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Matthew Chen, Lincoln Indicators

BUY RECOMMENDATIONS

OzForex Group (OFX)

Chart: Share price over the year

This online currency portal is growing strongly in the international payment services segment. While terminating potential takeover discussions with Western Union is disappointing, management is still targeting strong revenue growth in the immediate future, which should generate higher medium term earnings. With the stock recently trading around a 15 per cent discount to our valuation, it looks attractive at current levels. The stock was trading at $2.08 on May 4.

Bellamy’s Australia (BAL)

Chart: Share price over the year

The organic baby formula company recently reported a strong first half result. Its product is most popular in China and the company continues to grow strongly on the back of disposable income increases. The recent share price retreat in response to the Chinese Government announcing a foreign website sales tax is unlikely to materially impact the outlook. The stock was recently trading around a 35 per cent discount to our valuation, so it looks compelling value at current levels. The shares were trading at $10.88 on May 4.     

HOLD RECOMMENDATIONS

Westpac Bank (WBC)  

Chart: Share price over the year

Its recent half year result retained its 94 cent dividend despite ongoing concerns around operations and regulatory requirements. WBC continues to lead its peers in a number of key measures, including net interest margin, cost to income ratios and common equity tier 1 ratios. We believe there’s potential price upside, while the grossed up dividend, in excess of the market average, should continue to support the market’s yield appetite.   

Telstra (TLS)

Chart: Share price over the year

The telecommunications giant recently announced a well received capital management program, earmarking a return of at least $1.5 billion to shareholders. Given recent off market buyback activity, this is the likely preference for management to release franking credits to shareholders. The grossed up dividend yield should continue to support its price levels.  

 

SELL RECOMMENDATIONS

Fortescue Metals Group (FMG)

Chart: Share price over the year

Recently, Fortescue has enjoyed positive momentum. In our view, iron ore inventory re-stocking has been mistaken for growth in global demand. The market still remains in oversupply, so we expect the price to fall from here. We prefer global leaders lower down the cost curve for bulk commodities exposure.  

Origin Energy (ORG)

Chart: Share price over the year

This integrated energy company is undertaking structural changes. The company is selling off non-core assets while also competing in an environment of weak oil prices. While cargo loading at the Australia Pacific LNG project is encouraging, production has begun at a most unfortunate time of fragile energy prices. In our view, the company’s debt continues to weigh heavily on the balance sheet.   


Mathan Somasundaram, Baillieu Holst

 

BUY RECOMMENDATIONS

IPH (IPH)

Chart: Share price over the year

An intellectual property group, our buy call is supported by a full period inclusion of recent acquisitions in the 2016 second half and the growing Asian footprint via organic means and acquisitions. It’s opening new offices in the region, and will attain efficiencies through combining back office services. It will continue to grow the industry data business and examine opportunities in the patent renewals industry. Our analyst Nick Caley upgrades to a buy with a price target of $8.45. The shares were trading at $7.05 on May 5.

Village Roadshow (VRL)

Chart: Share price over the year

Following our positive view of the domestic tourism outlook, we forecast that VRL will generate around 32 per cent of its fiscal year 2016 revenue from its theme park division, which mostly comprises assets on the Gold Coast (Sea World, Movie World, Wet ‘n’ Wild) and in Sydney (Wet ‘n’ Wild). Analyst Nick Caley retains a buy with a price target of $6.75. The shares were trading at $5.17 on May 5.

 

HOLD RECOMMENDATIONS

Catapult Group International (CAT)

Chart: Share price over the year

We believe this sports technology group offers significant growth opportunities across global elite sporting markets, with the US college market being the single largest. We believe the rollout of the subscription sales model should see the company evolve into a low risk, recurring revenue business. That said, we see current valuation as close to fair and retain a hold rating.

SeaLink Travel Group (SLK)

Chart: Share price over the year

SLK is the largest ferry operator in Australia. At a recent investor presentation, SLK estimated that 53 per cent of pro-forma revenues are linked to tourism post the recent acquisition of Captain Cook Cruises (CCC) in WA. We expect SLK to benefit from a surge in Chinese tourists enjoying a Sydney Harbour cruise.

 

SELL RECOMMENDATIONS

Doray Minerals (DRM)

Chart: Share price over the year

We have reduced our earnings forecasts for the Deflector gold/copper deposit from fiscal year 2017 and beyond. This is due to a forecast decrease in copper prices. The stock is trading at a significant premium to our valuation. Our analyst Warren Edney has a price target of 60 cents. The shares were trading at 94 cents on May 5.

Saracen Mineral Holdings (SAR)

Chart: Share price over the year

Our price target for this gold producer is 78 cents a share. However, the shares are still trading at a significant premium to our valuation, so we retain our sell recommendation. Share price performance will need to be driven by a successful ramp-up in production at Thunderbox and integration of new ore sources at Carosue Dam. The shares were trading at $1.205 on May 5.


Les Szancer, AXL Capital Partners

BUY RECOMMENDATIONS

JC International Group (JCI) 

Chart: Share price over the year

The company hires out trades people on large overseas projects linked to Chinese state owned enterprises. Because it has a database of more than 20,000 workers, it provides constant work flow.

American Patriot Oil and Gas (AOW) 

Chart: Share price over the year

Running Foxes Petroleum offered a takeover bid of 22 cents a share in February. The shares were trading at 17.5 cents on May 4. I expect a higher bid to emerge sooner rather than later. 

HOLD RECOMMENDATIONS

Dongfang Modern Agriculture Holding Group (DFM) 

Chart: Share price over the year

On November 5, 2015, it was priced at $1.44. The stock was trading at $2.43 on May 4. It listed on the ASX in October 2015 and reported a much better profit than issued in the prospectus and paid a better dividend than expected. The company is constantly looking at ways to be even more profitable.

Ding Sheng Xin Finance (DXF) 

Chart: Share price over the year

Provides finance guarantee services for small enterprises and individuals applying for home loans in China. It listed on the ASX in March 2016. The share price has risen from 33 cents on March 11 to trade at 79 cents on May 4. Hold, as the company looks to generate growth. 

 

SELL RECOMMENDATIONS

Liquefied Natural Gas (LNG)

Chart: Share price over the year

On May 4, 2015, the stock was priced at $4.58. Precisely a year later, the stock was trading at 57.2 cents. Its projects do have merit, but there appears to be an abundance of LNG, particularly in North America. Is this around the bottom? Maybe, but I think I will wait a little longer.

ANZ Bank (ANZ)

Chart: Share price over the year

First half statutory profit after tax was down 22 per cent to $2.7 billion. A large increase in bad debts is a concern. The dividend was cut by 7 per cent. A most disappointing result.

 

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