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18 Share Tips - 11 September 2017

18 Share Tips - 11 September 2017

By Anthony Black 11.09.2017



Ben Faulkner, Sanlam Private Wealth

 

BUY RECOMMENDATIONS

 

ShareRoot (SRO)

Chart: Share price over the year

Operates a user generated content proprietary technology platform. Key clients include CostCo and McDonald’s. SRO still has negative cash flow, but we expect it to neutralise later this year before turning positive in 2018. Trading at less than a cent on September 7, we see this as a buying opportunity for investors with an appetite for risk. Sanlam received fees for raising capital for SRO this year. I own shares in SRO.

 

Todd River Resources (TRT)

Chart: Share price over the year

Holds large zinc and copper exploration assets in the Northern Territory. TRT also owns one of Australia’s largest undeveloped zinc-lead deposits, which it’s progressing to a conceptual mining study. Zinc and copper prices have rallied strongly and we remain bullish on both. We view TRT as one of the most undervalued speculative exploration stocks with exposure to zinc and copper. Sanlam received fees as lead manager for the Todd River IPO earlier this year. I own shares in TRT. The shares closed at 12.5 cents on September 7.

 

HOLD RECOMMENDATIONS

 

Tech Mpire (TMP)

Chart: Share price over the year

This digital performance-based marketing company reported strong quarterly numbers in its fiscal year 2017 results, with record revenue growth. It’s now shifting to profitability. TMP has a unique product that we view as a market leader in its specific sector. Its addressable market is big and growing year on year. The stock should re-rate over time if it continues to deliver profit growth. 

 

Key Petroleum (KEY)

Chart: Share price over the year

Holds a portfolio of onshore oil and gas assets in the Perth and Cooper basins. KEY recently raised capital at 1 cent a share. At the time, it was a 20 per cent premium to the market. We continue to hold a position in KEY for speculative oil and gas exposure in both basins. 

 

SELL RECOMMENDATIONS

 

Harvey Norman Holdings (HVN)

Chart: Share price over the year

The retail giant delivered a headline fiscal year 2017 result that beat expectations on paper. However, after examining the result, we forecast continuing margin pressure and view the stock as overvalued. 

 

Prime Media Group (PRT)

Chart: Share price over the year

Structural changes in their markets are taking a toll, in our view. We expect other media sources and providers to take market share and audience away from its more traditional TV broadcasting.

 


Jeremy Hook, TMS Capital

 

BUY RECOMMENDATIONS

 

Brickworks (BKW) 

Chart: Share price over the year
 

BKW is enjoying a good period in its brick and tile operations, but the story is more than that. The stability provided by its cross-shareholding with Washington H. Soul Pattinson make it a sound consideration for investors. Unlocking its strong property portfolio and its recent inclusion in the S&P/ASX 200 are positives for BKW.

 

IMF Bentham (IMF) 

Chart: Share price over the year
 

Funds litigation and class actions and has a strong track record of success. An investment book of more than $3.7 billion and several big cases pending suggest a positive outlook. Geographical expansion and greater cost management in a growing segment point to growing profits and dividends.

 

HOLD RECOMMENDATIONS

 

CSL (CSL) 

Chart: Share price over the year
 

This blood products group reported an excellent full year profit without exceeding expectations, but the stock pulled back from recent highs. We like the positive pipeline of development projects and the long term respect for capital that we find too rare in this sector. A great long term hold.

 

Lendlease Group (LLC) 

Chart: Share price over the year
 

Capped off an excellent year with its 2017 full year result. LLC generates a solid return on equity and has iconic projects, including the Barangaroo project in Sydney. LLC is well priced at current levels and we expect it to go higher in the medium to long term.

 

SELL RECOMMENDATIONS

 

IOOF (IFL)

Chart: Share price over the year
 

This financial services company produced a good full year report and the stock rallied well. Despite this, we see it as overvalued at recent 18 times 2018 earnings. Our primary concern is business quality versus value and we can find better value in other stocks.

 

Iress (IRE) 

Chart: Share price over the year
 

Provides market data and solutions in Australia and in key offshore markets. In our view, the first half 2017 result was underwhelming and we concluded there may be structural elements clouding the outlook. On a recent price/earnings ratio of 26 times, we believe there’s downside risk.

 


Peter Moran, Wilsons

 

BUY RECOMMENDATIONS

 

Suncorp (SUN)

Chart: Share price over the year
 

Suncorp’s profit result for fiscal year 2017 was better than the sharp share price fall might suggest. The group delivered net profit after tax of $1.075 billion, up 3.6 per cent on the prior corresponding period. The big drag on earnings was from earthquake-related claims and re-insurance costs in New Zealand. Suncorp’s two main divisions, Australian insurance and banking, delivered solid results. Suncorp announced a final dividend of 40 cents a share, taking the full year dividend to 73 cents.

 

Ruralco Holdings (RHL)

Chart: Share price over the year
 

A major player, along with Landmark and Elders, in the domestic rural services market. Key products and services (some offered under an agency model) include merchandise, fertiliser, seed, wool, livestock, real estate, stock feed, risk management, water, grain, finance and insurance. We expect recent acquisitions and sustained improvement in the cost ratio to deliver future earnings growth.

 

HOLD RECOMMENDATIONS

 

AMA Group (AMA)

Chart: Share price over the year
 

We have moderated our recommendation to a hold following recent results. We have retained a positive view on AMA’s strategy of consolidating the panel repair industry. However, margins have been softer than we had anticipated in both acquired and greenfield panel repair shops.

 

Ramsay Health Care (RHC)

Chart: Share price over the year
 

The private hospital operator’s core net profit after tax of $542.7 million was in line with guidance, but, in our view, the full year 2017 result missed on revenue, EBITDA and cash flow expectations. It appears its successful “build and fill” expansion campaign in Australia may be reaching a natural limit. While we expect there will be abundant opportunities in out of hospital care, this will take a long time to materialise. 

 

SELL RECOMMENDATIONS

 

Oz Minerals (OZL)

Chart: Share price over the year
 

BHP has notified OZ Minerals that it will terminate a power connection access agreement to Prominent Hill from 2020. This could see all in sustaining costs rise between 2 per cent to 5 per cent. We’re uncertain whether this decision will impact the OZL Carrapateena project. But it adds to the development construction risk at Carrapateena. We prefer other miners.

 

Iluka Resources (ILU)

Chart: Share price over the year
 

In our view, this mineral sands company reported a weaker than expected underlying net profit after tax in the first half due to higher inventory and restructuring costs. While cash flow will be strong in the second half, ILU needs to substantially increase spending between 2018 and 2020. We believe the current share price factors in too much optimism about a recovery in mineral sands prices.

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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