In case you haven’t noticed, risk appetite has come bouncing back with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) decisively breaking through the psychologically important 6,000 mark for the first time since February. The bulls are firmly in control of our market as the index chalked up an impressive 6% gain over the past month even as many companies in the top 200 stock benchmark paid out their dividends, which would normally put their share prices under pressure. This risk-on environment is a good time to be looking outside the blue-chips as smaller stocks tend to outperform in such a market –…
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In case you haven’t noticed, risk appetite has come bouncing back with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) decisively breaking through the psychologically important 6,000 mark for the first time since February.
The bulls are firmly in control of our market as the index chalked up an impressive 6% gain over the past month even as many companies in the top 200 stock benchmark paid out their dividends, which would normally put their share prices under pressure.
This risk-on environment is a good time to be looking outside the blue-chips as smaller stocks tend to outperform in such a market – assuming that the bullish sentiment persists.
From that perspective, equipment leasing company Axsesstoday Ltd (ASX: AXL) may be worth a look with Shaw and Partners reiterating its “buy” recommendation on the stock after management announced the successful settlement of a $200 million securitisation warehouse facility to help fund its expansion in the hospitality and transport industries.
The broker likes Axsesstoday as it is leveraged to the growth of the non-bank lenders market and thinks that the pieces are falling into place for the company to enjoy a big FY19.
“Enjoying attributes including recurring income, long duration receivables, high NIM’s, operating leverage and best in breed tech across multiple growth levers, we continue to see materially above market earnings growth and returns,” said Shaw and Partners, who has a $2.86 price target on the stock.
Another small cap worth keeping an eye on is FAR Ltd (ASX: FAR). This is one of Credit Suisse’s favourite picks in the oil and gas sector as FAR is closing in on its next catalyst.
The field evaluation report for its SNE project is expected to be handed into the Senegal government by the end of June, which will pave the way for FAR to achieve a number of other value-adding milestones over the next 12-months as it advances its joint-venture oil project in that country.
“We expect the Evaluation Report should see alignment from the JV on scale (assumedly ~100kbbl/d plateau rate), capex, resource size, etc., with FAR indicating capex may ultimately be 25% lower than previous estimates,” said Credit Suisse.
FAR should have a good pipeline of positive news and is also leveraged to the bullish outlook for oil prices. The broker has an “outperform” rating on the stock with a price target of $0.14 a share.
“Momentum within the core business is strong, Toxfree provides earnings diversity at similar quality levels and Management are targeting $35m of synergies over the next few years,” said UBS.
The broker noted that Cleanaway’s FY19 price-earnings (P/E) multiple of 22.7 times is fairly similar to other US waste management companies but Cleanaway’s earnings per share (EPS) is on an expected compound annual growth rate (CAGR) of 17% from FY19 to FY22, compared with its US peers at just 8%.
UBS has a “buy” recommendation on the stock with a price target of $1.90 a share.
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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Tox Free Solutions Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.