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Tom Bleakley, BW Equities

BUY RECOMMENDATIONS

Telix Pharmaceuticals (TLX)  

This research and development oncology company has lodged an application to the US Food and Drug Administration for its lead prostate cancer imaging technology. It recently announced a strategic commercial partnership with China Grand Pharmaceutical and Healthcare Holdings (CGP) for Telix’s portfolio of molecularly targeted radiation products. Telix is also developing oncology therapeutics for prostate, renal and brain cancers. I believe the company’s developments offer long term potential.

Unibail-Rodamco-Westfield (URW) 

URW has a global network of shopping malls, which were greatly impacted by COVID-19 restrictions. URW is trading at a significant discount to historical asset valuations. I believe URW’s assets will perform well as COVID-19 restrictions ease. Unlike the market, I’m pricing in a brighter outlook on the back of an increasing number of shoppers returning to malls.

HOLD RECOMMENDATIONS  

BetMakers Technology Group (BET)

BET provides back end technology for online bookmakers and racecourses. BET also has a white label online platform, which it’s partnered with leading on-course bookmakers. With an accelerating shift to online betting, the company is well positioned to benefit from its revenue sharing model.

PolyNovo (PNV) 

PNV is a wound care company that sells its NovoSorb BTM polymer across the world. It’s enjoyed much success from improving the treatment for severe burns and wounds. COVID-19 reduced the company’s capacity to promote and sell its products to new customers. I expect sales growth rates will accelerate in line with restrictions easing.

SELL RECOMMENDATIONS

Domino’s Pizza Enterprises (DMP)  

The company has benefited from increasing home deliveries during lockdown periods. As restrictions continue to ease in Australia, I expect an increasing number of diners to return to hotels, restaurants and other eateries. The stock has performed strongly this calendar year, so investors may want to consider taking a profit.

Westpac Bank (WBC)  

Cash earnings for fiscal year 2020 fell 62 per cent to $2.608 billion. I expect net interest margins to remain under pressure from lower interest rates for an extended period. A risk is bad and doubtful debts may climb if small to medium sized businesses find it difficult to meet loan repayments. It’s hard to find a catalyst for a re-rating in the short term.

Peter Moran, Wilsons

BUY RECOMMENDATIONS

ReadyTech Holdings (RDY)

Provides a wide range of software offerings, including student management to the education sector and payroll systems to employers. RDY has more than 4000 customers, which, in our view, provides evidence of the benefits its products offer. The business model is attractive due to high levels of recurring revenue. In our view, the share price is undervalued. We retain an overweight rating.

Pinnacle Investment Management Group (PNI)

This investment company appeals for its exposure to a network of high quality affiliate managers. The company has highlighted that 90 per cent of affiliate managers have outperformed their benchmarks during the past five years. Consequently, this has provided good performance fees and appears to be contributing to increasing levels of fund inflows. We retain an overweight rating.

HOLD RECOMMENDATIONS

Nick Scali (NCK)

The furniture retailer recently confirmed strong growth in sales orders for the first quarter of fiscal year 2021 compared to last year’s corresponding period. The company anticipates that first half net profit after tax in fiscal year 2021 will be between 70 per cent and 80 per cent higher than fiscal year 2020. The shares look fairly valued at current prices. We retain a market weight rating.

GUD Holdings (GUD)

 

This automotive and water products company has enjoyed a strong start in fiscal year 2021. Its core automotive division increased sales by almost 16 per cent in the first quarter of fiscal year 2021 compared to last year’s corresponding period. Re-sellers building inventory and strong product demand has contributed to growth. The shares look fairly priced at current levels. We retain a market weight rating.

SELL RECOMMENDATIONS

Elders (ELD)

The share price of this rural services company has almost doubled since the start of the year. The gains have been driven by the acquisition of Australian Independent Rural Retailers and more favourable weather conditions benefiting the agricultural sector. We’re expecting an earnings increase of around 40 per cent this financial year, but relatively flat profit growth the following year. In our view, the share price is too optimistic about future growth. We retain an underweight rating.

Breville Group (BRG)

Although the share price of this kitchenware company is off recent highs, it’s still too expensive, in our view. Economic conditions are likely to remain difficult and there’s a risk consumers will cut spending, particularly if government stimulus declines. The company was recently trading on a price/earnings multiple of around 40 times. Investors may want to consider taking profits. We retain an underweight rating.

Jabin Hallihan, Morgans

BUY RECOMMENDATIONS

Orocobre (ORE) 

This high-grade lithium producer posted sales revenue of $US10.5 million for the September quarter at its Argentinian facility, a 68 per cent increase on the previous quarter. We expect profit growth from higher lithium prices to be underpinned by increasing demand for electric vehicles. We expect production to increase when the lithium hydroxide plant in Japan is likely to be completed in the first half of 2021.

ANZ Bank (ANZ)

ANZ’s full year result met expectations and the bank appears to be successfully managing the COVID-19 crisis. The results show operating conditions are improving. We’re pleased with the company’s progress on loan deferrals and see continuing improvement in the credit outlook on the back of low interest rates and Federal Government stimulus measures. Management expects an earnings recovery in 2021, and we expect this to be reflected in a higher share price.

HOLD RECOMMENDATIONS

JB Hi-Fi (JBH) 

The latest trading update was impressive. This consumer electronics retailer traded through the Melbourne lockdown and generated solid online sales growth. High growth expectations are built into the share price. But we expect Federal Government stimulus to support sales and earnings during the busy Christmas shopping period.

Fortescue Metals Group (FMG) 

This iron ore company posted first quarter production ahead of expectations. It’s also benefiting from high iron ore prices, which we believe will continue to hold. FMG is a quality company to retain in the resources sector. In our view, much of the growth has been priced in, leaving the shares priced to perfection. But it does pay an attractive dividend, so it’s worth holding for income.

SELL RECOMMENDATIONS

Telstra Corporation (TLS)

The telecommunications giant is as committed as possible to retaining its annual dividend of 16 cents a share. To achieve this, it may exceed its payout framework of between 70 per cent and 90 per cent of underlying earnings. The potentially higher payout ratio can subtract from investing in capital growth. In our view, the outlook for earnings growth remains subdued. We believe better growth prospects can be found investing in Telstra’s competitors.

Virgin Money UK PLC (VUK)

The underlying mortgage business is in England. Earnings may be further pressured in response to another lockdown in England. Bad and doubtful debts could potentially rise if economic conditions deteriorate. The company has already cancelled the dividend. The outlook for growth is subdued.

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.