18 Share Tips – 20th January 2025

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Jed Richards, Shaw and Partners

BUY RECOMMENDATIONS

BUY – Amaero International (3DA)  

The company continues to strengthen its position as a leading provider of high value metal powders and advanced manufacturing and welding technologies for the aerospace and defence  sectors. Amaero recently achieved AS9100D accreditation, an internationally recognised aerospace quality management standard. The certification validates Amaero’s adherence to rigorous safety, reliability and quality requirements, positioning it to supply components for aerospace and defence programs. Amaero is well positioned for growth in high demand regulated industries.

BUY – WEB Travel Group (WEB)

WEB provides online travel booking services in Australia and globally. Services includes flights, insurance, car hire and accommodation. First half underlying group EBITDA of $70 million in fiscal year 2025 was marginally above our forecasts. We expect the company will rebase this year, and we forecast earnings to grow by 20 per cent in fiscal year 2026. Management has embarked on a $150 million buy-back, which will help offset any dilution effect from its $250 million debt facility due in 2026. Our share price target is $6.60. The shares were trading at $4.65 on January 16.

HOLD RECOMMENDATIONS

HOLD – Sandfire Resources (SFR)

Sandfire is one of the few pure copper producers listed on the ASX. It operates in Australia, Spain and Botswana. The company has consistently improved volume growth following the ramp up of the Motheo Copper mine in Botswana. Sandfire continues to explore and drill for more copper deposits in preparation for higher demand in coming years. Although the share price has significantly risen in the past two years, we anticipate copper stocks will continue to find support in calendar year 2025.

HOLD – Insignia Financial (IFL)

Bain Capital recently revised its bid to $4.30 cash a share to acquire wealth giant IFL. It represents a 7.5 per cent increase from its initial proposal on December 12, 2024, and matches a competing offer proposed by CC Capital Partners LLC for IFL on January 3, 2025. On January 13, The IFL board announced it was considering both proposals. IFL announced there was no certainty that either proposal would result in a binding offer, or that any transaction would eventuate. But IFL investors should consider holding as they may benefit from a possible bidding war. The shares were trading at $4.15 on January 16.

SELL RECOMMENDATIONS

SELL – Wesfarmers (WES)

This industrial conglomerate is also a prominent retailer. Its retail brands include the Bunnings hardware chain, Officeworks and Kmart Group. Wesfarmers is also involved in chemicals, energy, fertilisers and health, among other activities, so it’s well diversified. We believe the company’s recent price/earnings ratio above 31 times is elevated. In our view, the company’s growth potential doesn’t justify this high price/earnings ratio and now is an opportune time to lock in some gains.

SELL – Commonwealth Bank of Australia (CBA)

There’s been a lot of commentary and confusion on CBA’s record share prices during the past year. Broader banking sector management has been quite vocal explaining the expected tough outlook ahead. Given high interest rates, increasing costs, a flat Australian economy and intensifying private debt competition, we believe the banking sector faces challenges in sustaining recent profits let alone generating growth. The CBA’s price/earnings ratio is much higher than historical levels and is pricing in considerable growth. In our view, this is highly unusual and unlikely given the economic environment.

Tony Paterno, Ord Minnett

BUY RECOMMENDATIONS

BUY – Goodman Group (GMG)

This integrated industrial property group has embraced data centres, and particularly fully fitted facilities as a greater proportion of its strategy moving forward in order to capitalise on the global cloud computing theme. Data centres generate 42 per cent of work in progress, with an uptick to more than 50 per cent expected within the next 12 months. We forecast a further increase to as much as 80 per cent within five years. In our view, the strategy pivot towards higher value data centres elevates GMG’s attractiveness.

BUY – Rio Tinto (RIO)

The global miner’s recent annual investor seminar provided updates to volume guidance, a reiteration of confidence around the outlook for the Arcadium Lithium transaction and the lithium market as a whole. Rio management is bullish on lithium and expects the market size to grow five-fold by 2035. It also expects to close the $US7 billion acquisition of Arcadium by mid-2025 which, when combined with its Jadar and Rincon assets, elevates RIO to the third biggest lithium miner in the world.

HOLD RECOMMENDATIONS

HOLD – Woodside Energy Group (WDS)

This energy giant has struck a revised engineering, procurement and construction (EPC) contract with US engineering services and construction group Bechtel to continue work on its recently acquired Driftwood LNG project in the US state of Louisiana. Louisiana LNG is a key plank of Woodside’s plan to replace possible declines in its production from calendar year 2030. But in the meantime, capital expenditure remains higher for longer, although it could be partially offset by a sell-down of its stake. Despite the value on offer following share price weakness in 2024, we retain our hold recommendation.

