John Athanasiou, Red Leaf Securities
BUY RECOMMENDATIONS
Dropsuite (DSE)
Chart: Share price over the year
This global cloud software company increased its annualised recurring revenue by 15 per cent to $6.01 million in the previous quarter, while also diversifying its client base. If DSE continues to grow annualised recurring revenue at this pace, the shift towards working from home is expected to increase demand for its services. Increasing demand should lead to the company breaking even and a potential re-rating by the market. The shares closed at 5.5 cents on May 21.
Paladin Energy (PDN)
Chart: Share price over the year
Uranium has been in a bear market for more than 10 years. But we believe a yellow cake bull market is about to begin after uranium recently broke to the higher side of its four year trading range between $US20 and $US25 a pound. If you share our optimism, then buying Paladin Energy may be rewarding, as it part owns one of the world’s largest uranium reserves. PDN is a speculative buy for those with an appetite for risk. The shares closed at 12.5 cents on May 21.
HOLD RECOMMENDATIONS
JB Hi-Fi (JBH)
Chart: Share price over the year
This consumer electronics giant is a proven performer. Third quarter 2020 sales in Australia increased by more than 11 per cent on the prior corresponding period after customers bought more technology products and home appliances. We expect most students and employees would have already upgraded their home office, so we believe fourth quarter sales will probably ease in line with restrictions. Best to hold for a sales update.
Telstra (TLS)
Chart: Share price over the year
The dividend yield of about 3 per cent is relatively attractive, particularly when compared to bank interest on term deposits. But, in our view, there’s no rush to buy this telecommunications giant, as its growth prospects appear relatively limited compared to other stocks trading at a discount. We consider TLS a hold for those more interested in income than capital growth.
SELL RECOMMENDATIONS
AP Eagers (APE)
Chart: Share price over the year
New car sales in Australia have plunged in response to the Coronavirus. Consumers are reluctant to buy big-ticket items during these difficult times of high unemployment and meeting household expenses. Motorists will keep their cars longer before upgrading. Shares in this automotive retail group have fallen from $9.40 on February 20 to close at $5.55 on May 21.
Myer Holdings (MYR)
Chart: Share price over the year
We believe the recent share price spike was a response to an easing in lockdown restrictions. But, in our view, the price rise was an over-reaction. Until this retail giant can consistently grow online sales for an extended period, we believe it will struggle to meet investor expectations in a fiercely competitive industry. In our opinion, better opportunities exist elsewhere.
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Giuliano Sala Tenna, Bell Potter Securities
BUY RECOMMENDATIONS
Woodside Petroleum (WPL)
Chart: Share price over the year
Woodside is Australia’s biggest oil and gas producer, offering a strong balance sheet and a portfolio of growth assets. We believe energy prices will continue to rally as the global economy gradually recovers after Coronavirus restrictions are lifted and OPEC and other producers cut supplies. Buying a quality energy company, such as WPL, at what we consider a discounted price improves the probability of making gains during the next two years. I own stock in WPL.
Sonic Healthcare (SHL)
Chart: Share price over the year
Sonic is the world’s third largest pathology services provider, and operates in eight countries. As Coronavirus restrictions ease, we expect business to return to normal relatively quickly as SHL provides essential services. Strong cash generation and more than $1 billion in liquidity on the balance sheet appeals at recent prices. I own shares in SHL.
HOLD RECOMMENDATIONS
Altium (ALU)
Chart: Share price over the year
Altium develops software and hardware used for designing and developing printed circuit boards. ALU enjoys a global market share of 26 per cent. Altium remains one of our highest conviction long term investments. But we have moved to a short term hold, as the company expects prolonged Coronavirus restrictions in key US and Western European markets to impact performance in the final quarter. Any weakness towards $32 would represent good buying. I own shares in ALU. The shares closed at $36.22 on May 21.
Appen (APX)
Chart: Share price over the year
Appen is a leading global provider of language technology and data services to enterprise and government customers. It remains another long term, high conviction investment for our clients. But the recent share price run has caused us to move to a hold on valuation grounds. Any weakness towards $24 would be good buying. The shares closed at $29.92 on May 21.
SELL RECOMMENDATIONS
Flight Centre Travel Group (FLT)
Chart: Share price over the year
The travel group recently raised $700 million at $7.20 a share to provide working capital through the COVID-19 pandemic. We believe FLT’s share price has bottomed. But in the absence of visible earnings for travel related stocks, we recommend investors consider selling and look for more certain opportunities elsewhere.
WiseTech Global (WTC)
Chart: Share price over the year
WiseTech is a leading global provider of software solutions to the logistics services industry. We believe the trough in the global logistics industry is behind us, but our recommendation is based on valuation. WTC shares have risen from a 52 week low of $9.97 on March 19 to close at $20.89 on May 21.
Peter Moran, Wilsons
BUY RECOMMENDATIONS
Xero (XRO)
Chart: Share price over the year
This cloud based accounting software company reported strong growth for fiscal year 2020, with limited impact from the Coronavirus. XRO’s move into the French market amid new product offerings should assist in offsetting any potential adverse effects from the Coronavirus going forward. Another positive is the company’s recurring revenue above 95 per cent. We retain an overweight rating.
ReadyTech Holdings (RDY)
Chart: Share price over the year
We believe the share price of this software provider to educators and employers has been oversold and now offers value. The company provides market leading, cloud based solutions to more than 4000 Australian customers. RDY has a strong track record of profitability and is well placed to meet today’s challenges in a difficult economic environment. We retain an overweight rating.
HOLD RECOMMENDATIONS
Bubs Australia (BUB)
Chart: Share price over the year
This infant nutrition company posted a strong third quarter result, in our view. Quarterly revenue rose 67 per cent on the prior corresponding period to $19.7 million. The company doubled direct sales to China and experienced strong demand in Vietnam. Some third quarter growth may be a result of stockpiling due to the Coronavirus and may not reach the same levels in the fourth quarter. BUB looks fully valued following a strong recent run in the share price. We retain a market weight rating.
Bravura Solutions (BVS)
Chart: Share price over the year
Bravura is a well-regarded provider of software products and services to the wealth management and funds administration industries. However, potential new business may be deferred or cancelled as a result of this challenging investment environment. We retain a market weight rating.
SELL RECOMMENDATIONS
Wagners Holding Company (WGN)
Chart: Share price over the year
The Coronavirus made an already difficult environment even tougher to negotiate for this diversified construction materials provider. We believe product volumes across the south east Queensland construction sector are likely to decline. Consequently, we believe WGN margins will continue to be pressured amid fierce competition. Growing its international business is becoming increasingly difficult due to COVID-19. We retain an underweight rating.
LiveTiles (LVT)
Chart: Share price over the year
This software provider has cut back on spending due to the Coronavirus deferring several key projects. The company has a target of achieving cash flow breakeven this calendar year, but it may prove a difficult task if too many customers hold back on their own spending. Others preferred. We retain an underweight rating.
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.
