Your view on several stocks

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Question asked 09/03/2024

Your view on several stocks

Hello, I wish to apologize as I have asked a few questions lately and do NOT want to wear out my welcome. However, the market has been very volatile and the situation seems to almost violently change every day. So, hopefully, after this , you will not hear from me for a good while. I would like to hear your view on SHC, SFR, and EDV. I am an investor rather than a trader. Longer range investing is my preference. SNC seems like a good long term investment to me. However it has dropped suddenly and there does not seem to be much enthusiasm in the market for it. SFR also seems like a good long term buy but I am uncomfortable with their African holdings because governments can change very radically and very quickly there. Their Australian and USA operations seem to be excellent assets. EDV seems a stable long term investment but there does not seem to be a lot of room for growth and margins may be under pressure. I am NOT asking advice on whether to buy these stocks or not. That is my decision. What I am seeking is your view on the risk, stability, and growth prospects of these stocks. Thank you, Paul

Answer

Hi Paul,

You’re giving Debbie a run for her money!

We’ll take a longer-term view on each:

The first stock we’re a little confused on, there is no SHC while SNC is a small, listed investment company (LIC) with a $100m market cap, a volatile track record (~20% volatility in the past year), trading at a 10% discount to NTA run by Gabriel Radzyminski, an activist investor who does run larger funds outside of the listed structure. We did actually engage with Gabriele around Magellan (MFG), and supported their view of unlocking value in the funds business which is starting to play out. With a strategy like this, you’re essentially backing the one guy and his ability to find value and unlock it. Not one for us.

Sandfire Resources (SFR): The risk profile of SFR has improved over recent years, and they are now more diversified. Its flagship asset has been the 100%-owned DeGrussa copper-gold mine in WA, however, it is nearing its end. SFR acquired the MATSA copper-zinc mine in Spain, is developing the Motheo copper project in Botswana and continues to progress with the Black Butte project in Montana. We think SFR is growing copper production strongly at a time when copper fundamentals simply look phenomenal. Importantly, they are delivering operationally and clearly winning back market trust which had taken a battering a few years ago. UBS this week upgraded their price target to $8.85 (retaining the buy), and in that note did some sensitivity analysis around value at various price points for Copper. At US$4.5/lb (currently $US3.92), SFR is worth ~$11.50 and at US$5.00/lb, SFR is worth just shy of $15.00. We are bullish copper here, and we love SFR’s growing production profile, hence we think SFR is a solid long-term proposition.

Endevour Group (EDV): retail liquor, pubs, wineries and ecommerce underpinning this $9bn business that should continue to do moderately well over the coming years. Population growth is a positive and they have good brands, run well, a solid business, growing revenue at 2-4% pa and earnings at ~6%. Reasonably defensive & consistent so trades on 18x. One word to describe the stock would be ‘solid’.

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Sandfire Resources (SFR)

LAST UPDATED 09/03/2024 07:09

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