Warwick Grigor, Far East Capital
BUY RECOMMENDATIONS
First Graphite (FGR)
Chart: Share price over the year
FGR is progressing key divisions – vein graphite mining in Sri Lanka, downstream processing to produce high quality, low cost graphene and IP licencing. Its latest announcement details licencing rights to the BEST Battery that could revolutionise energy storage by replacing chemical batteries with supercapacitors that charge in one to two minutes and last in excess of 10,000 times. It’s the next step beyond lithium-ion and could be worth a fortune to FGR.
Lucapa Diamond Company (LOM)
Chart: Share price over the year
LOM has significantly improved its risk profile on news it will acquire the Mothae diamond project in Lesotho for $US9 million. Even though LOM generated gross sales of $US51 million from its Lulo alluvial mine in 2016, many investors are cautious about Angola. Developing a second mine in a safer jurisdiction reduces geopolitical risk and makes LOM much more attractive from an investment point of view. The cost and the capital expenditure fall well within existing financial capabilities.
HOLD RECOMMENDATIONS
Base Resources (BSE)
Chart: Share price over the year
BSE has successfully commissioned its Kwale mineral sands project in Kenya. It’s profiting from ilmenite prices rising 40 per cent in the December quarter. Project debt is being repaid and is under control. The company is now positioned to expand operations and benefit from a renewed emphasis on infrastructure spending. It’s a strong stock to hold in a portfolio.
Pantoro (PNR)
Chart: Share price over the year
Pantoro is emerging as a new gold success story in Western Australia. Production from the Halls Creek Gold Project now exceeds 50,000 ounces a year and is expected to grow to 80,000 ounces. This is a high grade field with small pits that evolve into very profitable underground mines. Management quality is a big factor behind the success. We expect several years of growth and a rising share price as institutional investors move to take positions in the stock.
SELL RECOMMENDATIONS
Syrah Resources (SYR)
Chart: Share price over the year
In my view, too many questions remain unanswered regarding the development of a huge flake graphite mine in Mozambique. Independent analysis recently released on the internet also left me with more doubts. I believe it’s a good example of a well promoted company in the discovery phase having to face up to the music in the development and commissioning phase. It’s much safer to watch from the sidelines.
Talga Resources (TLG)
Chart: Share price over the year
Originally promoted as an exciting new graphene company, there’s been little news on the graphene front for many months. News flow has been about lower value micro graphite and trying to find uses. More recently, the shares have gone for a run based on an IOCG (iron oxide copper-gold) deposit in Sweden with cobalt credits. Cobalt won’t change the conclusion, so it’s a good time to take advantage of the share price run and cash out.
Matthew Litchfield, PhillipCapital
BUY RECOMMENDATIONS
Greencross (GXL)
Chart: Share price over the year
A quality veterinary business and we believe value has recently emerged. Greencross offers good growth prospects via cross-selling opportunities between vet customers and retail shoppers. Growth should also be supported by new outlets and future acquisitions.
Carsales.com (CAR)
Chart: Share price over the year
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CAR plans to expand to Latin America, including Argentina, providing the company with a significant presence in one of the most attractive markets in the region. The core business continues to perform well and the stock was recently trading on a decent dividend yield of about 3.5 per cent fully franked.
HOLD RECOMMENDATIONS
EML Payments (EML)
Chart: Share price over the year
EML continues to leverage and expand its unique payment solutions technology into new markets. Recently, EML expanded its reach into the Canadian market with a multi year agreement with Luaspay to launch a winnings payout card program for electronic gaming customers. I expect these agreements to continue.
Ramsay Health Care (RHC)
Chart: Share price over the year
This private hospital operator continues to perform well and benefits from size, scale and geographical diversification. Ramsay offers good growth prospects from expanding into the pharmacy segment and from potential new markets, such as China.
SELL RECOMMENDATIONS
GBST Holdings (GBT)
Chart: Share price over the year
This provider of securities transaction and fund administration software to the financial services industry announced an earnings downgrade due to an anticipated reduction in services revenue. Due to underperformance, I see better growth opportunities and dividends elsewhere.
Woolworths (WOW)
Chart: Share price over the year
After exiting the home improvement chain Masters and announcing the sale of its fuel business, Woolworths is relying more on supermarket performance going forward. But fierce competition from Aldi, Costco and online players presents increasing challenges to the core business.
Mathan Somasundaram, Blue Ocean Equities
BUY RECOMMENDATIONS
Austin Engineering (ANG)
Chart: Share price over the year
Since initiating coverage on September 30, 2016, industry conditions have significantly improved. Austin has appointed new, highly experienced management and new orders have started to flow. Our analyst Philip Pepe has a price target of 30 cents. The shares closed at 18 cents on February 9.
Highfield Resources (HFR)
Chart: Share price over the year
Madrid’s permit authority is evaluating Highfield’s environmental and social impact assessment. We’re revisiting this compelling potash developer. While there can be no guarantees on the timing of permits, we believe the company may receive its long awaited environmental permit between April 1 and June 30. Our analyst Steuart McIntyre has a price target of $3.10. The shares closed at $1.22 on February 9.
HOLD RECOMMENDATIONS
Navitas (NVT)
Chart: Share price over the year
This global education provider delivered a first half 2017 financial result broadly in line with our expectations. Revenue of $478.1 million was about 8 per cent below the prior corresponding period and 3.8 per cent below our forecast. EBITDA of $76.6 million was about 8 per cent below the prior corresponding period, but 1.2 per cent ahead of our forecast. Our analyst Philip Pepe has a price target of $5.25. The shares closed at $4.74 on February 9.
Technology One (TNE)
Chart: Share price over the year
We expect limited operating margin expansion for this software company in fiscal year 2017. Performance is heavily weighted towards the second half to September 2017. We feel TNE needs to deliver more than 20 per cent annual earnings growth to justify existing trading multiples. Our analyst Gregg Taylor has moved to a hold.
SELL RECOMMENDATIONS
AGL Energy (AGL)
Chart: Share price over the year
AGL should benefit from higher electricity prices. But we believe stiffer competition from an increasing number of retailers could negatively impact the 2018 earnings outlook. Our research suggests AGL will struggle to attract buyers above $24 in response to rising US bond yields. The shares closed at $24 on February 9.
Breville Group (BRG)
Chart: Share price over the year
We expect weaker consumer sentiment will weigh on the growth outlook. Given the relative valuation to growth outlook, we believe BRG looks expensive. Performance risk is to the downside.
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.
