Lynas Rare Earths Ltd (ASX: LYC) shares could have market-beating potential.

That’s the view of analysts at Ord Minnett, which believe the rare earths producer’s shares are being undervalued by the market.

What is the broker saying about Lynas shares?

According to a note, the broker has described the mining company as “the safe way to play the sector ” for investors.

This is largely because rare earths prices are currently at depressed levels. And as history shows, it is often best to buy miners at the bottom the cycle.

In addition, Ord Minnett highlights its position as the only significant producer of rare earths outside China. This makes it the “blue-chip” of the rare earths producers. It commented:

Lynas Rare Earths is an integrated source of rare earths from mine to customer. Lynas has a portfolio of aligned assets to explore, develop, mine and process rare earth minerals. These are the Mt Weld project and the Lynas Advanced Materials Plant (LAMP). The main asset of Lynas is the Mt Weld rare earths deposit in Western Australia. REO prices are depressed, which makes it the right time to buy in cheaply.

Most REO companies are still explorers and would-be developers. There is only one significant producer in Australia and the world ex-China – Lynas, at its LAMP in Malaysia. ‍ Lynas is the blue-chip stock of rare earths companies. It defied years of low prices by getting costs even lower and raising product quality. Now it is the non-Chinese producer of critical REOs for the energy transition. The Lynas multiples are punchy but deserved. It is the safe way to play the sector. ‍

Big returns

The note reveals that Ord Minnett currently has a buy rating and $8.00 price target on Lynas shares.

Based on its current share price of $6.55, this implies potential upside of 22% for investors over the next 12 months.

To put that into context, a $10,000 investment would become approximately $12,200 if the broker is on the money with its recommendation.

It is also worth noting that Ord Minnett is not alone with its bullish view on the stock.

For example, last week, Bell Potter put a buy rating and $7.80 price target on its shares. It notes that “with risks mounting to the upside for rare earths we retain our Buy outlook.”

Elsewhere, Goldman Sachs has a buy rating and $7.50 price target on its shares. Earlier this week, the broker declared its shares as “undervalued” based on its long run rare earths price forecast.

The post Top brokers agree that Lynas shares are ‘undervalued’ appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The S&P/ASX 200 Index (ASX: XJO) share Brickworks Limited (ASX: BKW) has several appealing factors that make it a great investment opportunity right now.

The company is facing several headwinds at the moment, including high interest rates, inflation, and higher manufacturing costs.

But there are a number of reasons why I think Brickworks shares can deliver strong returns over the long term at the current price, particularly once interest rates start coming down.

Here’s why I’m bullish about Brickworks shares and thinking about buying more for my portfolio.

Population growth

Brickworks’ operating businesses produce building products in Australia and the United States. It’s the biggest brickmaker in Australia and the northeastern US. In Australia, it also produces roofing, masonry, timber battens, cement, and specialised building systems.

The populations of both the US and Australia continue to climb, requiring more dwellings. And larger populations will no doubt add to the long-term demand for products from Brickworks’ businesses.

Construction can be a cyclical industry, so I think now is a good time to consider the business while sentiment is weaker. If interest rates have materially reduced in a couple of years, conditions for the ASX 200 share could be much stronger then.

Ongoing underlying growth

Brickworks owns around a quarter of investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and half of an industrial property trust alongside Goodman Group (ASX: GMG).

Both of these assets are seeing longer-term growth in their operational profits, cash flows, and payments to Brickworks, which is driving up their value.

As the values of Soul Patts and the industrial property trust increase, Brickworks’ underlying value lifts, too.

If Brickworks’ balance sheet‘s value goes up over time, this can help increase how much the market is willing to pay for Brickworks shares.

Big asset discount

I love being able to buy businesses that are at a big discount to their underlying assets.

This ASX 200 share has significant asset backing across its building products manufacturing, the land it owns, the industrial and manufacturing property trusts, and the Soul Patts shares, though it also has a (relatively small) level of debt.

Every six months, Brickworks tells the market its underlying (inferred) asset backing. At 31 January 2024, the business had $36.68 of inferred assets per share. The Brickworks share price is at a 27% discount to the January 2024 figure, though the Soul Patts share price regularly changes to alter this discount.

In my opinion, it’s a very appealing valuation discount.

The post 3 reasons to buy this ASX 200 share like there’s no tomorrow appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, Goodman Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Clinuvel Pharmaceuticals Limited (ASX: CUV) shares are having a strong finish to the week.

In morning trade, the ASX 300 healthcare stock is up a sizeable 12% to $17.00.

