18 Share Tips – 6 July 2015

Simon Herrmann, wise-owl.com

BUY RECOMMENDATIONS

Crowd Mobile (CM8)

Acquiring Netherlands-based technology company Track Concepts represents a transformational deal for Crowd Mobile by adding a strong earnings growth history and immediate scale. Crowd Mobile provides profitable exposure to the market for mobile software and services. We remain attracted to its established income profile and view the Track transaction to be highly complementary and value accretive. We have upgraded our valuation to 63 cents a share. The shares closed at 21.5 cents on July 1.

Gold Road Resources (GOR)

The Gruyere Project’s economic potential is supported by progression to a pre-feasibility study. The plan is to finish the study by the end of the year. We’re attracted to the size of its land in the Yarmana region, existing resource inventory at Gruyere and track record of low discovery costs. We expect takeover interest to build and therefore retain our speculative buy recommendation.

HOLD RECOMMENDATIONS

Nemex Resources (NXR)

The company has acquired 100 per cent of Wavefront Biometric Technologies, giving it full control. With its investment in the biometric security markets, we see additional potential upside in the long term. After a strong run, NXR may consolidate for a while.

Insurance Australia Group (IAG)

IAG announced a strategic partnership with Warren Buffett’s Berkshire Hathaway in which Berkshire takes a 3.7 per cent stake in IAG for about $500 million. The 20 per cent quota share agreement reduces IAG’s earnings volatility and capital requirements. Following the announcement, IAG has broken out of its medium term downtrend, presenting a technical buying opportunity in this fundamentally strong company.

SELL RECOMMENDATIONS

Henderson Group (HGG)

This global investment management company has moved sideways in the past three months after finding technical resistance at $5.80. HGG had recently gained 34.3 per cent this year and we expect selling pressure to increase in the short term, which we believe should result in a technical correction.

Magellan Financial Group (MFG)

Technical support was broken which may expose MFG to further downside risk. Following recent developments between Greece and its creditors, we expect elevated volatility for investment management businesses in the short-term. The shares closed at $17.45 on July 1.

Matthew Litchfield, PhillipCapital

BUY RECOMMENDATIONS

ANZ Bank (ANZ)   

The share price has been hammered to an attractive price. We see the dividend underpinning the share price, and it should start to benefit from its growth strategy in savings rich Asia. The shares closed at $32.50 on July 1.

IOOF Holdings (IFL)

The price recently fell by as much as 20 per cent after a press article slammed the firm’s compliance practices. This medium sized wealth manager has launched an independent review and insists the firm adheres to high standards. I still like the company’s growth prospects given demographic trends and the compulsory superannuation regime. The shares are oversold. The stock closed at $9.10 on July 1.

HOLD RECOMMENDATIONS

APA Group (APA)

APA is Australia’s largest gas pipeline owner. The company has defensive earnings and astute management is achieving organic growth and is open to possible acquisitions. APA is shortlisted as one of four entities bidding to build the Northern Territory pipeline link.

Amcor (AMC)

A defensive packaging stock paying an attractive dividend around 3 per cent, although unfranked. This stock is also exposed to growth in emerging markets and is a beneficiary of any fall in the Australian dollar.

SELL RECOMMENDATIONS

Seek (SEK)

It’s time to reduce holdings in this online job advertiser. It recently announced that an upgrade to IT systems in the Seek Learning division had negatively impacted earnings growth. Although the impact is only small, it was the third consecutive earnings disappointment. While it’s the leader in online job advertisements, I see risk to its market share from the rise in social media.

Metcash (MTS)

Larger retail competitors are leveraging their scale and fighting fiercely for market share. This company seems to be struggling and, as a result, has axed this year’s dividend, while next year’s is under review. Better opportunities exist elsewhere.

Les Szancer, Paradigm Securities

BUY RECOMMENDATIONS

Medibio (MEB)

The only company in the world to have patented a wearable device to test for depression and other mental disorders. A thin strap worn around the chest can tell in one evening if a person suffers from depression or another disorder. We expect the technology to be available in smart watches. Entering into a $1 trillion market.

Magnis Resources (MNS)

Entered into 10 year offtake agreements to supply 180,000 tonnes of mostly jumbo and super jumbo flake graphite to Sinosteel and Sinoma at premium prices. MNS has the best graphite project by far and Sinoma is funding the project.

HOLD RECOMMENDATIONS

Gulf Manganese (GMC)

Plans to build eight smelters in West Timor to process high grade manganese for the global sale of high value ferromanganese product. The company will source from local producers. It also plans to build its own power plant. Offers potential.

Core Exploration (CXO)

The company recently announced it had been awarded funding of $96,000 to drill zinc, silver and lead mineralisation in the Northern Territory. The stock price has been most disappointing, which presents an opportunity for averaging down or buying some. This multi mineralisation company has put out encouraging announcements, but has failed to excite the market. But it may.

SELL RECOMMENDATIONS

ALS Limited (ALQ)

A diversified company offering laboratory testing services to industries. But the stock was recently down by more 35 per cent this year. The chart shows the stock has been trending down for the past two years.

Ainsworth Game Technology (AGI)

Gaming companies aren’t immune from economic indicators. AGI expects total revenue for fiscal year 2015 to be about 2 per cent less than $244.1 million reported in fiscal year 2014. If you’re a chart reader, this stock has been trending down since the middle of last year.

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