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December, 2017 3:02 PM



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18 Share Tips - 4 December 2017

18 Share Tips - 4 December 2017

By Anthony Black 04.12.2017



Ishan Dan, Wattle Partners

BUY RCOMMENDATIONS 

Domain Holdings Australia (DHG) 

Chart: Share price over the year
 

Fairfax Media’s offshoot real estate business recently hit the boards. It was a strong debut. Fairfax Media shareholders received one Domain share for every 10 shares held in Fairfax Media. No new money was raised. Listing activity remains strong, which should benefit Domain. This nimble business is ready to take on REA Group. We expect it will be volatile short term, but a good medium term buy. 

NextDC (NXT)

Chart: Share price over the year
 

Demand for data storage can only increase as the Internet of Things, artificial intelligence and autonomous vehicles continue to develop. NXT is in prime position to benefit. It has made a solid start to the year, and we’re confident it will meet its fiscal year 2018 guidance targets. Expect underlying EBITDA of between $56 million and $61 million in fiscal year 2018.  

HOLD RECOMMENDATIONS

Santos (STO) 

Chart: Share price over the year


STO rejected a confidential, non-binding, conditional and indicative proposal from Harbour Energy offering $4.55 a share in August. There may be other parties interested in STO, so a higher bid may emerge. Shares in the energy giant were trading at $5.14 on November 29. 

Webjet (WEB)

Chart: Share price over the year


Shares plummeted following a trading update that included a softer earnings outlook. It expects earnings of $80 million in the 2017/18 financial year, up 14 per cent. The market didn’t like it as it was short of an expected $89 million in earnings. WEB has enjoyed a solid run in the past two years, so it wasn’t a surprise. In our view, growth of 14 per cent is still good. Investors should hold on. WEB will soon find a bottom. 

SELL RECOMMENDATIONS

Coca-Cola Amatil (CCL)
 
Chart: Share price over the year


We expect earnings in fiscal year 2018 to be impacted by about $40 million as the company brings forward its accelerated Australian growth plan. The carbonated drinks sector is in structural decline. The 52 week high was $10.87 on March 31. On November 29, the shares closed at $7.76.  

JB Hi-Fi (JBH)

Chart: Share price over the year


Amazon’s here. Price competition is key and it’s going to be difficult to match Amazon’s overheads. In our view, risks in this consumer electronics giant are now to the downside, particularly with stiffer competition prior to Christmas. We much prefer Kogan in the retail space.  


Ian Dorrington, Argonaut
 
BUY RECOMMENDATIONS

Sino Gas and Energy Holdings (SEH)

Chart: Share price over the year

 
SEH is on the cusp of full scale development. SEH has provided details on the proposed development for its Ordos Basin gas assets. Staged development includes phase 1 production of 350 million to 550 million standard cubic feet a day.  Development will be fully funded from debt, existing cash and free cash generation. Importantly, the company is unlikely to raise equity capital. Argonaut holds or controls 7 million SEH shares.
 
Orthocell (OCC)

Chart: Share price over the year

 
OCC’s proprietary CelGro collagen medical device has received European regulatory approval (CE Mark) for marketing and distribution in the European Union. Approval is for dental bone and soft tissue regeneration applications. CelGro is a medical scaffold that provides integral support to the soft tissue while it undergoes repair. Argonaut currently owns and/or controls 600,000 OCC options exercisable at 55 cents on or before December 13, 2019. Argonaut acted as the sole lead manager for a placement to raise $4 million in December 2016 and received fees commensurate with this service.
 
HOLD RECOMMENDATIONS
 
Fortescue Metals Group (FMG)

Chart: Share price over the year

 
The iron ore producer retained guidance of shipping 170 million tonnes at a cash production cost of between $US11 to $US12 a wmt (wet metric tonne) in fiscal year 2018. Autonomous haulage deployment to the Chichester Hub and the re-locatable conveyor system will continue to see downward pressure on costs.
 
 
Pacific Energy (PEA)

Chart: Share price over the year

 
PEA continues to grow organically through contract expansions, with existing customers recently adding 13 megawatts of additional capacity. The company now has record contracted capacity of 293MW locked in for a weighted average term of four years.  However, a likely shift to gas at Newmont’s Tanami Desert operations provides likely near term negative sentiment. We continue to like PEA for its consistency and visibility in the often volatile mining services space, but we retain a hold recommendation until more clarity on Newmont emerges.
 
 
SELL RECOMMENDATIONS
 
Blackmores (BKL)

Chart: Share price over the year

 
Blackmores has been the market leader for complementary medicines in Australia since 2003. A combination of product innovation, category expansion and increasing distribution has helped the company retain this position. We have downgraded to sell due to strong price growth. The shares were trading at $168.84 on November 30.
 
Treasury Wine Estates (TWE)

Chart: Share price over the year

 
At this point, we need more confidence the company can deliver meaningful underlying revenue growth from pricing. We would like more visibility regarding a future reduction in its wine portfolio.


Michael Wayne, Medallion Financial Group

BUY RECOMMENDATIONS

Speedcast International (SDA)

Chart: Share price over the year


An emerging business providing satellite-based communication networks and services. SDA buys satellite capacity from operators and then resells the satellite usage and telecommunication services to more than 100 different customers worldwide. The business provides services to global drilling contractors in the maritime and energy sectors. The shares have risen from $3.64 on September 1 to close at $5.07 on November 29.   

Bapcor (BAP)
Chart: Share price over the year
 

The share price has been gathering momentum in recent weeks and appears to be threatening a breakout. This automotive aftermarket parts provider delivered an impressive annual report, which highlighted strong margin growth, same store sales and cash generation. Although debt levels remain relatively high after a series of acquisitions, impressive free cash flow generation ensures it can comfortably service debt. For a business with an impressive earnings profile and strong competitive advantage, the valuation multiple appears attractive at only 17 times 2018 earnings.

HOLD RECOMMENDATIONS

Janus Henderson Group (JHG)

Chart: Share price over the year


The recent quarterly update highlighted a shift to net inflows for the first time since Brexit. The merger between Janus Group and Henderson Global Investors brings together two asset management businesses with excellent reputations and track records. On a recent P/E ratio of 15.5, JHG compares favourably to its peers on valuation and earnings potential. 

IDP Education (IEL)

Chart: Share price over the year


IDP Education is a world leader in international student placement services, with 93 offices helping students from 30 countries. Emerging middle classes, renowned educational institutions and a low Australian dollar are tailwinds for some time. IEL’s strong brand, scale and history in dealing with universities give it a strong competitive advantage, placing it in an enviable position to capitalise on favourable structural tailwinds in international student numbers.

SELL RECOMMENDATIONS

Coca-Cola Amatil (CCL)

Chart: Share price over the year


The business has been experiencing soft volume growth, declining margins and falling revenues in Indonesia. We feel the structural trend of consumers shifting away from fizzy drinks will remain a headwind for some time. Increases across water, dairy and energy drinks only partially offset declines in carbonated and sugary drinks. Competitor pricing pressure and intense competition across the grocery industry have the potential to further compress margins. 

Fletcher Building (FBU)

Chart: Share price over the year


The board has indicated that it’s completing yet another strategic review after flagging further losses in the construction segment. The business faces operational issues, as the sector appears to have reached a cyclical peak. This is concerning and for that reason we feel its best to avoid FBU until an element of certainty returns.


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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week 15 December 2017
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    • 12
    • ANZ Roy Morgan Consumer Confidence weekly survey | 9:30 AM
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If Australia follows international trends, Amazon will eat into market share and inflated margins of many retailers.

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