18 Share Tips – 31 October 2022

Stuart Bromley, Medallion Financial Group

BUY RECOMMENDATIONS

PolyNovo (PNV)

The company provides dermal regeneration solutions via its NovoSorb biodegradable polymer technology. The company posted unaudited record first quarter sales of $12.5 million in fiscal year 2023. We’re encouraged that Swami Raote, a former US Johnson & Johnson veteran of 30 years, was appointed chief executive in July. Raote brings a lot of connections to PNV. Breakeven is now closer for this business, with a net loss after tax of just $1.19 million in fiscal year 2022.

Pro Medicus (PME)

This medical imaging technology business is taking impressive market share, primarily at the top end of the big and lucrative US market. We believe future growth justifies a relatively high price/earnings ratio. Existing clients are renewing contracts, providing PME with defensive, long-term revenues. Fiscal year 2022 underlying revenue increased 37.7 per cent to $93.5 million.

HOLD RECOMMENDATIONS

CSL (CSL)

Blood plasma collections are recovering. CSL has positioned to capitalise on this tailwind, with 73 new centres opening since the pandemic began. Net profit after tax guidance is between $US2.4 billion and $US2.5 billion at constant currency in fiscal year 2023. With a large portion of earnings generated in the US, we expect CSL to benefit from a stronger US dollar against a weaker Australian dollar.

Aristocrat Leisure (ALL)

Physical gaming activity has benefited Aristocrat, as economies re-opened from the pandemic. But we’re particularly optimistic about the prospects for the mobile and digital segments of the business, where management has invested $313 million. Aristocrat is well positioned for growth.

SELL RECOMMENDATIONS

Scentre Group (SCG)

The shopping centre giant owns and operates 42 Westfield Living Centres across Australia and New Zealand. We’re concerned discretionary consumer spending is likely to be impacted from higher interest rates. SCG has quality assets. But some SCG tenants may be impacted from a potentially slowing economy and stiffer competition from other online retailers.

Kogan.com (KGN) 

The online retailer performed well during the pandemic. Later, it was left with costs after holding excess inventory. Inventory levels are subsiding. Total gross sales of $202.3 million in the first quarter of fiscal year 2023 declined by 38.8 per cent on the prior corresponding period. Gross profit of $31.3 million in the 2023 first quarter fell 40.4 per cent on the prior corresponding period. A recovery will take time.

Tom Bleakley, BW Equities

BUY RECOMMENDATIONS

Lynas Rare Earths (LYC)

Lynas has one of the biggest high-grade rare earth deposits in the world. Given the scale of its resource, it has the capacity to increase supplies to meet future demand. Rare earths are a key mineral used in electric vehicles. The company delivered a strong fiscal year 2022 result. We like the company’s outlook.

Syrah Resources (SYR)

Syrah is the biggest graphite producer listed on the ASX. Syrah was recently selected for a US Department of Energy grant for up to $US220 million. The grant will support the financing for a potential expansion of the Vidalia active anode material facility in the US state of Louisiana. Graphite is a critical mineral for the transition to electric vehicles, so strong demand should persist for many years. The company’s outlook is bright.

HOLD RECOMMENDATIONS

OZ Minerals (OZL)

The outlook for copper supplies appears tight, with limited new discoveries of this critical base metal. We’re bullish on copper, and expect the underlying commodity price to increase during the next few years. BHP Group has made a takeover bid for OZL at $25 a share. Keep an eye on the news flow.

Telstra Corporation (TLSDA)

Telstra is the dominant national communications carrier. The stock is defensive and appeals in volatile markets. The company is forecasting total income of between $23 billion and $25 billion in fiscal year 2023. Telstra may benefit by attracting new customers following the Optus cyber attack.

SELL RECOMMENDATIONS

Boral (BLD)

Boral is exposed to residential construction and new infrastructure projects. Projects under construction have been largely factored into the share price, in our view. A high inflation and rising interest rate environment presents challenges in the infrastructure sector exposed to a possibly slowing economy. We prefer others at this point of the cycle.

Beacon Lighting Group (BLX)

Record net profit after tax of $40.7 million in fiscal year 2022 was up 8.1 per cent on the prior corresponding period. However, we expect costs to increase in response to high inflation and a weaker Australian dollar. Rising interest rates may impact discretionary spending and demand.

Tony Locantro, Alto Capital

BUY RECOMMENDATIONS

Mako Gold (MKG)

The gold explorer has acquired an additional 39 per cent of the flagship Napie Gold Project in Cote d’Ivoire, taking total ownership to 90 per cent. The company recently announced a mineral resource estimate of 868,000 ounces at the Napie Gold Project. A company placement raised $3.1 million at 4.1 cents a share. A highly speculative buy that’s more suited for investors with an appetite for risk.

Basin Energy (BSN)

The uranium explorer listed on October 4, 2022 after raising $9 million in an initial public offering (IPO). BSN is focusing on exploring its North Millennium, Geikie and Marshall projects in the prolific Athabasca Basin uranium district of northern Saskatchewan, Canada. BSN is targeting a maiden drilling campaign at Geikie in the first quarter of calendar year 2023. A speculative buy as explorers carry a degree of risk.

HOLD RECOMMENDATIONS

Demetallica (DRM)

This minerals exploration company has received a takeover bid. AIC Mines is offering one AIC share for every 1.5 DRM shares. DRM’s Jericho mineral resource delivered a 62 per cent increase in contained copper. Encouraging copper intersections have been reported at the Peake and Denison joint venture project with Oz Minerals. Hold for further announcements.

Maronan Metals (MMA)

First assay results from the Maronan copper-gold, lead-silver resource in Cloncurry, Queensland reveal an advancing program. True width intercepts from the weathered Chalcocite zone include 33.6 metres at 0.28 per cent copper and 0.59 grams a tonne of gold from 649.9 metres. MMA aims to expand existing resources.

SELL RECOMMENDATIONS

Commonwealth Bank of Australia (CBA)

The share price has risen from $90.70 on September 30 to close at $102.42 on October 27. In our view, the rising share price provides a profit taking opportunity in a volatile sharemarket. Australian residential property values are forecast to fall. The banking sector is up against potentially slowing economies here and overseas.

Whitehaven Coal (WHC)

The coal sector has outperformed the market. The company achieved a record average coal price of $A581 a tonne in the first quarter of fiscal year 2023. This compares with $A514 a tonne in the June quarter. The company has retained its fiscal year 2023 guidance. The shares have risen from $2.75 on January 5 to close at $9.83 on October 27. Investors may want to consider locking in a profit.

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.