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December, 2017 3:11 PM



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18 Share Tips - 23 October 2017

18 Share Tips - 23 October 2017

By Anthony Black 23.10.2017



Jeremy Hook, TMS Capital

BUY RECOMMENDATIONS

Qube Holdings (QUB)

Chart: Share price over the year


This logistics and stevedoring operator is a top long term play on Australia’s economy. Now a $4 billion company, it’s in investment phase with the strategic Sydney freight interchange being a prized asset. We believe now is a good time to consider buying this company that was recently trading on 33 times fiscal year 2018 profit.
 
Fairfax Media (FXJ) 

Chart: Share price over the year


The media giant has announced plans to partially demerge its key asset Domain. FXJ shareholders will receive one Domain share for every 10 Fairfax shares if shareholders vote in favour. We believe the market will re-appraise the growth prospects of Domain with a higher multiple than it has been valued inside Fairfax.
 

HOLD RECOMMENDATIONS

Magellan Financial Group (MFG) 

Chart: Share price over the year


Reported an excellent profit, without exceeding expectations, and the stock pulled back from recent highs. With a return on equity of 48 per cent and having exceeded $50 billion in funds under management, MFG is now setting its sights on $100 billion. The new listing of the $1.5 billion Magellan Global Trust will help.
 
Medibank Private (MPL)

Chart: Share price over the year
 

Capped off an excellent year with its 2017 full year result. MPL generates a solid return on equity and is still generating cost savings across the business. MPL is well priced at current levels and has the capacity to go higher in the medium to long term.
 
SELL RECOMMENDATIONS

Newcrest Mining (NCM)

Chart: Share price over the year


The gold miner’s share price has hovered this year after a strong 2016. Despite this, we see it as overvalued at 29 times 2018 earnings and while delivering below market returns.
 
Iluka Resources (ILU) 

Chart: Share price over the year


The mineral sands producer has reduced debt. Sales growth is solid, but, in our view, a share price recently near $10 is excessive. The gains have come largely from a spike in rutile prices that we believe is unlikely to be sustained.


Tony Locantro, Alto Capital

BUY RECOMMENDATIONS

Minotaur Exploration  (MEP)

Chart: Share price over the year


Exploration is accelerating on Minotaur’s joint venture with Oz Minerals. Drilling is underway at the Eloise copper targets, with the hunt around Prominent Hill set to resume later this month. In my view, MEP offers a rare risk/reward profile in the junior resources sector based on its low market capitalisation, quality JV partners and elephant style targets that may provide multiple upside potential.

Nanollose (NC6)

Chart: Share price over the year


New listing NC6 is aiming to disrupt the textile industry by producing plant free cellulose fibres. Nanollose uses microbes that ferment biomass waste products from the food and beverage industries into cellulose fibre that requires very little land, water or energy. One to follow as a first mover in a sector likely to attract further attention.
 
HOLD RECOMMENDATIONS

Red Metal  (RDM)

Chart: Share price over the year


The 400 metre plus drill hole at Leichhardt missed the desired copper target, but activity is set to start at the major Lawn Hill zinc project in coming weeks. RDM’s market capitalisation remains well underpinned by the Maronan lead-silver, gold-copper JORC resource and a pipeline of other emerging products. Near term price weakness has also provided an opportunity to accumulate a quality explorer.

HRL Holdings (HRL)

Chart: Share price over the year


This emerging environmental services company has just announced the acquisition of Analytica Laboratories in New Zealand. If bedded down successfully, this could prove transformational for HRL with revenues of more than $50 million targeted in three to five years. A $15 million institutional placement at 8.5c a share is planned to fund the acquisition. While stock digestion is to be expected, HRL’s growth profile may well accelerate.

SELL RECOMMENDATIONS
 
Aristocrat Leisure (ALL)

Chart: Share price over the year


ALL has run strongly. However, pressure is now emerging from rival poker machine manufacturers amid the changing demographics of gamblers and moves towards social media gaming platforms. It’s worth considering taking profits at this price level. The shares closed at $22.53 on October 19.
 
The A2 Milk Company (A2M)

Chart: Share price over the year


The share price has soared this year and the company was recently on a price/earnings ratio of almost 60 times despite, in my view, the resurgence of the Chinese milk bubble. I believe the valuation appears stretched and prone to a near term correction. At current prices, the business is priced for absolute perfection and, in my view, the risk/reward profile appears to be to the downside.


Darren Jackson, Sanlam Private Wealth 

BUY RECOMMENDATIONS
 
Lynas Corporation (LYC)

Chart: Share price over the year


We’re bullish on rare earth elements neodymium and praseodymium (known together as NdPr), which are used in producing electric vehicles. Lynas, a major miner and processor of NdPr, offers considerable upside to this emerging electric vehicle theme. Recent quarterly report showed record sales as the company turnaround continues.
 
Catapult Group International (CAT)

Chart: Share price over the year


Catapult is a global leader in the athlete analytics space. Arguably, the stock was overbought on the way up and oversold on the way down. Catapult achieved record revenue of $60.8 million in fiscal year 2017 amid a strong growth trajectory.   
 

HOLD RECOMMENDATIONS
 
Asia Pacific Data Centre Group (AJD)

Chart: Share price over the year


A real estate investment trust that owns data centres. The company has received an unconditional all cash offer to be acquired by 360 Capital Group at $1.95 per security. This offer closes on November 6. However, a superior bid may emerge before the deadline.
 
TPG Telecom (TPM)

Chart: Share price over the year


The future is in wireless and the Internet of Things (IOT), so we believe the NBN will be obsolete by the time it’s fully completed. Already in the US, Verizon is trialling 5G as a replacement for home broadband. David Teoh’s TPG has been busy buying spectrum in Australia for the longer term 5G evolution. Watch for the turnaround.
 
 
SELL RECOMMENDATIONS
 
Orocobre (ORE)

Chart: Share price over the year


Orocobre is one of the few listed pure lithium producing companies. We remain bullish on lithium. Our concern is the short term production outlook appears too optimistic. We put recent share price strength mostly down to short covering. 
 
Updater Inc (UPD)

Chart: Share price over the year


Updater is a US based tech company that has so far penetrated 15 per cent of the moving and relocation market. We see merit in the business, but a rising share price this year leaves little room for error for a company with a market capitalisation of $680 million on October 18.


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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