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Michael Gable, Fairmont Equities

BUY RECOMMENDATIONS

Technology One (TNE)

Chart: Share price over the year

The ongoing transition of customers to the cloud underpins a stronger and longer term growth profile. Investors punished the share price over concerns about a slowdown in profit growth in the second half of 2019. The shares now appear to be finding support and this means current prices represent a good buying opportunity. Shares in this software as a service company closed at $7.49 on June 13.

WiseTech Global (WTC)

Chart: Share price over the year

A buy signal was triggered on the technical charts after the company broke through $24. The shares have performed strongly in June and hit a high of $28.29 on June 12 before retreating. We advise investors to run trailing stop losses.
Shares in this cloud based software solutions company finished at $26.70 on June 13.

HOLD RECOMMENDATIONS

Newcrest Mining (NCM)

Chart: Share price over the year

NCM has been our preferred gold stock since the start of the year and it continues to perform well. With the shares now pushing past the 2016 high, they look set to make a move towards the next major line of resistance. This means that NCM could move beyond $30 soon. The shares closed at $29.25 on June 13.

Aristocrat Leisure (ALL)

Chart: Share price over the year

This gaming machine manufacturer has an attractive medium to long term earnings growth profile, and can generate strong free cash flows. We also like the way it’s trading on the charts. The recent rally appears to be sustainable and ALL is likely to continue trending higher from here. The stock finished at $30.63 on June 13.

SELL RECOMMENDATIONS

Appen (APX)

Chart: Share price over the year

Develops human annotated datasets for machine learning and artificial intelligence. We’re taking profits in APX as recent price action suggests to us that the stock is going to struggle to head higher in the short term. We’re happy to get back into APX if it falls to low $20 levels. The shares closed at $25.55 on June 13.

Saracen Mineral Holdings (SAR)

Chart: Share price over the year

We’ve taken profits in this gold miner as a share price spike in early June gave us a sell signal. After heading to a new high, it then retreated to provide us with a false break. Our technical analysis suggests the shares are likely to fall towards the lower end of its recent range, which is below $3. The stock finished at $3.47 on June 13.

Tony Paterno, Ord Minnett

BUY RECOMMENDATIONS

Fortescue Metals Group (FMG)

Chart: Share price over the year

Recently surprised the market with an early declaration of its dividend for the second half of fiscal 2019, setting a payout of 60 cents a share. The announcement accelerated dividend payments to shareholders given strong cash flows from a buoyant iron ore market. Iron ore markets remain tight. We expect more returns to be a feature of fiscal year 2020, and forecast a full year dividend of $1.09 a share.

Please note: Fortescue Metals Group is recommended as a buy and a sell this week as analysts offer alternative outlooks.

Smartgroup Corporation (SIQ)

Chart: Share price over the year

Smartgroup has completed several small accretive transactions in the novated leasing and salary packaging sectors. Opportunities should present to make more acquisitions in the novated leasing sector. The shares have risen from $7.235 on April 3 to trade at $9.09 on June 14.

HOLD RECOMMENDATIONS

Telstra (TLS)

Chart: Share price over the year

Telstra updated its guidance around restructuring costs and asset impairment in light of good progress made on its T22 strategy. Management now expects $800 million of restructuring costs to be incurred in fiscal year 2019, up from $600 million previously. Telstra also plans to write down the carrying value of its legacy IT systems by $500 million as they are retired as part of the T22 strategy.

Suncorp Group (SUN)

Chart: Share price over the year

This financial services company confirmed fiscal year 2019 cash earnings were tracking in line with market expectations. The company is due to report its result on August 7. We have reduced earnings estimates to reflect our view that Suncorp is likely to invest more in growth initiatives, which may pressure improving margin trends and could necessitate a reset of margin targets.

SELL RECOMMENDATIONS

Xero (XRO)

Chart: Share price over the year

The software company’s latest result was largely in line with our expectations for subscriber and revenue growth. We note the share price rose strongly leading up to the result, and on the day it was delivered on May 16. However, we believe free cash flow guidance is expected to drive consensus earnings downgrades.

REA Group (REA)

Chart: Share price over the year

Third quarter revenue of $198.6 million was below our forecast of $204.2 million, but operating earnings (EBITDA) of $110.7 million came in higher than our $102 million estimate. New listings fell 9 per cent in the quarter and 22 per cent in April. Management expects even lower revenue growth in the fourth quarter compared to the third quarter. For fiscal year 2020, we have reduced our price growth expectations from 10 per cent to 8 per cent year on year. Shares in this digital advertising business specialising in property were trading at $92.45 on June 14.

Patrick Trindade, PhillipCapital

BUY RECOMMENDATIONS

National Australia Bank (NAB)

Chart: Share price over the year

Investors sent bank shares up following the election result. NAB is now trading closer to our fair value of $30. The NAB was recently yielding more than 6.3 per cent fully franked. NAB’s yield offers a far better return than bank deposits. There appears to be limited downside risk to the current share price while the dividend yield is retained. The shares were trading at $26.99 on June 13.

Telstra (TLS)

Chart: Share price over the year

Investors viewed TPG Telecom’s decision to shelve plans to enter the mobile network market as a positive for Telstra. Telstra is trading at an attractive discount to our fair value estimate of $4.40. As it’s also trading on a forecast fiscal year 2019 dividend yield of 4.3 per cent fully franked, we retain our buy recommendation. The shares were trading at $3.83 on June 13.

HOLD RECOMMENDATIONS

Beston Global Food Company (BFC)

Chart: Share price over the year

Our 12 month price target is 18 cents. But we acknowledge BFC is still a high risk potential turnaround story given, in our view, significant net debt and continuing losses. The 12 month high was 22 cents on August 8, 2018. The shares were trading at 11 cents on June 13, 2019.

JB Hi-Fi (JBH)

Chart: Share price over the year

This consumer electronics giant enjoys a strong market position. In theory, the recent interest rate cut should be a benefit to retailers. However, a softening domestic economy and increasing competition from online alternatives are ongoing headwinds for bricks and mortar consumer discretionary stocks. As JBH is trading significantly above our fair value of $24.50, we retain a hold recommendation. The shares were trading at $26.67 on June 13.

SELL RECOMMENDATIONS

Lendlease Group (LLC)

Chart: Share price over the year

First half 2019 net profit after tax fell 96 per cent on the corresponding period to $15.7 million. The company’s 52 week high was $21.73 on August 8, 2018. Shares in this international property and infrastructure group were trading at $13.02 on June 13, 2019. In our view, LLC is up against increasing competition from offshore entrants willing to accept lower margins, elevated tendering costs and disproportionate risk sharing. We believe the sector is exposed to potential downgrades going forward.

Fortescue Metals Group (FMG)

Chart: Share price over the year

Management has done a top job paying down debt. This iron ore producer reported a solid third quarter. However, FMG is trading at a significant premium to our fair value of $5.70. Iron ore prices have significantly spiked this year in response to supply disruptions in Brazil. Any material correction in the iron ore price could pressure FMG’s share price and see it trading closer to our fair value. The shares were trading at $8.37 on June 13.

 

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.