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Angus Geddes, Fat Prophets

 

BUY RECOMMENDATIONS

 

BUY – Gold Road Resources (GOR)

The first half result in 2024 was negatively impacted by severe weather reducing production and increasing costs. However, the impact was cushioned by record high gold prices. We expect a strong recovery for the company in the second half. The Gruyere gold mine remains a quality asset with high margins under normal operating conditions, and particularly as we expect gold prices to remain elevated. There is much scope for turning more ounces into reserves at Gruyere.

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BUY – Rio Tinto (RIO)

The market’s bearish sentiment on iron ore has been priced in, creating a disconnect from fundamentals. Rio’s high-quality iron ore assets sit low on the cost curve and continue to generate strong cash flows. A growing copper contribution in coming years should generate appealing returns. The stock responded positively to China’s recent stimulus package to trade at $122 on September 26. However, the shares were higher earlier this year, closing at $136.17 on May 22.

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HOLD RECOMMENDATIONS

 

HOLD – Qantas Airways (QAN)

The shares have risen from $5.78 on August 5 to trade at $7.425 on September 26. The upward trajectory has been fuelled by robust travel demand and aggressive share buy-backs. Recent crude oil price corrections offer relief on fuel costs. Investments in fleet renewal and reputation repair may pressure short term profits, but the longer term outlook appears poised for growth on the back of a growing loyalty base and plans for fuel-efficient aircraft.

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HOLD – SRG Global (SRG)

SRG is a diversified infrastructure services company. SRG recently announced it had entered into a binding agreement to acquire Diona and its associated entities for $111 million. Diona is a leader in water security and energy transition. The acquisition is poised to strengthen SRG’s position in critical infrastructure amid boosting recurring revenue. SRG generated revenue of $1.069 billion in fiscal year 2024, up 32 per cent on the prior corresponding period.

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SELL RECOMMENDATIONS

 

SELL – The Reject Shop (TRS) 

The discount retail chain reported statutory net profit after tax of $4.7 million in fiscal year 2024, down 35.9 per cent on the prior corresponding period. This was despite a 4.1 per cent increase in sales to $852.7 million. Ongoing margin pressure from rising costs and shrinkage impacted profitability. The cost of doing business was higher in fiscal year 2024 when compared to the prior corresponding period. In this environment, the company’s target to open about 15 to 20 stores in fiscal year 2025 appears ambitious, in our view. The shares have fallen from $5.45 on January 2 to trade at $3.14 on September 26. The company didn’t declare a final dividend in fiscal year 2024.

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SELL – Nine Entertainment Co. Holdings (NEC)

Weaker advertising and economic conditions had a negative impact on this diversified media giant’s fiscal year 2024 results. Group revenue before specific items was down 3 per cent on the prior corresponding period. Group EBITDA before specific items was down 12 per cent and net profit after tax fell 22 per cent. The shares have fallen from $2.02 on January 2 to trade at $1.325 on September 26. NEC operates in a competitive sector. Other stocks appeal more at this stage of the cycle.

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Stuart Bromley, Medallion Financial Group

 

BUY RECOMMENDATIONS

 

Top Australian Brokers

 

 

BUY – Opthea (OPT)

Opthea is a clinical stage biopharmaceutical company. The company is seeking US Food and Drug Administration approval for a drug that aims to treat wet age-related macular degeneration. Results from phase 2 trials were encouraging. In June, OPT raised almost $230 million to carry it through phase 3 clinical trials, with results expected mid next year. We would expect to see significant share price upside if the results are positive. But there is risk involved. The share price has been enjoying favourable momentum since July.

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BUY – LTR Pharma (LTP) 

The company is focused on commercialising an innovative nasal spray to treat erectile dysfunction.  LTR’s lead product Spontan appears to be effective in 10 minutes as opposed to longer durations for some traditional pill alternatives. In August, the company announced a first select group of patients had been prescribed Spontan under the TGA (Therapeutic Goods Administration) authorised prescriber scheme. In July, the company raised $10.5 million via a share placement to advance Spontan’s regulatory pathways and expand its research and development pipeline. Keep up to date with news developments as Spontan may potentially become an exciting prospect.

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HOLD RECOMMENDATIONS

 

HOLD – WiseTech Global (WTC)

WiseTech develops software for the global logistics industry. We’re encouraged by the company’s fiscal year 2024 results. EBITDA of $495.6 million was up 28 per cent on the prior corresponding period. Statutory net profit after tax of $262.8 million was up 24 per cent. WiseTech has a proven track record of acquiring and integrating businesses extremely well. Margins are often weighed down early after a purchase, but we continue to see management drive efficiencies and consistently deliver margin improvement.

