Growth Focus: Highfield Resources

by Patrick Taylor



Date of Data Capture: 24/02/2016
 
Name: HIGHFIELD RESOURCES LTD (HFR)     
      
Classification:Agricultural Chemicals
 
Current Price: $1.86
 
Market Capitalisation: $569M
 
Forecast EPS Growth: n/a
 
Gross Yield: 0%
 
Consensus Price Target: $2.45
 
# Covering Analysts: 6
 
Discount at Current Price: 32%
 
Price Target Trend: Increasing/Flat
 
Signal Time Frame: Long (Monthly) Short (Daily)
 
Trend Bias: Up/Flat (Monthly) (Weekly)

Indicators:
Short-term:Positive
Medium-term: Neutral
Long-term: Positive

Recommendation: Buy
 
Set up Notes:

·         HFR has been climbing the ladder to test its highs at structural resistance around $2.00 and we expect them to try again soon.

·         This overhead resistance may not break at the first attempt but expect a jump in price soon after it does.

·         Good momentum building here with a great correlation to the longer-term signal.

·         Support at $1.60 if it gets pushed back a bit, with $1.50 and $1.40 behind.
 









 
  Growth Focus: HIGHFIELD RESOURCES

Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.

Hoping for another serving from the ‘Dining Boom’ that has dished out great returns from agricultural stocks throughout 2015, we are taking a step back from the table to look at Highfield Resources (HFR), a potash mining company based in Spain. Recent strength in the food and farming sectors should provide fertile ground for agricultural chemical stocks and we believe HFR are well placed to reap their reward.

This is a pure growth gambit as HFR is still progressing its Spanish potash mine towards completion with first production scheduled for late 2017 and do not pay a dividend. They have a geographical advantage over many of their peers which should see them being the highest margin potash producer in the world (according to Argus FMB in an independent review).

While their deposit is world class with a long mine life, the key fact here is that a great deal of any success here will hinge upon the price of potash. That price has fallen from $900/T in 2008 to the current spot price of $290. Despite the cascading price for their underlying commodity the price of HFR has performed strongly, increasing 935% since listing at 20c in Feb of 2012 to today’s $1.86 – the same timeframe saw the price of potash dip by 42%. It is obvious that this stock has some interested observers and their recent collaboration agreement with Acconia Infraestructuras, one of Spain’s largest construction companies, brings yet more warranted attention.  

The trading history of HFR is written in bold and carries a general theme of great strength through major adversity which can only be a reflection of the quality of their Muga potash deposit. The stock is capable of enormous gains when it is running but is currently working its way out of a major consolidation that began back in May 2015 and almost cut the price in half. The pullback looks like it could be finishing soon with long-term signalling turning positive on the break above $1.60 resistance after falling from a high of $2.08, but with real structural resistance at the $2.00 level.

This same resistance ceiling should act as a psychological lure from here though breaking the barrier may take a few attempts before it is successful. This is not an investment for the risk averse but with a great asset, good price action, indirect exposure to a strong sector and well-correlated Buy signals we think this fertiliser stock has down the groundwork for further growth.  
 
 

Disclaimer

This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of RM Capital Pty Ltd (Licence no. 221938). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.