Lewis Jackson: COP26 has come and gone, and the energy transition is on everyone's lips. Today, I'm joined by Lazard's Aaron Binsted to talk through three names he thinks are well-positioned to take advantage of this trend.

Aaron, thanks for joining me.

Aaron Binsted: Pleasure, Lewis.

Jackson: Let's jump into the first name, South32. Aaron, what about the stock is best positioned to take advantage of the energy transition?

Binsted: We think South32 is going to be a huge beneficiary of the energy transition. Some of their key metals being aluminum, copper and manganese are going to be required for a lot of the renewable and EV buildout that we're going to see. Demand is going to increase substantially, which is going to push up prices relative to cost curves, giving South32 stronger margins than we've seen historically, plus much, much stronger demand growth. The company also has a really good balance sheet enabling them to invest in future growth projects, two of which we've seen recently with the acquisition of a copper asset and also the acquisition of a larger share of an aluminum smelter. So, South32 is really well-positioned to capitalise on the volume growth and better profitability of those key enabling metals for the energy transition.

Jackson: Fantastic. And Monadelphous, what about Monadelphous caught your eye?

Binsted: So, Monadelphous is currently suffering from a low level of profitability. Margins are probably about half what they should be. A large factor with that is because of the closed borders in Western Australia, which means that they've got inefficient labor and expensive labor. This will resolve overtime, meaning that margins should overtime double. That's the first leg. Secondly, and related to the energy transition, we are going to need lots more lithium, lots more copper, lots more of a whole bunch of other materials to build those wind farms, solar PV, batteries, electric vehicles. Monadelphous is the person who builds those mines for the miners. So, we think they're going to see a huge increase in their order book going forward. So, there's two big trends driving Monadelphous – increased demand, higher top line, and much stronger margins.

Jackson: Okay. A miner's miner. And the third name – Worley. What about Worley has caught your eye?

Binsted: So, Worley's traditional business is being primarily an engineering firm servicing the traditional hydrocarbon markets – things like chemicals, refining and oil and gas. We know that CapEx work and therefore engineering work has been hugely depressed in 2020. So, the base business is coming off from very low levels. What excites us about WorleyParsons is that they have emerging businesses in decarbonisation, in hydrogen, and particularly, in offshore wind. The level of CapEx in these areas is going to increase exponentially. It's estimated that the world is spending maybe $1.5 trillion to $3 trillion, depending on how you count it, in terms of reaching sustainable development goals. That probably needs to increase to $5 trillion to $6 trillion to get close to meeting the goals that we have. Worley is going to service these new areas that grow, being green hydrogen, being offshore wind in particular, and they're also going to do decarbonisation work with their traditional business – so, helping refiners become more efficient, helping with carbon capture, utilisation and storage. So, again, Worley has a huge growth pipeline, particularly if they can execute on these green initiatives, which are really where the future lies.

Jackson: Okay. Fantastic. So, it was South32, Monadelphous and WorleyParsons. Aaron, thanks so much for your time.

Binsted: Great chatting with you, Lewis.