18 Share Tips – 2nd December 2024

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James Nicolaou, PAC Partners

BUY RECOMMENDATIONS

BUY – SKS Technologies Group (SKS)

The company delivers advanced technology through digital transformation. Its presentation at the annual general meeting in 2024 emphasised positive momentum and an improving demand outlook. Management reiterated revenue guidance of $260 million in fiscal year 2025, supported by a solid first quarter performance. Work in hand as of November 2024 reached $185 million, up from September’s $180 million. The pipeline of opportunities grew to $413.5 million across 1100 tenders, driven by robust data centre demand. We believe the group is strongly positioned to benefit from growing demand for its IT networking and electrical services during the year ahead.

BUY – Austco Healthcare (AHC)

The company makes nurse call systems and clinical communication solutions for hospitals and aged care facilities. AHC has rebounded strongly in the first quarter of fiscal year 2025, with organic revenues increasing 16 per cent, excluding acquisitions, compared to the prior corresponding period. The company announced several major contract wins in the first quarter. Contracted orders have reached a record $51.1 million. Net profit after tax of $7.1 million in fiscal year 2024 was up 213 per cent on the prior corresponding period. Record high contracted order values amid the full integration of recent acquisitions during the next 12 months positions AHC for sustained growth.

HOLD RECOMMENDATIONS

HOLD – Ora Banda Mining (OBM)

Now firmly established as a producer, this gold company exceeded past consensus, with production up and costs down. Underground operations are now in full production, paving the way for consistent output and cost optimisation. Ora Banda Mining is strategically positioned to unlock new discoveries and generate additional feed sources. The company benefits from low capital requirements, low-cost discovery opportunities and grade reconciliation that exceeds block model expectations—creating potential for further upside surprises. With its infrastructure fully operational, Ora Banda Mining remains on track to achieve free cash flow by fiscal year 2026.

HOLD – Bhagwan Marine (BWN)

BWN is a marine services provider. It operates across critical growth sectors, some including oil and gas, civil construction, renewables and defence. Gross revenue surged 79 per cent to $303.1 million in fiscal year 2024, exceeding prospectus forecasts. A deleveraged balance sheet following its $80 million initial public offering leaves the company poised for sustained expansion. Its fleet of 100 vessels supports blue chip clients, while industry tailwinds and disciplined growth strategies, including merger and acquisition activity and fleet upgrades, underline its robust future prospects.

SELL RECOMMENDATIONS

SELL – Metro Mining (MMI)

Metro Mining is a high alumina bauxite producer. Bauxite is the ore used to make aluminium. MMI posted an encouraging operating update for October 2024. It shipped a record 793,420 wet metric tonnes to customers, up 2 per cent on September 2024 and 18 per cent on the prior corresponding period. The company reported a net operating loss of $22 million in the first half of fiscal year 2024. The financial performance was impacted by a prolonged monsoon season that extended into May 2024, which reduced first half loading rates. While progress is evident, challenges remain for sustained momentum. The shares have risen from 2.1 cents on January 2 to trade at 5.9 cents on November 28. Investors may want to consider cashing in some gains at these levels.

SELL – Wesfarmers (WES)

This diversified industrial conglomerate generated revenue of $44.189 billion in fiscal year 2024, up 1.5 per cent on the prior corresponding period. However, moving forward we believe the company faces challenges in an economy of high interest rates, inflationary pressures and soaring cost of living expenses. Consequently, we believe the company is exposed to significant downside risk. The company’s price/earnings ratio and earnings per share valuation were recently above the historical average. Wesfarmers shares have risen from $66.64 on November 5 to trade at $72 on November 28. It may be prudent to consider taking some profits.

Angus Geddes, Fat Prophets

BUY RECOMMENDATIONS

BUY – Evolution Mining (EVN)

We hold bullish expectations about the outlook for gold and copper prices. Although the major investment banks have turned bullish on gold this year, investor positioning has lagged. Higher gold prices are flowing through to Evolution Mining’s financial results, enabling an impressive swing to positive cash flow. We find the gold and copper asset mix appealing. Momentum is firmly on Evolution’s side, and execution has improved. The company posted a statutory profit after tax of $422 million in fiscal year 2024, up 158 per cent on the prior corresponding period.

BUY – Ansell (ANN)

Ansell makes personal protection equipment for healthcare and industrial workplaces. Ansell completed the acquisition of Kimberly-Clark’s personal protective equipment business in early July 2024. The acquisition significantly enhances Ansell’s presence in the high growth life sciences and cleanroom manufacturing sectors. The business offers opportunities for synergies in supply chain optimisation, product in-sourcing and operational efficiency. Meanwhile, the destocking headwind in the medical space has faded, and we see a positive step change looming for group earnings.

