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18 Share Tips - 7 August 2017

18 Share Tips - 7 August 2017

By Anthony Black 07.08.2017



Matthew Felsman, APP Securities

 

BUY RECOMMENDATIONS

 

Harvey Norman Holdings (HVN) 

Chart: Share price over the year

I’m keeping a close eye on retailers during the reporting season given the fear expressed by some people surrounding Amazon’s arrival in Australia. Results will be closely examined in response to higher interest rates and a stronger Australian dollar. I’m expecting HVN results to show strong like-for-like sales. HVN is my pick in this space, as it was recently trading on a forecast price/earnings ratio of 11 times and a fully franked dividend yield of 7.4 per cent.

 

Aristocrat Leisure (ALL) 

Chart: Share price over the year

The share price of this gaming machine maker rose following a top half year result in May. Since June, the share price has fallen by more than 15 per cent. It generates about 60 per cent of its revenue in the US, so recent US dollar weakness has set up the company as a buy. The company is performing well and I expect a strong result when it next reports.

 

HOLD RECOMMENDATIONS

 

The A2 Milk Company (A2M) 

Chart: Share price over the year

Short sellers recently made up about 9 per cent of the company’s register, which was record highs. After recent profit upgrades, I expect the short sellers to feel the pinch as the stock continues to rise. I expect the short cover rally to continue. I’m also expecting a strong result when the company reports later this month.

 

Bank of Queensland (BOQ) 

Chart: Share price over the year

Technically, the stock looks very bullish while it can hold $11.40. Consider buying the banks on any weakness as they approach full year results. They pay good dividends. BOQ shares were trading at $12.30 on August 3.

 

SELL RECOMMENDATIONS

 

CSL (CSL)

Chart: Share price over the year

CSL is one of the highest quality stocks on the ASX. However, technically the charts are pointing to the price falling towards $100. High valuation stocks face performance headwinds, such as currency moves and rising interest rates. In my view, the stock is looking tired. Shares in this blood products group were trading at $126.79 on August 3.

 

Transurban Group (TCL) 

Chart: Share price over the year

On June 19, the share price of this toll road operator was $12.90. The shares were trading at $11.65 on August 3. In my view, the higher interest rate and lower bond environment are driving the share price performance of this company. I would consider taking some money off the table.

 


Peter Moran, Wilsons

 

BUY RECOMMENDATIONS

 

Zenitas Healthcare (ZNT)

Chart: Share price over the year

This community based healthcare provider has announced the acquisition of Dimple Group for $13.4 million in cash and shares. The Dimple business provides podiatry services to 550 residential aged care facilities. What appeals to Zenitas is a growing Dimple’s business. The acquisition will also enable Zenitas to market its own healthcare services at residential aged care facilities. 

 

Westpac Bank (WBC)

Chart: Share price over the year

The Australian Prudential Regulation Authority expects major banks to hold common equity tier 1 capital of 10.5 per cent by January 1, 2020. We believe WBC will meet this requirement via organic capital generation without the need to raise capital. WBC was recently trading on undemanding 2018 multiples that included a forecast dividend yield of 6 per cent. 

 

 

HOLD RECOMMENDATIONS

 

Mantra Group (MTR)

Chart: Share price over the year

We have upgraded this accommodation services provider from a sell to a hold following a 25 per cent price fall in the past year. We believe MTR is likely to benefit from a more positive environment in fiscal year 2018, led by a stronger Sydney market and the Commonwealth Games on the Gold Coast. 

 

Elders (ELD)

Chart: Share price over the year

This leading agribusiness has done well to improve and grow in recent years. The company has particularly benefited from higher stock and wool prices and good cost control. However, we believe stock prices may have peaked and operating costs are now at industry best practice levels, implying improvement will be difficult from here. 

 

SELL RECOMMENDATIONS

 

GUD Holdings (GUD)

Chart: Share price over the year

This consumer goods manufacturer and distributor recently delivered a mixed full year result. Underlying EBIT for Davey’s Water was much weaker than expected, falling by 24 per cent. Underlying EBIT for the Oates cleaning products division was down by 15 per cent. The positive was its core automotive business, with increasing revenue and stable margins leading to underlying EBIT growth of 11 per cent for the year. However, we’re concerned GUD will eventually struggle to maintain margins, which, in our view, are high relative to the rest of the industry.

 

Domino’s Pizza Enterprises (DMP)

Chart: Share price over the year

The company’s 12 month high was above $80 in August last year. On August 2, 2017, the stock closed at $52.86. Competition in the fast food market is fierce and we believe the stock could be pressured even more. We believe the stock is still too expensive and better value can be found elsewhere.

 


Jeremy Hook, TMS Capital

 

BUY RECOMMENDATIONS

 

BHP Billiton (BHP)

Chart: Share price over the year

Diverse commodities and a strong balance sheet mean BHP is never far away from being included in an investment portfolio. We expect oil and other commodity prices to remain volatile in the short term. But BHP is reducing costs. A recovery in commodity prices will strengthen the company’s balance sheet, enabling it to implement appealing capital management initiatives.

 

Commonwealth Bank of Australia (CBA)

Chart: Share price over the year

Investors punished the stock in early trade on August 4 following allegations the bank had breached money laundering laws. In relation to the property market, we can’t see any potential cooling in the short term despite concerns voiced by some people. Rising interest rates should result in higher profits and returns to shareholders. 

 

HOLD RECOMMENDATIONS

 

Challenger (CGF)

Chart: Share price over the year

The dominant player in the Australian annuities space with exposure to funds management. The company should benefit if superannuation and investment platforms increase their exposure to annuities. The share price has increased by about 50 per cent in the past year, so we think it’s a hold.

 

Seek (SEK)

Chart: Share price over the year

We still view this online jobs classifieds provider as a premier growth company. The Chinese business, Zhaopin, should continue to provide strong growth. We would add to this holding on weakness. But given it was recently trading on a price/earnings multiple of 36 times, we believe it’s above fair value.

 

SELL RECOMMENDATIONS

 

Bellamy’s Australia (BAL)

Chart: Share price over the year

It’s been a bad year for the infant formula maker with board changes and an over supply in the market. The company has started to recover from its lows, but we would prefer to see some more stability in management and markets before looking at this one. 

 

Dexus (DXS)

Chart: Share price over the year

This Australian real estate group has improved year on year since the GFC. Most of the property in its portfolio is in Sydney, Melbourne and Brisbane, which has delivered good growth. While growth could continue in the short term, the recent spike in bond yields is a significant risk and could push this bond proxy lower. 

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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Featured Comment

If Australia follows international trends, Amazon will eat into market share and inflated margins of many retailers.

Amazon\'s low-key start a positive for retail stocks

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