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3 ASX shares of the week: August 17th 2018

For the week, the S&P/ASX 200 index has gained about 1.3 per cent.

Big winners have included NIB Holdings (ASX: NHF) after a huge profit upgrade, Ausdrill Ltd (ASX:ASL) after the mining services company reported a 96 per cent jump in full year profits alongside the $270 million acquisition of Barminco, and Afterpay Touch Group (ASX:APT) for no apparent reason.

On the downside, the Pact Group (ASX: PGH) share price hit the skids after reporting a fall in profits in a challenging macro environment. Origin Energy (ASX:ORG) shares had a tough week despite more than doubling its full year profits. Challenger Ltd (ASX:CGF) shares were weak despite reporting record profits.

Here 3 shares The Capital Club came across this week that look interesting.

1) The Longtable Group Limited (ASX:LON) share price fell 20 per cent in July, with the top performing Saville Capital Emerging Companies fund saying the weakness was likely due to the recent capital raising and the short-term supply/demand imbalance this has created for the stock.

Longtable is focused on the premium end of the food and beverage industry. Its brands include Maggie Beer, Paris Creek, and the recently acquired St David Dairy. The company’s managing director is former Bellamy’s CEO Laura McBain.

Longtable raised $15 at a share price of 70 cents as part of its $15.25 million acquisition of inner-city Melbourne dairy business St David Dairy.

Today, Longtable shares languish way below the placement price, trading at just 48 cents.

Longtable is capitalised at around $60 million. The company itself is forecasting FY18 sales of $5.7 million (+27 per cent) and EBITDA of $1.7 million (+26 per cent). It intends to grow brands and products with broad consumer appeal that can scale not just nationally, but globally.

Click here to read about two other companies highlighted in the Saville Capital Emerging Companies July 2018 monthly update.

2) The Link Administration Holdings Ltd (ASX:LNK) share price jumped 6 per cent higher on Friday after reporting full year profits jumped 68 per cent higher. The company declared a fully franked full year dividend of 20.5 cents per share, an increase of 46 per cent.

Link Group Managing Director, John McMurtrie, said: “We are carrying good earnings momentum into FY2019 and the strength of our balance sheet and cash flow places us in a strong position to explore further growth opportunities.”

In May, the Ellerston Australian Share Fund added to its position in Link after its share price fell 17 per cent in response to the Federal Budget’s proposed changes to the treatment of inactive superannuation accounts.

Click here to find out the names of the other two companies Ellerston added to its fund in May.

3) Mineral Resources Limited (ASX:MIN) shares had a tough week, falling 9 per cent despite reporting profits 35 per cent higher and increasing its full year fully franked dividend by 20 per cent.

Mineral Resources provides crushing services to resources companies. In addition, the company owns and operates resources projects in iron ore and lithium.

Writing in its recent quarterly update, the top performing Flinders Emerging Companies Fund said lithium is providing the company with material growth options.

According to Flinders, the key drivers of growth include:

a) Crushing volumes increasing from 126mtpa in FY17 to 145mtpa in FY19;

b) Lithium ore production set to increase from 0.2mtpa to ~1mtpa; and

c) Innovation to drive costs reductions in the iron ore business. Earnings are expected to grow ~25% pa over the next 3 years.

As ever with mining shares, cyclicality of earnings is the key risk, with commodity prices dictating demand for its services.

From a valuation perspective, Flinders have a share price target for Mineral Resources of $21.90.

Mineral Resources shares are currently trading at around $14, implying more than 55 per cent upside to the Flinders share price target. The company trades on an attractive fully franked dividend yield of 4.6 per cent.

Read more

Three more cheap ASX stocks

Combining countless hours of research with over 30 years of hands-on stock market investing experience, The Capital Club’s founder Bruce Jackson has just published his definitive list of 3 Cheap and Good ASX Stocks for 2018.

The names of the three companies are revealed in a brand new investing report. But you will have to hurry, as these stocks are already on the move. Click here now to get this FREE report.

Bruce Jackson is the founder of The Capital Club. Of the companies mentioned in this article, Bruce has a position in Challenger. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended NIB Holdings Limited. 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.

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