18 Share Tips – 20 September 2021

Peter Day, Sequoia Wealth Management

BUY RECOMMENDATIONS

Macquarie Group (MQG)

This well managed group offers a diversified global business model. MQG has a strong balance sheet. It has tens of billions of dollars in equity and assets under management. The company is poised to grow in a global low interest rate environment. Positive momentum favours the share price.

Mineral Resources (MIN)

MIN recently announced a successful gas discovery at the Lockyer Deep-1 well in the Perth Basin. Should the flow test prove successful, MIN will be able to accelerate its decarbonising plans at its mining operations in Western Australia. Completion of the flow test and updates on MIN’s iron ore and lithium growth plans present key near term catalysts for the stock.

HOLD RECOMMENDATIONS

Rhipe (RHP)

RHP provides cloud and technology solutions. The share price has benefited from a takeover offer from Norwegian IT advisory firm Crayon Group at $2.50 a share. Rhipe’s board has recommended shareholders vote in favour of the scheme at a meeting expected in October. If the scheme is approved, Rhipe intends to potentially maximise shareholder returns via a permitted fully franked special dividend.

Helloworld Travel (HLO)

The pandemic contributed to the company reporting a full year 2021 normalised net loss of $31.1 million. It was ahead of our forecast of $27.9 million. On a brighter note, Federal Government contracts underpin group earnings to a degree. Despite the uncertain outlook as a consequence of COVID-19, the company has inherent value within its business units, which may not be fully captured in the share price.

SELL RECOMMENDATIONS

Boral (BLD)

Our target price for this building products company has fallen from $6.70 to $6 after analysing underlying earnings revisions in the continuing business and updated capital expenditure guidance. We retain a lighten recommendation due to short term uncertainty surrounding prices, volumes and the outlook for the continuing pandemic.

ANZ Bank (ANZ)

Our analysis of the mortgage business in past four years leads us to conclude below system growth for the most part. An exception was a period of above system growth following a celebrity ad campaign. In our view, mortgage underperformance most likely relates to restrictive credit policies, a shrinking physical network and a lack of service to the broker channel. ANZ is our least preferred major bank.

Harrison Massey, Argonaut

BUY RECOMMENDATIONS

Centaurus Metals (CTM)

Centaurus is developing the Jaguar nickel project at the tier 1 Carajas mining province in Brazil. Centaurus has a current JORC compliant resource of 58.5 million tonnes at 0.96 per cent nickel. The company recently published a value-add scoping study that it claimed confirmed the strong economic fundamentals of the project. It will focus on producing high quality nickel sulphate. Nickel sulphate production generates a lower carbon footprint and generally yields much better premiums.

Genesis Minerals (GMD)

Genesis Minerals is focusing on developing the Ulysses gold project in the Leonora mining region of Western Australia. Ulysses has a current JORC resource of 27 million tonnes at 1.8 grams a tonne of gold for 1.6 million ounces of contained gold. An updated mineral resource is expected by the end of calendar year 2021. Genesis recently completed the transformational acquisition of the Kookynie gold project near Ulysses, which should add significant value to the company’s exploration program.

HOLD RECOMMENDATIONS

Poseidon Nickel (POS)

Poseidon is a nickel sulphide explorer, operating the Black Swan nickel project in Western Australia. The company has recently targeted its exploration program towards the Golden Swan resource within the Black Swan asset, and has identified several significant nickel intercepts at grade and depth. Post the capital raising in August 2021, the company has additional funds to undertake further drilling programs of its assets.

Northern Star Resources (NST)

Following the acquisition of the Kalgoorlie Super Pit and the merger with Saracen Mineral Holdings, NST owns a portfolio of quality gold assets. Ongoing cost pressures and labour issues have put pressure on the broader industry and margins are starting to narrow. Northern Star remains a staple stock for the gold bull investor. However, in our view, higher gold prices need to emerge to make NST a worthwhile buy.

SELL RECOMMENDATIONS

Domino’s Pizza Enterprises (DMP)

The fast food giant operates across the world. The company has benefited from delivering food during COVID-19 lockdowns. Domino’s was recently trading on a relatively uninspiring dividend yield of around 2 per cent. The share price has doubled between late November 2020 and September 16, 2021. At these levels, it may be prudent to take some profits.

Paladin Energy (PDN)

Paladin owns 75 per cent of the Langer Heinrich uranium mine in Namibia. Uranium spot prices have risen more than 25 per cent in the past month to September 16, 2021. But, in our view, prices still need to move higher for PDN to make meaningful revenue from production. Paladin’s share price has doubled in the past three weeks to September 16 on the back of improving sentiment in the uranium space. It might be worthwhile taking some profit off the table at these levels.

Peter Moran, Wilsons

BUY RECOMMENDATIONS

Integral Diagnostics (IDX)

IDX provides diagnostic imaging services in Victoria, Queensland, Western Australia and New Zealand. The company has grown strongly in the past five years. Concerns that lockdowns and increasing wages will negatively impact earnings have recently led to a weaker share price. In our view, these issues are short term and the softer price provides a buying opportunity. We retain an overweight rating.

Silk Laser Australia (SLA)

Increasing demand for non-surgical aesthetic products and services is behind SLA’s growth in the past few years. Silk recently acquired Australian Skin Clinics, resulting in the number of clinics increasing from 61 to 117. The acquisition is expected to increase earnings per share by up to 20 per cent. We retain an overweight rating.

HOLD RECOMMENDATIONS

Cochlear (COH)

This hearing implants maker has an impressive record of long term growth, driven by continuing research and development. Cochlear grew market share in the second half of fiscal year 2021, although underlying broader market growth was weak. As a result, underlying profit for 2021 was below expectations. The company has reduced earnings guidance for fiscal year 2022. We hold a market weight rating.

AMA Group (AMA)

The auto repair group has raised $150 million to repay debt and provide working capital for growth initiatives. The company has been negatively impacted by COVID-19 lockdowns. Assuming COVID-19 lockdowns subside, AMA expects to grow to 180 sites over the medium term. This should increase revenue to about $1 billion. The shares are currently trading around our valuation. We hold a market weight rating.

SELL RECOMMENDATIONS

Bravura Solutions (BVS)

BVS provides software solutions to the wealth management, life insurance and funds administration industries. The company’s fiscal year 2021 profit result met expectations. However, in our view, disappointing guidance for fiscal year 2022 and the departure of its chief executive officer suggest a return to pre-COVID-19 profit may take time. Bravura needs to generate client growth despite difficult times. Our rating is underweight.

Elmo Software (ELO)

This provider of cloud based employee management software is increasing revenue. But cash burn is an issue, in our view. The company has net cash of around $80 million. However, according to our analysis at this point, we believe a capital raising in the next one to two years is a possibility. Our rating is underweight.

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.