A WA industrial company with operations as far afield as Kazakzstan, Queensland and Qatar has emerged as a favourite among stockbrokers looking for good value amid the resources boom.
After being asked to pick their best five WA stocks under $2, the brokers' most selected stock was the Malaga-based, international scaffolding operation PCH Group, which yesterday announced a 46 per cent rise in annual net profit.
Other popular stocks included emerging gold miner Avoca Resources, which is preparing to mine the old Higginsville operation worked through by Resolute and Samantha.
Avoca, which has enjoyed considerable exploration success at Higginsville, plans to have ore toll treated from the rich Trident deposit by the end of the year and use the cash flow to underpin the development of a company-owned plant.
Hartleys broker Ian Parker said Avoca was an emerging producer with the potential to increase its resources at Higginsville, while Strachan Corporate chief Peter Strachan said mine development would provide the cash flow to support other exploration activities.
Avoca shares have rallied from 38 to $1.27 over the past year amid market interest in Higginsville, which boasts a gold resource of 1.1 million ounces at 4gpt.
Reflecting the State's minerals and petroleum focus, the majority of the picks were heavily focused on the resources sector either in exploration, production or associated service sectors.
DJ Carmichael & Co dealer Mike Munro said WA was becoming a major venture capital centre for investment in the resources sector and particularly for exploring and developing projects around the globe.
"If you have an idea and you want to raise money for it, you don't set your company up in NSW, Queensland or Victoria," he said.
"Perth is where the action is and the place you can get deals off the ground."
M~r Munro's picks included the Queensland copper project developer CopperCo, which is hoping to have its Lady Annie copper deposit in production by the middle of year, and the Sunshine State uranium hopeful Summit Resources.
Investors in Summit, whose shares have jumped from 75 to $1.50 in the past 12 months, are punting on the Peter Beattie-led Queensland Government being the nation's first State Labor administration to back away from the party's no new uranium policy.
Sentinel Securities chief Norman Robinson said Summit was probably first in line among Australian explorers to have a mine.
Mr Munro said it had the biggest uranium resource in Australia outside Rio Tinto and BHP Billiton.
Atlas Iron also rated two mentions from the panel of brokers, with Montagu Stockbrokers adviser Rohan Edmondson describing it as an aggressive explorer that had built a resource of 7.2 million tonnes at 57.2 per cent of direct shipping iron ore.
The group is aiming to export about one million tonnes a year from early 2008.
Another stock to rate multiple mentions was Mermaid Marine, which services the State's booming oil and gas industry. Bell Potter Securities wealth management chief Heather Zampatti said Mermaid's business providing spot servicing to vessels remained strong and had a buoyant outlook.
It was also well placed to benefit from significant offshore oil and gas activity on the North West Shelf.
Mr Parker said Mermaid, whose shares have risen from 42 to 68 over the past three months, was
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highly leveraged to the North West Shelf.
PCH is also hoping to benefit from a booming petroleum sector and has a major scaffolding contract for the Woodside Petroleum-operated fifth LNG train.
But the full revenue effects of that project and a major product in Singapore are not expected to kick in until next year, and the group has other major projects in WA and in the Caspian Sea that are winding down.
PCH ~managing director Jamie Cullen said yesterday the group had expanded into new markets, including Victoria, Queensland, Qatar and Thailand, and this was expected to provide benefits in 2007-08, when growth would resume.
Net profit rose from $9.16 million to $16.16 million in 2005-06, while sales surged from $81.5 million to $121.1 million. "We are building into the next decade, not just having a thumping 2007," he said.
After releasing the result and giving the warning about a growth slump this financial year, PCH shares fell 7 to 63.
The stock peaked above $1 in March after rallying from around 66 a year ago.
Patersons Securities director Murray McGill said PCH's forthcoming growth hiatus had been well flagged to the market and the stock still had excellent growth potential.
He said it was a typical example of a company that had benefited from WA resources boom.
Mr Robinson said investors should look beyond short-term weakness and seek genuine growth stocks.
"Buy when things are down, not when they are up - as long as there is a long-term picture there," he said.
PCG Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
