waitsia and Beharra Springs Deep , I don ’ t expect Strike to be the only bidder when the auction starts . Risks are part of the game with oil and gas stocks , but this field is looking good and if the news gets better after they can do some flow tests then both Strike and Warrego should do well . Well worth a look and I do own WGO stock .
Medical Companies . I continue to like the long term outlook for both Medical Developments ( MVP ) and Nanosonics ( NAN ) as they push on with the rollout of their products into hospitals , clinics and in MVP ’ s case Ambulance and first responder services . Information flow has been very quiet since the February reporting season and this has meant the share prices have drifted lower . I expect investor attention towards these two stocks to pick up and if either announce significant contract upgrades then we will not see them at these current levels again . Both companies sales were impacted last year by the onset of Covid as hospitals prioritised Covid responses over new products . I do own both stocks .
Gold stocks . I have mentioned these previously but I continue to like the outlook for many gold producing stocks here in Australia . At the big end of town I still prefer Northern Star ( NST ) over Newcrest ( NCM ). Amongst the smaller producers I still find the value of Aurelia Mines ( AMI ) and Gascoyne Resources ( GCY ) attractive . Both have been unloved by the market for some time so investors will need to be patient , but they are both producing at profitable levels and have both exploration and development potential to come . Gascoyne ’ s recovery from administration and reconstruction is nearly complete with a good chance they will be debt free in coming quarters . As at 31 March they had more in the bank for operational purposes than the bank debt they owe . Both have drilling rigs spinning so positive news flow could change investor sentiment . I do own NST , AMI and GCY
Mike Baker
Advisor mbaker @ burrell . com . au ( 07 ) 5353 5224
TechnologyOne ( ASK Code : TNE ) recently announced their half-year result and it showed good momentum , winning new government contracts both in Australia and overseas . What is even more impressive is they are competing and winning against global heavyweights such as SAP . This reflects management ’ s foresight to transition to a SaaS model some years ago , whilst competition ignored the clear industry trends taking place . It is quite insightful to know that a company such as SAP recently announced to the market they needed to make the transition to the cloud and shift toward a SaaS model however with that comes short-term earnings pain and the stock fell 26 % on the news . TechnologyOne is in a very strong financial position with no debt and approximately $ 100m cash on the balance sheet and yet they still forecast to generate a Return on Equity over the full year of 40 % plus . Further , they continue to ramp up research and development ( R & D ) which will extend the functionality and capability of their global SaaS ERP solution to their respective markets . Whilst not cheap , trading on an FY22 PE of around 35x , companies of this quality with such solid growth prospects rarely trade on much lower multiples . For long term investors , accumulate below $ 9 .
Two small cap companies worth mentioning are Dusk ( ASX Code : DSK ) and Nick Scali ( ASX Code : NCK ).
Dusk was a low key , partial private equity sell-down which took place in late 2020 . The business principally sells candles and diffusers and operates in a highly fragmented market , with management indicating they currently hold around 10 % market share . They will look to increase share through their unique pay-to-join loyalty model which is currently running at 634,000 active members . Staff are incentivized at each store to actively grow these numbers as each yearly subscription of $ 10 drives customer loyalty . Whilst
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