Growth Focus: Orocobre Ltd (ORE)

by Patrick Taylor

Date of Data Capture:15/2/2018

Classification: Lithium Producer

Current Price: $6.73

Market Capitalisation: $1.68B

Forecast Sales Growth: 58.77%

Yield Estimate: 0%

Consensus Price Target: $7.91

# Covering Analysts: 12

Discount at Current Price: 17.53%

Price Target Trend: Increasing

Signal Timeframe: Quarterly-Weekly-Daily

Trend Bias: Up-Flat / Long-Medium
Short-term: Positive-Neutral
Medium-term: Neutral-Negative
Long-term: Positive-Neutral

Recommendation: Buy

 Focus: Capital Growth

Set up Notes:

·   We view the recent battery commodity sell off as an excellent opportunity to pick up some bargains and with Toyota Tushu buying $282M shares of ORE at $7.50 just last month this seems like a great place to start.

·   With the EV boom picking up speed we are focussed on the very strong forecasts showing aggressive gains across sales, earnings, margins and profits set to carry through to 2020.

·   Technically strong ORE didn’t dip as much as many of their sector peers but still show an excellent discount to steeply rising price targets.

·   Positive fresh short-term signalling should combine well with longer-term strength with good upwards momentum rebuilding here.

Growth Focus: Orocobre Ltd (ORE)

Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.
When we analyse the market, we put the fundamental data and the technical structures of many companies through a battery of tests – this week they connected us to lithium producer Orocobre Ltd (ORE). With the general market recovering from the recent dip we think they are set to make the best of current conditions and could be ready to charge ahead.
Founded in 2005 and headquartered in Brisbane, Orocobre does all of its real business in Argentina where it holds potash, borate and lithium assets. It is really the latter we are here for as the global phase-shift to electric vehicles (EV) gathers momentum, with many top-tier car manufacturers committing more and more funding towards this emergent and disruptive technology. This increasing demand needs greater supplies of lithium and ORE is well placed to deliver it, with production expansion plans pushing ahead right now.
Performance last year was very strong and we see continued strength forecast through to 2020 on the back of increasing sales, high margins and growing profits, with majority positive analyst sentiment offering price targets much higher than today’s level. That should be good news for Toyota Tushu (the trading support/supply company for Toyota Motors - the 3rd biggest global car company) that recently upped their stake in Orocobre by almost $300M at $7.50 just last month. The investment paves the way for their phase 2 expansions, which could really give their earnings growth a jolt and transform their potential even higher.
The recent fears about oversupply seem destined to be reversed, following fresh strength in lithium commodity pricing and lithium stock prices have begun heading higher again. There could be more volatility to come, but here we are happy to follow strong longer-term signalling and focus on strength within an already strong sector, and compared to sector peers the weakness of Jan 2018 failed to bring the price much closer to earth, and really offers a chance to enter the stock cheaply as it recharges it’s uptrend closer to support. With new sales records for EV being set, with the benefits of big electrical-grid-connected batteries becoming clearer and with China emerging as a battery powerhouse, we think you should switch on to Orocobre as we see plenty of positives that should spark your interest.



This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). 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.

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