18 Share Tips – 20th May 2024

Mattew Lattin, Marcus Today

BUY RECOMMENDATIONS

BUY – Perseus Mining (PRU)

PRU operates gold mines in West Africa. The company had available cash and a bullion balance of $US702 million at the end of the 2024 March quarter. It had $US74 million in listed securities and no debt. Average gold sale prices increased 3 per cent quarter on quarter to $US2025 an ounce. PRU has shown resilience amid industry challenges. Recent acquisitions underscore its forward-looking strategy.

BUY – Mineral Resources (MIN)

MIN is a diversified mining services company. It has extensive operations in iron ore, lithium and energy. In mining services, production volumes of 208 million tonnes for the financial year to March 31 were up 9 per cent on the prior corresponding period. The company retained volume and cost guidance for all operations in fiscal year 2024. MIN’s long-term outlook appears positive, with anticipated growth in mining volumes and improving earnings quality.

HOLD RECOMMENDATIONS

HOLD – Woolworths Group (WOW)

Group sales of $16.8 billion in the third quarter of fiscal year 2024 were up 2.8 per cent on the prior corresponding period. Australian food and B2B (business to business) sales were up, but Big W sales were down. A comparable sales increase of 1.1 per cent was well below competitor Coles Group’s 4.2 per cent. WOW’s challenges appear short-term. In our view, results were disappointing, but appear to have been priced into the stock. The medium to longer term outlook is brighter.

HOLD – Super Retail Group (SUL)

The retail giant operates high profile brands, including Supercheap Auto, Macpac, Rebel and BCF. Its second half trading update was marginally below expectations, with flat like-for-like sales for the group in the first 43 weeks of fiscal year 2024. Supercheap Auto benefited from strong demand in auto maintenance categories. Group gross margins are so far in line with 2023. The group expects to open a further seven stores before the end of fiscal year 2024.

SELL RECOMMENDATIONS

SELL – Bapcor (BAP)

This aftermarket automotive parts provider recently issued a profit downgrade. It expects 2024 second half pro forma net profit after tax (NPAT) to be below its first half of $54.2 million. Full year 2024 pro forma NPAT is expected to range between $93 million and $97 million. Declining consumer confidence and lower levels of discretionary spending impacted the retail business. The outlook appears challenging, at least in the short term.

SELL – National Australia Bank (NAB)

The bank expanded its on-market share buy-back program by $1.5 billion. However, revenue fell by 3.7 per cent in the first half of fiscal year 2024 compared to the prior corresponding period. The fall reflected softer margins and lower markets and treasury income. The net interest margin decreased by 5 basis points to 1.72 per cent. First half cash earnings of $3.548 billion were down 12.8 per cent. The bank is operating in a fiercely competitive environment of high interest rates and stubborn inflation, which may continue to pressure earnings and margins.

Arthur Garipoli, Seneca Financial Solutions

BUY RECOMMENDATIONS

BUY – PEXA Group (PXA)

PEXA operates a leading digital property platform and settles most transactions in Australia. The company is trying to replicate its Australian success in the UK. PXA recently announced it was progressing a strategic partnership with NatWest Group in the UK. Investors responded positively to the PEXA announcement. PEXA is poised to benefit further if it can expand its platform to other UK firms.

BUY – BHP Group (BHP)

BHP’s revised takeover bid for London listed mining company Anglo American has again been rejected. BHP recently increased its bid by about $4 billion after the initial bid of about $60 billion was rejected. BHP is targeting Anglo American’s copper assets. We believe BHP’s strategic move makes sense, as a successful transaction would enable it to become one of the world’s largest copper producers. Irrespective of the final outcome regarding the takeover play, BHP’s share price offers value despite a recent partial recovery.

HOLD RECOMMENDATIONS

HOLD – NextDC (NXT)

This data centre service provider recently raised $1.322 billion to fund future growth plans. Investors responded positively to the capital raising. Artificial intelligence should drive strong demand for data capacity in the future. Expanding data storage capacity paints a bright outlook for NXT. The shares have performed well since mid-April up until May 16.

HOLD – Amcor Plc (AMC)

This global packaging giant’s recent results highlighted an improvement in volume trend margins. Management appears to be focusing on cost control. The shares have risen from $13.82 on April 30 to trade at $15.445 on May 16. In our view, AMC is worth holding as we expect volume demand for packaging to increase and enhance shareholder value.

SELL RECOMMENDATIONS

SELL – JB Hi-Fi (JBH)

This consumer electronics giant recently posted a solid third quarter sales update in fiscal year 2024, which was in line with consensus forecasts. Higher interest rates and cost of living expenses are impacting consumer spending. In our view, investors haven’t fully factored in the impact of weaker consumer spending into the share prices of discretionary retailers. JBH is trading at a premium, in our opinion.

SELL – Commonwealth Bank of Australia (CBA)

Australia’s biggest bank posted a marginally better than expected third quarter result for fiscal year 2024, which reflected similar themes to its peers. We note a decline in net interest margins and lower revenue growth coupled with increasing cost pressures. We acknowledge CBA is the premier bank, but we can’t justify its valuation premium compared to competitors. Investors may want to consider taking a profit.

Michael Gable, Fairmont Equities

BUY RECOMMENDATIONS

BUY – Bannerman Energy (BMN)

BMN has one of the biggest undeveloped uranium assets in the world. The company’s flagship Etango project is in Namibia. It has a mining licence and all requisite environmental planning approvals, which pave a pathway to development. I remain bullish about the outlook for uranium prices. BMN offers plenty of scale and is one of the most leveraged stocks to increasing prices.

BUY – Resolute Mining (RSG)

This African based gold producer offers leverage to an increasing gold price. RSG remains on track to meet 2024 production guidance of between 345,000 ounces and 365,000 ounces, according to a recent company update. The share price chart was recently pointing to an upside break, which could see the company rally hard towards 80 cents. The shares were trading at 48.7 cents on May 16.

HOLD RECOMMENDATIONS

HOLD – Macquarie Group (MQG)

This diversified financial services company stands to benefit from an improving global economy. Its recent full year result was marginally below expectations, but appeared to be already factored in given the positive market reaction following the result. The stock recently resumed its uptrend to trade at $193.49 on May 16.

HOLD – WiseTech Global (WTC)

WiseTech develops software for the global logistics industry. It continues to dominate the logistics sector and has established a track record of growing its earnings year-on-year. The recent pullback in equity markets only resulted in a shallow decline for WTC shares, which is a sign of underlying strength. The shares were recently trending higher again to trade at $101.35 on May 16.

SELL RECOMMENDATIONS

SELL – Coles Group (COL)

Defensive stocks, such as this supermarket giant, became expensive in the past two years, but we expect that premium to unwind as investors chase better returns elsewhere. With food inflation retreating, we believe Coles will find it increasingly difficult to increase its margins.

SELL – QBE Insurance Group (QBE)

The shares have performed strongly in calendar year 2024. However, we believe QBE may find it challenging to charge higher premiums moving forward as inflation eases and competition increases. Insurance stocks are most volatile due to the uncertain timing of natural disasters. Investors may want to consider cashing in some gains.

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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.