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Chris Conway, Marcus Today

BUY RECOMMENDATIONS

James Hardie Industries PLC (JHX)

Chart: Share price over the year

The latest results were well received by the market. Profit generated by this building products company exceeded guidance, driven by solid growth and margin improvement in the US. The outlook remains positive despite increasing cost pressures, with JHX expecting to deliver margins at the top end of guidance. The three-year strategic transformation is off to a strong start.

REA Group (REA)

Chart: Share price over the year

Australian residential listing volumes were down 19 per cent in July 2019 compared to the prior corresponding period. Sydney declined by 31 per cent and Melbourne by 29 per cent. Listings in the first half of fiscal year 2020 are likely to be lower than last year’s corresponding half. However, the best time to buy this digital advertising company specialising in property is during periods of cyclical weakness. With auction clearance rates improving, there will be a recovery in listings.

HOLD RECOMMENDATIONS

Suncorp (SUN)

Chart: Share price over the year

Full year results were better than expected, with bank numbers the standout due to low bad debts and increases in second half non interest income. Strong reinsurance protection saw a big improvement in second half insurance margins. While fiscal year 2020 looks challenging, steps to de-risk the business should hold it in good stead. There’s also the prospect of a $506 million capital return being approved at the annual general meeting in September.

CSL (CSL)

Chart: Share price over the year

Recent full year results were mixed, in our view. Reported net profit after tax of $US1.92 billion was up 17 per cent and beat expectations. Total reported revenue of $US8.539 billion was up 11 per cent, but lower than we expected. Immunoglobulin growth stood out, but haemophilia remains soft. There’s enough in the report to stay a believer, but with an elevated share price, now isn’t the time to chase. The shares were trading at $233.90 on August 29.

SELL RECOMMENDATIONS

Blackmores (BKL)

Chart: Share price over the year

Shares in this vitamins and supplements firm have been punished since reporting full year 2019 results on August 15. Reported full year net profit after tax of $53 million was down 24 per cent on the prior year. In our view, BKL has struggled with product innovation and distribution channels into China, which are reflected in the results showing slower demand. The company has embarked on a cost cutting strategy. The shares have fallen from $166.76 on August 30, 2018 to trade at $69.60 on August 29, 2019. Other stocks appeal more.

The A2 Milk Company (A2M)

Chart: Share price over the year

I have been a fan for a long time, but the time has come to reassess. The recent full year results were weaker than I expected, despite net profit after tax increasing 47 per cent to $287.7 million. It’s the outlook that spells caution – no growth, in my view. If A2M isn’t going to grow, it can’t justify the lofty price/earnings multiple, even after the share price was significantly punished post the results.

Michael Gable, Fairmont Equities

BUY RECOMMENDATIONS

FlexiGroup (FXL)

Chart: Share price over the year

We consider this financial services firm a turnaround story that will require patience. It reported 1.76 million active customers in its 2019 full year results, up 8 per cent on last year. FXL has 65,000 retail partners, also up 8 per cent on last year. It reported $2.56 billion in transaction volumes, up 12 per cent. Any dips are a buying opportunity and we believe there’s a strong chance it will retest $2 before the end of the year. The shares were trading at $1.775 on August 29.

Goodman Group (GMG)

Chart: Share price over the year

This global industrial property group has been one of our core holdings for some time. The group’s 2019 full year operating profit was up 11.4 per cent on the prior corresponding period to $942 million. Strong demand and investment continues. In our view, the recent share price dip has more to do with market sentiment than fundamentals, providing another buying opportunity.

HOLD RECOMMENDATIONS

Santos (STO)

Chart: Share price over the year

While the energy sector remains weak, Santos has recently been showing some strong price action. From a charting perspective, it’s been holding up well in the past few months. It appears poised to rally strongly as soon as we see an end to crude oil price weakness. We would be looking for break above $7.45 as confirmation that it will resume the uptrend. The shares were trading at $7.06 on August 29.

