OMH's Recent Price Surge Has Momentum to Rally Higher

Investors are weighing how much further a rally in value/cyclical/commodity stocks can run, as expectations for greater fiscal spending under a Democrat-controlled Congress add momentum to the surging shares of companies that took a beating for most of 2020:

1) Pent up demand is slowly being unwound and over the next year, is probably going to result in one of the strongest growth in 20 years

2) Break through in vaccines against Covid 19

3) Value stocks with low P/B, P/E has stood out in a broader rally recently

OMH is one of such under-valued, under-loved stocks in 2020 as stock prices plunged from a high of $1.70. The price surge momentum is picking up nicely over the last month and will continued as the fundamentals are already in place to move its share price back to $1.70:

1) Low PE of only 5x (Forward 2021/2022) vs Press Metal 72x (Press Metal’s valuation is 20x bigger!!!) - a gross mispricing of the capital markets.

2) Commodity sector to go into multi-year super cycle (Goldman Sach)

3) Ferroalloy prices riding on the high (FeSi US$1,300-1,400) as due to surging demand and constraint supply (China pollution/power curb to smelting industry). OMH making gross margin of 30-40%, this is equivalent to its peak earning in 2018 whereby it achieves net profit of A$160m

4) Positive stock sentiment globally with rotation play in undervalued/commodity stocks going into 2021/2022

5) OMH share prices is still way below its recent high of $1.70, it is still a drop of 60%! When you compare with other peers, its is way under priced. (Lynas is up 60% again its recent high, Press Metal is up 40% against its recent high).

6) Bursa listing should put OMH in the spotlight and on the radar of Malaysia/Asian focus fund managers.

I believe OMH’s recent price surge momentum is still intact and it should catch up to it’s recent high of $1.70 really soon, optimistically by 1H2021 given its recent run of alloy prices underpinning its fundamental strength and growth.