Why is this ASX 300 healthcare stock rocketing?

Investors have been buying Clinuvel’s shares this morning after it announced the final set of results from its CUV151 study. It is evaluating the DNA-repair capacity of afamelanotide on skin of healthy volunteers exposed to ultraviolet (UV) radiation.

This study was undertaken at Salford Royal Hospital in Manchester. It is a centre globally acknowledged for its expertise in assessing the effects of UV-induced skin damage.

The results from CUV151 were presented overnight at the British Association of Dermatologists meeting in Manchester.

According to the release, the analysis of biopsies from seven patients with fair skin types taken prior to, and six days after afamelanotide treatment, illustrated that without afamelanotide, UV-irradiation resulted in 625 differentially expressed genes (DEGs) in comparison to non-irradiated skin.

However, with afamelanotide, the DEGs between irradiated versus non-irradiated skin reduced to 183. This is a factor 3.4 less DEGs (p<0.05).

Management notes that the genes evaluated are found to be crucial in the regulation of DNA repair and inflammatory reactions following solar and UV exposure.

What does this mean for CUV151?

The release highlights that for the overall XP-DNA Repair Program, the RNA sequencing results indicate that critical genes expressed after UV-damage can be positively affected with afamelanotide treatment.

For the general population, and specifically individuals with a fair skin type who easily burn in the sun, the results indicate that afamelanotide can reduce oxidative damage and inflammatory reactions after sun exposure and skin damage.

The ASX 300 healthcare stock’s chief scientific officer, Dr Dennis Wright, was pleased with the results. He said:

The results from RNA sequencing complement the earlier results we saw from immunohistochemistry, in that afamelanotide consistently seems to assist repair of UV-damaged DNA in the skin.

Dr Wright revealed that the company plans to confirm these results in a final study. He said:

The significance of these results evaluating the use of afamelanotide in reducing oxidative and inflammatory damage caused by UV is high for those at high risk of solar damage, sunburn and skin cancers, hence we will repeat and confirm these results in a final study.

Despite today’s strong gain, the Clinuvel share price remains down approximately 6% since this time last year.

The post Why is this ASX 300 healthcare stock surging 12% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Bank of Queensland Ltd (ASX: BOQ) share price underperformed the S&P/ASX 200 Index (ASX: XJO) during the last year. In the 12 months to 30 June 2024, the BOQ share price rose 5.8% while the ASX 200 went up 7.8%.

BOQ has a different financial year from the regular Australian tax year. The Bank of Queensland’s financial year runs to 31 August each year, so there are still a couple of months left to run.

We recently heard from the bank about how it performed in the six months to February 2024, which saw a number of financial measures go the wrong way. The market also heard several interesting comments about the bank’s outlook.

Earnings recap

BOQ reported that its HY24 cash earnings after tax fell 33% to $172 million. The ASX bank share reported its housing loan portfolio saw a 1% decline in the second half of FY23 or $411 million in dollar terms. It said a continued focus on economic return resulted in a contraction of the housing portfolio.

The company said its net interest margin (NIM) dropped by 3 basis points (0.03%) – compared to the second half of FY23 – to 1.55%. That means it’s making a smaller amount of profit on each dollar it lends.

BOQ blamed “competitive pressures” for its lower margins and the weak lending growth performance. Cash operating expenses also grew by 6% year over year to $524 million.

BOQ also reported that its cash return on equity (ROE) dropped to 5.8%, down from 8.4% in the first half of FY23.

Thankfully, asset quality remains “sound”, despite the higher interest rate environment.

The managing director and CEO Patrick Allaway said at the time of the result announcement:

This result has been impacted by continuing industry headwinds, with heightened competition for lending and deposits and higher funding costs. Pleasingly, in a reduced revenue and high inflation environment, we have held BAU [business as usual] cost growth at just 1.2% in the half.

Outlook for BOQ shares

When the bank announced its HY24 first-half result, it also provided some outlook commentary that could apply to the rest of FY24 and FY25.

BOQ said its loan impairment expense is expected to remain below long run averages, which sounds positive. The bank said it remains “optimistic on the long-term view”.

However, the regional bank said it expects revenue and margin pressures “to moderate” in the second half of 2024, though deposit competition “to continue.” It’s also expecting the home lending decline “to moderate”, and that business banking growth can increase.

The bank’s costs are expected to keep increasing due to inflation and continued investment in the business. BOQ said it’s on track to deliver single-digit business as usual (BAU) expense growth in the second half of FY24.

