18 Share Tips – 22nd July 2024

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Arthur Garipoli, Seneca Financial Solutions

BUY RECOMMENDATIONS

BUY – Stanmore Resources (SMR)

Stanmore is a large supplier of metallurgical coal to global markets. The company has long life, low cost assets. With additional growth projects in the pipeline, it has the scope to lift operational performance at a limited cost. In our view, Stanmore is undervalued even under conservative coal price scenarios. The shares have recently been enjoying favourable momentum.

BUY – Orora (ORA)

This packaging giant is trading on undemanding multiples, in our opinion. We expect operating conditions to remain challenging in the first half of fiscal year 2025, but anticipate packaging volumes to increase in the second half. The company has forecast fiscal year 2024 group earnings before interest and tax, excluding the Saverglass contribution, to be marginally lower than the prior corresponding period. The share price has retreated to an attractive level for long term investors.

HOLD RECOMMENDATIONS

HOLD – Telstra Group (TLS)

This leading telecommunications company recently announced pending increases to its postpaid and prepaid mobile phone plans, which is expected to generate higher average revenue per user this financial year. Analysts have recently upgraded their forecasts to account for price increases. Telstra’s attractive fully franked dividend appeals to income investors. The company is enjoying favourable price momentum.

HOLD – Transurban Group (TCL)

The company generates revenue from toll roads in Australia and the US, which are linked to inflation. Transurban has a high quality regulated asset base. TCL’s forecast dividend yield is attractive and was recently trading above its five-year average of 4.1 per cent. We expect the company to outperform if the Reserve Bank of Australia cuts interest rates.

SELL RECOMMENDATIONS

SELL – Wesfarmers (WES)

WES owns the Bunnings hardware chain, Officeworks and Kmart Group, among other businesses. Also, it makes and distributes chemicals and fertilisers. The share price has risen from $64.44 on July 2 to trade at $70.18 on July 18. In our view, the company’s valuation appears to be stretched. We’re also concerned that soaring cost of living increases may negatively impact discretionary retailers. Investors may want to consider cashing in some gains.

SELL – JB Hi-Fi (JBH)

The share price of this consumer electronics giant is trading at a premium, in our view. The shares have risen from $54.40 on January 2 to trade at $64.76 on July 18. Total sales in the first half of fiscal year 2024 were down 2.2 per cent on the prior corresponding period. Net profit after tax fell 19.9 per cent. JBH isn’t cushioned from cost of living challenges facing consumers. It may be time to consider locking in some profits.

Stuart Bromley, Medallion Financial Group

BUY RECOMMENDATIONS

BUY – Santos (STO)

Investors responded positively to speculation that Santos was a possible takeover target in the absence of confirmation from potential Middle Eastern suitors. The shares have risen from $7.35 on June 18 to trade at $8.09 on July 18. This oil and gas giant has quality assets. The company posted a 2 per cent increase in production in the second quarter ending June 30, 2024, when compared to the prior quarter. Previous investments are now flowing through to increasing cash flows. Management plans to pay out 40 per cent of cash flows as dividends, which may increase in the future.

BUY – Audinate Group (AD8)

Audinate provides professional audio visual networking technologies across the world. The share price has fallen from $19.45 on May 3 to trade at $15.19 on July 18. The fall may be due to profit taking, or the resignation of its chief financial officer. We believe the shares have been oversold, providing an opportunity to buy on weakness. The company posted a strong first half 2024 result, with revenue increasing 47.7 per cent on the prior corresponding period.

HOLD RECOMMENDATIONS

HOLD – Johns Lyng Group (JLG)

The group delivers building and restoration services in Australia and the US. At its first half 2024 results in February, the company forecasted a revenue and EBITDA upgrade, excluding commercial construction, for the full year. Management has a history of exceeding expectations. The shares fell from $7.20 on February 26 to $5.62 on June 27. The shares were trading at $5.99 on July 18.

HOLD – NexGen Energy (Canada) (NXG)

This uranium company’s main development stage project Rook 1 is in Saskatchewan, Canada. The project boasts a significant measured and indicated resource totalling 256.7 million pounds at 3.1 per cent uranium. The mine will initially operate for 11 years and will be capable of producing 29 million pounds of uranium a year in its first 5 years. Further upside may arise from an increase in the uranium spot price.

SELL RECOMMENDATIONS

SELL – Insignia Financial (IFL)

Funds under management and administration (FUMA) totalled $312.3 billion at March 31, 2024. FUMA in the third quarter increased by $11.7 billion, or 3.9 per cent on the previous quarter. However, total net outflows for the third quarter were $1.7 billion. This financial services company reported a statutory loss of $49.9 million for the six months ending December 31, 2023. This compares with a $45.1 million profit in the prior corresponding period. The shares have risen from $2.35 on January 2 to trade at $2.46 on July 18. Other stocks offer stronger growth prospects, in our view.

SELL – Coles Group (COL)

Supermarket giant Coles operates in a competitive, tight margin environment. Downside risks include a potential slowdown in consumer spending and cost push inflation. Supermarket sales revenue rose in the third quarter of fiscal year 2024 compared to the prior corresponding period, but liquor sales fell. We prefer companies operating in high growth industries with potential for meaningful margin expansion.

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Jed Richards, Shaw and Partners

BUY RECOMMENDATIONS

BUY – Worley (WOR)

WOR is a leading global engineering company leveraged to the energy sector. We expect WOR to benefit from increasing investment required by companies and sectors to achieve their global clean energy targets by 2030. The shares offer value at these levels. The stock was trading at $14.955 on July 18.

BUY – Qantas Airways (QAN)

We believe the outlook for Australia’s national carrier is bright during the next few years. The company’s loyalty business is expected to double earnings over the next five to seven years. It will benefit from new and more fuel efficient aircraft. The company’s Project Sunrise will enable direct flights between Australia’s east coast, Europe and New York. Qantas has sufficient balance sheet capacity to continue buying back shares before resuming fully franked dividends in the future.

HOLD RECOMMENDATIONS

HOLD – CSL (CSL)

CSL is the world’s largest maker of plasma-based therapies. It’s a global leader in treatments for immunodeficiency and bleeding diseases, such as haemophilia. CSL is one of the world’s biggest suppliers of flu vaccines. The company is well managed and is steadily growing its dividend stream. It usually under-promises and over-delivers when it comes to profit.

HOLD – Mineral Resources (MIN)

MIN is a well-managed mining services company. It also produces iron ore and lithium. In our view, the outlook offers strong growth prospects despite weaker commodity prices. Despite volatile lithium prices, MIN’s mines have attractive characteristics, such as long reserve lives. The company’s mines are low on the cost curve and operate in favourable jurisdictions.

SELL RECOMMENDATIONS

SELL – Lynas Rare Earths (LYC)

Shares in this rare earths producer have fallen from $7.17 on January 2 to trade at $6.26 on July 18. Revenue from ordinary activities in the first half of fiscal year 2024 was down 37 per cent on the prior corresponding period. EBITDA was down 67 per cent. China dominates the rare earths sector, making this space highly vulnerable to disruption. Other stocks appeal more at this stage of the cycle.

SELL – Endeavour Group (EDV)

Endeavour operates liquor outlets, hotels and gaming facilities. The share price has fallen from $6.18 on July 27, 2023, to trade at $5.265 on July 18, 2024. The company has faced challenges with regulatory reforms, board conflicts and lower margins. It recently dropped out of the S&P/ASX 50, reducing institutional investor interest. I see limited upside from current 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.