CSL (CSL)

Chart: Share price over the year

Many market watchers believe the CSL share price is topping out at these levels. However, price action still remains bullish and we believe this blood products group can continue to head higher. We believe double digit earnings growth can be achieved going forward and this should underpin further share price gains.

SELL RECOMMENDATIONS

Downer EDI (DOW)

Chart: Share price over the year

This infrastructure group has experienced strong resistance near $8 and once again found some selling at that level. Fiscal year 2019 results were marginally above guidance, in our view. But from a technical perspective, we believe the shares have reached their limit and would be targeting support near $7. The shares were trading at $7.57 on August 29.

G8 Education (GEM)

Chart: Share price over the year

The childcare centre operator’s half year results fell short of our expectations. Net profit after tax was down 20 per cent on the prior corresponding period to $19 million, which the company says was driven by the implementation of a new accounting standard. We believe the shares are likely to struggle in the absence of an imminent turnaround. The GEM chart also appears weak and we can envisage the shares falling below $2. The shares were priced at $3.635 on February 19 this year. The shares were trading at $2.435 on August 29.

Simon Herrmann, wise-owl.com

BUY RECOMMENDATIONS

IPH Limited (IPH)

Chart: Share price over the year

IPH offers profitable exposure to demand for intellectual property protection. The company recently posted double digit growth across all financial metrics for fiscal year 2019. We’re attracted to its strong market positions in Australia and Singapore, which provide a solid and proven growth platform into broader Asia. The company’s historical growth trajectory is robust. Recent cost and capital management initiatives could potentially reinvigorate the bottom line.

Codan (CDA)

Chart: Share price over the year

This electronic equipment and technology company posted record sales of $271 million in fiscal year 2019. It reported a record statutory net profit after tax of $45.7 million. The annual fully franked dividend is 9 cents a share, up 6 per cent. It had a net cash position of $37.5 million at June 30, 2019. The shares are enjoying good momentum. The company’s outlook is bright.

HOLD RECOMMENDATIONS

Sun Resources (SUR)

Chart: Share price over the year

We continue to see significant upside for the company’s Bowsprit project and remain attracted to the potential robust economics and pathway to near term profitable oil production. Recent project delays had a negative impact on sentiment, but we don’t believe they threaten the long term commercial viability of the project. However, timely and cost effective execution is required to restore shareholder confidence and to accelerate commercial delivery. Funding remains a key risk, but could also be a major value driver if delivered at favourable terms to shareholders. The shares finished at less than cent on August 29.

Enero Group (EGG)

Chart: Share price over the year

This international marketing and communications firm experienced growth in most key metrics across its markets. We expect the trend to continue via a mix of organic growth and acquisitions. The stock has made significant gains in recent times, so we’ll continue to monitor EGG for its growth potential.
 
SELL RECOMMENDATIONS

Gold Road Resources (GOR)

Chart: Share price over the year

Gold prices have risen strongly this year in response to global uncertainty and trade wars. Australia’s gold mining and exploration companies have performed strongly. While the long term fundamental outlook for Gold Road and its Gruyere joint venture remains compelling, we believe it’s an opportune time to take profits. The shares have risen from a low of 59 cents on December 20, 2018 to close at $1.38 on August 29, 2019. The gold price may ease if the US and China settle their differences on trade.

Fleetwood Corporation (FWD)

Chart: Share price over the year

This modular accommodation solutions provider reported a 15 per cent increase in operating net profit after tax to $14 million in fiscal year 2019. However, FWD recorded a statutory after tax loss of $6.2 million, which the company says included loses from discontinued operations. The stock is way off its 12 month high of $2.44 on September 10 last year. We believe better opportunities exist elsewhere. The shares finished at $1.66 on August 29.

 

The above recommendations are general advice and don’t take into account any individual’s objectives, financial situation or needs. Investors are advised to seek their own professional advice before investing.

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.