Resources returns lead rebound

The stock market has decisively turned back toward resources companies, according to total shareholder return data compiled for the annual BNiQ Search Engine analysis.

Among the 30 Western Australian stocks that comprise the BN30 index, three of the top performers are in the battery metals business, with lithium miner Pilbara Minerals posting second place with a one-year TSR of 128 per cent.

That metric measures the impact for investors of share price movements, dividends and buybacks, and is generally considered the best indicator of a stock’s performance.

Nickel producers Western Areas (70 per cent TSR) and Independence Group (64 per cent TSR) ranked sixth and ninth respectively, while  lithium-focused Mineral Resources ranked 11th with a 53 per cent return.

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All trailed medical cannabis hopeful AusCann Holdings, which posted a one-year TSR of 196 per cent.

AusCann’s share price nearly tripled from mid-December to mid-January after it received a licence to manufacture in Tasmania and started planting its second crop in Chile.

Resources players dominated the top 10 for TSR among  WA companies with market capitalisations of more than $500 million – seven were miners and the remaining three heavily exposed to the sector as contractors.

Similarly, across all stocks regardless of size, nine of the top 10 businesses were in the resources space.

Last year, by comparison, five of the top 15 companies on this measure were backdoor-listed plays in technology or health.

Battery minerals

The strong support specifically for battery-mineral related businesses comes as many large car manufacturers indicate interest in a shift to electric cars.

It also reflects the growing capability of batteries to store renewable power on a utility scale.

For Pilbara Minerals, as an example, some of the biggest share price jumps came in September and October last year, at the time Chinese automaker Great Wall Motors backed the business’s expansion plans for the Pilgangoora project and signed on for an offtake agreement.

Other drivers for Pilbara were its announcement around the same time that it would investigate an expansion of its mine to have a capacity of 5 million tonnes per annum, up from the 2mtpa plant that began production in June.

Although not listed on the BN30, Altura Mining, which is constructing a project a few hundred metres away from the Pilbara operation, outperformed its neighbour, with a one-year TSR of 160 per cent.

Altura was the fifth-strongest performer among stocks with a market cap above $500 million.

Its big share price run was concurrent with Pilbara’s as it announced a project funding package, reserve upgrades and positive project development updates.

Another lithium stock, Galaxy Resources, featured in ninth spot with an 83 per cent one-year TSR.

Battery-driven demand also boosted nickel miner Western Areas, which performed well in April when it began early works on the Odysseus project and announced it had completed its mill recovery enhancement project.

Among all WA companies with a market cap of more than $500 million, Western Areas was 12th.

It should be noted that exposure to the battery space did not guarantee share price performance, however.

A bag of eight smaller graphite stocks followed by Business News found five companies that had negative one-year TSR, with that subset averaging a negative return of 34 per cent.

A series of other resources businesses in the BN30 posted strong returns.

Canning Basin-focused oil and gas producer Buru Energy ranked third among BN30 companies with a one-year TSR of 96 per cent.

Buru was still down 23 per cent when measured over a five-year period, however.

The company performed well in spring of 2017, as it commenced a drilling program and restarted production at the Ungani well.

Copper producer Sandfire Resources featured seventh with a one-year TSR of 68 per cent, and gold miner Northern Star Resources posted a 56 per cent one-year return.

Seven Group Holdings, which is exposed to resources through ownership of yellow goods dealer WesTrac, achieved a one-year TSR of 79 per cent.

By comparison, Channel 7 owner Seven West Media, which is itself partly owned by Seven Group Holdings, lifted only 21 per cent.

Numerous major deals have been on the radar for Seven Group, including the purchase of the remainder of Coates Hire, the sale of WesTrac China, and Beach Energy’s (in which Seven holds a 23 per cent stake) acquisition of Lattice Energy.

In mid-May, the company announced a lift in earnings of 25 per cent above guidance.

FBR, formerly known as Fast Brick Robotics, ranked fifth among BN30 businesses, with a return of 71 per cent over the year.

The majority of that gain came on August 16, when the share price jumped around 50 per cent to 26.5 cents after the business signed an agreement with the government of Saudi Arabia.

FBR is the vehicle for the Hadrian X bricklaying robot, which the Saudi government wants to use to build 50,000 homes by 2022.

