Ann: Becoming a substantial holder, page-2

Sentiment is improving of late, some positive commentary coming through:

1) What higher rates mean for Aussie equities: 3 stock prices that will still stack up - Anton Tagliaferro | Livewire (livewiremarkets.com)

The global leader in explosives remains out of favour, despite clear signs of a recovery in mining volumes and explosive prices. Orica has faced a tough couple of years due to Covid disruptions, which have impacted mining output and explosives demand. This led to falling explosive volumes and prices and low plant utilisation which significantly impacted Orica’s margins and profits.Looking forward though the outlook is positive. Commodity prices have risen substantially and many are at, or close to, record highs. In addition to this, Covid disruptions are now reduced and mining volumes are expected to recover strongly during 2022. Explosive prices have also been rising sharply recently from lows of $500/t to $700/t, which is above pre-Covid levels.In addition, during the pandemic slowdown, Orica has continued to invest in its business, particularly in its technology and software products, which have grown substantially. And while these products only represented a relatively small percentage of Orica’s profits pre-Covid, they could potentially represent more than a quarter of the company’s profit in three years’ time. Despite all this, the share price is still only 15 % above its Covid lows. We see substantial upside to the company’s cash flows, dividends and share price over the next 2-3 years.

2) Dogs of the ASX in 2021 - Hugh Dive | Livewire (livewiremarkets.com)

For 2022 we are picking Orica and Lend Lease as the candidates for a strong rebound in 2022. Orica's fall in 2021 was attributed to decreasing thermal coal volumes which resulted in reduced demand for explosives. However, in 2022 the outlook for coal looks robust, particularly in light of major exporter Indonesia banning coal exports in January 2022. This move by the Indonesian government is being made to divert coal to domestic power producers and will be beneficial for Australian coal miners and hence Orica. Lend Lease looks like an attractive takeover candidate in 2022, with an attractive $110bn global development pipeline, and because it currently trades on a cheap multiple. Additionally, Lend Lease is a more palatable and cleaner acquisition target since exiting its volatile engineering business.