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February, 201812:35 PM



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18 Share Tips - 15 January 2018

18 Share Tips - 15 January 2018

By Anthony Black 15.01.2018



Ishan Dan, Wattle Partners 

BUY RECOMMENDATIONS 

Oil Search (OSH)

Chart: Share price over the year

The key asset of this major oil and gas producer is the world class Papua New Guinea LNG plant operated by ExxonMobil. The PNG joint venture is progressing well. We expect the company to benefit from a rising crude oil price, which was recently at its highest level in three years, and stronger demand from LNG importers. 

Bapcor (BAP)

Chart: Share price over the year

Distributes automotive aftermarket parts. At its recent annual general meeting, the company reaffirmed profit growth guidance above 30 per cent over financial year 2018. Over time, BAP has been growing via earnings accretive acquisitions and opening new stores. BAP has a solid track record of buying great businesses with strong margins. There’s concerns electric vehicles may change the landscape, but that’s still some time away. 

HOLD RECOMMENDATIONS

Macquarie Group (MQG)

Chart: Share price over the year

The investment bank enjoyed a good rally in 2017 with the shares up about 15 per cent. It also reported strong 2017 fiscal year numbers that included a record full year profit of $2.2 billion, up 7.5 per cent on the prior year. Expect earnings guidance to be marginally up on fiscal year 2017. In my view, MQG has a tendency to issue conservative guidance, which it beats. For that reason, it’s a hold. 


Domino’s Pizza Enterprises (DMP)

Chart: Share price over the year

It’s been a difficult 12 months and the share price has slumped. DMP reaffirmed net profit after tax guidance for 20 per cent growth in fiscal year 2018. The market is expecting a better performance going forward. DMP has operations in Europe, Australia and Japan. There’s strong momentum in Europe. For that reason, it could be a turn-around story in 2018, although it’s still very early days.

SELL RECOMMENDATIONS

Flight Centre Travel Group (FLT)

Chart: Share price over the year

Shares in this travel agency business have soared in the past year. The company recently issued pre-tax profit growth guidance of between 6 per cent and 16 per cent for fiscal year 2018. However, we believe earnings growth may be pressured if international airfares and domestic bookings can’t be sustained. Investors could consider taking a profit.

Aurizon Holdings (AZJ)

Chart: Share price over the year

In our view, the Queensland Competition Authority issued an unfavourable draft decision on access pricing to Aurizon’s rail service for the next four years. The draft decision said AZJ could earn a maximum of $3.893 billion, which is almost $1 billion less than what was anticipated. That’s quite a large revenue hole. With the firm’s heavy reliance on the coal industry and a slowdown in demand from China, its outlook is challenging. 


Harrison Watt, Shaw and Partners

BUY RECOMMENDATIONS


Healthscope (HSO)

Chart: Share price over the year

This private hospital operator has bucked the trend after missing guidance in its fiscal year 2017 result. The shares have been creeping higher since early September. I expect this to continue, as the Northern Beaches Hospital in Sydney is expected to open later this year. HSO is well positioned to take advantage of the increasing need for health care.
 
Ardent Leisure Group (AAD)

Chart: Share price over the year

After the Dreamworld disaster in 2016 and the departure of two CEOs, Ardent Leisure has simplified the business by selling its bowling and entertainment arm for $160 million. The sale supports the balance sheet and enables Ardent to reinvest in the business. Expected higher than average tourism to the Gold Coast this year, due to the Commonwealth Games, should also support profits and the share price.
 

HOLD RECOMMENDATIONS

Oil Search (OSH) 

Chart: Share price over the year

The rising crude oil price has contributed to driving this stock higher, albeit on lighter volumes. Expect crude oil to perform well in 2018. The shares were priced at $6.40 on August 18 last year. The shares closed at $7.97 on January 10 this year. In our view, the stock has moved too high to chase.
 
Perpetual (PPT)

Chart: Share price over the year

It’s hard to justify trading PPT at these levels despite funds under management declining $400 million for the three months to September 30. From a technical perspective, trading above $50 leaves PPT in a neutral pattern. It’s also hard to sell this company, as Perpetual remains a quality fund manager and has proven it can rebound from headwinds.
 
SELL RECOMMENDATIONS
 
Dexus (DXS)

Chart: Share price over the year

In our view, this Australian real estate investment trust is fully priced in a sector losing investor support. Recent revaluations have driven up net tangible assets and supported the share price. But we believe investors should consider selling into strength.
 
Fisher & Paykel Healthcare (FPH)

Chart: Share price over the year

This respiratory care products provider has been on a five year run, but has struggled technically around $13. The market has high growth expectations, with FPH recently trading on an estimated 2018 price/earnings multiple of 42 times. The risk is to the downside, as any slip up will be punished.



Tony Locantro, Alto Capital

BUY RECOMMENMDATIONS

Proteomics International Laboratories (PIQ)

Chart: Share price over the year

This medical technology company is soon to launch PromarkerD, a predicative and diagnostic test for diabetic kidney disease. It has partnered with drug developer Dimerix to improve the treatment for chronic kidney disease. The drug DMX-200 is said to have shown positive results for treating kidney disease in early phase clinical trials. PIQ is also involved in targeting improved diagnosis and treatment of lung conditions. Recent market capitalisation was only $15.9 million.

Red Metal (RDM) 

Chart: Share price over the year

In my opinion, RDM remains one of the cheaper, quality junior explorers on the ASX. Its valuation remains underpinned by the Maronan lead-silver, gold-copper inferred JORC resource. It has entered into a joint venture with Oz Minerals to advance the Punt Hill and Pernatty Lagoon projects in South Australia. Expect exploration to accelerate in 2018.

HOLD RECOMMENDATIONS

Nusantara Resources (NUS)
Chart: Share price over the year

In my view, this emerging Indonesian gold developer remains undervalued relative to its peers. The 1.74 million ounce Awak Mas deposit in Sulawesi is moving towards development. There is also considerable exploration potential. One of the higher risk speculative stocks, but balanced with considerable upside potential as management plan to create a significant South East Asian gold producer.

Metal Bank  (MBK)
 
Chart: Share price over the year

MBK’s share price has weakened due to a 2 cents rights issue, yet multi million ounce gold potential remains at Triumph. Drilling and studies have identified shallow gold targets and bulk tonnage potential at depth. MBK is aiming to build sufficient resources to support a multiple open pit mining scenario. MBK remains one of my preferred emerging gold juniors and can be accumulated on weakness.

SELL RECOMMENDATIONS

Pilbara Minerals (PLS)
Chart: Share price over the year

PLS is an emerging lithium and tantalum producer. The shares soared last year. On July 17 last year, the shares were priced at 39.5 cents. The shares were trading at $1.195 on January 12 this year. Its recent market capitalisation was $1.88 billion. Consider taking profits in PLS and the sector in general as I believe upside momentum will be difficult to sustain regardless of the longer term fundamentals. 

Insurance Australia Group (IAG)
Chart: Share price over the year

IAG has been a stellar performer after a long sideways pattern and exposure to several major weather events. Since attracting Berkshire Hathaway, and more recently completing a deal with European reinsurers, the stock has broken out from the $5.50 range. But the risks with insurers can’t be ignored. While there may well be more in this run, it’s time to consider locking in some profits. The shares were trading at $7.165 on January 12.


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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Rising demand for outdoor or leisure wear from old consumers is a reason why I have favoured Kathmandu Holdings for the past few years.

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