18 Share Tips – 29th July 2024

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John Athanasiou, Red Leaf Securities 

BUY RECOMMENDATIONS

BUY – Change Financial (CCA)

This global financial technology company posted unaudited revenue of $A9.3 million in the second half of fiscal year 2024, up 39 per cent on the prior corresponding period. Unaudited full year revenue of $A15.8 million was up 22 per cent. CCA is favourably positioned in terms of valuation, considering potential expansion opportunities from securing additional non-bank financial institutions in New Zealand and Australia.

BUY – CSL (CSL)

This blood products group is a consistent and reliable performer. The company lifted revenue and net profit after tax at its first half result in fiscal year 2024. We expect the company’s innovative plasma collection technology to significantly reduce collection times as it’s deployed across the US. We believe the rollout is progressing faster than market expectations, which could potentially yield margin improvements as its benefits materialise.

HOLD RECOMMENDATIONS

HOLD – Data#3 (DTL)

DTL is an information technology services and solutions provider. The company is a significant beneficiary of artificial intelligence trends in Australia. Total statutory revenue in the first half of fiscal year 2024 was up 11.1 per cent on the prior corresponding period and net profit after tax grew by 25.5 per cent. The shares have risen from $7.35 on May 22 to trade at $8.56 on July 25. A concern is a relatively high price/earnings ratio.

HOLD – NextDC (NXT)

NextDC is a data centre operator. The company has been benefiting from favourable dynamics, particularly increasing demand for data centre services. How long the tailwind lasts remains uncertain. Until there’s clearer evidence of sustained demand and broader adoption of artificial intelligence models outside major technical hubs, I would be inclined to hold rather than buy or sell the stock.

SELL RECOMMENDATIONS

SELL – Ansell (ANN)

This global leader makes personal protection equipment for healthcare and industrial workplaces. The company experienced a surge in demand during COVID-19, particularly from selling gloves. However, demand has since softened, as customers have stocked up beyond immediate needs. Sales in the first half of fiscal year 2024 fell 7.6 per cent at constant currency on the prior corresponding period. Earnings before interest and tax were down 6.4 per cent. ANN shares have performed well since June, so investors may want to consider cashing in some gains.

SELL – Sonic Healthcare (SHL)

Sonic is one of the largest providers of pathology and clinical laboratory services in the world. The company issued an earnings downgrade in May for fiscal year 2024. The business has experienced inflationary and margin pressures. The shares have fallen from $35.50 on July 27, 2023, to trade at $26.68 on July 25, 2024. However, the shares have risen from $24.04 on June 4, so investors may want to consider taking some profits.

Peter Day, Sequoia Wealth Management 

BUY RECOMMENDATIONS

BUY – Neuren Pharmaceuticals (NEU)

The US Food and Drug Administration has approved the drug DAYBUE (trofinetide) for treating Rett syndrome in adults and pediatric patients aged two years and older. The company has granted an exclusive global licence to Acadia Pharmaceuticals Inc for the development and commercialisation of trofinetide. NEU’s second pipeline drug (NNZ-2591) achieved positive results in phase 2 clinical trials for Phelan-McDermid syndrome and Pitt Hopkins syndrome. We believe the company offers a bright outlook for generating growth.

BUY – Pinnacle Investment Management Group (PNI)

PNI stands to benefit from meaningful earnings growth in the long term as its affiliates grow funds under management. Performance fees earned by affiliates contributed $12.3 million to PNI’s net profit after tax in the first half of fiscal year 2024. The company lifted net inflows to $4.5 billion. We see upside risk to our performance fee estimates. The share price has risen from $10.16 on January 2 to trade at $16.015 on July 25.

HOLD RECOMMENDATIONS

HOLD – Core Lithium (CXO)

Finniss operations have been temporarily suspended in response to a sharp decline in the price of spodumene concentrate. The company shipped a record 33,027 dry metric tonnes of spodumene concentrate in the June quarter. The company is debt free with a cash balance of $87.6 million at June 30, 2024. CXO has exploration options for other commodities. The company’s financial position enables it to re-set the business and resume Finniss operations when market conditions improve.

HOLD – Domino’s Pizza Enterprises (DMP)

The fast food giant is expecting to close up to 80 low volume stores in Japan following a review. These closures will be partially offset by opening 20 or more stores in potentially better locations. The company is also reducing between 10 and 20 stores in France. Store growth is expected to be flat to slightly positive in fiscal year 2025 as management focuses on store profitability.

SELL RECOMMENDATIONS

SELL – Fortescue (FMG)

FMG has announced a restructure, with the loss of 700 jobs from its global operations. FMG says it remains committed to leading the world in green technology, energy and metals. Investors have been questioning whether the company can meet its goal of producing 15 million tonnes of green hydrogen a year by 2030. FMG shares have fallen from $29.39 on January 2 to trade at $20.04 on July 25. We hold an underperform recommendation.

SELL – Commonwealth Bank of Australia (CBA)

CBA’s premium relative to its three major peers is substantially higher than its pre-COVID average. There are valid reasons for CBA to trade at a premium to its peers. Some of these include its higher return on equity, dominant market position in retail banking and effective cost management. However, we believe CBA’s current elevated premium overestimates its superiority. CBA appears priced to perfection, so investors may want to consider cashing in some gains.

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Dylan Evans, Catapult Wealth 

BUY RECOMMENDATIONS

BUY – Rio Tinto (RIO)

Rio is a global cost leader in iron ore production, which generates about 70 per cent of its earnings. The remainder of the business is primarily aluminium and copper production. Weakening Chinese demand for iron ore may negatively impact the price. But the outlook for copper and aluminium is brighter. Both commodities are key materials in the transition to cleaner energy and electric cars.

BUY – Technology One (TNE)

TNE has successfully transitioned to a software as a service subscription model. This is an attractive model for securing and increasing revenue. Growth has continued to surprise on the upside this calendar year, with TNE reporting total annual recurring revenue growth of 21 per cent at its half year result in May. The stock has been included in the S&P/ASX 100 index. The share price has performed well in 2024. We believe the stock will continue to outperform.

HOLD RECOMMENDATIONS

HOLD – Northern Star Resources (NST)

This gold producer has operations in Australia and North America. We’re attracted to the geopolitical stability of the company’s Australian operations. The company recently reported a strong balance sheet, with net cash of $359 million at June 30, 2024. We believe the company is well positioned to take advantage of higher gold prices, which we expect to be supported by political turmoil and continuing US budget deficits.

HOLD – Coles Group (COL)

The supermarket giant has been investing in big projects, such as automated distribution centres. These investments set Coles up to compete strongly and grow in the future. Margins may be pressured in the short term if inflation eases and from intense scrutiny on supermarket prices. Coles is also a reliable income stock.

SELL RECOMMENDATIONS

SELL – Ampol (ALD)

Ampol is a leading energy provider. It also operates a convenience store network. Key competitor Viva Energy Group recently completed the acquisition of OTR Group, a fuel and convenience store chain. OTR Group had 226 stores at the end of calendar year 2023. We believe Viva is ideally positioned to increase its market share at the expense of Ampol and other competitors.

SELL – Harvey Norman Holdings (HVN)

Shares in this retail giant have been enjoying positive momentum, boosted by recent income tax cuts. There’s a possibility interest rates may go up rather than down. Any interest rate rise is designed to slow retail spending. Whether rates fall or rise, the soaring cost of living increases leave us cautious about the outlook for discretionary retailers. Investors may want to consider taking some profits.

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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.