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September, 2017 7:53 PM



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18 Share Tips - 3 July 2017

18 Share Tips - 3 July 2017

By Anthony Black 03.07.2017



Matthew Felsman, APP Securities

 

BUY RECOMMENDATIONS

 

Wesfarmers (WES) 

Chart: Share price over the year

The share price of this industrial conglomerate has corrected almost 10 per cent from its April high. Amazon’s pending arrival has seen the market price in a worst case scenario for Australian retailers. In the past, July has been a strong month for the Wesfarmers share price as it leads into August results when a dividend will be announced.

 

Rio Tinto (RIO)

Chart: Share price over the year

The mining giant is selling its Hunter Valley coal mines. History tells us July is a much better month than June for stocks in the materials space. When the S&P/ASX200 gets off the fence and moves towards 6000 points, RIO will be along for the ride. Recent prices provide a buying opportunity. Rio shares closed at $63.39 on June 29.

 

HOLD RECOMMENDATIONS

 

Sirtex Medical (SRX) 

Chart: Share price over the year

The share price recovered some lost ground on June 28, 2017 after a disappointing 12 to 18 months. On June 28, investors responded positively to news that the company was writing off about $90 million in the value of intangibles and cutting staff. Consider holding, as the company is now better positioned for growth.

 

Suncorp (SUN) 

Chart: Share price over the year

We believe this financial services stock is trading at a discount after finishing at $15.06 on June 29. We see it closer to $16. Its recent fully franked dividend yield was almost 5 per cent. The local financials index is bullish, targeting pre-GFC highs. 

 

SELL RECOMMENDATIONS

 

Santos (STO) 

Chart: Share price over the year

The oil and gas giant raised capital around $4 a share in December 2016. This was after it rejected a takeover offer near $7 in 2015. The shares closed at $3.11 on June 29. If we overlay our forward curve into oil prices, we get a share price closer to $2.

 

Transurban Group (TCL) 

Chart: Share price over the year

We are bullish on global interest rates and bearish on yield play stocks. This toll road operator’s share price has made some good gains this year, so investors may want to consider taking a profit. In line with our macro view, we expect the share price to fall going forward as investors switch out of yield plays.

 


Peter Moran, Wilsons

 

BUY RECOMMENDATIONS

 

National Australia Bank (NAB)

Chart: Share price over the year

Concerns about government levies, asset quality and capital requirements have weighed on major bank share prices. We believe these concerns are overdone, so an opportunity exists to buy NAB at an attractive price. We expect mortgage re-pricing and improved funding will combine to lift margins. Recently trading on a fully franked dividend yield above 6.5 per cent is also behind our recommendation.

 

Nanosonics (NAN)

Chart: Share price over the year

Specialises in preventing infection. The share price has fallen from around $3.20 in May to finish at $2.61 on June 29. In our view, investor concerns about the level of sales growth going forward most likely contributed to the fall. But we’re expecting stronger growth to resume in 2019, led by expanding to Japan and expected new product launches.    

 

 

HOLD RECOMMENDATIONS

 

QBE Insurance Group (QBE)

Chart: Share price over the year

QBE recently issued a profit warning as a result of increasing claims in its emerging markets business. The share price fall following the announcement appears to be overdone, with the shares now trading at a discount to our valuation. Investors punished the stock given QBE downgrades several years ago. We expect investors will remain cautious in the near future and, accordingly, we have a hold recommendation.

 

Mirvac Group (MGR)

Chart: Share price over the year

We have downgraded this property group to a hold as the share price was recently trading around our valuation of $2.32. We continue to like MGR’s exposure to office and high quality retail assets, but have become more cautious about its residential portfolio. The shares closed at $2.20 on June 29.

 

 

SELL RECOMMENDATIONS

 

Beacon Lighting Group (BLX)

Chart: Share price over the year

Beacon has experienced management and a dominant market position. But we’re concerned earnings may be impacted by softer renovation activity, a slowing secondary housing market and growing online competition. In our view, there’s a risk the stock may fall given it was recently trading on a forecast 2018 price/earnings multiple of 15 times.

 

Northern Star Resources (NST)

Chart: Share price over the year

Although we’re expecting positive updates about resources, exploration success and expanding production facilities, our concern is about value. Taking into account recent spot prices for gold and silver and the value of the Australian dollar against the stronger greenback, we value NST around $4. Sell on valuation. NST shares closed at $4.84 on June 29. 



Ryan Gale, PAC Partners 

 

BUY RECOMMENDATIONS

 

Bega Cheese (BGA)

Chart: Share price over the year
 

Rational milk pricing has been maintained for the second consecutive year. A recent capital raising of $160 million can lower debt and enable the company to take advantage of potential food and dairy opportunities. We’re forecasting the company to grow by 11 per cent in the medium term and 15 per cent in the longer term.

 

Bubs Australia (BUB)

Chart: Share price over the year
 

BUB has built a strong and diversified infant food supply platform in the past 11 years. The company is increasing its retail footprint, with more than 1800 outlets selling its products in Australia. The company has further expanded access to China via a strategic partnership. We’re forecasting strong revenue growth going forward. The shares were trading at 26 cents on June 30.

 

HOLD RECOMMENDATIONS

 

Stargroup (STL)

Chart: Share price over the year
 

Deploys ATMs and eftpos technologies in Australia and New Zealand. It also owns 512 ATMs after recently acquiring 134 Fast Cash machines. As a result, STL projects an increase in annualised revenue to $20.1 million for fiscal year 2018. 

 

Technology Metals Australia (TMT)

Chart: Share price over the year
 

Wholly owns the Gabanintha Vanadium Project. The company recently announced encouraging maiden drilling results. Vanadium is predominantly used in steel production, but general market growth may be driven by the emerging energy storage battery sector. It’s early days for TMT, but consider holding until further developments emerge. 

 

SELL RECOMMENDATIONS

 

The Hydroponics Company (THC)

Chart: Share price over the year
 

THC is focused on making and distributing hydroponics equipment. The company has done well since listing in May. The future of medicinal cannabis has captured investor attention. My concern is low barriers to entry generating strong competition in this space. I would consider taking some profits as the shares were trading at 29 cents on June 30.

 

REA Group (REA)

Chart: Share price over the year
 

Revenues depend on the number of paying real estate agents, product depth and yield. Changes to any of these drivers could adversely affect near term earnings. In my view, low barriers to entry present a competitive threat to this online property specialist.

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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