John Edwards, Novus Capital 

 

BUY RECOMMENDATIONS

 

BUY – Meteoric Resources NL (MEI)

The company recently upgraded the resource estimate for its Caldeira rare earth element project in Brazil after completing additional infill diamond and aircore drilling. The global mineral resource now stands at 545 million tonnes at 2561 parts per million total rare earth oxides. These results support the Caldeira project’s potential to become a significant long-life supplier of rare earths, which are crucial for global electrification. I own shares in MEI. Our 12-month price target is 50 cents.

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BUY – Renegade Exploration (RNX)

RNX has started diamond drilling at its Mongoose Deeps magnetic anomaly within the Cloncurry project. The anomaly is located beneath the Mongoose copper deposit. Anomaly interpretation outlines a magnetite rich breccia pipe, with a similar configuration to the Ernest Henry copper mine with annual production of 80,000 ounces of gold and 50,000 tonnes of copper. Drilling will test to a depth of 1600 metres. Successful drilling would paint a bright outlook. I own shares in this high risk, speculative stock.

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HOLD RECOMMENDATIONS

 

HOLD – BHP Group (BHP)

This mining giant’s takeover proposal for Anglo American was recently rejected for a third time. The latest revised proposal was increased to about $74 billion, about $10 billion more than the second bid on May 7. BHP has been granted an extension until May 29 to announce a firm intention to make an offer, or announce it does not intend to make an offer for Anglo American. The market is concerned BHP may be offering too much for Anglo American. On the positive side, Anglo American has some of the best copper mines in the world.

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HOLD – James Hardie Industries PLC (JHX) 

JHX is a building products maker. The company reported record net sales of $US3.936 billion in full year 2024, up 4 per cent on the prior corresponding period. Moving forward, JHX is at risk of margin pressure from rising costs of pulp and cement. Delayed interest rate cuts have deferred the timing of a broad-based recovery in renovations.

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SELL RECOMMENDATIONS

 

SELL – Commonwealth Bank of Australia (CBA) 

Operating income fell 1 per cent in the third quarter of fiscal year 2024. Net interest income was 1 per cent lower and net interest margins slightly fell. We expect margin pressure on earnings to impact the full year results. CBA shares have risen from $111.86 on April 19 to trade at $120.815 on May 23. We expect the share price to fall substantially following full year results expected in August. In the meantime, investors may want to cash in some gains.

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SELL – Pilbara Minerals (PLS)

A large physical lithium surplus has been forecast due to weaker demand for electric vehicles in the US and Europe. The PLS share price is highly correlated to lithium prices, and the stock is highly liquid. The forecast for a lithium market surplus and consequent lower prices during the next 12 months are behind our sell recommendation.

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Christopher Watt, Bell Potter Securities

 

BUY RECOMMENDATIONS

 

 

Top Australian Brokers

 

BUY – Aristocrat Leisure (ALL) 

This gaming content creation company delivered strong earnings that exceeded consensus estimates in its first half 2024 results. The strong operational result was driven by lower-than-expected corporate costs. The stock remains one of the highest quality growth names on the ASX.

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BUY – Woodside Energy Group (WDS) 

The recent share price pullback in this energy giant presents an attractive entry point for investors, in our view. The shares have fallen from $30.59 on April 11 to trade at $27.45 on May 23. Although first quarter 2024 production fell by 7 per cent on the fourth quarter of fiscal year 2023, the company retained full year 2024 guidance of between 185 million and 195 million barrels of oil equivalent. Woodside remains Australia’s premier oil and gas exposure.

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HOLD RECOMMENDATIONS

 

HOLD – ResMed Inc (RMD) 

The sleep apnoea device maker’s better than expected third quarter results in fiscal year 2024 showed a marked improvement in gross margins, which had previously been a reason for the stock’s declining share price. Weight loss and diabetes drugs didn’t impact demand for RMD’s treatment products. The recent share price rally leaves us with a neutral rating.

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HOLD – Pro Medicus (PME) 

The company provides medical imaging software and services to hospitals and health care groups across the world. The shares have risen from $59.44 on May 25, 2023, to trade at $117.80 on May 23, 2024. A concern is intensifying scrutiny on a weakening macro outlook since January 1 impacting the valuation of equities at the growth end of the market. PME remains a quality technology company, but keep an eye on the news flow at these levels.

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SELL RECOMMENDATIONS

 

SELL – Cochlear (COH)

The hearing implants maker has delivered significant earnings growth in the past few years, driven by an increase in service revenues and new products. COH is a quality business. The shares have risen from $244.04 on May 25, 2023, to trade at $322.93 on May 23, 2024. We remain cautious about the current valuation, so investors may want to consider cashing in some gains.

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SELL – National Australia Bank (NAB)

The bank recently delivered a first half 2024 result that largely met expectations. We don’t believe the current valuation is justified and remain cautious about the near-term earnings outlook. While lending pressures are moderating, we expect deposit-led margin headwinds to persist.

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Tony Paterno, Ord Minnett

 

BUY RECOMMENDATIONS

 

BUY – Helloworld Travel (HLO)

HLO operates a travel distribution company in Australia and New Zealand. A trading update for the March quarter of 2024 revealed that unaudited total transaction value of $854.9 million was up from $596.2 million in the prior corresponding period. Unaudited underlying EBITDA of $14.6 million was up from $14.2 million. The company re-affirmed full year guidance. It has no debt. A weaker share price in the past month provides a buying opportunity.

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BUY – Smartgroup Corporation (SIQ)

SIQ provides salary packaging and fleet management services. A first quarter trading update in fiscal year 2024 highlighted increasing demand for electric vehicles. These accounted for 42 per cent of new car lease orders. As expected, costs also increased, but the net result was about 3 per cent ahead of our expectations. Earnings in the second half of fiscal year 2024 should improve once the South Australian Government contract starts, supported by further growth in novated leasing volumes across the rest of SIQ’s business.

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HOLD RECOMMENDATIONS

 

HOLD – Transurban Group (TCL)

We are downgrading our fiscal year 2024 proportional EBITDA forecast for this toll road operator, as traffic volumes are softer than we expected. Longer term forecasts are largely unchanged, and we continue to forecast a five-year EBITDA compound annual growth rate of about 7 per cent. Management says it will focus on extracting cost efficiencies and improving profit margins, but TCL always has an eye on expanding via acquisitions and developments.

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HOLD – Commonwealth Bank of Australia (CBA)

The bank reported an unaudited 2024 third quarter cash net profit after tax of $2.4 billion, down 3 per cent on the quarterly average in the first half. The decline is tracking marginally better than we expected. Operating expenses were well contained, up by 2 per cent. In the next five years, we assume pricing on loans and customer deposits will enable a modest margin improvement and a return to loan growth in line with the market.

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SELL RECOMMENDATIONS

 

SELL – JB Hi-Fi (JBH)

Shares in this consumer electronics giant are materially overvalued, in our view. We believe we’re more cautious than the market on the outlook for maintaining operating margins. Discounting has gripped the consumer electronics and household appliance retailing categories as competition intensifies amid weaker demand. We expect promotional activity to stay elevated and potentially weigh on JB Hi-Fi’s sales and gross profit margins in the second half of fiscal 2024.

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SELL – BlueScope Steel (BSL)

We believe the stock is overvalued. Steelmakers are price takers and have no control over steelmaking spreads, which have historically demonstrated significant volatility. End market demand for steel is driven by construction activity, which is cyclical. Import tariff regulations can impact BlueScope’s earnings.

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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.