HOLD – ANZ Group Holdings (ANZ)

ANZ Group has appointed veteran HSBC and Santander executive Nuno Matos as its chief executive. We don’t expect any substantial changes to existing strategy. ANZ screens as better value than its bigger rivals, although, as with the sector in general, it’s not fundamentally cheap. The bank’s institutional business has recovered well and should now be a more reliable contributor to group earnings. The bank’s commercial and New Zealand divisions are tracking well.

SELL RECOMMENDATIONS

SELL – Lendlease Group (LLC)

LLC is a property developer and investment manager. We expect it to deliver on operating earnings per share guidance of between 54 cents and 62 cents in fiscal year 2025. But we expect earnings to face tougher times in fiscal year 2026, so we take a more cautious view on its recovery and have cut forecasts. The group reported a statutory loss after tax of $1.502 billion in fiscal year 2024, mostly due to impairments. The company is focusing on growing its Australian operations. The shares have fallen from $7.36 on December 3, 2024, to trade at $6.26 on January 16, 2025.

SELL – ASX Limited (ASX)

Shares in this financial markets operator have been volatile in the past 12 months. The shares were priced at $64.23 on January 18, 2024. The shares moved from $56.45 on June 14 to close at $69.58 on December 9. The shares were trading at $64.80 on January 16, 2025. We believe the shares are trading on an elevated valuation as we expect operating conditions to start moderating from here. On November 15, 2024, the ASX filed its defence against proceedings lodged by the Australian Securities and Investments Commission in the Federal Court on August 13, 2024, concerning ASX statements made to the market on February 10, 2022, relating to the previous CHESS replacement project.

John Athanasiou, Red Leaf Securities 

BUY RECOMMENDATIONS

BUY – Straker (STG)

Straker is our top stock pick for the year. The company provides next generation language services and operates in a $70 billion industry. It’s well positioned to leverage off generative artificial intelligence (AI) to make translation services more accessible and cost-effective for customers. We expect strategic use of AI to drive significant growth and market share expansion for this innovative company. The shares have been enjoying favourable momentum since late November 2024 up to January 16, 2025.

BUY – Life360 Inc. (360)

This information technology company provides a mobile networking safety app for families. The company achieved a record number of monthly active users in the third quarter of fiscal year 2024. It’s establishing advertising partnerships with major players, such as Uber. This creates a substantial opportunity to monetise its growing user base in calendar year 2025. With a solid foundation in place, Life360 is poised for strong growth in the coming year.

HOLD RECOMMENDATIONS

HOLD – Mesoblast (MSB)

Mesoblast is developing and commercialising allogenic cellular medicines to treat complex inflammatory diseases. A global private placement recently raised $A260 million at $A2.50 a share to fund the commercial launch of Ryoncil in the US, among other activities. Mesoblast is on track for another promising year as it nears commercialising Ryoncil. We expect this development to boost revenue and market share. However, given the impressive rally in MSB shares during 2024, we believe it’s prudent to wait until Ryoncil is fully commercialised before making new investments.

HOLD – Viva Energy Group (VEA)

Viva operates a fuel and convenience network in almost 900 stores across Australia. It also owns and operates the Geelong refinery. It supplies fuels and lubricants to almost 1500 service stations. In 2024, Viva acquired the OTR Group, a fuel and convenience retailer operating mostly in South Australia. As VEA integrates OTR into its operations, we have adopted a wait and see approach to gauge progress and outcomes. The shares have drifted down from April 2024.

SELL RECOMMENDATIONS

SELL – ARB Corporation (ARB)

ARB supplies 4-wheel drive accessories to Australian and international markets. The company generated sales revenue of $693.2 million in fiscal year 2024, up 3.3 per cent compared to the prior corresponding period. Net profit after tax of $102.7 million was up 16.1 per cent. We are cautious about ARB’s upcoming interim results given Australia’s cost of living crisis. Sustaining sales may be challenging. The shares have fallen from $47.50 on September 30, 2024, to trade at $40.78 on January 16, 2025. It might be prudent to consider taking some money off the table.

SELL – Zip Co (ZIP)

This buy now, pay later provider delivered an extraordinary performance in calendar year 2024, with its share price soaring from 57 cents on January 18 to trade at $3.02 on January 16, 2025. The company delivered revenue of $868 million in fiscal year 2024, up 28.2 per cent on the prior corresponding period. First quarter revenue of $239.9 million in the first quarter of fiscal year 2025 was up 18.8 per cent on the prior corresponding period. The US business is also performing well. However, ZIP co-founder Larry Diamond sold $100 million of ZIP shares in early December 2024 after stepping down as a director and US chairman. Investors may want to consider taking some profits as well.

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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.