Peter Day, Sequoia Wealth Management
BUY – James Hardie Industries PLC (JHX)
This building products company reported record global net sales of $US3.777 billion for the year ending March 31, 2023, an increase of 4 per cent on the prior corresponding period. Net profit after tax of $US512 million was up 12 per cent. The company expects adjusted net income to range between $US145 million and $US165 million in the first quarter of fiscal year 2024. We retain an outperform recommendation. Our target price is $43.15. The shares were trading at $37.98 on May 25.
BUY – ResMed Inc. (RMD)
ResMed makes medical devices to treat sleep disordered breathing. Our analysis highlights potential for industry device volume growth, with sizeable market share opportunities. The company increased revenue by 29 per cent in the third quarter of fiscal year 2023 when compared to the prior corresponding period. RMD’s growth outlook is attractive. The shares have risen from $30.45 on January 3 to trade at $33.92 on May 25.
HOLD – Best & Less Group Holdings (BST)
This apparel specialty retailer reported total sales of $221.9 million in the first 19 weeks of trading in the second half of fiscal year 2023. Total sales were up 1.8 per cent on the prior corresponding period. However, the company has significantly downgraded second half pro forma net profit after tax guidance. The company expects lower product and shipping costs to start flowing through in the first half of fiscal year 2024.
HOLD – Metcash (MTS)
Metcash is a wholesale distribution and marketing company involved in food, liquor and hardware. These three divisions reported sales revenue increases in the first half of fiscal year 2023. Group earnings before interest and tax of $255 million was up 10.3 per cent. Moving forward, we’re concerned a possibly slowing building sector may impact hardware sales growth. We have moved from an outperform recommendation to a hold.
SELL – Fortescue Metals Group (FMG)
The iron ore division has tailwinds with strong production and cost performance expected over the remainder of fiscal year 2023. Also, the Iron Bridge Magnetite project is ramping up. However, recent iron ore price weakness has driven downside risk to our forecasts in a spot price scenario. The scope of projects remains a headwind to shareholder returns, in our opinion.
SELL – Appen (APX)
This artificial intelligence data provider recently announced a $60 million equity raising to provide balance sheet flexibility. Balance sheet repair is a positive. But we believe exposure to cyclical technology headwinds may weigh on APX in the next six to 12 months. We retain an underperform recommendation.
Top Australian Brokers
Braden Gardiner, Tradethestructure
BUY – Legend Mining (LEG)
This nickel and copper explorer recently announced it had started a diamond drilling program within its Rockford project in Western Australia. Investors reacted positively to the news. The shares have risen from 4.4 cents on May 17 to finish at 5 cents on May 25. My technical analysis suggests buyers are more optimistic about the stock in the medium term, so I expect the price to move above 6 cents. LEG should be considered a high risk, high reward play.
BUY – Deep Yellow (DYL)
This explorer is developing uranium projects. It has a big and experienced uranium team capable of generating increasing interest in the energy source. The share price has fallen from $1.24 on September 9, 2022 to close at 60.5 cents on May 25. Any move above 67 cents should propel the share price higher. I expect a brighter outlook in response to recent strong assay results from the Angularli deposit.
HOLD – Mader Group (MAD)
Mader provides specialist technical services across multiple industries. The company generated total revenue of $155.6 million in the third quarter of fiscal year 2023, an increase of 59 per cent on the prior corresponding period. I expect the recent share price rally to continue as MAD appeals to more buyers. However, those who rode the share price higher may want to consider cashing in some gains.
HOLD – NextEd Group (NXD)
NXD provides education services to international and domestic students. The company generated record revenue of $43.6 million in the first half of fiscal year 2023, a 239 per cent increase on the prior corresponding period. The share price has risen from 55 cents on May 27, 2022 to close at $1.54 on May 25. The price remains in a technical trend higher, but investors may want to consider taking some money off the table.
SELL – Aussie Broadband (ABB)
The broadband services provider lifted revenue to $379 million in the first half of fiscal year 2023, up 27 per cent on the prior corresponding period. Total broadband connections were up 27 per cent to more than 635,000. The share price has fallen from $3.43 on March 7 to close at $2.93 on May 25. In my view, the higher interest rate environment may pressure the share price, so other stocks appeal more for capital growth.
SELL – Meteoric Resources NL (MEI)
The explorer focuses on rare earth elements. MEI recently announced a global mineral resource estimate of 409 million tonnes of rare earths at 2626 parts per million at its Caldeira project. The shares have risen from 3.1 cents on December 16, 2022 to close at 22 cents on May 25, 2023. I expect some profit taking in the current economic environment. In my view, the shares are over priced.
Tony Langford, Seneca Financial Solutions
BUY – Amcor PLC (AMC)
The global packaging giant reported unaudited net sales of $11.021 billion for the nine months ending March 31, 2023, an increase of 4 per cent. Adjusted earnings per share of US54.1 cents were up 4 per cent on a comparable constant currency basis. In our view, AMC offers an attractive entry point for a stock with appealing defensive qualities.
BUY – Ramsay Health Care (RHC)
RHC is a private hospital operator. Total revenue of $11.242 billion for the nine months ending March 31, 2023 was up 10.9 per cent on the prior corresponding period. Earnings before interest and tax of $750.9 million were up 10.5 per cent. Increasing revenue reflected growth in surgical admissions, a recovery in non-surgical admissions and contributions from acquisitions. The shares offer an appealing entry point.
HOLD – Harvey Norman Holdings (HVN)
Successive interest rate rises in 2022 impacted consumer confidence. A Federal Government policy supporting migration should lead to more home building and underwrite sales across Harvey Norman’s key product lines. The stock was recently trading on an historical dividend yield of about 8 per cent and should support the shares around $3.60.
HOLD – Dicker Data (DDR)
DDR is a technology hardware, software and cloud distributor. The company generated total revenue of $772.3 million in the first quarter of fiscal year 2023, an increase of 14.7 per cent on the prior corresponding period. Net profit before tax was up 6.7 per cent to $25.4 million. The company expects upside from operational refinements within the next three to six months.
SELL – Brambles (BXB)
This integrated supply chain logistics giant reported sales revenue from continuing operations of $US4.481 billion in the first nine months of fiscal year 2023. It represented an increase of 9 per cent at actual foreign exchange rates on the prior corresponding period. The weighted average cost of new pellets in fiscal year 2023 is expected to be higher than previous years. We expect the US economy to slow moving forward. In our view, BXB shares are fully priced, so investors may want to consider taking a profit.
SELL – Fortescue Metals Group (FMG)
The iron ore producer shipped 46.3 million tonnes of iron ore in the third quarter of fiscal year 2023. It contributed to record shipments of 143.1 million tonnes for the nine months to March 31, 2023, up 3 per cent on the prior corresponding period. Recently, the iron ore price has been under pressure and this may continue. Also, we believe FMG is trading at a premium, so investors may find better value in BHP Group and Rio Tinto.
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.