HOLD RECOMMENDATIONS

HOLD – HUB24 (HUB)

HUB24 operates an investment and superannuation platform. The company generated record net inflows of $4 billion in the first quarter of fiscal year 2025, up 44 per cent on the prior corresponding period. Platform funds under administration soared to $91.6 billion, up 8 per cent on the previous quarter and 41 per cent on the prior corresponding period. The operational execution has long been impressive, with HUB continuing to capture market share. This has been reflected in the stellar share price performance in calendar year 2024 and past years, which has reduced the upside potential after a re-rating of multiples.

HOLD – SRG Global (SRG)

SRG is a diversified infrastructure services company. It recently secured $700 million of contracts across Australia and New Zealand. The multiple contracts are with existing clients in the water, transport, health, dairy and resources industries. The company has an 80 per cent recurring earnings base, which is in line with its long-term strategy. SRG’s track record of integrating acquisitions is solid and improves the business mix, with positive implications for its valuation. SRG generated revenue of $1.069 billion in fiscal year 2024, up 32 per cent on the prior corresponding period.

SELL RECOMMENDATIONS

SELL – Australian Agricultural Company (AAC)

AAC is an integrated cattle and beef producer. The company is facing challenges after a 17 per cent fall in the overall Wagyu meat sales price per kilogram in the first half of fiscal year 2025 when compared to the prior corresponding period. The fall in the Wagyu meat sales price contributed to a weaker operating profit and lower operating profit margin. It was driven by an oversupply of beef in some regions and restrained consumer spending as inflation and higher living costs continue to weigh on disposable incomes. We see better opportunities elsewhere at this stage of the cycle.

SELL – The a2 Milk Company (A2M)

Investors reacted positively to this infant formula company recently upgrading revenue guidance for fiscal year 2025. It also established a dividend policy. The shares rose from $4.81 on November 21 to trade at $5.77 on November 28. The shares were priced at $7.33 on May 28. Meanwhile, the infant formula market in China is under significant pressure from low birth rates, with the number of newborns dropping significantly in 2023. The company’s significant reliance on the Chinese market leaves it vulnerable to fluctuations and challenges within that region.

Arthur Garipoli, Seneca Financial Solutions

BUY RECOMMENDATIONS

BUY – Australian Finance Group (AFG)

AFG is a leading mortgage aggregator and securitised lender. It has the potential to re-rate driven by earnings growth. AFG is well positioned to benefit from new loan commitments, its competitive advantage and an improving macro outlook. It was recently trading on an attractive fully franked dividend yield above 5 per cent, so we believe it appeals for its valuation upside and income. In our view, the shares were recently trading at an attractive entry point.

BUY – Catapult Group International (CAT)

This sports wearable and analytics company provides sporting teams with technology to track and optimise player performance in real time. Catapult works with more than 4400 teams in more than 40 sports across more than 100 countries. Catapult recently released strong first half results in fiscal year 2025. All operating metrics were well above forecasts. In our view, Catapult is set to potentially become one of the better growth companies listed on the ASX. Another catalyst is its possible inclusion in the S&P/ASX 300 Index next March.

HOLD RECOMMENDATIONS

HOLD – Endeavour Group (EDV)

Endeavour operates liquor outlets, hotels and gaming facilities. This leading Australian liquor retailer includes brands, such as Dan Murphy’s and BWS. The group reported a modest 0.5 per cent gain in sales between July 1 and October 6. The numbers were below analyst expectations. This has led to analysts revising down their sales and earnings forecasts moving forward. In our view, Endeavour is a dominant retailer in its category and any market share gains will position the company well for a recovery.

HOLD – Amcor PLC (AMC)

This global packaging company recently agreed to acquire US listed Berry Global Group in a $US8.4 billion stock swap. We view this acquisition as earnings per share accretive of between 10 per cent and 15 per cent. The combined group will generate about $US24 billion in revenue and adjusted EBITDA of $US4.3 billion. This acquisition will make AMC a global plastics giant and enable cross selling opportunities. The deal is expected to close in mid 2025.

SELL RECOMMENDATIONS

SELL – Healius (HLS)

HLS is a diagnostic pathology and imaging company. It recently announced that earnings before interest and tax in its pathology division in the first half of fiscal year 2025 would be broadly in line with the prior corresponding period. However, it’s well below consensus. This is a disappointing result given revenue had grown by 5.9 per cent in the half year to November 15, 2024. The shares have fallen from $1.85 on October 15 to trade at $1.405 on November 28. Other stocks appeal more at this stage of the cycle.

SELL – Technology One (TNE)

This software-as-a-service provider posted a strong fiscal year 2024 result. Profit after tax of $118 million was up 15 per cent on the prior corresponding period. Total revenue of $515.4 million was up 17 per cent. The shares have risen from $15.85 on May 17 to trade at $30.40 on November 28. In our view, the shares have risen too quickly and are overvalued. The company is trading on a lofty price/earnings ratio. Investors may want to consider locking in a profit at these levels.

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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.