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Tom Bleakley, BW Equities

 

BUY RECOMMENDATIONS

 

BUY – Southern Cross Gold (SXG)

Southern Cross operates three exploration projects in Victoria and another in Queensland. The company owns the promising Sunday Creek project in central Victoria. SXG owns 133.29 hectares of freehold land at Sunday Creek. This stock is one to watch as the company continues to deliver successful exploration drilling results. Confidence is growing in a resource that could have significant scale.

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BUY – Botanix Pharmaceuticals (BOT) 

The US Food and Drug Administration (FDA) has approved BOT’s Sofdra topical gel, a prescription medicine for treating primary axillary hyperhidrosis (excessive underarm sweating) in adults and children aged 9 and beyond. The product is already marketed in Japan, but the US potentially provides a much bigger opportunity. BOT, a clinical dermatology company, says about 10 million people in the US suffer from excessive underarm sweating. FDA approval paints a brighter revenue outlook.

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HOLD RECOMMENDATIONS

 

HOLD – Qoria (QOR) 

Qoria is a technology company providing digital solutions to keep children safe on the internet. The QOR board rejected an unsolicited, non-binding takeover proposal from K1 Investment Management at 40 cents a share in early April on the grounds it undervalued the company. The company increased annual recurring revenue in the June quarter of fiscal year 2024. In our view, potential exits for further merger and acquisition activity.

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HOLD – REA Group (REA) 

REA is a global digital advertising business specialising in property. The company generated revenue of $1.453 billion in fiscal year 2024, an increase of 23 per cent on the prior corresponding period. Net profit after tax of $461 million was up 24 per cent. The company lifted volumes of new listings in Sydney and Melbourne. REA is the most downloaded app for property marketing in India.

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SELL RECOMMENDATIONS

 

SELL – Cochlear (COH) 

The hearing implants maker posted total sales revenue of $2.258 billion in fiscal year 2024, up 12 per cent in constant currency on the prior corresponding period. Underlying net profit of $387 million was up 15 per cent in constant currency. The company expects underlying net profit to increase in fiscal year 2025. Cochlear is a terrific business, but we believe the shares are priced to perfection and leave little or no room for error. Investors may want to consider cashing in some gains.

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SELL – Monadelphous Group (MND)

This engineering company generated revenue of $2.03 billion in fiscal year 2024, up 11 per cent on the prior corresponding period. Net profit after tax of $62.2 million was up 16.2 per cent. The company generates substantial revenue from mining customers in the metals and iron ore sectors. Iron ore and other commodity prices remain under pressure in this challenging sector. Moving forward, we’re concerned some MND customers may be forced to delay works in the short term as they battle to keep costs under control. Investors may want to consider reducing holdings.

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Tony Paterno, Ord Minnett

 

BUY RECOMMENDATIONS

 

Top Australian Brokers

 

 

BUY – Life360 Inc. (360)

This information technology company provides a mobile networking safety app for families. The company delivered another strong result in the second quarter of fiscal year 2024. The company generated record quarterly results in monthly active users, paying circles and subscription revenue. It materially upgraded full year guidance. Encouragingly, 360’s platform continues to strengthen amid improving unit economics. All structural trends remain in place and are accelerating.

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BUY – Ampol (ALD)

This leading energy provider reported underlying group RCOP (replacement cost operating profit) earnings before interest and tax in line with pre-guidance for the first half of fiscal year 2024. On our forecasts, a return to normalised earnings in calendar year 2025 leaves ALD trading on an undemanding price/earnings ratio and an appealing dividend yield. Due to recent share price underperformance, we believe the downside risks are more than priced into the stock.

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HOLD RECOMMENDATIONS

 

HOLD – Charter Hall Long Wale REIT (CLW)

CLW is a diversified real estate investment trust. Operating earnings of 26 cents a security in full year 2024 was in line with our forecast and consensus. Net tangible assets fell sharply to $4.66 a security in the six months to June 2024. Following asset sales of $762.2 million, look-through gearing falls to a more comfortable level of 37.6 per cent. CLW is reasonably clear of its debt covenants, so we believe further asset sales are unlikely.

