18 Share Tips – 3rd February 2025

Welcome to this week’s edition of 18 Share Tips – our weekly selection of top ASX shares, chosen by leading analysts, that we think are worth considering.

This week Peter Day of Sequoia Wealth Management, Dylan Evans of Catapult Wealth and James Nicolaou of PAC Partners share their ‘Buy’, ‘Hold’ and ‘Sell’ recommendations.

Please note these share tips are simply recommendations and are in no way intended as financial advice.  These share tips are general advice and don’t take into account any individual’s financial situation. Investors are advised to seek professional financial advice before investing.

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Peter Day, Sequoia Wealth Management

BUY RECOMMENDATIONS

BUY – CSL (CSL)

CSL is a global biotechnology company. Its medicines treat haemophilia and immune deficiencies. Its vaccines prevent influenza. It provides therapies in iron deficiency and nephrology. CSL provides products to more than 100 countries. The company has posted a significant increase in revenue during the past three years and delivered earnings growth that’s compounding at double digit rates. CSL was recently trading on a modest and appealing price/earnings ratio, which provides valuation support at current levels.

BUY – Life360 Inc (360)

This information technology company provides a mobile networking safety app for families. Life360 remains one of our key choices, and we expect a strong full year 2024 result, with EBITDA possibly exceeding guidance. We expect strong 2025 guidance involving revenue and statutory EBITDA. We expect the company to be added to the S&P/ASX 100 Index when the next rebalance occurs in early March. This should be a positive result if Life360 is added to this large market capitalisation index. Life360 is a global market leader with competitive advantages.

HOLD RECOMMENDATIONS

HOLD – Pinnacle Investment Management Group (PNI)

Pinnacle is a global multi-affiliate investment management firm. I recommended PNI as a buy in The Bull.com.au in late July 2024 when the shares were trading around $16. The shares were trading at $25.79 on January 30, 2025. On November 20, 2024, Pinnacle announced investments in VSS Capital Partners and Pacific Asset Management. We consider Pacific Asset Management a transformational affiliate. It increases PNI’s international presence and distribution strength. It also enables PNI to leverage off Pacific’s technology. Total affiliate funds under management grew to $128.1 billion as at September 30, 2024.

HOLD – Kogan.com (KGN)

This online retailer recently posted an encouraging first half update for fiscal year 2025. Gross sales of $492.5 million were up 10.3 per cent on the prior corresponding period based on unaudited management accounts at December 31, 2024. The company enjoyed accelerated gross sales growth of 23.8 per cent in the peak November and December months. Revenue of $272.7 million was up 9.9 per cent and adjusted earnings before interest and tax of $19 million grew 21.2 per cent. The outlook appears brighter given a possible interest rate cut.

SELL RECOMMENDATIONS

SELL – Proteomics International Laboratories (PIQ)

This medical technology company is involved in predicative diagnostics and bioanalytical services. The company’s PromarkerD test is designed predict the risk of diabetic kidney disease in people suffering from diabetes. In October 2024, the company announced that results published in a peer-reviewed journal showed that PromarkerD demonstrated accuracy in predicting chronic kidney disease in patients with type 1 diabetes. The company also recently reported encouraging results for its endometriosis diagnostic blood test. However, the company reported a full year loss after tax of $6.481 million from continuing operations for the year ending June 30, 2024. The share price has fallen from $1.03 on February 2, 2024, to trade at 68 cents on January 30, 2025. We see short term downside risk prior to any commercialisation of assets.

SELL – Imdex (IMD)

Imdex is a global mining technology company. It enables drilling contractors and resource companies to find, mine and define orebodies. The company generated revenue of $445.3 million in full year 2024, up 8 per cent on the prior corresponding period. However net profit after tax of $32.4 million was down 7 per cent. Our concern is continuing weakness in global exploration activity. While the industry is edging closer to an upcycle, the near term outlook is opaque, in our view. Investors may want to consider selling some shares, as we believe they may be cheaper following the first half 2025 result on February 12, 2025.

Dylan Evans, Catapult Wealth

BUY RECOMMENDATIONS

BUY – Charter Hall Long Wale REIT (CLW)

Charter Hall is a diversified property trust. CLW offers a quality and appealing property portfolio with an occupancy rate of 99 per cent and an average lease expiry of more than 10 years. However, in our view, a subdued development pipeline leaves limited growth opportunities, but with an anticipated dividend yield of 6.4 per cent in fiscal year 2025, CLW should be considered by those seeking a reliable and defensive income stream. Significant property sales completed in 2024 were used to reduce gearing to 26 per cent, which further lessens risk and improves the trust’s defensive character.

BUY – CSL (CSL)

The share price of this blood products company has been a disappointing performer. The shares have fallen from $320.03 on February 3, 2020, to trade at $276.77 on January 30, 2025. Yet the company generated full year 2024 net profit after tax of $2.75 billion at constant currency, up 25 per cent on the prior corresponding period. CSL is a high quality defensive stock, anticipating double digit earnings growth in fiscal year 2025 amid trading on a relatively modest earnings multiple. The patience of long term investors has certainly been tested, but we expect good returns going forward.

