Source: Adrian Day
October 26, 2023 (Investorideas.com Newswire) Global Analyst Adrian Day looks at seemingly weak results from two of his core holdings, in each case with a brighter outlook and an opportunity to buy.
Nestle SA (NESN:VX; NSRGY:OTC) reported lower-than-expected quarterly sales and mixed results overall. For the nine months, organic growth was almost 8%, but the strong appreciation in the Swiss franc had a negative impact on sales, and what Nestle calls "real internal growth" was slightly negative.
Organic growth was broad-based across geographies and segments, driven largely by pricing, with the largest contributor again, pet care, with double-digit growth. Overall, net divestitures decreased sales by a little less than 1%. The company said it was confident that real internal growth would turn positive again by year-end and drive growth going forward.
The company continues to invest in its health division. One innovation is the plan to create products for users of new weight-loss drugs like Ozempic after concern that the widespread use of these drugs will affect sales in the convenience food sector. The new products are intended to ensure that drug users receive the necessary nutrients.
The stock fell on the results, now trading at a 52-week low. Valuations are in line with the sector, but with a yield of over 3%, a 10-year high, Nestle is a Buy.
Altius' Revenue Down, but Much Was Expected
Altius Minerals Corp. (ALS:TSX.V) reported quarterly revenue of $17.9 million, largely in line with forecasts, though the potash revenue declined from over $6 million in the previous quarter to $3.9 million, lower than expected.
Base metals revenue, which saw a more modest decline, was also lower than expected. On the plus side, iron ore revenues increased nearly 50% to $3.5 million, while renewal energy revenues also doubled to $2.6 million. The full year will be down from 2022, as expected, due largely to the closure of the 777 Mine, the end of thermal coal revenue, and lower potash prices from the spike after the Russian invasion of Ukraine.
Altius also updated its Project Generation business and junior equities portfolio, which increased in value to $44.6 million, up from $41.8 million at the end of the last quarter. There were no material changes to the portfolio. Altius ended the quarter with almost $25 million in cash (excluding the cash held at Altius Renewables) and $94 million available under its credit facility.
If you do not already own Altius, you can buy here.
Midland Following Up on Positive Nickel Results
Midland Exploration Inc. (MD:TSX.V) reported assay results from drilling to follow up on the new nickel-copper discovery (called Santos) on the Tete Nord property, under option to Rio Tinto. Drilling was intended to test the thickness of the zone discovered in April, and results were deemed satisfactory. The zone remains open in all directions.
A new drilling campaign, set to start next month, will consist of four drill holes to test new targets identified at depth. With multiple partners, several active programs, strong management, and a solid balance sheet, Midland is undervalued. In the near term, there may be some tax-loss selling ahead, while longer term, there may be some fatigue in the name. That's nothing that a solid discovery won't negate. In the meantime, the stock is moving into stronger hands.
Midland is a Strong Buy at this price.
Revised Beedie Facility Ahead of Nova Acquisition
Nova Royalty Corp. (NOVR:TSX.V) said that Metalla had amended its convertible loan facility with Beedie in connection with Metalla's proposed acquisition of Nova. The amount of the existing convertible loan will double to CA$50 million.
Buy.
TOP BUYS in addition to the above include Gladstone Investment Corp. (GAIN: NASDAQ), Hutchison Port Holdings Trust (HPHT:Singapore), Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE), and Lara Exploration Ltd. (LRA:TSX.V).
We are holding off adding to positions in the senior gold companies, given the recent strong rallies. Although, as we discussed last week, the rally in gold is only partly due to the Israeli war, nonetheless, there is a probability that gold and the stocks will retrace at least some of the move if the situation there settles down.
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