In a sign of the strength of WA businesses generally last year, Woodside Petroleum found itself in the middle of the BN30 pack at 15th place despite a one-year TSR of 25 per cent.

That has come as the oil price rose dramatically, to be about 60 per cent higher across the course of the financial year.

Woodside announced a $2.5 billion capital raising earlier this year to fund the acquisition and development of the Scarborough LNG project.

The company’s share price has remained strong since, closing at $30.74 the day before the raising was announced, and finishing the year at $35.46.

Woodside paid an interim dividend of around 60 cents per share.

The state’s biggest business, Wesfarmers, performed well, with a one-year TSR of 30 per cent.

That was during a period of huge change, with Wesfarmers announcing it would ditch its investment into UK business Homebase for a large loss and would also spin-off retail giant Coles.

About 60 per cent of Wesfarmers’ deployed capital is in Coles, although it only accounts for 34 per cent of earnings.

Wesfarmers shares started the year around $40 and finished just below $50, while the company paid a $1.20 per share dividend.

Only five of the BN30 businesses posted negative TSR, with car dealer Automotive Holdings Group, miner Fortescue Metals Group, technology play Empired, education provider Navitas and manufacturer Fleetwood Corporation each in red territory.

Fortescue has suffered as prices for lower grade and high-grade iron ore diverge, driven by changing demand in China.

To put all that in perspective, the ASX200 increased about 9 per cent in the 2018 financial year, not accounting for dividend payments or share buy-backs.

But it looks like most large WA businesses outperformed the market.

Strong year

Other reasonably big businesses that scored strong returns included OM Holdings, which is not listed on the BN30 but was the best-performing stock among those with a market cap of more than $500 million.

Singapore-based OM, which mines and processes manganese, posted a one-year TSR of 629 per cent, driven by a dramatic rise in its share price.

The first big lift came in August last year, when it jumped nearly 70 per cent in four days.

That earned a query from the ASX, although the company replied that it was not aware of any information unreleased to the market.

A few weeks later, the business reported an increase in revenue driven by higher manganese prices, while a November spike in its share price also earned a query from the ASX.

In second place in the plus-$500 million market cap group was Subiaco-based New Century Resources, which is hoping to bring the Century Zinc mine near Mt Isa back into production, with a one-year return of 572 per cent.

Two contractors featured next, with Emeco Holdings third on 268 per cent and NRW Holdings at 163 per cent.

Both businesses were hit hard by the end of the resources boom, with Emeco in particular going through a restructure in late 2016 and early 2017.

Other strong performers included Saracen Mineral Holdings, a gold miner headed by 40under40 first among equals winner Raleigh Finlayson, which was in fifth place with a one-year TSR of 87 per cent.

Only three Perth-based businesses with a market capitalisation of more than $500 million tracked by the BNIQ Search Engine posted negative one-year TSR results – AHG, Fortescue and Navitas.

Westgold Resources (1 per cent), Ausdrill (2 per cent), Austal (4 per cent) and ALS Industrial (4 per cent) were in the next group of softer-performing stocks.

At the smaller end of the market, resources businesses again stood out, with Tungsten Mining first, returning 1,940 per cent in one year.

King River Copper and Kogi Iron also bagged big gains.

There was one business among the top 10 not involved in resources, Mount Pleasant-based mobile application developer Myfiziq.

Shareholders in that business had a rollercoaster year, with shares opening the year at 6.5 cents and peaking in January at $1.56.

Myfiziq closed the financial year at a share price of 37.5 cents, however.

Part of the dive was in late March and early April, when the company came under ASX scrutiny for previous announcements about revenue from its partnership agreements.

Companies that lost value year on year included human resources software provider Tikforce, which had a one-year TSR of -90 per cent.

A big dive started in March, with the business in and out of trading suspensions in the ensuing weeks.

The ASX wrote to the business sounding the alarm that Tikforce’s cash balance was $176,000 with an outflow predicted in the following quarter of $758,000.

Tikforce stitched up a $2 million convertible note facility with Regency Corporate but continued to hit trouble with convertible note holder Alignment Capital starting legal action in April.

In early July, there was a motion to remove one of the company’s directors.

Also having a tough year was Tech Mpire, with a one-year TSR of -88 per cent.

Tech posted a $3.9 million loss and restructured its North American business.