Michael Gable, Fairmont Equities
Pact Group Holdings (PGH)
PGH is the largest supplier of rigid plastics packaging in Australia, with a market cap of $1.2 billion. The stock is looking cheap compared to its growth prospects. The stock is also offering a 4.8 per cent dividend. It’s comfortably holding the uptrend line, which is behind our recommendation. We expect PGH to continue trending higher during the year.
Aveo Group (AOG)
Manages retirement villages, mostly in prime metropolitan locations. Management successfully executed several growth plans, resulting in a better than expected first half result. For growth potential, AOG is looking cheap. Charting wise, it’s broken out of a continuation pattern and should trend higher.
We’ve been targeting a low of about $28 for several months. It achieved that and we’re now expecting stronger support from here as all the negativity appears factored in to the share price. Recently on a yield of just below 5 per cent, WOW is a hold.
Despite marginally downgrading its guidance, BXB should continue to grow sales revenue at 8 per cent. It’s a growth stock with defensive characteristics and this CHEP pallet company is delivering on its efficiency programs. The stock pulled back to its recent uptrend line and we therefore believe it should hold here before heading higher again during the year.
BT Investment Management (BTT)
Like most financial stocks, BTT has rallied and, in our view, is about 15 per cent overvalued. The market seems to agree because price action on the charts indicates a top is forming and the bulls continue to fall short. We anticipate BTT pulling back towards the low $8 levels, providing better value for investors. The shares were trading at $9.58 on April 30.
ASX Limited (ASX)
ASX has done well recently due to a rising market, but it has sizeable maintenance capital expenditure ahead. We believe the share price has run ahead of itself and is now overvalued by several per cent. The sell offs since the high in early March have been fairly extreme and any counter rally has been quite feeble. This tells me the market is likely to push ASX lower towards support near $38. The shares were trading at $42 on April 30.
Gavin Wendt, MineLife
Aurelia Metals (AMI)
AMI is our preferred emerging gold and base metals producer. It’s recently commissioned Hera gold/base metal operation in NSW is ramping up to full production despite initial commissioning issues. Given the nature of Cobar style ore bodies, there’s big resource upside that should translate into a long life operation. Its corporate appeal is strong at a time when cashed up predators are on the lookout for emerging production plays in low risk jurisdictions.
Matsa Resources (MAT)
MAT, a base metals development company, is generating strong interest in WA’s Fraser Range province. Detailed analysis of two conductors at its Symons Hill project confirmed high quality targets with strong similarities to the nearby Nova deposit. Matsa plans to start drill testing the targets as soon as possible, which we believe will be before the end of May. Drilling should generate strong market interest and share price activity.
Strike Energy (STX)
Our preferred unconventional energy play, focused on defining the viability and the extent of resource at its Southern Cooper Basin Project. An independent review has confirmed high gas saturation, gas content and production potential. Few companies offer investors such quality exposure to the huge untapped potential of unconventional energy within the Cooper Basin.
White Rock Minerals (WRM)
Has commenced a maiden drilling program at its Mt Carrington project in northern NSW. The purpose of the program is to appraise significant new porphyry copper/gold targets that emerged following a review of recently compiled regional stream geochemistry data. Numerous high priority targets lie within a potentially extensive alteration system interpreted to be more than 5 kilometres in diameter.
Mount Gibson Iron (MGX)
Reported March quarter sales of 1.07 million tonnes that compares with estimates of 1.15 million tonnes of total sales, representing a 2 per cent decline on the previous quarter. The company achieved a realised price of $US47/(dry metric tonnes; free on board) for the quarter, which was down 22per cent. The company’s average C1 cost was $A47.80 (wet metric tonnes). Given the miniscule margins available to many smaller iron ore plays, we recommend any near term rally in the iron ore price be used as a selling opportunity.
Lynas Corporation (LYC)
Recently reported a worse than expected half year loss of $104 million and ended the half year with cash of $71 million and net debt of $436 million. While overall production has shown signs of improvement, forecast free cash-flow remains weak. We believe the company will have ongoing issues trying to manage its debt repayments.
Boe Campion, Ord Minnett
Surfstitch Group (SRF)
Fiscal year 2015 normalised EBITDA was upgraded by 37 per cent to $7 million. We’ve increased our fiscal year 2015 reported EBITDA estimate by 12 per cent to $5.7 million. This is due to substantial synergies from consolidating European operations. We believe there’s more cost out initiatives to come and potential upside to top line guidance. We retain our buy recommendation and increase our target price to $2.06 for this online sports apparel retailer. The shares were trading at $1.685 on April 30.
Rio Tinto (RIO)
We retain our accumulate recommendation. The stock was recently offering a fully franked dividend yield of more than 5.5 per cent (77 per cent payout ratio). We acknowledge the relatively bearish macro backdrop hanging over the resource sector, but the global miner remains a standout in terms of quality of assets and relative value.
In the near term, we’re expecting positive news flow from the Federal Government on retirement incomes policy that should boost sentiment towards the stock. However, we’re skeptical about the affordability of its deferred lifetime annuity product given the likely high capital loadings needed. In the longer term, we believe valuation considerations appear stretched.
Fairfax Media (FXJ)
After industry discussions, we’re more positive about the outlook for online property site Domain. We expect Domain’s prices to increase each year. Given our new pricing outlook and increase in Domain’s valuation, we have moved our recommendation from lighten to hold.
In our view, the company’s first half 2015 result highlighted continuing weakness in underlying growth. But EBIT margin expansion is a result of acquisition synergy delivery and restructuring benefits emerging ahead of plan. We expect some of the benefit will be eroded as cost savings from raw material declines are eventually passed on to customers. Improving the underlying business will be a challenge amid patchy global economic conditions.
Data centres are in various stages of ramp up. In order to estimate value, investors need to take a view on the longer term earnings potential of the asset base. Following comprehensive industry feedback, we have consolidated our views around NXT’s key value drivers. This has resulted in reducing our ramped up fiscal year 2018/19 EBITDA forecast to about $50 million, which is below our previous estimate of about $60 million and consensus of $60 million to $70 million. Our price target has fallen from $2.65 to $2.12 so we reduce our recommendation to lighten. The shares were trading at $2.40 on April 30.
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.