Here’s another list of 4 stocks priced under 40 cents, spread across varying industries, and with good prospects to grow their businesses, and analysts seeing a healthy runway for share-price growth.
- Sierra Rutile (SRX, 22.5 cents)
Market capitalisation: $95 million
Listed July 2022 at 40 cents
Analysts’ consensus target price: 55 cents (Stock Doctor/Refinitiv, one analyst)
Sierra Rutile was spun-off by mineral sands heavyweight Iluka in July 2022, to operate its existing Area 1 mine and processing plant in the West African country of Sierra Leone, and to develop its nearby Sembehun project.
Sierra is the world’s largest producer of natural rutile, which is the highest-grade naturally occurring titanium dioxide feedstock, and as such commands a premium price among mineral sands. Rutile is used to manufacture titanium metal, which has the highest strength-to-weight ratio of all commercial metals and is considered critical to a wide range of industries, from defence and aerospace to paint, cosmetics, medical implants, defence, communications, steel manufacturing and ship-building – and increasingly, renewable energy.
With the other main mineral sands products that Sierra produces – high-grade ilmenite and zircon – rutile is officially a “critical mineral” in the eyes of western governments.
Large-scale mining began at the Area 1 mine in 1967; Iluka bought the operation in 2016. But more recently, Iluka has focused on its Australian assets, particularly its diversification into rare earths, with its fully integrated Eneabba Rare Earths Refinery approved in April 2022. So, it decided to spin-off the Sierra Leone assets.
Area 1 has an ore reserve of 541,000 tonnes of contained rutile, which gives it about four remaining years of mine life at the current production rate. But with a resource of 2.1 million tonnes, Sierra thinks it can convert more of the resource to ore reserves and extend the mine life at Area 1.
Meanwhile, the nearby Sembehun project – which is only 30 kilometres away and will use Area 1’s infrastructure and port facilities – represents one of the largest and highest-grade natural rutile deposits in the world. Sierra is working on the definitive feasibility study (DFS) for Sembehun and is expected to reach a final investment decision (FID) in late 2023. With a mineral resource of 508 million tonnes at a grade of 1.10% rutile, and a reserve of 174 million tonnes at 1.45% rutile, the mine life at Sembehun is expected to be at least 13 years – and the company will back itself to extend that through further exploration.
After a peak of 43 cents just after listing, SRX has fallen back to 22 cents, with a low of 18 cents. But global supply of titanium minerals is depleting, just as demand lifts. Sierra Rutile is in a great position to benefit from this situation. Broker Morgans has a target price on the stock of 55 cents.
- Immutep (IMM, 30 cents)
Market capitalisation: $268 million
12-month total return: –3.3%
Three-year total return: 26.7% a year
Analysts’ consensus target price: 90 cents (Stock Doctor/Refinitiv, five analysts), 60 cents (FN Arena, one analyst)
Cancer-fighting biotech Immutep – named in honour of the Egyptian god of medicine, Imhotep – is one of the ASX’s most exciting biotech stocks. Immutep specialises in immuno-oncology, which is the field of developing immune-based therapies that enable and stimulate the body’s immune system to selectively recognise and attack cancer cells. Immutep’s lead product candidate, IMP321, is called eftilagimod alpha, or “efti,” and it is being developed for the treatment of cancer and auto-immune disease.
Efti is a soluble LAG-3 protein, based on the LAG-3 immune control mechanism, which is Immutep’s intellectual property. LAG-3 is considered one of the most promising targets in immuno-oncology: it is a protein molecule that can identify cancer cells to regulate immune responses, allowing patients to fight the disease using their own cells.
Efti is under evaluation for a variety of solid tumours including non-small cell lung cancer (NSCLC), head and neck squamous cell carcinoma, and metastatic breast cancer. In May, Immutep got approval from the US Food & Drug Administration (FDA) to move ahead with its late-stage clinical plans to treat first-line NSCLC, in combination with anti-PD-1 therapy. (PD-1 is a protein found on T cells – a type of immune cell – that helps keep the body’s immune responses in check: when PD-1 is bound to another protein called PD-L1, it helps keep T cells from killing other cells, including cancer cells.) First-line means a drug that is the first choice for treating a particular condition.
Immutep announced that efti, in combination with MSD’s anti-PD-1 therapy Keytruda, had achieved “robust initial overall survival in first-line NSCLC patients in the Phase II TACTI-002 trial.
Also in May, Immutep safely dosed its first patient at a European clinical site for its integrated Phase II/III AIPAC-003 trial to treat metastatic breast cancer. The trial is evaluating efti in combination with the standard-of-care drug, paclitaxel, for the treatment of metastatic breast cancer.
Immutep is well-funded, having raised $80 million from shareholders and institutional investors in early June. The drug is well positioned to improve clinical outcomes from standard-of-care chemotherapy: because it is a combination therapy, the route for efti to expand is through boosting the effectiveness – and the market dominance – of anti-PD-1 ‘blockbuster’ drugs such as Keytruda, in large oncology markets.