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HOLD – Treasury Wine Estates (TWE) 

The global wine giant recognised a non-cash impairment charge of $354 million in its fiscal year 2024 results in relation to the valuation of its treasury premium brands division. Net sales revenue of $2.7 billion in fiscal year 2024 was up 13.1 per cent on the prior corresponding period. TWE’s intention to divest its commercial brand portfolio is part of the company’s strategy to focus on its luxury brands, which should strengthen TWE’s position and underpin its growth prospects.

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SELL RECOMMENDATIONS

 

SELL – Bendigo and Adelaide Bank (BEN)

The bank’s shares have risen from $9.92 on May 16 to trade at $12.46 on August 22. Moving forward, we’re concerned about Australia’s economic outlook, which could soften in times of high interest rates. BEN is up against fierce competition from the major banks and others. Investors may want to consider cashing in some gains.

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SELL – ASX Limited (ASX)

The financial markets operator has made a solid start to fiscal year 2025 across the futures, trading, clearing and settlement divisions. The ASX generated operating revenue of $1.03 billion in fiscal year 2024, up 2.4 per cent on the prior corresponding period. However, total expenses of $429.5 million were up 14.7 per cent. Statutory net profit after tax was up 49.4 per cent, but underlying NPAT was down 3.4 per cent. We recognise the traditionally defensive attraction of ASX’s earnings, but, at this point, we find it challenging to rationalise its lofty valuation metrics.

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Philippe Bui, Medallion Financial Group

 

BUY RECOMMENDATIONS

 

BUY – Unico Silver (USL)

This silver explorer has high quality assets in the world class mining province of Santa Cruz in Argentina. The company has a substantial resource base and trades on an attractive enterprise valuation. The share registry includes many high profile funds. A continuing increase in silver prices could lead to substantial upside for USL, as silver markets are experiencing a supply deficit. The company recently announced it was raising capital to fund the proposed acquisition of the Joaquin and Cerro Puntudo projects. In our opinion, USL is the most attractive pure play silver company on the ASX.

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BUY – Opthea (OPT)

This biopharmaceutical company is developing a new drug for macular degeneration. Macular degeneration is the leading cause of blindness for people aged 50 and older. The company is in the process of completing US Food and Drug Administration phase 3 clinical trials, with results due in the June quarter of 2025. The company has lifted available funds following a capital raising at 40 cents a share. The shares were trading at 55.5 cents on August 22.

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HOLD RECOMMENDATIONS

 

HOLD – Challenger (CGF)

Challenger is the leading provider of annuity payments in Australia. Recently, the company posted strong results for fiscal year 2024. The company grew normalised net profit before tax by 17 per cent. Group assets under management increased by 21 per cent, and CGF lifted its fully franked full year dividend by 10 per cent, which was ahead of forecasts. The company has guided for a 10 per cent increase in profit in fiscal year 2025.

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HOLD – Evolution Mining (EVN)

Evolution Mining is the second largest gold miner on the ASX by market capitalisation. After acquiring an 80 per cent interest in the Northparkes mine, the company now has significant exposure to copper. Recently, the company posted strong earnings results in fiscal year 2024. After several acquisitions, the large amount of free cash flow is helping the business reduce its debt. This should lead to strong dividends down the track. The company is a low cost producer.

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SELL RECOMMENDATIONS

 

SELL – Wesfarmers (WES)

Shares in this industrial conglomerate have risen from $57.51 on January 2 to trade at $75.06 on August 22. In our view, the shares look expensive. The business has plenty of balance sheet options, but, in our opinion, underlying earnings growth is slow. Depressed lithium prices are likely to impact the numbers at the Mt Holland project, which should start producing by end of 2024. Recently trading on a price/earnings ratio of about 33 and a dividend yield below 3 per cent, we find it difficult to see value.

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SELL – Commonwealth Bank of Australia (CBA)

CBA is arguably the best of the Australian banks. In this case, quality doesn’t come cheap. Recently trading on a price/earnings ratio of about 24 puts it at the top of almost any mature domestic bank in the world. It’s trading on a substantial P/E premium when compared to the average of the other three major banks. The shares have risen from $111.86 on April 19 to trade at $136.48 on August 22. 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.