Philippe Bui, Medallion Financial Group
BUY RECOMMENDATIONS
Elmo Software (ELO)
Chart: Share price over the year
ELO provides cloud based payroll, recruitment, rostering and HR software in Australia and New Zealand. The company operates a software as a service business model. ELO recently raised $70 million via an institutional placement and is aiming to raise another $20 million via a share purchase plan, which closes on June 1. The additional funds should provide management with more flexibility in relation to merger and acquisition opportunities. At current levels, we believe the company remains an attractive growth opportunity.
Home Consortium (HMC)
Chart: Share price over the year
This property group owns and manages retail centres across most Australian states. The company provided a positive operating update in early May. It reported strong occupancy and traffic rates during the lockdown period due to the essential services offered by many of its retailers. At current levels, we believe the company remains an attractive income opportunity.
HOLD RECOMMENDATIONS
Credit Corp Group (CCP)
Chart: Share price over the year
This receivables management company focuses on acquiring purchase debt ledgers from Australian and New Zealand banks, finance companies and telecommunication firms. The company recently raised $120 million via an institutional placement. The $30 million share purchase plan closes on June 2. The funds should provide CCP with more capacity to buy debt in what is a weak economic environment.
Regis Resources (RRL)
Chart: Share price over the year
RRL is a gold producer and explorer in Western Australia. March quarter results were marginally below the estimates of analysts. However, gold sector momentum looks strong. RRL’s recent price/earnings multiple was lower and, in our view, more appealing than many of its peers. Also, RRL pays a fully franked dividend. Share price momentum since mid March has been favourable for RRL.
SELL RECOMMENDATIONS
Afterpay (APT)
Chart: Share price over the year
Recent updates from this buy now, pay later company have been positive. However, we believe potential exists for an increase in bad debts given the economic slowdown. Although we like the business, we can’t justify a hold on current valuations. The share price has risen from a 52 week low of $8.01 on March 23 to close at $46.09 on May 28.
Webjet (WEB)
Chart: Share price over the year
The share price of this online travel agency has risen significantly since the company raised capital at $1.70 a share in April. But it’s still unclear when international travel restrictions will ease and volumes return to normal. The shares closed at $4.11 on May 28.
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BUY RECOMMENDATIONS
Aristocrat Leisure (ALL)
Chart: Share price over the year
We believe a negative reaction to this poker machine company’s recent results was overdone. ALL has invested heavily in digital gaming, and acquisitions have been seamlessly integrated. Investing in design and development, supported by strong growth in mobile gaming, are likely to increase market share. The company’s land based assets should also begin recovering in line with economies gradually opening up.
Altium (ALU)
Chart: Share price over the year
ALU is synonymous with printed circuit boards. The company expects it may fall short of reaching its $US200 million revenue target in fiscal year 2020 due to near term headwinds from the Coronavirus. However, the bigger opportunity remains intact. The company has retained its target of 100,000 subscribers by 2025. ALU will offer discounts and extended payment terms to customers to support volumes during this difficult period. In our view, any share price weakness provides an opportunity to invest for longer term strength.
HOLD RECOMMENDATIONS
Afterpay (APT)
Chart: Share price over the year
This buy now, pay later company recently announced it had 5 million active customers in the US. The company will be included in the MSCI Australia index, which measures the performance of the big and mid cap segments of the market. This stock can be volatile, with big moves in either direction.
Magellan Financial Group (MFG)
Chart: Share price over the year
This global fund manager has a strong track record of performance. In our view, MFG has taken a cautious approach to the asset management sector in an environment of market uncertainty. A 3 per cent rise in funds under management in April was well ahead of forecasts.
SELL RECOMMENDATIONS
Woolworths (WOW)
Chart: Share price over the year
Apart from hotels, the retail giant enjoyed solid growth rates across all divisions in the March quarter. Sales growth across the group continued in April, but at moderating rates. It seems investor excitement in WOW and rival Coles Group resembled panic buying previously seen in stores. WOW remains a hold, but better short term value may be found in an array of discounted stocks that are recovering in line with the market.
Technology One (TNE)
Chart: Share price over the year
We previously liked this software as a service company, but first half 2020 results fell marginally short of our expectations. Margins were largely in line with our estimates, although revenue slightly missed for the half year ending March 31. We believe tighter cost controls will be needed if TNE is to deliver on full year estimates. We believe investors should consider locking in some gains, as the stock was recently trading near all time highs. We would happily revisit the stock around $8. The shares closed at $8.91 on May 28.
Omkar Joshi, Opal Capital Management
BUY RECOMMENDATIONS
GrainCorp (GNC)
Chart: Share price over the year
This grain handling business is leveraged to a current resurgence in the agricultural cycle due to increasing rain and the associated easing of the drought. As a result, we expect volumes to recover in the near term. Also, the business has no debt. The company has a re-insurance contract in place to help avoid previous stints of earnings volatility.
Ampol (ALD)
Chart: Share price over the year
This fuel retailer has been impacted by the lack of cars on the road during lockdown restrictions. As people return to their normal lives, ALD will benefit from an uplift in volumes. Also, the commercial business has continued to be relatively resilient in recent months.
HOLD RECOMMENDATIONS
Ramsay Health Care (RHC)
Chart: Share price over the year
This private hospital operator will benefit when elective surgery resumes in response to an easing of COVID-19 cases in Australia. However, in the meantime, RHC has negotiated deals for state governments to use their hospitals during the pandemic, which removes earnings downside.
Crown Resorts (CWN)
Chart: Share price over the year
CWN is set to benefit once COVID-19 restrictions are lifted and casinos resume trading. CWN has a new site opening in Sydney in December 2020, which will increase traffic in the future. There’s also potential for corporate activity, as US private equity firm Blackstone recently acquired a 9.99 per cent stake in the company.
SELL RECOMMENDATIONS
JB Hi-Fi (JBH)
Chart: Share price over the year
Third quarter Australian sales in this consumer electronics giant were boosted as more people upgraded their technology to work from home in response to the Coronavirus. However, in my view, home office technology upgrades at recent levels isn’t a sustainable source of growth as more employees return to work. I expect sales growth to slow, although the recent share price isn’t reflecting this outcome.
AGL Energy (AGL)
Chart: Share price over the year
In my opinion, this energy retailer is facing headwinds during the next 12 months. Wholesale electricity prices remain under pressure, and there’s a risk of increasing bad debts from customers unable to pay their bills due to challenging economic circumstances. AGL has almost finished its buyback, which has helped support the share price.
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.
