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Michael Gable, Fairmont Equities
BUY RECOMMENDATIONS
Newcrest Mining (NCM)
Chart: Share price over the year
Since buying NCM earlier this year, we continue to remain bullish about the company and the gold price. With fear gripping markets once more, it now looks likely this gold miner will try to retest old highs above $40. Any weakness is another buying opportunity, in our view. NCM was one of the few big stocks to rise during a day of carnage on August 15. The shares finished at $36.77.
Centuria Industrial REIT (CIP)
Chart: Share price over the year
CIP is a pure play industrial real estate investment trust. We like CIP’s mix of assets, its low leasing risk, high occupancy rates and improving gearing levels. As an interest rate sensitive stock with an attractive dividend yield, it’s set to benefit in an environment of falling rates. It has good price support at current levels and we believe it’s ready to head higher again.
HOLD RECOMMENDATIONS
Sydney Airport (SYD)
Chart: Share price over the year
SYD is another interest rate sensitive stock offering a good and reliable dividend yield. We also expect the stock to attract investor support in an environment of falling rates. Total revenue for the half year rose 3.4 per cent on the prior corresponding period to $797.1 million. Total passengers declined 0.2 per cent to 21.6 million. However, international passengers rose 1.9 per cent. SYD broke above an important resistance level several weeks ago and it looks set to continue rallying higher.
Saracen Mineral Holdings (SAR)
Chart: Share price over the year
We continue to like the prospects for gold and this producer has been trending up nicely during the past four months. The shares have risen from $2.55 on April 18 to close at $4.06 on August 15. While it’s trending higher, we would be happy to hold. Keep an eye on the gold price.
SELL RECOMMENDATIONS
Cimic Group (CIM)
Chart: Share price over the year
The market was disappointed with its interim result posted on July 17. Shares in this engineering-led construction and mining company have fallen from $45.27 on July 16 to finish at $30.71 on August 15. We can’t see any meaningful buying support around these levels. In our view, risks remain to the downside.
Bendigo and Adelaide Bank (BEN)
Chart: Share price over the year
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The share price performed well between March and June 30, 2019. However, in our view, an underwhelming full year result confirmed our suspicions that it had ran too hard. Going forward, we believe margins and earnings will be pressured in an increasingly competitive sector. BEN’s charting profile points to a lower share price. The shares finished at $10.50 on August 15.
Michael McCarthy, CMC Markets
BUY RECOMMENDATIONS
Reliance Worldwide Corporation (RWC)
Chart: Share price over the year
Sustained price pressure has pushed the shares of this international plumbing products company from levels above $6 to an August 15 close of $3.35. Concerns about the outlook for the US economy led to an earnings downgrade in May, adding further downward momentum. However, the longer term outlook for RWC’s innovative plumbing products is brighter in my opinion, and the lower share price is potentially an attractive entry point to a company with higher growth prospects.
News Corporation (NWS)
Chart: Share price over the year
It’s easy to overlook the fact that News Corp is still listed in Australia. Its broad base of media exposures generate about 45 per cent of revenue in the US, and it retains significant Australian exposure through newspapers, Foxtel and REA Group, among others. The share price has risen from $16.76 on June 3 to finish at $20.37 on August 15. The price could go higher from here on positive momentum and its recent full year profit result.
HOLD RECOMMENDATIONS
AGL Energy (AGL)
Chart: Share price over the year
The energy giant reported a flat operating profit and, in my view, a concerning outlook at its recent results. In contrast, underlying revenue was up strongly, and some may consider the bad news about possible increased regulatory interference as priced in. Management announced an on-market buy-back of up to 5 per cent of its issued share capital during the next 12 months. Hold around $19. The shares finished at $18.78 on August 15.
CSL (CSL)
Chart: Share price over the year
CSL suffered pre-result market wobbles on reports of lower blood product supplies across the board in the US. However, a better than expected full year result and a positive management outlook statement resulted in CSL touching new highs. It’s hard to buy in at current levels, but I can’t see any reasons to sell this blood products group. The shares finished at $226.61 on August 15.
SELL RECOMMENDATIONS
Aurizon Holdings (AZJ)
Chart: Share price over the year
A stronger report from the rail freight giant pushed the share price to record highs. Analysts revised up their valuations. Unfortunately, in most cases, these increased share price estimates were still below the closing price of $6.09 on August 13. It may be worth locking in gains around $6. The shares finished at $5.80 on August 15.
Mirvac Group (MGR)
Chart: Share price over the year
A 6 per cent drop in profits and a $500 million fall in residential pre-sales, combined with a recent post-GFC high unit price, puts this diversified property group on my sell list. Its status as a higher yielding bond proxy erodes above $3, as the dividend yield drops below 4 per cent, and there’s no franking attached. The shares closed at $3.11 on August 15.
Tony Paterno, Ord Minnett
BUY RECOMMENDATIONS
Boral (BLD)
Chart: Share price over the year
We expect growth to persist in the US, underpinned by synergies. We also expect capital expenditure to moderate in Australia and free cash flow to improve materially in fiscal year 2020. There’s also scope for further investment in plasterboard to deliver earnings per share accretion. Boral remains attractively priced relative to peers. Our price target is $6. Shares in this building products company were trading at $5.05 on August 16.
Lendlease Corporation (LLC)
Chart: Share price over the year
This international property and infrastructure group is trading well below our valuation of $15.85 a share based on a worst case scenario of an orderly wind down of its engineering business. We believe LLC’s capital position is relatively sound. The company could materially deleverage going forward. The shares were trading at $13.53 on August 16.
HOLD RECOMMENDATIONS
Insurance Australia Group (IAG)
Chart: Share price over the year
IAG’s general insurance division generates high margins. This is due to a strong position in Australian and New Zealand personal line operations and operational improvements across the business. IAG also enjoys a strong position in several key Asian markets. The stock has good defensive earnings characteristics.
Origin Energy (ORG)
Chart: Share price over the year
While most of its earnings and valuation comes from the retail business, the company is highly levered to oil prices through its Australia Pacific LNG (APLNG) venture. We expect higher cash flows from APLNG to boost earnings growth. The share price is trading in line with our net present value, so we retain a hold on the stock.
SELL RECOMMENDATIONS
Medibank Private (MPL)
Chart: Share price over the year
The private health insurance sector remains under pressure. Industry growth has slowed and we believe Medibank faces challenges in retaining market share. An increasing number of people, particularly the young, are questioning the value of private health insurance as premiums rise across the board. MPL has enjoyed a good run since the coalition government was returned in May, so investors may want to consider taking profits. The shares were trading at $3.385 on August 16. In our view, better growth opportunities exist elsewhere.
Wesfarmers (WES)
Chart: Share price over the year
A housing slowdown presents challenges for hardware giant Bunnings. Retailers Kmart and Target are up against thrifty consumers in the absence of meaningful wage rises and rising household charges. In our view, execution risk is high regarding the proposed acquisitions of rare earths miner Lynas Corporation and lithium company Kidman Resources. We believe return on capital will be diluted in the near term if either of the proposed acquisitions proceed. In our view, growth in earnings before interest and tax (EBIT) is modest.
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.
