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Tom Bleakley, BW Equities

BUY RECOMMENDATIONS

Spirit Telecom (ST1)

Chart: Share price over the year

Spirit is a commercial telecommunications company providing data, broadband and cloud services. Spirit has recently made strategic acquisitions that will materially increase the scope of its business. In fiscal year 2020, Spirit’s unaudited underlying EBITDA is expected to range between $3.5 million and $3.8 million. Management is targeting revenue of $80 million and a 15 per cent EBITDA margin in the 2021 financial year.

REA Group (REA)

Chart: Share price over the year

Despite recent challenging operating conditions, this digital advertising group specialising in property continues to attract an increasing number of browsers to its platforms. The company has an enviable track record of performance. REA is primed for a post COVID-19 rebound in housing market transaction volumes. The shares have risen from $65.02 on March 23 to close at $115.98 on August 13.

HOLD RECOMMENDATIONS

4DMedical (4DX)

Chart: Share price over the year

A recent listing, 4DX is focusing on commercialising its respiratory imaging platform. The company says its technology converts sequences of X-ray images into four-dimensional quantitative data. It enables physicians to better diagnose and treat patients with respiratory diseases. We believe the company offers a bright outlook.

Pact Group (PGH)

Chart: Share price over the year

Makes rigid plastic packaging in Australia and has a growing presence in Asia. The company is defensive and its reliable financial metrics appeal to investors. Good free cash flow enables the company to service debt and to focus on growth going forward.

SELL RECOMMENDATIONS

Air New Zealand (AIZ)

Chart: Share price over the year

Prior to the recent COVID-19 outbreak in Auckland, AIZ had been increasing domestic flights, but the number was still below pre-Coronavirus levels. However, international travel was a significant contributor to AIZ revenue. It remains uncertain as to when international travel will return to meaningful levels. Investors seeking a better risk/reward equation can consider looking elsewhere.

Myer Holdings (MYR)

Chart: Share price over the year

The department store giant has been forced to close its Melbourne outlets due to tighter stage 4 lockdown restrictions. COVID-19 has severely impacted second half trading. A growing number of online only retailers have posted positive updates in the past six months. Lockdowns and social distancing regulations have been a government-enforced driver of shifting business from traditional bricks and mortar outlets to online. In future, bricks and mortar outlets can expect even stiffer competition as smaller online competitors build scale.

Philippe Bui, Medallion Financial Group

BUY RECOMMENDATIONS

PolyNovo (PNV) 

Chart: Share price over the year

PNV is an Australian based biotechnology company focusing on dermal regeneration. Its main patented product is NovoSorb biodegradable polymer technology. The company’s latest trading update guided for at least a doubling of year-on-year product sales, with a 33 per cent increase in the June quarter compared to the March quarter. The share price is off recent highs, and the company appears to be growing market share, although off a low base. The stock finished at $2.14 on August 13.

Pushpay Holdings (PPH)

Chart: Share price over the year

Provides a donor management system to churches, non-profit organisations and education providers in Australia, New Zealand, the US and Canada. The company increased EBITDA guidance when releasing good full year results in May. We like PPH for its favourable trends in underlying revenue, gross profit margins and customer acquisitions.

HOLD RECOMMENDATIONS

KKR Credit Income Fund (KKC)

Chart: Share price over the year

A listed investment trust managed by global investment giant KKR, which has about $200 billion in assets under management. The share price was recently trading at around a 20 per cent discount to net tangible assets. The on- market buyback still has a lot capacity to continue buying units. With quarterly distributions amounting to about 5.5 per cent per annum, KKC is attractive to income-orientated investors.

Nanosonics (NAN)

Chart: Share price over the year

NAN makes the trophon EPR ultrasound probe disinfector. The company offers a strong growth pipeline. On July 1, the shares were priced at $6.80. The shares closed at $5.98 on August 13. We believe the shares offer value, so NAN is business we continue to hold.

SELL RECOMMENDATIONS

Corporate Travel Management (CTD)

Chart: Share price over the year

CTD is a global provider of cost effective travel solutions for the corporate space. Historically, the business has performed quite well. But domestic and global lockdowns translate to uncertainty in the travel industry. Uncertainty combined with the potential for a long term shift towards virtual meetings mean CTD isn’t a business we would be holding at this stage.

IOOF Holdings (IFL)

Chart: Share price over the year

A recent update from this diversified financial services provider was below consensus, in our view. We concluded the update outlined challenges with its operating margins. Until net inflows improve, investors can consider looking elsewhere for better risk/reward opportunities.

Luke Pavone, Broadbent Financial

BUY RECOMMENDATIONS

Santos (STO)

Chart: Share price over the year

The company is operationally and financially leveraged to a recovering crude oil price. In recent years, this oil and gas company has focused on improving existing operations, creating a sustainable business model to deal with lower oil demand. STO has been aggressively paying down debt, while building a growth portfolio. The Dorado discovery is arguably the best undeveloped oil and gas prospect in Australasia, which is forecast to be operational in several years.

ResMed Inc. (RMD)

Chart: Share price over the year

This medical device maker has retreated into buy territory after fiscal year 2020 results showed a significant increase in ventilator sales offsetting a fourth quarter decline for sleep apnoea products – the company’s core business. The 12-month high was $29.30 on July 21. The shares closed at $24.52 on August 13. The longer term growth outlook remains robust.

HOLD RECOMMENDATIONS

Fortescue Metals Group (FMG) 

Chart: Share price over the year

FMG recently announced record iron ore shipments of 47.3 million tonnes in the fourth quarter and 178.2 million tonnes for fiscal year 2020. Annual shipments exceeded the top end of guidance. Strong iron ore prices and exports suggest an attractive final dividend. We believe FMG is fully valued at this point.

JB Hi-Fi (JBH)  

Chart: Share price over the year

This consumer electronics giant has benefited from increasing home office sales during COVID-19 restrictions. We believe it will be difficult to sustain existing growth rates, as Victoria’s lockdown will delay an economic recovery. The stock has enjoyed a great run, soaring more than 20 per cent in calendar year 2020. In our opinion, the stock is fully priced for now. The shares closed at $46.40 on August 13.

SELL RECOMMENDATIONS

AMP (AMP)

Chart: Share price over the year

As expected, this embattled wealth giant recently reported significant falls in operating earnings for the half year. Australian wealth management fell 43 per cent. AMP Capital was down 40 per cent, while AMP Bank was down 30 per cent. New Zealand wealth management declined 18 per cent. The bright news was a fully franked special dividend of 10 cents a share to be paid later this year. However, until we see a significant improvement in company culture, we suggest investors consider other options.

REA Group (REA)

Chart: Share price over the year

In our view, fiscal year 2020 results were robust given the challenging property advertising market, particularly as lockdowns continue in Victoria. A return to growth is most likely factored into the share price of this online property advertising company. On our analysis of fiscal year 2021 earnings multiples, we believe there’s little scope for a fall in listing volumes should the housing market remain soft due to continuing COVID-19 restrictions.

Please note that REA Group is recommended as a buy and a sell this week due to differing outlooks.

 

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.