Tim Haselum, Catapult Wealth
BUY RECOMMENDATIONS
Charter Hall Long WALE REIT (CLW)
The trust was recently trading at a discount to net tangible assets. We believe the price offers an attractive entry point, and distribution yields also appeal. This trust invests in quality real estate assets that are mostly leased to corporate and government tenants. It enjoys an occupancy rate of 99 per cent. A portfolio weighted average lease expiry of 11.8 years provides long term income security.
Cleanaway Waste Management (CWY)
A statutory net profit after tax of $49 million in the first half of fiscal year 2023 was down 6.7 per cent on the prior corresponding period. The fall largely reflected increasing costs following a fire at its Victorian mill. Acquisition and integration costs also contributed. We believe cost issues will subside and expect the company’s earnings to be boosted from acquisitions. In our view, the company offers an attractive entry point.
HOLD RECOMMENDATIONS
Sonic Healthcare (SHL)
COVID-19 revenues were always going to retreat in response to increasing vaccinations and the removal of restrictions and lockdowns. However, base business revenue of $3.703 billion in the first half of fiscal year 2023 was up 9 per cent on the prior corresponding period. Base business margins are in line with pre-pandemic levels. Since mid February, the shares have been enjoying a strong rally to trade at $35.70 on April 27, which we consider fair value.
Coles Group (COL)
The share price of this supermarket giant has risen from $16.46 on January 3 to trade at $18.40 on April 27. We believe the market underestimated the company’s ability to increase margins in this inflationary environment. The company posted total sales revenue of $20.8 billion in the first half of fiscal year 2023, an increase of 3.9 per cent on the prior corresponding period. Consumer staples are defensive in uncertain times.
SELL RECOMMENDATIONS
InvoCare (IVC)
The board of this funeral services provider recently announced that TPG Global LLC has withdrawn its unsolicited, non-binding indicative proposal for IVC at $12.65 a share. The company lifted revenue in fiscal year 2022, but also reported a loss partly due to a revaluation of pre-paid funerals. Investors may want to consider locking in some gains.
Rio Tinto (RIO)
Pilbara iron ore shipments of 82.5 million tonnes in the first quarter of fiscal year 2023 were up 16 per cent on the prior corresponding period, but down 6 per cent on the fourth quarter of fiscal year 2022. The share price has fallen from $123.19 on April 19 to trade at $111.54 on April 27. The iron ore price has recently been under pressure. Investors may want to consider locking in some profits.
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Angus Geddes, Fat Prophets
BUY RECOMMENDATIONS
Alkane Resources (ALK)
The company’s Tomingley gold mine delivered a strong March quarter, producing 16,641 ounces of gold at an all-in sustaining cost (AISC) of $A1805 an ounce. Fiscal year 2023 guidance was upgraded from 65,000 ounces to 73,000 ounces of gold at an AISC of between $A1550 an ounce and $A1800 an ounce. Meanwhile, approval to develop the Roswell and San Antonio deposits open Tomingley to 100,000 ounces of gold production during calendar year 2025.
National Storage REIT (NSR)
NSR has been using its strength in the storage sector to consolidate its leading position. The company recently raised about $340.4 million via an institutional placement and security purchase plan. This will enable the company to advance development initiatives that underpin future earnings growth. Meanwhile, a strong balance sheet enables NSR to navigate the higher interest rate environment.
HOLD RECOMMENDATIONS
Sonic Healthcare (SHL)
SHL provides pathology, radiology and medical services. SHL posted a good first half result in fiscal year 2023. The company’s financial strength has enabled it to acquire key equity holdings and an acquisition to bolster its position as a leader in diagnostic services. In our view, these initiatives will underpin future earnings growth.
Rio Tinto (RIO)
The global miner posted record first quarter shipments of iron ore from the Pilbara region. It shipped 82.5 million tonnes, up 16 per cent on the prior corresponding period. It produced 79.3 million tonnes of iron ore, an increase of 11 per cent on the prior corresponding period. Rio has benefited from China re-opening its economy amid improving economic growth.
SELL RECOMMENDATIONS
Bubs Australia (BUB)
The rising cost of doing business is pressuring gross margins of this infant formula company. The group gross margin decreased to 8 per cent in the first half of fiscal year 2023. China remains a difficult region with sales momentum waning. Slower than expected consumer offtake agreements in key markets contributed to softer revenue in the first half.
Medibank Private (MPL)
The private health insurance giant reported group net profit after tax of $233.3 million in the first half of fiscal year 2023, an increase of 5.9 per cent on the prior corresponding period. The company was subjected to a cyber attack in October, 2022. The loss of almost 13,000 resident policies in the second quarter resulted in subdued growth of 1700 policyholders for the half. In our view, retaining or growing policyholders will be a challenge in an environment of higher interest rates and soaring cost of living expenses.
Niv Dagan, Peak Asset Management
BUY RECOMMENDATIONS
EQ Resources (EQR)
EQR is Australia’s only primary tungsten producer. It owns the Mount Carbine tungsten mine near Cairns. The company recently updated its mineral resource estimate at Mount Carbine. It confirmed an increase of 64 per cent metal contained in indicated resources (in-situ), adding about 2.11 million metric tonne unit (mtu). The market responded positively to the update. The shares were trading at 8.3 cents on April 27.
Latrobe Magnesium (LMG)
The company is developing a magnesium production plant in Victoria’s Latrobe Valley. The board has also chosen Malaysia for its 100,000 tonne per annum project. The company says it has held advanced discussions with ministry officials in the state of Sarawak about securing suitable land for the project, which is close to port facilities and ferrosilicon producers. We believe the stock offers potential for investors with an appetite for risk. The shares were trading at 7 cents on April 27.
HOLD RECOMMENDFATIONS
Meteoric Resources NL (MEI)
The company recently announced it had entered into a binding agreement to acquire significant and strategic ionic clay rare earth element licences contiguous with highly prospective areas of its tier 1 Caldeira REE project in Brazil. The acquisition comprises 21 licences, covering 49 square kilometres. It increases the company’s total area in this REE province by 40 per cent to 172 square kilometres. The shares have risen from 5.8 cents on January 3 to trade at 16 cents on April 27.
Cooper Metals (CPM)
The explorer’s Mount Isa East Copper and Gold project in Queensland covers about 1600 square kilometres of tenure. Recent success by neighbour Carnaby Resources highlights potential in the region. Increasing copper prices is a response to the transition to cleaner energy. The shares have risen from 21.5 cents on March 15 to trade at 34.7 cents on April 27.
SELL RECOMMENDATIONS
Fletcher Building (FBU)
Fletcher is a building products manufacturer. It’s also a home builder. The company operates in Australia and New Zealand. First half net profit after tax of $NZ92 million in fiscal year 2023 was down 46 per cent on the prior corresponding period. Trading in January and February had been impacted by adverse weather events in New Zealand. The outlook for fiscal year 2024 is softer.
Myer Holdings (MYR)
The department store giant generated total sales of $1.884 billion in the first half of fiscal year 2023, an increase of 24.2 per cent on the prior corresponding period. Net profit after tax of $65 million was up 101.4 per cent. However, we believe sustaining revenue for the full year will be a challenge given higher interest rates and increasing cost of living expenses. Investors may want to consider cashing in some gains.
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.
