4 stocks with imminent catalysts backed by L1 Capital

In a recent investor webinar, James Hawkins, Partner and Head of the L1 Capital Catalyst Fund, provided a mid-year update on markets, the fund’s positioning, and the outlook for the second half of 2025.

While touching on macro themes including offshore capital flows, sector distortions, and activist engagement, the core of the presentation centred on four portfolio holdings in the concentrated, long only activist portfolio that are approaching key inflection points: Santos, Aurizon, Mineral Resources, and Qantas.

“Many of our key holdings have catalysts on the horizon and we believe the portfolio is really well positioned to benefit as these play out,” Hawkins said.

He also offered an interesting take on why CBA’s share price continues to power ahead — and why the bank’s valuation is flashing red.

Macro moves and capital flows

Hawkins outlined the major forces that have shaped markets in 2025 so far:

• The Liberation Day tariffs announced in April, followed by a temporary, three-month pause from President Trump
• The passage of Trump’s “One Big Beautiful Bill”
• A stronger-than-expected federal election win for Labor in May
• Oil price volatility following the Iran-Israel conflict

Offshore capital has rotated into large-cap Australian equities, turning the ASX into a perceived safe haven. But Hawkins warned this is distorting fundamentals.

“CBA now trades on 30 times forward EPS… in line with Nvidia, Microsoft, Walmart – and trades on twice the multiple of the best bank in the world, JP Morgan,” he said.

He attributed this to global capital flowing into Asia-Pacific banks outside China, with Australia benefiting disproportionately. CBA now represents 12% of the ASX 200, up from 8% just 18 months ago.

“All of this just reinforces how expensive the Aussie banks are right now. They provide lower growth with a lower dividend yield, and yet they trade at significantly higher multiples than their global peers.”

Constructive engagement and a portfolio with potential

Hawkins said company boards are increasingly open to L1’s brand of shareholder engagement, recognising the fund’s long-only orientation and alignment with long-term value creation.

Successful activism, he noted, comes down to building trust and making credible, well-researched cases that resonate with the key decision-makers.

On positioning, the Catalyst Fund has deliberately avoided crowded, valuation-stretched sectors like the major banks. Instead, the focus remains on companies trading below intrinsic value, with identifiable catalysts expected to play out over the coming quarters.

“We’ve done the groundwork and laid the foundations. The next step is to ensure these companies execute successfully. That’s when the share price upside will start to crystalise for the benefit of investors." he said.

Santos (ASX: STO): Strategic assets and a value disconnect

The recent ~$9 per share bid for Santos by ADNOC and Carlyle validates the Catalyst Fund's long-held view on the potential of the company’s LNG assets.

Hawkins said the bid underscores the disconnect between Santos’ market valuation and the intrinsic worth of its portfolio of assets. L1 had publicly advocated for the demerger of the LNG assets since late 2023 and sees the Barossa and Pikka projects as driving a significant uplift in near-term earnings and cash flow.

He also addressed concerns about regulatory risk, noting that ADNOC — the state-owned oil company of Abu Dhabi — already holds stakes in several major Australian infrastructure assets, and that Carlyle is a trusted US partner with a strong global track record.

“ADNOC’s lower cost of capital could help bring future gas supply to market faster, which is essential given Australia’s looming gas shortfall. This whole process really highlights something we say often: activism is a game of patience," Hawkins said.

“In Santos’s case, it took time, research, and consistent engagement to help shape a more balanced conversation and unlock value.”

Aurizon (ASX: AZJ): Regulated strength and room to grow

Aurizon offers a rare combination in listed infrastructure. Its network of regulated rail assets provides a stable, long-duration revenue stream with strong cash flow visibility, underpinned by high barriers to entry and regulatory protection.

Hawkins said these structural advantages underpin the fund’s conviction in the stock — even if the market is yet to fully recognise their value.

“We were pleased that the Aurizon board recently announced a review of the ownership structure of the network business," he said.

He also welcomed the company’s recently announced $50 million cost-saving initiative and pointed to a new Olympic Dam contract with BHP as a potential catalyst for future growth.

While the earnings contribution from the Olympic Dam contract is modest today, Hawkins sees it as a strategically significant step.

“It aligns with BHP’s broader ambition to grow Olympic Dam beyond 2030, so Aurizon is now embedded early in that journey. More importantly, it’s a stepping stone that could lead to expanded bulk haulage opportunities more generally with BHP.”

He added that these developments support Aurizon’s long-term shift away from coal and into diversified bulk infrastructure.

Mineral Resources (ASX: MIN): Onslow progress builds conviction

A site visit to the Onslow iron ore operations in May reaffirmed L1’s bullish thesis on Mineral Resources. Hawkins said the project is on track to reach its 35Mtpa nameplate capacity, and the sealing of the 180km haul road is expected to be completed by September 2025.

He also praised the active involvement of Chair Malcolm Bundey, viewing it as a positive signal for governance renewal.

Hawkins drew a parallel with Qantas in late 2023 — a company that faced strong criticism, delivered operationally, and was ultimately rewarded by the market.

“All in all, it was a trip that really reinforced our conviction in the long-term value proposition embedded in Mineral Resources’ share price. In some ways, it reminds us of Qantas in late 2023, when the share price was around $5 and the company was facing enormous public criticism," he said.

“We then saw an impressive operational turnaround and improved market sentiment over time, which has resulted in a 100% share price rally. We think MinRes has a similar opportunity.”

Qantas (ASX: QAN): A recovery rewarded — and more to come

Qantas was a case study in how quickly sentiment can turn when a company addresses its issues head-on.

After facing intense public scrutiny in 2023 and falling below $5 per share, the airline’s performance rebounded under CEO Vanessa Hudson and Chair John Mullen. Operational issues were addressed, Jetstar growth accelerated, and the frequent flyer business delivered strong returns with low capital intensity.

“The share price has more than doubled. This shows how quickly equity markets can reward investors once a company gets back on track," Hawkins said.

L1 sees further upside in Qantas, underpinned by three key catalysts:

1. Customer experience improvements: Ongoing initiatives to improve on-time performance, Net Promoter Scores, customer reputation, and lounge upgrades.
2. Fleet reinvestment: Qantas is in the early stages of a significant fleet renewal, with 18 new aircraft arriving in FY25 and over 100 more on order. These will increase capacity, reduce fuel consumption, and unlock new, previously unviable routes.
3. Strong balance sheet: In February 2025, Qantas paid its first dividend since the pandemic. Despite the scale of its fleet renewal program, L1 believes the balance sheet is strong enough to support ongoing fully franked dividends and/or share buybacks in addition to earnings growth.

Looking ahead

As the second half of 2025 begins, Hawkins said the Catalyst Fund remains focused on idiosyncratic opportunities that combine improving fundamentals with near-term catalysts.

“We’re not paying up for thematic growth. We’re focused on improving earnings and cashflow, strong valuation support, earnings resilience, and clear and near-term catalysts," he said.

He added that the fund’s hands-on engagement model - including site visits and direct company meetings - has helped shape outcomes and surface value.

“There’s no substitute for being on site, walking the floor, talking to teams, seeing the assets firsthand. That’s where the real insight is gained.”