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Carey Smith, Alto Capital
BUY RECOMMENDATIONS
Collection House (CLH)
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Chart: Share price over the year
The share price of this leading receivables manager has fallen about 60 per cent in the past six months on the back of increasing competition and unfavourable economic conditions. We believe the share price fall has been overdone, with purchases around current levels providing top value.
SMS Management & Technology (SMX)
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Chart: Share price over the year
This leading consulting, technology and systems integration company specialises in improving operational performance and IT delivery to customers in the private and government sectors. We believe the market over-reacted to the 5 per cent decline in revenues and 16 per cent decline in earnings per share reported for the December half. An opportunity exists, as we believe the shares have been oversold. The shares closed at $1.82 on March 30.
HOLD RECOMMENDATIONS
Coca-Cola Amatil (CCL)
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Chart: Share price over the year
New management at Australia’s largest manufacturer and distributor of carbonated soft drinks, water and sports and energy drinks appears to have halted the earnings decline of the past few years. With the share price down about 40 per cent from its highs in 2013, we believe the company is trading at fair value and on a recent fully franked dividend yield of about 5 per cent.
Woolworths (WOW)
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Chart: Share price over the year
The share price has fallen about 40 per cent from its highs in 2014 on the back of the disastrous Masters home improvement experiment and increasing competition from ALDI. With WOW announcing an exit from Masters, we believe it’s trading at fair value on a recent price/earnings multiple of 15 times and a fully franked dividend yield of about 5 per cent.
SELL RECOMMENDATIONS
Hansen Technologies (HSN)
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Chart: Share price over the year
This technology company providing customer care and billing services to the energy, telecommunications and pay TV sectors has experienced share price gains of more than 300 per cent in the past three years. We believe it’s too expensive, as it was recently trading on a price/earnings multiple approaching 30 times. Forecast earnings growth doesn’t justify the current price level in our view. The shares closed at $3.74 on March 30.
Event Hospitality & Entertainment (EVT)
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Chart: Share price over the year
One of Australia’s premier entertainment and hospitality companies, EVT has enjoyed a stellar sharemarket run in the past few years on the back of a strong cinema releases. However, we believe the company is trading above fair value on a recent price/earnings multiple of about 20 times, compared to an historical average closer to 13 times.
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Mathan Somasundaram, Baillieu Holst
BUY RECOMMENDATIONS
Mantra Group (MTR)
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Chart: Share price over the year
Provides accommodation services. Our buy call is supported by stable revenue streams with an attractive yield, ongoing portfolio expansion in an industry where demand generally exceeds supply and a relatively capital light model focusing on the property operator and management rights rather than ownership. A lower Australian dollar and global security concerns favour domestic and international travel. Our analyst Nick Caley’s price target is $5.40. The shares were trading at $4.45 on March 31.
SpeedCast International (SDA)
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Chart: Share price over the year
A satellite communications service provider, SDA is one of our top picks, as we believe it represents top value at these levels. Revenue growth remains strong and cost benefits from integrating acquisitions will be realised progressively as legacy contracts roll off. We are forecasting earnings per share growth of around 30 per cent a year for the next three years. Our analyst Luke Macnab’s price target is $5.30. The shares were trading at $4.63 on March 31.
HOLD RECOMMENDATIONS
BT Investment Management (BTT)
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Chart: Share price over the year
The long term fundamentals for retail fund managers in key European markets remain intact. In our view these are low interest rates, increasing regulation to encourage savings and broad distribution networks. That said, we believe there may be a better opportunity to buy this stock over the next few months as the fund flow environment in Europe settles. Our analyst Nicolas Burgess has downgraded from a buy to a hold with price target of $10. The shares were trading at $9.60 on March 31.
Domino’s Pizza Enterprises (DMP)
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Chart: Share price over the year
Delivered a strong result and guidance appears conservative in light of current operating momentum, upcoming promotions, digital updates and maiden acquisition impacts. We retain our hold recommendation on valuation grounds. The stock was recently trading on a forecast fiscal year 2017 price/earnings multiple of 42 times with 29 per cent earnings per share growth.
SELL RECOMMENDATIONS
Doray Minerals (DRM)
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Chart: Share price over the year
After factoring in expected net debt levels going forward, our price target is 67 cents. Our analyst Warren Edney has downgraded this gold producer to a sell. The shares were trading at 79 cents on March 31.
JB Hi-Fi (JBH)
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Chart: Share price over the year
We believe increasing online competition and price deflation will continue to weigh on the stock despite short term strength following the collapse of competitor Dick Smith. The market, in our view, is paying premium multiples for a stock that we expect to retreat to a single digit growth outlook in 2017.
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Jonathon Howe, Red Leaf Securities
BUY RECOMMENDATIONS
Vita Life Sciences (VSC)
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Chart: Share price over the year
This pharmaceutical and healthcare company has been heavily accumulated recently by Vicky Teoh, wife of David Teoh and executive chairman of TPG Telecom. The company has attractive financials and pays a reasonable dividend, but investor interest is likely to focus on the Teoh family’s plans in relation to VSC. The company has been around for more than 60 years. But more recently, have we seen new vitamin launches and penetration into new markets.
Disruptive Investment Group (DVI)
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Chart: Share price over the year
The company has announced it’s increasing ownership in iBuyNew.com.au to 100 per cent. The company should now be rated as a real estate play against peers in the same space, and it probably won’t surprise anyone if there’s a name change. This is a promising business, offering potentially attractive growth in what would appear a relatively stable sector. I own shares in DVI.
HOLD RECOMMENDATIONS
Qube Holdings (QUB)
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Chart: Share price over the year
The recent rights issue will ensure QUB has the firepower to go through with the joint takeover of Asciano. The stock is trading on an attractive price/earnings ratio. A successful deal should cement QUB as the number one logistics play in Australia.
ANZ Bank (ANZ)
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Chart: Share price over the year
The big four banks are showing signs of value. The ANZ Bank’s share price has been slashed in response to rising bad debt provisions related to mining exposure. But dividend yields are getting stronger, so it’s a good time to be accumulating ANZ at these levels. The shares were trading at $23.11 on March 30.
SELL RECOMMENDATIONS
The a2 Milk Company (A2M)
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Chart: Share price over the year
After such a strong run, the stock is taking a breather. The stock has soared since listing a year ago. Investors sitting on big gains should consider trimming at these levels. We’re not suggesting exiting the entire position. Rather, locking in some comfortable gains on part of a position.
Cabcharge Australia (CAB)
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Chart: Share price over the year
The company pays a reasonable dividend yield. But we believe the stock may flounder until the company develops its own competing advanced technology like Uber’s. Consequently, investors should consider reducing or selling their positions.
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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.
