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18 Share Tips - 30 January 2017

18 Share Tips - 30 January 2017

By Anthony Black 30.01.2017



Ryan Gale, PAC Partners

 

BUY RECOMMENDATIONS
 

Berkeley Energia (BKY)

Chart: Share price over the year

Spot uranium prices slumped to a 12 year low of $US18.25 a pound in late November, with several major mines announcing production cuts. However, a recently rising uranium price to $US22.50 a pound provides opportunities for juniors, such as BKY. It has weathered tough times and is among the lowest cost pre-production uranium companies listed on the ASX. Construction at its Salamanca uranium mine in Spain continues.
 

Ausnet Financial Services (AU1)

Chart: Share price over the year

The company has strong backing from Finsure Group, one of Australia’s fastest growing retail finance brokerages. We expect AU1’s disruptive platform to increase revenues going forward. Some major real estate operators are leaving established brands to pursue this higher margin model. The shares are expected to resume trading on January 31 following the company’s request for a suspension.

 

HOLD RECOMMENDATIONS

CSL (CSL)

Chart: Share price over the year

The share price in this blood products company recently soared in response to a significant profit upgrade after much stronger than anticipated sales. In August last year, the company foreshadowed that group net profit after tax was expected to grow about 11 per cent at constant currency in fiscal year 2017 after adjusting for one off gains and costs associated with the acquisition of the Novartis influenza vaccines business. CSL will provide a further update when it releases its first half results on February 15.

 

Bega Cheese (BGA)

Chart: Share price over the year

The market responded positively after BGA announced it would buy most of the MDLZ Grocery Business, which includes the iconic Vegemite brand. Bega will pay $460 million for the acquisition, which the company believes will be value accretive in its own right. The company expects the MDLZ Grocery Business to generate pro-forma EBITDA of between $40 million and $45 million in its first full year of operation. That is prior to one off transaction and implementation costs and any impact arising from a purchase price allocation.

 

SELL RECOMMENDATIONS

McGrath (MEA)

Chart: Share price over the year

In a recent trading update, the real estate group confirmed unprecedented low volumes of listings as a percentage of total housing stock. MEA acknowledged that the recent net departure of 36 sales agents from its company owned offices segment would make it more difficult to grow market share. It expects second half results to be weaker than the first half, which it will release on February 23. McGrath faces challenges from disruptive operators with fiercely competitive business models and fee structures. 

 

Atlas Iron (AGO)

Chart: Share price over the year

The iron ore producer has staged a recovery. It has significantly reduced debt and improved its cash position. However, we are bearish on the longer term outlook for iron ore and expect recent high prices to fall. Investors should consider selling into recent share price strength. The 52 week high is 5 cents. The shares closed at 4.7 cents on January 25.

 


Michael Heffernan, PhillipCapital

BUY RECOMMENDATIONS

BHP Billiton (BHP) 

Chart: Share price over the year

The global miner recently advised that coal, iron ore and petroleum production was strong. Sharp price rises in most minerals it produces should result in an impressive interim profit when it reports on February 21.

 

Rio Tinto (RIO)

Chart: Share price over the year

Recently delivered a strong production report. Iron ore output is up 6 per cent this financial year. We expect solid earnings going forward on the back of higher iron ore prices. 

 

HOLD RECOMMENDATIONS

Iress (IRE)

Chart: Share price over the year

This financial services information provider, with operations in Australia and internationally, keeps on performing in a most workman-like fashion. Continuing improvements in global sharemarkets make this company an attractive investment proposition.

 

Computershare (CPU)

Chart: Share price over the year

A major share registry business that usually delivers respectable results in challenging circumstances. A stronger US dollar, rising US interest rates and international diversification add to its appeal.

 

SELL RECOMMENDATIONS

Vocus Communications (VOC) 

Chart: Share price over the year

The share price has suffered following its Nextgen acquisition mid last year. The company’s 52 week high was $9.40 on May 30, 2016. The shares closed at $4.24 on January 25, 2017. I found commentary from its annual general meeting to be underwhelming and its share price remains soft. There’s better options in the short term, as VOC tries to regain sustainable profit momentum.

 

DuluxGroup (DLX)

Chart: Share price over the year

In my view, this iconic Australian paint company didn’t get enough traction from a robust residential construction and renovation market. The shares were priced at $6.61 on January 25, 2016. Precisely a year later, the shares closed at $6.04. Easing building approvals will make it tougher for the share price to recover.

 


Darren Jackson, Sanlam Private Wealth


BUY RECOMMENDATIONS

 

Sky and Space Global (SAS)

Chart: Share price over the year

 

This technology firm plans to launch three commercial nano-satellites by May to provide global communication infrastructure and services to the telecommunications industry. The company recently completed a large capital raising in November, with Sanlam acting as co-lead manager. We see significant upside if the company can execute on its strategy. 

 

Mayfield Childcare (MFD) 

Chart: Share price over the year

 

The childcare provider listed on November 30 last year. We believe it offers relatively better value than competitors   Think Childcare (TNK) and G8 Education (GEM). The company is significantly smaller than TNK and GEM, but its discount looks excessive. Recently, Mayfield was trading on an indicative price/earnings ratio of about 9 times, compared to Think Childcare on about 18 times and G8 Education on about 15 times.

 

HOLD RECOMMENDATIONS

 

Tassal Group (TGR)

Chart: Share price over the year

 

Expect this salmon producer to benefit from reported supply restrictions in exporting countries Chile, Scotland and Norway related to environmental contamination on farms. Demand for salmon remains robust so the price should continue rising. 

 

Automotive Solutions Group (4WD)

Chart: Share price over the year

 

A recently listed roll-up for 4WDs and sports utility vehicle accessories. Automotive Solutions is attractively priced, recently trading on an indicative price/earnings ratio of about 10 times. In our view, it offers relatively better value than more established competitors Bapcor and ARB Corporation. The stock needs time to consolidate post listing. The shares were trading at 90 cents on January 27.

 

SELL RECOMMENDATIONS

 

WiseTech Global (WTC)

Chart: Share price over the year

 

Develops cloud based software solutions for the logistics industry. It’s a quality company and operating performance is strong. However, in our view, the company is overvalued. Earnings and revenue need to play catch up to justify its very generous valuation.

 

Whitehaven Coal (WHC)

Chart: Share price over the year

 

The share price of this coal producer rose almost 300 per cent last year, as it had been way oversold in the first place.  The rising share price was also driven by increasing coal prices and strong company fundamentals. But, in our view, the stock has overshot to the upside. Also, China has announced plans to scrap 100 new coal plants. We view this move as being consistent with a global shift towards cleaner energy.

Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions. 


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