Angus Geddes, Fat Prophets
BUY RECOMMENDATIONS
TPG Telecom (TPM)
Chart: Share price over the year
Investor sentiment towards TPG Telecom continues to improve as a proposed merger with Vodafone Hutchison Australia draws closer. Investors are anticipating long term synergies flowing from a combined entity will drive shareholder value. TPG Telecom shares have risen from $7.20 on May 7 to finish at $8.84 on June 18. We believe TPG has further to run.
St Barbara (SBM)
Chart: Share price over the year
This junior gold producer is a quality exposure to what we believe will be a continuing gold bull market, further fuelled by inflation from unprecedented global stimulus. A pre feasibility study has been completed at the company’s Simberi Sulphide Project, which may extend mine life by a further 13 years to 2035, with an additional 1.8 million ounces of gold. The company’s Atlantic gold mine is set to generate about 100,000 ounces of additional gold production in 2020.
HOLD RECOMMENDATIONS
Telstra (TLS)
Chart: Share price over the year
Telstra shares were priced at $3.20 on April 1. The stock closed at $3.19 on June 18. The company’s overall turnaround strategy is going well and it also has 5G growth on the horizon. The company is defensive. It was recently trading on a dividend yield above 3 per cent.
Commonwealth Bank of Australia (CBA)
Chart: Share price over the year
The shares have risen from $58.84 on May 1 to close at $69.01 on June 18. We believe the shares could continue to rise, particularly if bad debts from COVID-19 turn out to be less than the initially anticipated provisions. CBA continues to trade at a premium valuation relative to peers.
SELL RECOMMENDATIONS
OneVue Group (OVH)
Chart: Share price over the year
After a few challenging years, shares in this technology firm recently surged following a takeover bid by market software firm Iress. The scheme implementation agreement proposes that OneVue shareholders will receive 40 cents a share in cash, representing a 66.7 per cent premium to the last closing price prior to the announcement. The OneVue board has unanimously backed the offer and recommended shareholders vote in favour. Much has to happen before the deal is potentially finalised in September. I suggest moving on now. The shares finished at 38 cents on June 18.
Zip Co (Z1P)
Chart: Share price over the year
There’s huge growth levels baked into the valuations of companies operating in the buy now, pay later sector, which largely cast aside uncertainty about default levels in the next few years. Companies in the space are, nonetheless, aggressively pursuing growth. This includes Zip Co’s planned acquisition of US firm QuadPay for $403 million. In our view, Z1P is planning to take on a lot in times of uncertainty.
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Luke Pavone, Broadbent Financial
BUY RECOMMENDATIONS
Redcape Hotel Group (RDC)
Chart: Share price over the year
Owns 32 pubs across the eastern seaboard, generating solid earnings from poker machines. Revenue was impacted after venues closed due to the Coronavirus, although most have re-opened. This high yielding business is defensive and well managed. We expect RDC to pay good distributions again later this year. Longer term, we expect profits to revert to pre-COVID-19 levels as demand recovers.
Woodside Petroleum (WPL)
Chart: Share price over the year
Provides an opportunity to gain exposure to the oil and gas sectors, with prices recently near multi-year lows. WPL offers upside risk after deferring large and expensive projects, such as Pluto-2 and Browse Basin. The crude oil price was smashed to below $US20 a barrel in April as the global economy went into lockdown. We expect WPL to benefit from continuing rising energy prices as global COVID-19 restrictions ease.
HOLD RECOMMENDATIONS
Zip Co (Z1P)
Chart: Share price over the year
This buy now, pay later company has entered into an agreement to potentially acquire US firm QuadPay. Zip Co’s share price has soared from a 52 week low of $1.05 on March 23 to trade at $6.16 on June 18. We prefer to wait and see how normalised earnings look post the possible acquisition in fiscal year 2021 and how the US economy is performing at that time.
Wesfarmers (WES)
Chart: Share price over the year
Sales in the Bunnings hardware chain rose 19 per cent in the second half of fiscal year 2020 until the end of May. Officeworks was up 28 per cent. The retailers benefited from the lockdown, as people improved homes and upgraded their home office. In our view, the stock appears too expensive to buy at this point, so hold for the longer term.
SELL RECOMMENDATIONS
ASX Limited (ASX)
Chart: Share price over the year
A key driver of ASX earnings is market activity levels. The ASX is a stable business that generates high margins. It pays out much of its earnings in dividends. However, in our view, the company appears expensive as it was recently trading on a forward price/earnings multiple of 33 times and a forecast dividend yield of 2.7 per cent.
Woolworths (WOW)
Chart: Share price over the year
The supermarket giant posted strong food sales in a 13-week period up until April 5. Consumer stockpiling during the Coronavirus and more eating at home contributed to growth. Sustaining recent sales in times of higher unemployment going forward will be a challenge. We believe the shares are over valued, so investors can consider taking a profit.
Giuliano Sala Tenna, Bell Potter Securities
BUY RECOMMENDATIONS
Unibail-Rodamco-Westfield (URW)
Chart: Share price over the year
URW owns and operates shopping centres in 12 countries across Europe and North America. The portfolio was valued around €65 billion at December 2019. If we deduct debt and total liabilities of €33.1 billion, we’re left with a book value of €31.9 billion. Recently trading at a fraction of book value, we believe URW offers top long term value for the patient investor. I own shares in URW.
Aristocrat Leisure (ALL)
Chart: Share price over the year
We expect the outlook for this global gaming company to improve in fiscal year 2021, as lockdowns in Australia and the US begin to ease. The company has a strong balance sheet to support continuing investment in new product development, while many of its competitors are under pressure to reduce expenditure. Aristocrat remains our preferred choice in the gaming sector. I own shares in ALL.
HOLD RECOMMENDATIONS
Uniti Group (UWL)
Chart: Share price over the year
The telecommunications company recently raised $152 million from institutions at $1.40 a share. The retail component at the same price opens on June 22 and closes on July 6. In our view, Uniti Group provides faster download speeds at a more competitive price than the NBN. It’s one of the few stocks in the sector that still appears reasonable value and is a strong candidate for an upgrade to guidance. I own shares UWL.
City Chic Collective (CCX)
Chart: Share price over the year
City Chic is a global multi-channel retailer specialising in women’s apparel, accessories and footwear. A company update indicated CCX had traded profitably through COVID-19 restrictions, with a strong online presence and a flexible supply chain supporting operations. CCX remains our preferred long term exposure to the consumer discretionary sector.
SELL RECOMMENDATIONS
Lovisa Holdings (LOV)
Chart: Share price over the year
This fashion jewellery and accessories retailer relies on a global store rollout strategy to grow earnings, which we believe is challenging in this uncertain environment. Further, big events to show their products have been cancelled due to COVID-19, which we believe presents a headwind for some time.
Flight Centre Travel Group (FLT)
Chart: Share price over the year
International borders are expected to remain closed for the foreseeable future. Consequently, in our view, the risks remain elevated for this global travel agency. We suggest investors consider selling into the recent share price rally. While the recent capital raising has de-risked the company’s balance sheet, we believe better risk/reward opportunities exist elsewhere for investors.
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.
