Weekly Reports | 10:00 AM
Three small/micro cap companies capturing secular trends across the energy transition markets, the demand for gold, copper and critical minerals.
- Renewables complexity towards net zero and trading lifts demand for Energy One's software suite
- New Murchison Gold's Crown Prince project cash flow to fund a bigger Garden Gully story
- America West Metals targets Storm Copper upside and strategic West Desert indium leverage
By Danielle Ecuyer
This week's quote comes from Carl Ang, MFS Investment Management
"Recent inflation and activity data like GDP and credit growth have generally been on the stronger side, challenging the RBA’s assessment that policy remains a little restrictive.
"We expect the RBA to stay on hold at the December meeting but express openness to a rate hike should the economy strengthen materially from here.
"The base case remains for a prolonged hold by the RBA as the labour market gradually softens.
"However, the balance of risks are clearly tilting towards a rate hike, likely sometime in the second half of 2026 at the earliest."
Energy One, including ASX300 potential
Canaccord Genuity initiated coverage of Energy One ((EOL)) a specialist provider of software services for companies involved in the wholesale energy, environmental and carbon markets.
The company has grown through strategic M&A across Australasia, UK/Europe and has expanded from a software business concentrating on industrial and commercial billing systems to focus on energy trading and risk management systems (ETRM).
The analyst notes with over 450k global customer installations, Energy One services nearly 50% of the Australian power generation market. Europe/UK are standout growth opportunity markets over the medium term.
The expanding renewable energy mix and changing market pricing structures are positive macro tailwinds. From a competitive position, Energy One is not the largest company but the analyst views it as one with “deep domain expertise” in a market segment where M&A and private equity are active.
Over 30% of revenue is generated by ETRM which assists generators, retailers and traders manage physical and financial energy positions across all aspects of the trading suite, substantially improving risk management.
Energy One has several offerings for the domestic and UK/EU markets in the physical trading segment.
The three key factors underpinning Canaccord’s positive stance on the company are:
- Regulatory changes in the European market are expected to underpin upgrades and new customer activity across FY26 and FY27.
- Major end markets are experiencing significant structural changes and thematic tailwinds in the move to net zero and rising share of renewable generation.
- If the company can achieve its cash earnings (EBITDA) margin target of 30% versus 17.5% currently around FY27, this infers a EPS compound annual growth rate of 57% organic while management continues to be on the lookout for M&A opportunities. Management is also targeting recurring revenue growth of 15-20% p.a. on or around FY27.
At a current market cap of circa $550m, Energy One has scope to ascend to the ASX300 over the next year with ongoing earnings growth, positive accretive acquisitions and possible improvements in free float.
The stock is rated Buy given the recent pullback in the share price with a $22.94 target price. The broker does not believe there are reasons for the PEG valuation to be at a discount to its closest peers Gentrack Group ((GTK)) and Hansen Technologies ((HSN)).
Emerging gold producer
Taylor Collison initiated coverage on New Murchison Gold ((NMG)), described as an early-stage Western Australian gold producer concentrating on the 100% owned Garden Gully Gold project in Murchison, near Meekatharra.
The main asset is the high-grade Crown Prince gold deposit which started producing gold in mid-2025. Strategically, management is aiming to speed up Crown Prince to steady state production by concentrating on a single open pit ore reserve, amounting to 0.89Mt at 4.8g/t for 140koz.
There is a 2.5-year timeline producing around 56koz, and ore is being mined at over 50kt per month and stockpiled by grade for on-site crushing and sampling prior to being trucked to Westgold Resources’ ((WGX)) Bluebird plant under a toll-treatment agreement.
Westgold enables New Murchison to move swiftly into production removing the need for capex investment on processing infrastructure.
The broker estimates the open-pit stage is forecast to generate around $340m in post-tax cash flow across a 30-year mine life depending on the gold price.
The ore purchase agreement with Westgold means New Murchison is paid on recovered gold ounces net of treatment, haulage and processing charges.
The cash flow generated from Crown Prince will be deployed to fund additional open pit and underground development, as well as further exploration regionally across the Garden Gully project.
Commentary posits Crown Prince’s proposition as a high-grade feed delivers robust margins and makes New Murchison an attractive supplier to nearby mills seeking to raise the blended grades and better returns.
In its first quarter, 3.2koz of gold sales were achieved. Open pit mining produced 9.9koz at 1.92g/t of which 7.7koz grading 3.8g/t was sold to Westgold under the agreement.
The 2.4koz of low-grade stockpiles at 0.7g/t is considered as providing flexibility for the back end of life of mine, the analyst explains.
The underground scoping study for Crown Prince is viewed as the most significant technical milestone and is due 2Q2026. Taylor Collison anticipates it to test gold continuity below the pit shell and offer a realistic underground operation.
New Murchison is only expected to commit its resources once they come in above 300koz, which the analyst believes will be achieved and thus this has been included in the EV/oz-based valuation.
The stock is rated Speculative Buy with a 4.1c target price.
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