Darren Jackson, Sanlam Private Wealth
Mayne Pharma Group (MYX)
Mayne recently announced what we believe is a company changing acquisition – Teva’s generic drug portfolio on a low forward earnings multiple. The acquisition should be highly complementary to its existing US drug distribution network and offer considerable cross selling opportunities. We expect company earnings and the share price to increase over the longer term.
Empire Resources (ERL)
Gold stocks have been outperforming this year. Empire Resources is an aspiring gold producer. With a market capitalisation of less than $9 million, the company appears undervalued compared to potential returns from its Penny’s Find gold deposit in Western Australia. Gold priced in Australian dollars also appeals. Sanlam participated in a recent capital raising to help fund its near term gold production. HOLD RECOMMENDATIONS?
Infigen Energy (IFN)
Prime Minister Malcolm Turnbull is a renewable energy supporter. Infigen Energy stands out due to its liquidity, market capitalisation and significantly growing free cash flow. CYBG PLC (CYB)
CYBG is the NAB spinoff of its UK assets – Clydesdale and Yorkshire banks. The stock lost more than 30 per cent of its market capitalisation in response to Brexit, so today’s valuation looks attractive. However, the stock is highly sensitive to a potential Scottish exit from the UK and contagion from weaker European banks. We remain cautious. SELL RECOMMENDATIONS QBE Insurance Group (QBE)
An insurer sensitive to bond market performance. Longer term bond yields in Japan, Germany, Switzerland, the Netherlands and Denmark are in negative interest rate territory. It’s becoming increasingly difficult to generate reasonable returns from relatively safe and liquid assets. Computershare (CPU)
Computershare is a major global provider of share registry and transfer services. The current registration process seems antiquated and ripe for disruption through the application of blockchain technology. The ASX has already invested $14.9 million in Digital Asset Holdings alongside Deutsche Borse and some of the world’s biggest banks. Recently, CPU’s share price has been going down in a market going up.
Daniel Han, Alpha Securities
The automotive parts supplier delivered strong growth across its segments for the first half of 2016. Revenue and profits increased, but gross margins were flat. Automotive parts are somewhat cushioned from economic downturns, as people tend to fix cars rather than buy new ones. After a recent pullback in price, the stock looks attractive. The shares closed at $5.40 on July 12.
Tatts Group (TTS)
Delivered a strong half year result in February with statutory net profit after tax up 5.2 per cent to $147 million. Punters have more money to gamble in a low interest rate environment. We expect growth to continue.
The blood products company continues to grow its businesses and has provided solid investment returns in the past few years. The company is well managed and has a history of rewarding shareholders. We expect long term upside from here. The shares were trading at $112.73 on July 14.
Vocus Communications (VOC)
Vocus has entered into a binding agreement to acquire Nextgen Networks and two development projects. This will give it more firepower to compete against the likes of Telstra. Vocus has a history of growing revenues in line with an expanding presence in recent years. We expect a volatile share price in the short term after a recent capital raising.
Western Areas (WSA)
The nickel producer is up against an oversupply of the metal. The spot price of nickel has fallen by almost 20 per cent in the past 12 months. We expect a subdued nickel price going forward. Consequently, we believe WSA’s share price is likely to struggle from here. The shares closed at $2.66 on July 12.
Karoon Gas Australia (KAR)
The share price has been beaten down since early 2015 after failing to find oil and gas at its Kangaroo West-1 target off the coast of Brazil. Karoon recently issued a default notice to joint partner Pacific Exploration and Production Corp in respect to an overdue payment. The payment has since been made, but we remain uncertain about the company’s outlook. The shares were priced at $2.30 on July 13 last year. The shares were trading at $1.37 on July 14, 2016.
Jeremy Hook, TMS Capital
The infrastructure giant has become a value buy in this market. Its price was recently falling due to concerns about the sustainability of the local property market and Brexit. But recently trading on a fiscal year 2017 price/earnings ratio of 9.5 times, the price is attractive for this well managed and diversified property play. The shares were trading at $12.21 on July 13. Isentia Group (ISD)
The company has pulled back to buying levels after a strong 2015. We like the business mix of Media Monitors, media intelligence services and the content operation and geographical reach of marketing company King Content. The recent acquisition of media intelligence company Social Net Creator in South Korea has upside. The shares were trading at $3.23 on July 13. HOLD RECOMMENDATIONS
The job classifieds website operator is consolidating after its June outlook statement. For some reason when Seek talks about growth, the market sells and delivers a buying opportunity for this quality operation. We’re happy long term holders.
Magellan Financial Group (MFG)
MFG has been an outstanding performer in the competitive funds management space. Although performance fees will be down on last year, funds under management are expected to grow beyond $50 billion in the next year to 18 months. SELL RECOMMENDATIONS
A rewarding stock, but we’ll be looking to exit soon. We believe a capital management opportunity will emerge in next month’s full year results, which will provide an opportunity to sell a stock with immediate growth challenges. Cardno (CDD)
This infrastructure and environmental services company has raised capital and downgraded earnings – a potent mix responsible for recent declines and indicative of further troubles. Better to cut losses.
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