The below stock investing commentary is based mainly on director trades, our share selection criteria and monitoring stocks we own and are watching.

 

The below commentary is not stock buy or sell recommendations. Please read disclaimer. Sharp Investor owns: (ASX: ACR), (ASX: ARL), (ASX: ALQ), (ASX: CDX), (ASX: CDXO), (ASX: CGO), (ASX: COL), (ASX: CYP), (ASX: DHG), (ASX: EVN), (ASX: EXR), (ASX: FBR), (ASX: FID), (ASX: FRI), (ASX: GGG), (ASX: GOR), (ASX: IRI), (ASX: MGX), (ASX: MNY), (ASX: OZL), (ASX: PRO), (ASX: SBM), (ASX: SF1), (ASX: SFL), (ASX: SRG), (ASX: SXE)


Domain Holdings (ASX: DHG) has come back strongly since the low in March. There are indications the property market may not be impacted as badly by Covid-19 as first thought.

Talking to a property agent she said that competitor REA seemed to be a better at keeping up with technological advancements in property. Hopefully as a holder of DHG stock they work on catching up.

 

 

Date: 27 May 2020


Southern Cross Electrical (ASX: SXE) announced on the 20th of May it has entered into a five-year services agreement with Energy Queensland Limited for asset inspection and maintenance services on their network in North Queensland.

This agreement replaces the original three-year services agreement with EQL which commenced in August 2017.

 

 

Date: 26 May 2020


Finbar Group (ASX: FRI) has established a new sales division in house to focus exclusively on the marketing and sales of Finbar properties. The team has worked together for more than 13 years in off-the plan project sales and with Finbar in an external sales capacity since 2006. Sales were previously outsourced to several external residential sales agencies.

Having one in house team vs several external sales agencies, should streamline the sales and marketing process.

 

 

Date: 26 May 2020


Iron Ore

 

Mount Gibson Iron (ASX: MGX) is a West Australian based Iron ore miner.

 

The iron ore price has shown resilience throughout the coronavirus crash. Iron ore, the main ingredient in steel, is in demand from China as its economy begins to rebound. Government infrastructure initiatives designed to stimulate battered economies will also support demand for iron ore.

 

Cash operating costs are expected to decrease steadily for the company’s Koolan Island pit, in step with the scheduled decline in the waste to ore stripping ratio, which should increase cash flows from the mine over the five/six year mine life. The first shipment of ore was in April 2019.

 

March quarterly report highlights:

 

  • Cash and liquid investments of $402 million at 31 March 20
  • Sales revenue of $82 million Free on Board
  • Increase of $4m in cash and investment reserves after capital expenditures and positive working capital movements
  • Ore sales of 1 million wet metric tonnes

 

 

Date: 28 April 2020


Small acquisitions using cash on hand

 

Growing small cap, financial services business, Fiducian Group (ASX: FID) has continued its modus operandi of buying small financial advice firms with cash on hand. Fiducian’s latest acquisition is a regional financial planning business with Funds under Advice (FUA) of $56m. The $435k purchase was funded from internal cash this month.

 

Date: 28 April 2020


Director buying during the crash

 

On-market buys by Australian company directors spiked in the weeks the market was crashing. Directors took the opportunity to buy shares at depressed prices in companies they know well. The last bar is the week ending 27 March as directors have five days to report trades to the market.

 

Date: 13 April 2020


Bad news

 

When bad news is announced by a company, the market has a tendency to overreact. When the news is regarding an external event that impacts the company in the short-term, investors still tend to oversell. This can provide opportunities for the long-term investor, provided the company has solid fundamentals and the long-term outlook is still good.

 

An example is the 30 March announcement by Mount Gibson Iron (ASX: MGX) that costs have increased and production is down due to coronavirus. Coronavirus has nothing to do with the iron miner specifically and will eventually blow over. MGX had ~$398m in cash at 31 December 2019 which provides a buffer to get through current uncertainty. It is also profitable.

 

Investors panicking and selling shares due to external short-term events can provide opportunities for savvy buyers provided the companies in question are positioned to ride out the particular event.

 

Prices will often rebound as traders move into capture a bounce in prices when shares have been oversold. The price of Mt Gibson Iron shares declined 7% on its news but then increased  9% during the day.

 

Date: 5 April 2020


Director buy

 

Service Stream Limited (ASX: SSM) provides integrated end-to-end asset life-cycle services across essential infrastructure networks within the telecommunications and utilities sectors.

 

SSM is a stock we have been watching and there are previous notes lower down on this page.

