Next Phase for KGD, page-63

Credit Suisse's top stock picks for the brave

Date
January 28, 2016

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Simon Evans

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Kula Gold is trying to develop a gold project in Papua New Guinea and tops the charts in a rundown of companies expected to deliver the best total returns over the next year by Credit Suisse. Photo: Bloomberg
Six stocks are projected to deliver total returns of more than 120 per cent for 2016 in a broad overview by Credit Suisse of the 180 companies which its analysts put under the microscope.
The six standouts are all in the resources industry, and with commodity prices having taken a beating and remaining extremely volatile, a certain amount of courage may be required to pile into them.
Kula Gold, which is developing a gold project in Papua New Guinea, is the standout and is ranked at the top of the charts with a total return of 362 per cent anticipated by Credit Suisse.
Altona Mining, seeking to develop a copper project near Mt Isa in Queensland sits at No.2 with an expected total return of 210 per cent.
The unloved mining services and engineering firm Worley Parsons is at No.3 with an expected return of 150 per cent, while Whitehaven Coal is poised to deliver a return of 144 per cent.
Battered mining services and heavy engineering firm Bradken is next with potential upside of 127 per cent.
Cooper Basin oil and gas group Senex Energy rounds out the half-dozen with an anticipated 122 per cent return on the cards.
Credit Suisse analyst Adam Indikt says the projections are based on the current share price, and the analysts' 12-month target price for each company and takes into account any dividend payments.
At the other end of the 180 stocks is Evolution Mining which was forecast to deliver a negative return of 21 per cent when the table was compiled on the night of January 27, but will move up the ranks after its share price target was upgraded to $1.45 from $1.19 by Credit Suisse's mining analysts, meaning the expected decline is now 5 per cent. Another cellar-dweller was blue-chip staple Brambles, which Credit Suisse expects will post a negative return of 18 per cent for the next 12 months.
The six for the brave are:
Kula Gold: It is developing a gold project on Woodlark Island about 600km from the Papua New Guinea capital Port Moresby but its share price is coming off a very low base at 1¢ a share so any rise is amplified. It has big shareholders such as the investment arm of Sydney corporate finance firm Pacific Road, and big US fund manager Franklin Templeton and the PNG government holds 5 per cent.
Altona Mining: Credit Suisse has an "outperform" on the company developing a copper project near Mt Isa and expects its share price to rise from around 8¢ currently to 26¢.
Copper prices have been at six-year lows but haven't been thrashed as much as iron ore, and bigger copper players such as OZ Minerals keep reminding people that copper is a vital element in the digital world because of its use in mobile phones, storage batteries and other devices.
WorleyParsons: The big tumble in oil prices has put this service provider under severe pressure and prompted aggressive restructuring but it has incurred the wrath of some investors who've launched a class action over disclosure practices stemming from profit downgrades.
It hired a new finance director from Transurban, Tom Honan, in November, 2015 to overhaul reporting systems and Credit Suisse expects its shares may be at $8 in a year.
Whitehaven Coal: The pure-play coal group could rise from around 40¢ a share to reach $1 in 12 months and is also rated an "outperform".
While the China economy slowdown has put temporary question marks over just how much steel that country will be producing – with coking coal a vital ingredient – Whitehaven's higher-quality coal puts it among the best operators in an industry under siege from environmentalists.
Bradken: The engineering and heavy industry firm where former NSW Premier Nick Greiner departed as chairman in late 2015 has been under severe pressure as big miners slash their capital spending.
Credit Suisse thinks it might get to 93¢ a share in a year's time, and an indicative bid from private equity firm PEP and Bain Capital of $5.10 per share lobbed 14 months ago is a distant memory.
Senex Energy: Being a small player when the oil price gets a thumping means the herd generally stays away, but this producer in South Australia's Cooper Basin is set to more than double its return to shareholders and is also rated an "outperform" by Credit Suisse. It was at 45¢ a share in April, 2015.


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