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Sunday share tips: Serabi Gold, Domino's Pizza

Sun 10 July 2022 12:29 | A A A

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No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.

(Sharecast News) - The Financial Mail on Sunday's Midas column recommended readers buy shares of Serabi Gold, telling them that production was recovering and that profits were set to soar.

Brazil-focused Serabi had seen gold production from its Palito mine in the Tapajos region drop in the wake of the Covid-19 pandemic.

In 2019 Serabi was producing 40,000 ounces of gold from Palito, but output fell to 35,000 ounces in both 2020 and 2021.

Production in the first three months of 2022 meanwhile slipped to less than 7,000 ounces due to the impossibility of procuring the necessary equipment to mine high-grade ores.

Yet Midas said an update due out over the coming week should show production recovering since March, even if Serabi's output was "unlikely" to recover to 40,000 ounces during the current year.

Furthermore, the tipster predicted that Serabi's other mine, Coringa, would double the outfit's total output once it was fully up and running.

In fact, the miner was already processing some ore from Coringa at Palito, which should increase output by 3,000 ounces of gold in 2022 and by more than 6,000 ounces in 2023.

And early exploration at Matilda, a section of the Palito complex, suggested the existence of large amounts of copper, which might yield lucrative deals with some of the big miners such as Rio Tinto and Anglo American.

Even absent a lucrative deal with them, Serabi's profits were seen jumping from $4m in 2022 (£3.3m) to $12.6m in 2023, Midas said.

"Serabi has had a rough couple of years, but the company is back on track, profitable and moving in the right direction. At 39p, the shares are a buy."

The Sunday Times's Lucy Tobin told readers to sell shares of Domino's Pizza, arguing that Britons had their fill of takeaways during the pandemic.

So much so that the company's pizzas had lost their lustre.

"Many of us had our fill of takeaways in the pandemic; they no longer seem a luxury, but a reminder of time spent eating from cardboard food boxes," Tobin said.

Then there was wage, fuel and food inflation to contend with, although she conceded that Domino's had hedged its exposure to soaring wheat prices as a result of the war in Ukraine thus far.

She also noted that the company continued to deliver in multiple areas, including £100m of free cash flow in 2021 and was a reliable dividend payer.

Even so, she thought its customers might trade down to supermarket pizzas in response to soaring bills.

The new mandatory calorie labels might also take a bite out of the business.

"No wonder Domino's chief executive has just made his escape: Dominic Paul is off to run Whitbread in January; a replacement has not yet been named. Sell Domino's Pizza."

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