 

Although the market has just bounced from its lows Service Stream is showing a double bottom in the share price chart (below). There was an insider buy from Managing Director Leigh Mackender of $50,000 of shares on 2 April.

 

It is unclear whether this is a ‘V’ shaped recovery in the market or there is more downside to come. Either way the market is depressed and if you find good companies to buy for good value, you can dip your toes into the water. Leigh Mackender was the director who sold shares in October and probably sees them as good value at the lower price.

 

The company paid its 4c interim dividend on 13 March.

 

Date: 5 April 2020


Director Buying

There has been higher than normal director buying of stocks on-market throughout the current coronavirus crash. Monitoring this can help decide regarding which ASX shares we may want to add to or investigate further. The best ASX shares to buy may be ones you already own and know well. A lot of share selection metrics are distorted right now due to the market plunge so director buying  can provide valuable insights at present.

 

Integrated Research Limited (ASX: IRI) is a global provider of performance management software for critical IT infrastructure, payments and communications ecosystems. The company earns over 95% of its revenue outside Australia – mainly in USD, so stands to benefit from the weak AUD.

 

Two directors have bought since the crash and in addition to two others over the last six months:

OZ Minerals (ASX: OZL) is a gold and copper miner and that will benefit from a weak AUD and has seen directors taking advantage of the current depressed price.

 

Director trades over the last six months:

Date: 23 March 2020


Iron Ore

Iron ore miner Fortescue Metals (ASX: FMG) has seen directors buying in the last few weeks.

 

We own iron ore miner Mount Gibson Iron (ASX: MGX), which has also held up well.

Date: 23 March 2020


Money3

Money3 (ASX: MNY) is an automotive lender and personal loan provider that has been sold down hard as investors anticipate a possible increase in loan defaults and decrease in new loans. Fears are exacerbated as Money3 lends to borrowers that may be excluded from getting a loan with other lenders, such as the big banks.

 

Directors have been buying up shares in Money3 following a sharp decrease in the price . Any good news suggesting the economic outlook may be less severe than predicted would most likely see the share price rise. Given the current economic climate we will monitor for the time being.

 

An update on the 23rd of March shows a cash position of $46m and debt facilities of $40m. Debt facilities were recently drawn down to fund growth but do not mature until December 2022. MNY expects earnings for the nine months ending 31 March 2020 to be approximately $23 million, but has not provided FY20 guidance due to current uncertain economic conditions.

Date: 22 March 2020


Director Buying

Director buying during the crash for growing small cap wealth management firm Fiducian Group (ASX: FID):

Fiducian Group weathered the Royal Commission into misconduct in the Banking, Superannuation and Financial Services Industry, which concluded in February 2019, far better than larger wealth managers IOOF Holdings Limited (ASX: IFL) and AMP Limited (ASX: AMP).

Date: 21 March 2020


Southern Cross Electrical Engineering

Southern Cross Electrical Engineering Ltd (ASX: SXE) is an electrical, instrumentation, communication and maintenance services company.

 

SXE announced on the 9th of March 20, that its subsidiary Heyday signed a contract with CPB Contractors, which is part of Cimic Group to design and construct the electrical services associated with Sydney Metro’s Pitt Street Station integrated development.

The value for the contract is circa $40m. Sydney Metro is Australia’s biggest public transport project.

Recent projects won in 2019/20:

  • 06 Feb 20 – Resources – Contract to work on Rio Tinto’s refinery site on the Grove Peninsula. Valued at approximately $18 million.
  • 20 Dec 19 – Resources- Electrical and instrumental work at the Kemerton Lithium processing plant. Approximately value $65 million.
  • 13 Aug 19 – Multiple projects with aggregate value of $35 million in the commercial, data centre and energy sectors.
  • 17 Jun 19 – Multiple projects with an aggregate value of $25 million in the social and transport infrastructure sectors.
  • 20 May 19 – Multiple awards aggregating over $30m in the commercial, telecommunications and resources sectors.

Stats:

 


Director Buying

Mount Gibson Iron Limited (ASX: MGX) is an iron ore miner.

 

The below chart shows insider buys and sells by directors recently for MGX. Latest director buy of $520,052 worth of shares, was on the 26th of February for $0.6998. Buys are represented by green dots and red dots are sells.

 

 

 


Announcement

Ardea Resources Ltd (ASX: ARL) is a copper and gold explorer.

 

Drilling results announced on the 26/27th of February showed significant gold intercepts near the surface at both the Mulga Plum and Big Four Gold projects.

