18 Share Tips – 21 December 2015

Michael Gable, Fairmont Equities

BUY RECOMMENDATIONS

Mirvac Group (MGR)

MGR didn’t dip like the rest of the market in mid November. Instead, it just continued to rally higher. With news of a recent contract win, the volume is now coming in and we have seen the short term downtrend being easily broken. There was some resistance near $1.93, but now that it’s met that and eased back, it becomes a buy again. We expect a rally towards $2.10. Shares in the property group closed at $1.98 on December 16.

Corporate Travel Management (CTD)

The stock recently broke the downtrend that started earlier this year. This downtrend is merely a small correction against a longer term uptrend, which is a positive sign in the medium to longer term. Since breaking out several weeks ago, CTD has eased back more than a dollar to retest that smaller downtrend. It has momentum, so it will probably resume the uptrend and push through $13 over the next few months. The stock finished at $11 on December 16.

HOLD RECOMMENDATIONS

Village Roadshow (VRL)

We have previously traded VRL, but took our profits several weeks ago as it was forming a rising wedge. It broke down a month ago and recently hit the base of that wedge at $6.50. Now it’s done that, we expect support to come back into the stock. We expect to see it head back towards $7.30 from its December 16 closing price of $6.48. 

GUD Holdings (GUD)

We previously recommended this consumer and industrial products company as a buy here a month ago and it has gone on to rally higher despite the overall market retreating. There’s still further upside in the stock from here and we have advised against taking early profits. We’re looking for levels as high as $9. The shares closed at $7.97 on December 16.

SELL RECOMMENDATIONS 

Pacific Brands (PBG)

After rallying strongly in the middle of the year, PBG has been trading at 70 cent levels. It looks like the stock may have peaked. There’s also been a crossing on the weekly MACD (moving average convergence divergence), indicating a change of trend. In our view, the most likely path from this point is to the downside where we can see 60 cent levels in the next few months. The shares were trading at 76 cents on December 17.

AMP (AMP)

The chart on AMP suggests the share price is in trouble, with possible downside to about $5.20. We’re concerned  about earnings given market volatility. We’re also concerned about insurance margin risks as seen recently by the Suncorp downgrade. If $5.20 can’t hold then support can be seen near $5. The shares were trading at $5.525 on December 17.

Mathan Somasundaram, Baillieu Holst

BUY RECOMMENDATIONS

GBST Holdings (GBT)

Leadership uncertainty has been resolved after Robert DeDominicis was appointed chief executive of this software provider. Allan Brackin will take on the chairman’s role. Our analyst Nicolas Burgess has upgraded the stock from a hold to a buy with price target of $4.80. We are forecasting operating EBITDA of $20 million for fiscal year 2016. Company guidance is between $19 million and $23 million. We expect the new leadership team to focus on profitable markets and client opportunities while reducing speculative spending elsewhere. The shares closed at  $4.22 on December 16.   

Mantra Group (MTR)

Our buy call on this hotel and resort marketer and operator is supported by stable revenue streams and an attractive dividend yield. Also appealing is ongoing portfolio expansion in an industry where demand generally exceeds supply. Debt capacity has been increased to fund acquisitions. Our analyst Nick Caley has revised MTR’s price target from $4.40 to $5. The stock finished at $4.55 on December 16.   

HOLD RECOMMENDATIONS

IPH Limited (IPH)

IPH has delivered on its stated objectives since listing by quickly snaring a 21 per cent share of the domestic patent market and recommencing trademark services in Asia. We expect the Asian business to grow as we anticipate regional acquisitions.   

Select Harvests (SHV) 

SHV’s share price has fallen about 30 per cent from its yearly high on expectations the drought will break in California. Also contributing to the price decline was softening prices and drought in Australia. On a forecast price earnings multiple of 10.6 times for fiscal year 2016 and a dividend yield of 4.6 per cent, we do think value has emerged. However, we require stable almond prices before upgrading our recommendation. Our analyst Josh Kannourakis has a price target of $10. The shares were trading at $8.28 on December 17.   

SELL RECOMMENDATIONS

JB Hi-Fi (JBH)

We retain our negative view on discretionary retail in an environment of high competition, lower currency, rising unemployment, rising cost of living pressures, declining real wages, property bubble worries and falling consumer sentiment. The recent market update from Dick Smith Holdings and substantial discounting are likely to impact Christmas sales while new smart phone sales are unlikely to be as strong as last year.

Harvey Norman (HVN)

We believe the cooling property market will take the wind out of the HVN sales outlook in the next few years. HVN will face more competition in white goods from JB Hi-Fi and Dick Smith. 

Simon Herrmann, wise-owl.com

BUY RECOMMENDATIONS

Carnarvon Petroleum (CVN)

Carnarvon made a significant oil discovery in the Phoenix South-1 well in August 2014. Drilling at the Roc-1 exploration well has recently started. Carnarvon Petroleum is well funded with zero debt. It has more than $100 million in cash. I’m not necessarily bullish on oil and gas, but Carnarvon is an asset play and remains a speculative opportunity. 

Bulletproof (BPF)

Providing end-to-end managed cloud services, Bulletproof is well positioned in a fast growing sector. It will benefit from a growing number of enterprises taking their business to the cloud. Recurring revenue provides income stability. Management has a favourable track record in the internet and software industry and are major shareholders in the company.

HOLD RECOMMENDATIONS

Slater & Gordon (SGH) 

Despite the law firm’s recent decline, I believe the market has excessively over-reacted. SGH’s business in Australia remains robust. Even though there’s regulatory hurdles impacting its UK operations from fiscal year 2017, management has previously demonstrated that it’s able to adjust to changes. 

Greencross (GXL)

GXL has been volatile in 2015, but our positive medium term view remains unchanged. The company is transitioning from a pure play veterinary service provider to a more diversified consumer driven company. This is positive as it diversifies income and provides stability. We reiterate our target of $7.70 a share and retain our hold advice.

SELL RECOMMENDATIONS

Suncorp (SUN)

General insurance margins were negatively impacted by increasing costs in response to settling claims. The stock has underperformed most of its peers. It may take time for the stock to recover after recent falls. In our view, SUN is likely to remain volatile until management can demonstrate stability. Better opportunities elsewhere.

Downer (DOW) 

This engineering services provider warned of lower earnings and revenue this financial year. We expect it to face challenging conditions going forward. Competitor Sedgman (SDM) has done well in the current environment and, in our view, a better option at this point. 

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