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18 Share Tips - 12 February 2018

18 Share Tips - 12 February 2018

By Anthony Black 12.02.2018



Ben Faulkner, Sanlam Private Wealth

BUY RECOMMENDATIONS

ALS Limited (ALQ)
Chart: Share price over the year

We see a buying opportunity in this analytical laboratory services provider below $7. We expect earnings momentum with the recovery in commodity exploration. We understand laboratories have a backlog and are experiencing delays with their assays. The next commentary could show increasing volumes and the stock may re-rate to higher prices. The shares were trading at $6.50 on February 9.

Western Areas (WSA)
Chart: Share price over the year

A reliable, low cost, pure play nickel producer with operations in Western Australia. The nickel price has held up well despite volatile equity markets. The supply and demand equation favors higher nickel prices. In our view, WSA is a buy for a price target above $5. The shares were trading at $3.035 on February 9.

HOLD RECOMMENDATIONS

Oil Search (OSH)
Chart: Share price over the year

A company update about its operations in late 2017 showed low cost, long term production of oil and gas. The share price retreat provides an entry opportunity. In our view, OSH is a long term hold for oil and gas exposure. The shares were trading at $7.30 on February 9.

PWR Holdings (PWH)
Chart: Share price over the year

A niche automotive parts and equipment manufacturer for high performance motorsport. The stock remains a hold and has presented a good entry point in the recent sell off. Any Australian dollar weakness is positive. In our view, PWH is a long term hold for a share price above $3 in time. The shares were trading at $2.38 on February 9.  

SELLS RECOMMENDATIONS

Costa Group Holdings (CGC)
Chart: Share price over the year

The share price of this fruit and vegetable grower has fallen almost $1 since November 7. The chart has now broken key support at $6 and, in our view, will struggle to climb back. The shares were trading at $5.76 on February 9. 

Wesfarmers (WES)
Chart: Share price over the year

WES recently reported a significant writedown of its Bunnings UK operations. In our view, this news will overhang the stock until we get the next update on its UK operations. Wesfarmers faces increasing competition across its various market segments. 


Jeremy Hook, TMS Capital

BUY RECOMMENDATIONS
 
Magellan Financial Group (MFG) 
Chart: Share price over the year

The fund manager delivered a solid first half 2018 result, with the dividend increasing 16 per cent. We believe two major acquisitions will add significant value, while highlighting the strength of the Magellan brand. The Australian equities strategy under Airlie and new US distribution potential under Frontier should deliver MFG long term growth. 
 
Event Hospitality and Entertainment (EVT) 
Chart: Share price over the year

A leading hotel operator, with exposure to tourism and leisure via its Rydges, QT and Atura brands. A large property portfolio, the cinema exhibition business and the Thredbo ski resort should contribute to a growing and diversified earnings stream. EVT was recently delivering a grossed up dividend yield of 5.7 per cent.
 
HOLD RECOMMENDATIONS
 
Treasury Wine Estates (TWE) 
Chart: Share price over the year

The wine maker has delivered exceptional results from sound brand management and clever export marketing. Increasing margins are a good sign, but the market has fully priced this stock, so it’s time to hold.
 
Rio Tinto (RIO) 
Chart: Share price over the year

The mining giant has performed well in the past year, as a combination of cost management initiatives and stronger commodity prices sent the stock above $80 before the recent sell off. We’re comfortable with the outlook, but think it’s run hard enough for now, so continue holding.
 
SELL RECOMMENDATIONS
 
Sirtex Medical (SRX) 
Chart: Share price over the year

Shareholders of this biotechnology company should accept the takeover offer, or sell on market. In our view, the $28 a share offer by US giant Varian Medical Systems is over priced and represents an opportunity to move on from SRX’s chequered past. The shares were trading at $27.42 on February 9.
 
McGrath (MEA) 
Chart: Share price over the year

This real estate company has been a disappointing performer. On September 4 last year, the shares were priced at 80 cents. The shares were trading at 44 cents on February 9. In our view, governance issues and a shrinking network have put further pressure on a business that we believe isn’t suitable for retail investors.


Adam Spicer, Baillieu Holst 

BUY RECOMMENDATIONS

REA Group (REA)
Chart: Share price over the year

REA is a quality business, generating high returns on equity and achieving consistent double digit earnings growth over the past 5 years. According to recent data, auction clearance rates have hit fresh multi year lows in major Australian cities, and will likely trend lower towards more normalised levels. This will benefit online property portals such as REA, as vendors will have to list their houses and apartments for longer periods on its website.
 
LendLease Group (LLC)
Chart: Share price over the year
 
LendLease Group is a global property and infrastructure business, which is nicely positioned to capitalise on more infrastructure spending. We expect the business to expand margins between fiscal years 2018 and 2020, contributing to stronger earnings per share growth. LLC trades on a prospective fiscal year 2018 price/earnings multiple of 12.1 times, which isn’t demanding given the forecast growth rates.

HOLD RECOMMENDATIONS

ASX Limited (ASX)
Chart: Share price over the year

The ASX is a defensive business. It generates reliable, but single digit earnings growth. ASX is trading on a prospective fiscal year 2018 price/earnings ratio of 24 times – the upper end of its historical P/E band. We believe it’s prudent to hold on valuation grounds.

Praemium (PPS)
Chart: Share price over the year

Praemium is a technology provider to the global wealth management sector. PPS has achieved strong growth in funds under administration (FUA) over the past three years, which is currently about $7 billion. We expect PPS to continue its good momentum in new business flows and FUA going forward.
 
SELL RECOMMENDATIONS

Perpetual (PPT)
Chart: Share price over the year
 
PPT is a long standing diversified financial services and asset management business. PPT trades on a forward fiscal year 2018 price/earnings multiple of 17.8 times. In the absence of any meaningful earnings drivers, we believe investors can consider selling PPT given our forecasts of modest earnings per share growth in fiscal years 2018 and 2019.
 
Charter Hall Retail REIT (CQR)
Chart: Share price over the year

Earnings growth for this Australian property trust has been relatively flat in the past few years. Despite CQR owning some defensive quality assets, the prospects of higher interest rates in the future make this bond proxy stock less appealing.


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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