Announcement extract:

Ardea’s Managing Director, Andrew Penkethman, said: “Ardea is highly encouraged by these first-pass drill results from Big Four. The fact that all planned holes intersected significant gold mineralisation confirms the geological model. Mineralisation is still open at depth and a possible fault off-set structural repetition has been modeled along strike to the north and will now be tested to define the extent of this mineralised system.Ardea will continue to test the prospectivity of its large Eastern Goldfields land holding for gold and nickel sulphides, in parallel to de-risking the nickel-cobalt resources within the broader Kalgoorlie Nickel Project.”

 


Announcement

Finbar Group Limited (ASX: FRI) is an Western Australian apartment developer.

 

Finbar reported a net profit after tax of $6.64m for the first half of financial year 2020, which is an improvement on the same period last year of $4.75m (224% increase). The result was boosted largely by a return to net positive value of the Karratha and East Perth investment properties and the sale of completed stock and settlements at stage 1 of the Palmyra East project.

The company finished the reporting period with $31.2 m in cash and has paid back $12m in bank facilities.

 


Announcement

Southern Cross Electrical Engineering Ltd (ASX: SXE) is an electrical, instrumentation, communication and maintenance services company.

 

Half-year ending 31 Dec 19 results:

  • Record half year revenue of $230.3m up 27% on PCP
  • EBITDA of $10.9m up 21%
  • EBIT of $8.4m up 22% and
  • NPAT of $5.5m up 24% on PCP due to continuing growth in infrastructure and commercial activity.
  • Balance sheet remains strong with total cash of $53.3m
  • No debt
  • No interim dividend declared,as SXE is holding cash to pursue acquisitions
  • Historically an electrical contractor, but has a strategy to diversify into commercial,infrastructure, defense, telecommunications, industrial, energy and utilities

 


Results

Money3 Corporation Limited (ASX: MNY) – 1H FY20 Results

 

Money3 is involved in the provision of finance specialising in the delivery of secured automotive loans as well as secured and unsecured personal loans.

 

 

H1 FY20 results announcement- 17/2/2020:

 

For 1H FY20, Money3 reported strong growth against the prior corresponding period:

 

  • 55.0% increase in revenue to $62.7 million;
  • 36.9% increase in EBITDA to $30.5 million;
  • 56.4% increase in Normalised EBITDA to $30.5 million;
  • Statutory NPAT of $17.7 million, with $15.7 million from continuing operations;
  • 58.8% increase in loan originations to $138.3 million;
  • 44.9% in cash collection to $134.5 million;
  • 48.8% growth in gross loan book to $426.7 million; and
  • Declared a fully franked 5 cents interim dividend payable on 20 April 2020.

 

Mr Scott Baldwin, Managing Director of Money3, said: “With the transformation of Money3 into an automotive finance company, investors will be able to see the remarkable growth of the core business, which is originating in excess $1.0m per business day in auto loans. Over the last five years the automotive division has produced compound average growth of over 25% p.a. and, with the acquisition of Go Car Finance in New Zealand and expansion of products offered in the Australian business, we are confident of maintaining this growth trend into the future. Our business in New Zealand has had an outstanding growth in gross loan book over the first half of 2020, growing the loan book over 50% since acquisition. Pleasingly, the growth has been achieved while maintaining the cost base of the business by leveraging operations in Australia. We anticipate gross receivables in New Zealand will exceed $100 million in 2020.”

 

 


Multiple director buys

Service Stream Limited (ASX: SSM) – Director buying

 

Three different directors bought Service Stream shares after the share price fell follow the release of 1HFY20 results.

 

 

 

 

 


Finbar Group Limited (ASX: FRI) – ASX announcement

 

The share price of residential apartment developer, Finbar Group (ASX: FRI) has been moving up since announcing they received approval for the company’s Civic Heart development on the 4th of February.

The project will have two towers of 39 and 22 storeys each consisting mainly of residential apartments. There will also be 25 ground floor commercial tenancies.

The project has an estimated end value of $365 million and the company has already received 4,700 enquiries about it.

 

Managing director Darren Pateman commented:

“This news has come at a good time for our business and for the WA

economy. We have recently sold out of South Perth stock and are very keen to

bring this flagship project to a market which is showing very positive signs of both

sales rate and price recovery,”

 

Disclosure: I own

 


Decmil Group Limited (ASX: DCG) – Director buying

 

Decmil offers a diversified range of services to the resources and infrastructure industries throughout Australia and New Zealand.

Two directors have bought decent bundles of shares ($50k and $27k) and fund manager Thorney International bought more shares after the price plunged following trading updates. Nonetheless, I will leave this on the watch list for the time being and monitor. There is usually no rush to buy after big price declines.