Does MM like Alumina (AWC)?

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Question asked 14/07/2022

Does MM like Alumina (AWC)?

Hi James, AWC has fallen to new lows and is currently paying a High Dividend Yield. But for how long? This stock was held in the MM Portfolio, does it now represent a Buy at these levels ? What is your outlook for Aluminium and AWC which has it's challenges with soaring Electricity prices and smelters are huge power users- increasing Opex & reducing their profit margin/Earnings Thanks for assessment

Answer

Hi Richard,

We spoke about AWC in our Thursday morning report, basically as you say it looks cheap BUT has major headwinds from an input cost perspective and we doubt that will change in the near term – here is what we wrote:

AWC failed to enjoy a surging commodities market in Q1 but it’s had no problems jumping on board the savage resources correction over the last few months, the stock made fresh multi-month lows on Wednesday taking its decline to -25% year to-date. Something still feels wrong here as we keep reminding ourselves to “don’t fight the tape” which for AWC continues to point downwards. The stock still looks cheap trading on a sub 10x valuation for 2022 while its forecast to yield ~7.5% over the next 12-months but we need to see a catalyst to spark our interest.

The are a number of Australian resources plays MM prefers to AWC.

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Alumina (AWC)

LAST UPDATED 14/07/2022 12:18

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