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18 Share Tips - 25 June 2018

18 Share Tips - 25 June 2018

By Anthony Black 25.06.2018



James Bryce-Lind, Patersons Securities

BUY RECOMMENDATIONS
 
ReadCloud (RCL)
Chart: Share price over the year

An education technology company that provides a digital eLearning solution to Australian secondary schools. We believe RCL’s digital textbook platform is in the best position to wrestle digital dominance from the incumbent whale in the space Campion. Sound management has continued to buy on market after listing in February and now makes up more than 12 per cent of the register.
 
Mayne Pharma Group (MYX)
Chart: Share price over the year

The pharmaceutical company’s price action indicates a bottoming out of the stock. Earnings concerns over a crackdown by US officials to cut the cost of prescription drugs appear to have eased. Breaking through key resistance at 80 cents reveals a change in sentiment. The shares closed at at 86.5 cents on June 21.

HOLD RECOMMENDATIONS
 
RCR Tomlinson (RCR)
Chart: Share price over the year

This diversified engineering and infrastructure company has more than 50 per cent of fiscal year 2019 revenue in hand, with major rail and solar catalysts in the pipeline. In our view, RCR is one of the ASX’s best plays on renewable energy projects.
 
Janus Henderson Group PLC (JHG)
Chart: Share price over the year

The stock, along with other listed money managers, has fallen since the start of the year on global equity concerns. We believe JHG’s early transition to the exchange traded funds market will underwrite earnings against outflows and we expect results to beat expectations.

SELL RECOMMENDATIONS

Kogan.com (KGN)
Chart: Share price over the year

The share price has been punished recently after chief executive Ruslan Kogan and chief financial officer David Shafer sold a total of about 6 million shares at $7 each. The share price was $9.80 on June 4. The shares closed at $7.35 on June 21. Prefer others following this news.
 
APA Group (APA)
Chart: Share price over the year

Concerns over whether the Foreign Investment Review Board and the Australian Competition and Consumer Commission will allow the CK Infrastructure consortium’s $11 a share offer are well founded, in my opinion. A successful deal would allow a significant percentage of the eastern seaboard’s gas pipelines to be foreign owned. CKI’s bid for DUET Group took 13 months to get a successful result. Better alternatives exist for the capital over the next 12 months from a capital growth and yield perspective.

Ian Dorrington, Argonaut

BUY RECOMMENDATIONS

Hazer Group (HZR)
Chart: Share price over the year
 
HZR’s technology to process natural gas into hydrogen and graphite has the potential to be highly disruptive and presents substantial value if the process can be scaled up to sufficient commercial quantities. HZR has advanced to commercialisation, de-risking the technology and unlocking value along the way. The potential reward is appealing.
 
Gage Roads Brewing Co (GRB)
Chart: Share price over the year
 
The acquisition of Matso’s Broome Brewing is compelling. Matso’s brands are well known, complementary and should boost earnings per share by more than 20 per cent in fiscal year 2019. GRB’s brands represent a bigger portion of the sales mix and we expect higher gross margins going forward, moving GRB closer to $1 underlying EBITDA a litre.  
 
HOLD RECOMMENDATIONS
 
Ausdrill (ASL)
Chart: Share price over the year
 
A downward revision to our forecasts in Australia and potentially in Africa will negatively impact our valuation. The shares were punished after the value of a major contract was slashed. However, we retain a positive view on ASL’s balance sheet and on medium term growth prospects in Africa. Shares in the mining services company were trading at $1.85 on June 21. 
 
Austin Engineering (ANG)
Chart: Share price over the year
 
While management’s strategy and focus should deliver margin gains going forward, we’re more conservative in our assumptions pending further outlook commentary in coming months.  Our blended valuation drops from 27 cents to 25 cents, which continues to support our hold recommendation. The stock was trading at 23.5 cents on June 21.
 
SELL RECOMMENDATIONS
 
Qantas Airways (QAN)
Chart: Share price over the year
 
We’re concerned the share price isn’t adequately reflecting the nature of the airline environment. Demand is uncertain and the company potentially faces steeper price discounting from competitors and a rising oil price. The recent share price run offers an opportune time to take profits. The shares were trading at $6.66 on June 21.
 
Wesfarmers (WES)
Chart: Share price over the year
 
Clearly a favourite for longer term income focused investors. However, growth orientated investors may wish to take advantage of a climbing share price by reducing positions. The company plans to spin off its Coles Supermarkets business. The shares have risen from $41.07 on April 16 to trade at $48.66 on June 21.

Michael McCarthy, CMC Markets

BUY RECOMMENDATIONS
 
IPH Limited (IPH)
Chart: Share price over the year

This intellectual property group offers exposure to potential upgrades if demand for professional services in IP, trademarks and the legal division strengthens with the broader economy. Positive earnings momentum and a recovery in the share price above support and resistance at $4.50 also point to possible further gains. The shares were trading at $4.63 on June 21.
 
TPG Telecom (TPM)
Chart: Share price over the year

Competition among the telecommunication companies is heating up. TPM’s more selective strategy, and its focus on high speed data may see it leap frog its rivals for customers and market share. While capital requirements have some analysts expressing caution, underlying earnings are subject to longer term upward revision, despite delays in the roll out of the NBN. Much less demanding at $5.31 a share on June 21, 2018 compared to highs above $12 in 2016.
 
HOLD RECOMMENDATIONS
 
Macquarie Group (MQG)
Chart: Share price over the year

Despite a 30 per cent share price rise in less than 12 months, there is a case for investors to respect the positive share price momentum. Conservative earnings guidance, leverage to the market cycle and the broader economy and potential for its longer term strategy to deliver larger irregular income are reasons to look for further gains.
 
CSL (CSL)
Chart: Share price over the year

Trading at all time highs, this blood products company is a great Australian success story. Its 20-year track record is one of the most impressive on the market. A strong research and development pipeline is business as usual for CSL. In my view, there is no change to the outlook, and CSL’s share price could see more significant gains over the medium to long term.
 
SELL RECOMMENDATIONS
 
St Barbara (SBM)
Chart: Share price over the year

The gold miner is at all time highs following several positive developments in the past few years. Now producing in Western Australia and Papua New Guinea, SBM is benefiting from a lower Australian dollar. In my view, this is as good as it gets for SBM. A potential downdraft in gold as the US dollar strengthens makes this stock vulnerable to a potentially large pull back.
 
BlueScope Steel (BSL)
Chart: Share price over the year

Traded below $11 a share late last year to highs above $18 in June 2018. The chart is showing signs of topping out, failing around $18.80 on five occasions. The stock is trading above consensus valuation and there is potential for earnings downgrades.

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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Featured Comment

Almost all sectors sit at historic extremes in terms of price earnings ratios versus history.

Extreme asset prices fuelled by cheap money

Broker buys

  • ASX Code
  • Company
  • Broker
  • RCLReadCloudPatersons
  • MYXMayne PharmaPatersons
  • HZRHazer GroupArgonaut
  • GRBGage RoadsArgonaut
  • IPHIPH LimitedCMC Markets
  • TPMTPG TelecomCMC Markets

Broker sells

  • ASX Code
  • Company
  • Broker
  • KGNKogan.comPatersons
  • APAAPA GroupPatersons
  • QANQantasArgonaut
  • WESWesfarmersArgonaut
  • SBMSt BarbaraCMC Markets
  • BSLBlueScope SteelCMC Markets

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  • FED0.50%
  • BOE0.25%
  • BOC0.50%
  • RBNZ2.00%
  • ECB0.00%
  • SNB-0.75%
  • BOJ-0.10%

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