18 Share Tips – 26 September 2022

Elio D’Amato, Spotee Connect

BUY RECOMMENDATIONS

Illuka Resources (ILU)

This mineral sands producer recently delivered a solid interim report. Sales exceeded production, and all at high zircon prices. The company is expected to start its rutile mill in Western Australia by mid next year. The Eneabba rare earths refinery will be a new growth engine, following recent approvals and a $1.25 billion non-recourse loan from the Australian Government to build it.

92 Energy (92E)

A uranium prospector operating in Canada, 92E is drilling out its Gemini prospect near the McArthur River mine, which is one of the biggest and best grade uranium mines in the world. Further, 92E has acquired a 100 per cent interest in the Wares Uranium Property in the northern region of the prospective Athabasca Basin. Given a buoyant uranium price, 92E offers potential for a superior risk/reward return.

HOLD RECOMMENDATIONS

Mineral Resources (MIN)

The shares soared to all time highs on speculation the company may be considering spinning off its world-class lithium assets and potentially listing in the US. While a US listing won’t guarantee success, splitting its lithium and iron-ore operations into separate entities could create value. While nothing was certain at September 21, the market is excited by the prospect.

Cronos Australia (CAU)

This medicinal cannabis company is a profitable and low debt stock. It pays a dividend and is a leader among its peers. The company has a unique edge via its CanView platform, which is an online market enabling transactions between producers and distributors. The platform is generating an increasing number of patients, pharmacies, doctors and products.

SELL RECOMMENDATIONS

NextDC (NXT)

The data centre provider should see sustained demand for its services. However, in our view, the cost of providing services is expected to rise exponentially, with the price of energy its biggest operating expense. Margins are under pressure, according to our analysis. NXT has broken price support at $9.78, so we expect to see more selling from here. The shares closed at $9.30 on September 21.

Newcrest Mining (NCM)

The US dollar is expected to remain stronger for longer, so the gold bulls may have to wait for eagerly anticipated inflation trades. Gold production guidance of between 2100 ounces and 2400 ounces in fiscal year 2023 is weaker than we expected. All in sustaining costs of between US$930 an ounce and $US1070 an ounce is higher than we anticipated. Other stocks appeal more at this time.

Arthur Garipoli, Seneca

BUY RECOMMENDATIONS

Sarytogan Graphite (SGA)

The explorer is drilling for graphite in Kazakhstan. The inferred JORC resource highlighted the highest grade and second largest deposit compared to ASX peers. It recently added another drill rig on site, with a view of extending mineralisation and upgrading its existing inferred JORC resource. We expect the resource will continue to be defined. There’s potential to upgrade areas of mineralisation from inferred to indicated.

Seek (SEK)

This employment and education company reported a good fiscal year 2022 result. Revenue from continuing operations was up 47 per cent on the prior corresponding period, while EBITDA grew 53 per cent. The market failed to embrace the good result based on an uncertain macro-economic outlook. Seek is a cyclical business. The stock offers potential upside on valuation grounds, as a result of a tight domestic labour market.

HOLD RECOMMENDATIONS

Wesfarmers (WES)

Earnings before interest and tax in fiscal year 2022 were marginally below fiscal year 2021, but above consensus forecasts. The company has strong retail brands. WES should be able to ride out pressures on household budgets, as a result of rising interest rates. The Bunnings hardware chain is a strong contributor to company earnings. It should continue to benefit from people continuing to invest in their homes.

Coles Group (COL)

The supermarket and liquor giant’s result in fiscal year 2022 was in line with market expectations. Like most retailers, COL experienced cost pressures in response to COVID-19. In a higher interest rate environment, Coles can be sufficiently agile to appeal to shoppers by ensuring affordable prices.

SELL RECOMMENDATIONS

Zip Co (ZIP)

This buy now, pay later company is up against higher costs in a fiercely competitive and crowded sector. Discretionary consumer spending is likely to be impacted by higher interest rates and cost of living increases, in our view. The share price has fallen from $4.33 on January 4 to trade at 73 cents on September 21. The outlook presents challenges in a tough economic environment.

Cettire (CTT)

Cettire is an online luxury goods retailer. The company posted a statutory net loss after tax of $19.062 million in fiscal year 2022. The shares have fallen from $3.67 on January 4 to trade at 88 cents on September 21. A higher interest rate environment may pressure company earnings moving forward, in our view. Other stocks offer more appealing prospects at this time.

Jean-Claude Perrottet, Medallion Financial Group

BUY RECOMMENDATIONS

CSL (CSL)

Full year results for this blood products company were positive in response to strong demand for flu vaccines, in our view. CSL is rolling out new technology in the US, which reduces plasma donation procedure times by about 30 per cent. These innovations should improve the collection process and, as a result, we retain a positive long term view on CSL.

IDP Education (IEL)

This global education services provider delivered a strong fiscal year 2022 result. Margins improved by 24.8 per cent, the highest in the company’s history. Revenue grew by 50 per cent on the prior corresponding period in response to a 45 per cent increase in student placements and a 67 per cent increase in international English language tests. With Australian student placement volumes expected to grow, IDP offers a bright outlook.

HOLD RECOMMENDATIONS

Goodman Group (GMG)

This integrated commercial and industrial property group delivered a strong fiscal year 2022 result. The company is forecasting earnings per share growth of 11 per cent in fiscal year 2023. Other positives are an occupancy rate of 98.7 per cent and a track record of guidance upgrades.

Pilbara Minerals (PLS)

The company owns big lithium assets. Revenue of $1.2 billion in fiscal year 2022 was up 577 per cent on the prior corresponding period. The company has almost $900 million in liquidity and cash on its balance sheet. Despite higher-than-expected costs, PLS has upgraded production expectations for fiscal year 2023. The outlook is bright if prices remain elevated.

SELL RECOMMENDATIONS

Harvey Norman Holdings (HVN)

The retail giant reported a net profit after tax of $811.53 million in fiscal year 2022, a fall of 3.6 per cent on the prior corresponding period. The company expects low unemployment and increasing immigration to support demand. However, we’re cautious about the outlook for the retail sector due to higher interest rates, which are likely to reduce discretionary spending.

Scentre Group (SCG)

The shopping centre giant owns and operates 42 Westfield Living Centres across Australia and New Zealand. Recent half year results were ahead of estimates. Operating profit of $540.5 million was up 17.5 per cent on the prior corresponding period. However, online retailers may provide stiffer competition to bricks and mortar shopping centres in a higher interest rate environment.

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.