MARKETS SPECTATOR: Small-cap mining specials

Citigroup names two small-cap stocks in the energy and mining space that are trading at massive discounts.

If you want to buy stocks with small market values, buy mining stocks as they are trading at such a discount to other stocks, about 74 per cent, and now offer a bigger return, says Citigroup analyst Ben Dalling.

Dalling is recommending investors buy oil and gas explorer AWE and iron ore producer Mount Gibson.

“Citi Research remains bullish on AWE and thinks that market has underestimated the value of its Ande Ande Lumut oil project in Indonesia and the farm down will likely confirm that it has been adding value,” writes Dalling.

“Mount Gibson is our preferred stock in iron ore space which has net cash and no capex plans,” he writes.

“Its 6 per cent dividend yield and 49 per cent payout ratio further strengthens our outlook”.

At 1101 AEST, AWE shares were down 1 cent, or 0.3 per cent, to $1.225. The stock has dropped 16 per cent in the last year. Mount Gibson stock has added 0.25 of a cent, or 0.6 per cent, to 45.25 cents, after falling 49 per cent in the past 12 months.

Among small market value industrial stocks, Dalling has buy recommendations on M2 Telecommunications, support vessel supplier to offshore oil and gas platforms Miclyn Express Offshore and McMillan Shakespeare, a salary packaging provider.

“With a 5 per cent dividend yield continuing to look attractive relative to alternate income producing asset classes, we expect the industrials to continue to enjoy support despite offering only small capital growth opportunities from current prices,” writes the Citi analyst.

At 1109 AEST M2 Telecommunications shares dropped 3 cents, or 0,5 per cent, to $5.53. The stock has gained 62 per cent in the last 12 months. Miclyn shares added 0.5 of a cent, or 0.3 per cent, to $1.775. The stock has fallen 8 per cent in the last year.

McMillan shares have dropped 14 cents, or 0.9 per cent, to $15.72. The stock has added 34 per cent in the last 12 months.

The S&P/ASX200 Index was down 18.882, or 0.4 per cent, at 4807 at 1115 AEST.

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