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HOLD – CSL (CSL)

This blood products business posted a solid set of fiscal year 2024 results. Reported net profit after tax of $US2.64 billion was up 20 per cent on the prior corresponding period. Revenue of $US14.8 billion was up 11 per cent at constant currency. We expect US immunoglobulin price increases to continue and provide tailwinds for CSL over the years ahead.

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SELL RECOMMENDATIONS

 

SELL – National Australia Bank (NAB) 

The NAB’s share price has risen from $30.86 on January 2 to trade at $37.64 on September 26. Revenue in the first half of fiscal year 2024 was down 3.7 per cent on the prior corresponding period and cash earnings were down 12.8 per cent. The net interest margin decreased by 5 basis points to 1.72 per cent. Possible future interest rate cuts may also squeeze margins. We believe the shares are trading at a premium, so investors may want to consider cashing in some gains.

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SELL – Wesfarmers (WES) 

While Wesfarmers is a long term powerhouse, it may be an opportune time to consider taking a profit. The Bunnings hardware chain delivered modest earnings growth of 2.6 per cent, excluding property contributions, in full year 2024 when compared to the prior corresponding period. Kmart performed well, with earnings up 24.6 per cent. However, in our view, international competitors and online markets remain a consistent threat to market share and margins.

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James Nicolaou, PAC Partners

 

BUY RECOMMENDATIONS

 

BUY – DXN Limited (DXN)

DXN designs, makes and operates data centres on behalf of its customers. Group revenue of $10.755 million in fiscal year 2024 was up 63.5 per cent on the prior corresponding period. It achieved positive EBITDA of $644,000 compared to a loss of $4.963 million in the prior year. The company is anticipating fiscal year 2025 revenue of $16 million and positive EBITDA. This signals strong market confidence, driven by artificial intelligence advancements and rising data consumption, which are accelerating industry growth. Potential exists for further upside as the year progresses.

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BUY – WRKR Limited (WRK)

Wrkr is a regulatory technology business. It helps Australian employers simplify workforce compliance from hire to retire. Its market-leading technology is used by payroll and human resource management providers, super funds and businesses, providing a secure and efficient compliance management platform. Factors driving demand for its solutions include strong population growth and immigration trends. The shares have risen from 2.8 cents on August 7 to trade at 5.6 cents on September 26.

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HOLD RECOMMENDATIONS

 

HOLD – Eagers Automotive (APE)

Eagers is an automotive retail group operating in Australia and New Zealand. The company lifted revenue by 13.4 per cent in the first half of fiscal year 2024 when compared to the prior corresponding period. However, underlying operating profit before tax from continuing operations fell by 12 per cent, but was ahead of market expectations. The stock can by cyclical, but was recently trading on an annual dividend yield of about 6.91 per cent.

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HOLD – Universal Store Holdings (UNI)

This specialty retailer sells youth casual fashion apparel. The company managed to buck weaker consumer trends and exceed its guidance. The company lifted group sales by 9.7 per cent in full year 2024 when compared to the prior corresponding period. Statutory net profit after tax was up 45.3 per cent. The company generated strong sales growth in the first seven weeks of fiscal year 2025.

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SELL RECOMMENDATIONS

 

SELL – Cettire (CTT)

Cettire is an online luxury goods retailer. The company lifted sales revenue by 78 per cent in fiscal year 2024 when compared to the prior corresponding period. However, statutory net profit after tax fell by 34 per cent. On September 4, the company announced that its founder and chief executive Dean Mintz lifted his stake in CTT by 3 per cent to 33 per cent. But Mintz has sold CTT stock in the past. CTT shares have risen from $1.06 on August 29 to trade at $1.895 on September 26. Investors may want to consider cashing in some gains after a rapid rise.

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SELL – Brickworks (BKW)

BKW is a stalwart of the Australian building industry. The company reported a statutory net loss after tax of $119 million in fiscal year 2024. Underlying net profit after tax of $61 million from continuing operations was down 88 per cent on the prior corresponding period. The company reported that earnings were adversely impacted by a non-cash property devaluation of $215 million and a $15 million loss on property sales. BKW faces challenges in its Australian and North American building products businesses due to subdued building activity in key markets.

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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.