In terms of analyst expectations, the broker UBS is expecting BOQ’s cash earnings to drop from $450 million in FY23 to $294 million in FY24. However, the ASX bank share could then see cash profit recover to $320 million, though it would still be lower than FY23.

In fact, while UBS has pencilled in a steady recovery of profit in the coming financial years, FY28 is still only expected to show a cash profit of $406 million – lower than FY23.

The broker suggested a higher return on equity (ROE) and BOQ share price re-rating are dependent on improving the NIM and costs.

According to UBS, the BOQ share price is valued at 14x FY25’s estimated earnings.

The post Can things get better for BOQ shares in FY25? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

To say that Fortescue Ltd (ASX: FMG) shares had a turbulent ride in FY24 would be an understatement.

The stock whipsawed from lows of $19.40 per share in September last year to highs of $29.88 by the end of January. With a large consolidation in the iron ore price, the mining giant’s shares are now fetching $22.62 apiece.

In other words, shareholders watched their Fortescue stock move a total of $17.74 per share in that time, including both up and down moves.

The mining stock is now valued at a price-to-earnings ratio (P/E) ratio of 7.7 times, with a trailing dividend yield of 9.64%.

Let’s dive into the key highlights from FY24 that you need to know.

Strong first half for Fortescue shares

A strong iron ore price kept Fortescue shares buoyant in the first half of the financial year.

Currently, iron ore is priced at US$113 per tonne. This is after it peaked at US$144 per tonne in January, finishing an 8 %rally starting in August 2023.

This strength inflected positively on Fortescue’s H1 FY24 results. It clipped a 24% rise in the average revenue per dry metric tonne (dmt) of iron ore sold.

This translated to a 21% increase in revenue to US$9.5 billion, while net profit after tax (NPAT) surged by 41%.

That means that for every new $1 in revenues, Fortescue produced $1.95 in NPAT, which is quite the result.

Consequently, free cash flow increased by 68% year over year to US$2.66 billion, while net debt was reduced by almost half.

The company also rewarded shareholders with a 44% increase in the interim dividend, which is now at A$1.08 per share.

As a result, Fortescue shares were a winner in the first half of FY24. They saw a roughly 33% rise in that period.

But the second half, though? Almost a complete reversal.

Challenges arose from Q3

Despite the strong first half, Fortescue faced some hurdles in Q3 FY24. Not least, the pricing of iron ore weakened significantly and hit a low of around US$100 per ton in April.

Unsurprisingly, the company reported an average revenue per dmt of US$104 per tonne, down almost 4% from its first-half results.

Fortescue reported that iron ore shipments for the three months ended 31 March were 43.3 million tonnes (Mt), down 6% from the previous year. It was also below consensus estimates.

Some of the shortfall was attributed to an ore car derailment and some to weather disruptions. Thankfully, a record shipment month in March helped mitigate the impact. The stock consequently finished the financial year roughly in line with where it started.

Future prospects and iron ore prices

Fortescue shares are highly sensitive to iron ore prices. Looking ahead, the iron ore market remains volatile.

UBS forecasts an average iron ore price of US$113 per tonne for the rest of 2024 – flat with today’s price.

But predicting future iron ore prices is challenging, given commodity markets’ cyclical and unpredictable nature.

While Trading Economics forecasts a potential rebound to US$126 per tonne in the next 12 months, much will depend on economic conditions in China, a major consumer of iron ore.

According to my colleague Tristan, the recent economic data from China has shown a decline in house prices and reduced industrial demand, which could impact future prices.

Goldman Sachs sees further risks for Fortescue shares in FY25. In a July note, the broker reiterated its sell rating on Fortescue, stating that its upcoming guidance “will disappoint.”

It said:

We maintain Sell rating on: (1) Relative valuation vs. BHP & RIO, (2) Widening of low grade 58% Fe product realisations over the medium to long term, (3) Execution and ramp-up risks on Iron Bridge and Gabon, (4) Uncertainties around Fortescue Energy diversification (such as the recent approval of the Phoenix hydrogen hub) and Pilbara decarbonisation and impact on dividend and balance sheet.

The stock is also rated a sell by consensus, according to CommSec. No brokers rate it a buy.

Fortescue shares’ FY24 wrap

Fortescue shares were volatile in FY24, but that’s the risk of owning an ASX mining stock. They are price takers on the commodities they sell – not price setters. Fluctuations in the price of iron ore are likely to strongly influence Fortescue shares.

This year to date, Fortescue is down 22%, having slid 7% into the red in the past month.

The post Fortescue shares: Here are the must-know highlights from FY24 appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.