We believe that the market is currently discounting the earnings growth that Automotive Holdings Limited (AHG) has achieved over the past 12 months and so this is a candidate to beat expectations. However, we believe that Mineral Resources Limited (MIN) has been even more harshly discounted by the herd, and hence is well positioned to surprise on the upside. At the AGM in November, MIN management provided EBITDA guidance in the range of $250m to $290m. The current market consensus is $226m. Breaking this down further, our internal modelling suggests that MIN will report a bottom line (NPAT) figure of circa $90m. This is some 27% above the current market consensus forecast of $71m. The difference in our mind stems from an under-appreciation of the size and quality of MIN’s underlying crushing and mining services revenues. As a substantial iron ore exporter in its own right, investors can tend to overlook the high quality, predictable and recurring income streams that the CSI division generates.
