9min read
PREVIOUS ARTICLE 18 Share Tips - 14 June 2016 NEXT ARTICLE 18 Share Tips - 27 June 2016

Jonathon Howe, Red Leaf Securities
Telstra (TLS)
#FOTO:306865678:300#Chart: Share price over the year

Key parts of this business are consistent revenue and steady dividends. Recently, Telstra’s fully franked dividend yield was about 8 per cent. The company is relatively well cushioned from a big fall in global markets. Fastbrick Robotics (FBR)
#FOTO:306865679:300#Chart: Share price over the year

This highly speculative concept stock is a potential game changer in the building industry with its prototype bricklaying machine. It could lead to serious disruption in the way future houses are built. FBR has patents in 11 countries. Upcoming catalysts may include licensing deals, updates on building the new machine and a maiden residential housing contract.  HOLD RECOMMENDATIONS
Woolworths (WOW)
#FOTO:306865680:600#Chart: Share price over the year

Still extremely beaten down, we’re taking a long term view at these levels. As the company looks for innovative ways to meet Australian consumer demand, the share price should recover. BetaShares Australian Dividend Harvester Fund (HVST)
#FOTO:306865681:600#Chart: Share price over the year

This ETF offers an attractive dividend yield. Annual yield from substantial exposure to the financial sector is almost 11 per cent. For income, it’s worth including in portfolios.  SELL RECOMMENDATIONS
Blackmores (BKL)
#FOTO:306865682:600#Chart: Share price over the year

The share price of this vitamins and supplements company has enjoyed a great run in the past two years on the back of Chinese trade. Regulatory changes are making it more difficult to access China. Investors sitting on solid gains should take profits at these levels prior to any regulatory changes taking hold. Estia Health (EHE)
#FOTO:306865683:600#Chart: Share price over the year

I can’t justify owning this stock in response to proposed regulatory changes in the aged care sector that may have a detrimental effect. Until the uncertainty is cleared, it’s best to sit this one out for now.
Peter Moran, Wilson HTM 
Ruralco Holdings (RHL)
#FOTO:306865684:600#Chart: Share price over the year

As an agribusiness, we’re attracted to Ruralco’s longer term growth potential, with an expanding network expected to deliver significantly higher earnings as new stores and businesses mature. The balance sheet remains in good shape, offering funding capacity for any new opportunities. Recently, trading on a price/earnings multiple of about 10 times and a fully franked dividend yield of about 5 per cent also appeals.
Afterpay Holdings (AFY)
#FOTO:306865685:600#Chart: Share price over the year

We have initiated coverage with a buy recommendation and a 12 month price target of $1.80 a share. Our positive view is underpinned by Afterpay’s unique online deferred payment product, enabling retailers to drive higher sales. The business model is attractive, with a highly scalable platform. Afterpay offers many growth opportunities, including an in-store product to soon replace the generally unprofitable lay-by service. The shares were trading at $1.34 on June 15.

Link Administration Holdings (LNK)
#FOTO:306865686:600#Chart: Share price over the year

We’re attracted to Link’s exposure to growth and strong cash flows generated from share registry and superannuation administration businesses. However, the share price has been outperforming, leaving the valuation looking full. LNK trades on a forecast price/earnings ratio of 31 times for fiscal year 2016 and a forecast P/E of 27 times for fiscal year 2017. While risks around these numbers are low, these are large multiples for a company that will need to find other sources of growth in the medium term that don’t rely on cost out and integration savings.

#FOTO:306865687:600#Chart: Share price over the year

CSL continues to transition its key markets towards biotech style innovative products to protect its revenue streams from commodity like pricing effects and competition. CSL generates strong cash flows and returns on invested capital. As a result, it typically trades at a substantial premium to the All Ordinaries Index. The share price is trading around our valuation.
WorleyParsons (WOR)
#FOTO:306865688:600#Chart: Share price over the year

The share price of this contractor to the oil and gas sector has more than doubled since early February in response to a partial recovery in the oil price. However, we believe it’s too early to conclude the worst is over in the energy sector. Trading conditions remain very challenging, so we see the recent rally as an opportunity to sell.
Newcrest Mining (NCM)
#FOTO:306865689:600#Chart: Share price over the year

As with most gold producers, Newcrest shares have risen sharply in recent months. However, we’re cautious about near term cash generation. We believe the balance sheet appears stretched given debt is in US dollars. This leaves NCM susceptible to any correction in the gold price.
Michael Wayne, KOSEC
iSentia Group (ISD)
Chart: Share price over the year

This media monitoring company operates within a $US400 million industry in the Asia Pacific region, which is projected to continue growing at mid double digit levels for the next few years. ISD services 92 of the top 100 global brands and has 5000 clients. Importantly, its diverse client base means the business doesn’t rely on a single source of income. No single client accounts for more than the 2 per cent of the company’s revenue base. The customer base tends to be sticky, with an average tenure of 11 years for the top 50 clients. 
Chart: Share price over the year

This intellectual property group is operating in a structurally growing industry. Most of its revenue comes from patent design that involves protecting intellectual property. It’s highly leveraged to a falling Australian dollar. It’s looking to expand and has the firepower to acquire new businesses and enter new markets. In the meantime, organic growth continues to be a driving force. A report indicates that 7889 patent and 1763 trademark applications are in the pipeline.
Fisher and Paykel Healthcare (FPH)
Chart: Share price over the year

Makes medical devices for treating respiratory and sleep apnoea disorders. The long term looks bright as the total addressable market is estimated at 130 million patients with only 20 million currently undergoing treatment. Revenue and profits are growing by about 20 per cent, while gross margins continue to improve.
Vita Group (VTG)
Chart: Share price over the year

Operates selected Telstra shops and Telstra business centres in Australia. Commission has been the major driver of profitability growth in recent times. The company’s portfolio has expanded into six business units, reducing reliance on the original Fone Zone as a single revenue stream. Management has implemented an exit strategy for the Next Byte business, which will no longer drain cash flows and should drive higher returns.
Insurance Australia Group (IAG)
Chart: Share price over the year

Insurers aim to earn returns of between 5 per cent and 8 per cent on consumer premiums to fund future obligations. Today, about 30 per cent of the developed world’s sovereign debt is in negative yield territory as Japan and Europe reduce interest rates to counter deflationary pressures. For insurers, this has led to significantly lower contributions from investment income to overall profitability. 
Flight Centre (FLT)
Chart: Share price over the year

Still a fundamentally sound business, but earnings growth has started to stagnate as the business faces several challenges. The company has downgraded guidance three times in 18 months in response to cheaper flights and fierce competition. Deflation is an issue. For example, a flight to London now costs about 40 per cent less than three years ago and its constraining margins. 

>> BACK TO THE NEWSLETTER: Click here to read other articles from this week’s newsletter

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.