HOLD RECOMMENDATIONS

HOLD – JB Hi-Fi (JBH)

JB Hi-Fi has surprised the market with its ability to sustain sales in home office and entertainment post the COVID-19 pandemic boom. Total sales of $9.6 billion in fiscal year 2024 were in line with the prior year, but ahead of fiscal year 2022. JB Hi-Fi used this sales boom wisely, repaying debt to put the company in a net cash position and boosting its online sales presence. However, competition in the consumer discretionary market is fierce, which led to declining earnings margins in Australia in fiscal year 2024. We temper our enthusiasm for the stock.

HOLD – NextDC (NXT)

The company operates a network of data centres across Australia. These data centers hold customer information technology infrastructure and enable them to access global cloud platforms. The fundamentals of data centre revenues are attractive, particularly as demand for services increase in line with rising cloud adoption and growing data volumes. The high cost of switching data centres mean revenues are sticky. The challenge for investors is high ongoing capital requirements amid full year statutory bottom line losses.

SELL RECOMMENDATIONS

SELL – Sims (SGM)

The sale of the company’s UK division to fund opportunities in Australia and the US has been a positive development. However, scrap metal is a cyclical industry, as metal prices and energy costs are highly volatile. This can leave it difficult to forecast future results. Sims reported a statutory loss after tax of $57.8 million in fiscal year 2024. The underlying return on productive assets of 1.8 per cent was down from 11.4 per cent in the prior corresponding period.

SELL – Xero (XRO)

Xero provides cloud accounting software. It has a large share of the Australian and New Zealand markets and is expanding worldwide. Xero is a quality business with recurring and growing revenues. However, we see much of Xero’s potential growth already represented in its current share price. Xero is exposed to fierce competition in overseas markets amid rapid and unpredictable changes in technology. Investors are willing to pay for future potential, but we don’t see sufficient compensation for the risk if Xero fails to fully realise what we consider lofty expectations.

Don’t Buy Just Yet

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James Nicolaou, PAC Partners

BUY RECOMMENDATIONS

BUY – MoneyMe (MME)

Alternative finance lenders are often overlooked by the market in favour of bigger banking and financial institutions. MoneyMe is a digital lender building innovative financial solutions. It’s poised to benefit from strong growth and improving fundamentals. Loan originations surged 62 per cent in the first quarter of fiscal year 2025, driven by a shift towards higher quality loans. Net credit losses fell to 3.8 per cent compared to 4.4 per cent in the prior corresponding period. We believe expected interest rate cuts in 2025 will lift demand for loans. MME is poised for further outperformance after its strong share price rally in the second half of calendar year 2024.

BUY – Humm Group (HUM)

Humm is a diversified financial services company. It provides instalment plans which enable businesses and consumers to make large purchases. HUM’s diversified loan portfolio supports the company’s resilience. The company is also a buy now, pay later provider. With the alternative finance sector poised for growth on the back of expected interest rate cuts in 2025, we believe HUM’s valuation offers significant upside potential supported by strong sector tailwinds. In our view, the company is trading at a significant discount to peers.

HOLD RECOMMENDATIONS

HOLD – Energy One (EOL)

Energy One is a leading provider of energy management software and is benefiting from structural growth in renewable energy markets. It holds a significant market share in Australia and is expanding in Europe, with recurring revenues driving its strong financial position. EOL is well placed for growth in fiscal year 2025 as we expect the company to generate forecast revenue of $60 million amid improving margins. While the current valuation reflects its progress, holding EOL offers exposure to long term gains as the company executes its expansion and acquisition strategies.

HOLD – Block Inc. (XYZ)

This technology company is dual listed on the ASX and the New York Stock Exchange. Former buy now, pay later (BNPL) ASX listed success story Afterpay is now part of Block. US consumers were slow to embrace BNPL, but now it’s now part of their culture. Falling interest rates is a tailwind. The BNPL component is but a part of this burgeoning technology conglomerate. Block also offers commerce and financial services via its brand Square. Block was recently holding about 8363 bitcoin on its balance sheet. The company is a strong performer. The shares have risen from $110.38 on November 5, 2024, to trade at $145.22 on January 30, 2025.

SELL RECOMMENDATIONS

SELL – GQG Partners Inc. (GQG)

Once a darling of funds management, GQG Partners rose to prominence, overshadowing Magellan as the industry’s preferred asset manager. However, the shares have fallen from $3.09 on July 24, 2024, to trade at $2.105 on January 30, 2025. Investors started selling GQG shares in November 2024 in response to the company’s exposure to Adani Group companies, where several Adani executives are at the centre of bribery allegations in the US. The company reported total funds under management had fallen from $US159.5 billion on November 30, 2024, to $US153 billion at December 31, 2024.

SELL – Resolute Mining (RSG)

The company’s chief executive Terence Holohan and two other employees detained by the Mali military junta in early November were released in late November. Their release follows an agreement for Resolute to pay $US160 million to the Mali Government to resolve a tax code dispute. Shares in this gold miner have fallen from 87.5 cents on October 23, 2024, to trade at 41 cents on January 30, 2025. This dispute highlights sovereign risk in Mali and other parts of the globe. Sovereign risk needs to be factored in before investing in mining and resource companies wherever they may be located.

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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.