The company has three other assets based on the LAG-3 intellectual property: one, IMP761, being developed inhouse like efti, and the other two, LAG525 and IMP731, licensed-out, to Novartis and GSK respectively, with eventual potential milestone and royalty revenue.
Immutep has a clear path to market and is a highly exciting stock.
- Aerometrex (AMX, 30 cents)
Market capitalisation: $28 million
12-month total return: 36.4%
Three-year total return: –40.4% a year
Analysts’ consensus target price: $1.09 (Stock Doctor/Refinitiv, one analysts), $1.09 (FN Arena, one analyst)
Aerometrex is a geospatial tech company that specialises in aerial mapping, offering aerial photography and mapping, LiDAR (light detection and ranging, three-dimension (3D) modelling – the company says it is the “world leader in high-resolution 3D modelling” – as well as orthophotography (scale-corrected 2D aerial imagery maps), digital terrain models (DTMs), digital surface models (DSMs) and digitized 3D feature data for geographic information systems. and aerial imagery subscription services.
It also offers MetroMap, an online aerial imagery data-as-a-service (DaaS) subscription service that gives users easy access to high-quality 2D imagery, 3D reality models and LiDAR-derived products. The company has 700 clients in Australia, including federal, state and local government; Aerometrex has recently begun working in the USA and Europe.
The company operates a nine-aircraft fleet, which it augments by charter if required, and serves both business and government customers across areas such as infrastructure, engineering, construction, environment & disaster management, transport and logistics, and energy and utilities.
While Aerometrex’s revenue can be lumpy, it is demonstrating a growing base of annual recurring revenue (ARR) and repeat client wins in project work, showing that its product offering is valuable and competitive in the market. It has big opportunities in the emerging 3D dataset industry, on the back of the quality and realism of its imagery and has growing scope to sell its large historical datasets, as packaged products.
Aerometrex is expected to show falling revenue and a net loss in the soon-to-be-announced FY23 year, but broker Morgans predicts strong growth in revenue in FY24 and FY25, a maiden profit of $1.2 million in FY24, surging to $4.1 million in FY25; at earnings per share (EPS) of 4 cents, that prices AMX at a very attractive 7.5 times projected earnings for FY24. Morgans has a price target of $1.09 on the stock.
- Integrated Research (IRI, 36 cents)
Market capitalisation: $62 million
12-month total return: –4%
Three-year total return: –52.6% a year
Analysts’ consensus target price: 65 cents (Stock Doctor/Refinitiv, one analyst), $1.09 (FN Arena, one analyst), 65 cents (FN Arena, one analyst)
Listed in 2000, Integrated Research is an Australian developer and global provider of enterprise software to monitor and maintain critical IT infrastructure, payment systems and communication systems. IRI has five direct sales offices around the world, and serves more than 600 corporate customers, in more than 60 countries, through offices in the US, UK, Singapore, and Australia. More than 25% of its client base are global Fortune 500 companies, including eight of the top ten US telecommunications companies, seven of the top ten US banks, and six of the 20 largest Australian listed companies by market capitalisation.
The company’s roots are in enterprise software, but in the last two years it has moved into the subscription-based software-as-a-service (SaaS) model. It has three main businesses:
- Collaborate: for communications environments.
- Transact: for global payments networks; and
- Infrastructure: for business-critical network infrastructure.
The company says both its Collaborate and Transact businesses have “few direct competitors and high barriers to entry.”
In the first half of the FY23 financial year, IRI made a good start, with total sales and renewals (measured on a total contract value basis) up 22% on the first half of FY22.
Average contract length increased to more than four years, versus a low of 2.5 years in H1 FY22, largely because of a higher proportion of new sales and renewals of the Transact and Infrastructure solutions, which typically have longer durations.
Statutory revenue for the six months was up 19%, to $38.4 million, on the back of the TCV improvement; while EBITDA (earnings before interest, tax, depreciation and amortisation) rose 26% to $8.5 million, and net profit saw an 80% lift, to $3.2 million. The company’s balance sheet looks very healthy, with no financial debt, and net tangible assets of $60 million, including net cash of $9.3 million.
IRI has been a big disappointment to longer-term investors, being hammered by the macro environment of COVID and the customer shift to SaaS, which it has now joined. But investors coming to the stock now can make that work to their favour.
Bell Potter, the lone broker to contribute to the analysts’ consensus collated by both Stock Doctor/Refinitiv and FN Arena, sees earnings per share (EPS) doubling in FY23, to 1.8 cents, and tacking-on 61% growth in FY24, to 2.9 cents – pricing IRI, at 36 cents, at a very undemanding price/earnings (P/E) ratio of 12.4 times expected FY24 earnings. But the stock won’t be a dividend payer.
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