Simon Herrmann, wise-owl.com
BUY RECOMMENDATIONS
Beach Energy (BPT)
An Australian oil and gas company focusing on the Cooper/Eromanga Basins. Beach Energy is highly leveraged to any recovery in the oil price, generating an additional $50 million in net profit after tax if oil prices increase by $US10 a barrel. The company successfully identified operational cost savings, reducing the cash flow break even point to $26 a barrel. Beach has a strong balance sheet with $243 million in cash and undrawn debt facilities of $350 million.
MNF Group (MNF)
An Australian technology company providing internet based telecommunication services. MNF Group has increased revenue in every year since listing in 2006. In the past five years, revenue has grown at a compound annual growth rate of 64 per cent. Growth is achieved through a mix of organic expansion and acquisitions. Continuing this trend is the major value driver. MNF Group has consistently paid dividends and increasing earnings could allow for higher distributions in the future.
HOLD RECOMMENDATIONS
Cradle Resources (CXX)
We retain our hold advice for this Niobium explorer in Tanzania. The mining company experienced a sharp sell off in October, but managed to recover in November, which is a sign of confidence by the market. Board restructuring during 2016 has positioned Cradle to secure the necessary technical and financial resources required to bring its Panda Hill project into production. The company trades at a substantial discount to its net present value. Delivery of the offtake partnerships and project financing represent major catalysts.
Dicker Data (DDR)
Dicker Data distributes leading technology brands to more than 3000 resellers across Australia. We’re attracted to its revenue growth trajectory, relationships with vendors and resellers and its history of dividend distributions. Primary risks include earnings volatility, corporate structure and balance sheet gearing. The stock is travelling in a long term uptrend and appears stable even in volatile market conditions.
SELL RECOMMENDATIONS
Paladin Energy (PDN)
The uranium miner’s share price has plunged more than 70 per cent since the start of the year, with the company’s market capitalisation recently shrinking to just $111 million. The company announced likely delays for the potential sale of a 24 per cent interest in its Langer Heinrich Mine for $US175 million, which may challenge Paladin’s ability to repay its $US212 million convertible bond obligations due in April 2017.
Bellamy’s Australia (BAL)
Wise-owl has flagged numerous times that Bellamy’s valuation was inflated and the latest share price slump confirmed our view for this infant formula company. It may take years for the stock to recover and we believe there are better opportunities elsewhere. Due to limited investment opportunities in this space and mismanagement of expectations, the entire sector experienced a hard landing.
Janine Cox, Wealth Within
BUY RECOMMENDATIONS Platinum Asset Management (PTM)
Generally, every listed company will have its day in the sun. However, PTM needs to jump a few hurdles and get buyers back on side to break out of the current overall decline. A rise above the previous month’s bar is required to put PTM on the short term buyers watch list. The Reject Shop (TRS)
Chart: Share price over the yearThe monthly swing chart hasn’t turned back up, indicating that buyer momentum isn’t yet supporting the share price. If TRS trades above the November high of $8.49, it may present a short term buying opportunity. If not, look elsewhere in the sector. A trade in TRS may be considered high risk, as the sellers could once again take control. Not suitable for uneducated traders. The shares were trading at $8.21 on December 8. HOLD RECOMMENDATIONS QBE Insurance Group (QBE)
Chart: Share price over the year QBE lost around 73 per cent of its value following the GFC and finally appears to have found a low at $9.23 in November 2016. However, since 2012, QBE has risen off support at around $10 six times before it fell each time, so be mindful this pattern may still repeat. A strong trade back below $10 would indicate the longer term decline is likely to continue. The shares were trading at $12.10 on December 8. Super Retail Group (SUL)
Chart: Share price over the year
SUL has been trading sideways since 2015. A rise above $10 would be a very positive sign and increase the stock’s probability of breaking the sideways trend and rising. Considering the downside risk, a fall below $8.71 would shine a bearish light on the shares. The shares were trading at $9.40 on December 8. SELL RECOMMENDATIONS Qantas Airways (QAN)
We can postulate all we like about the impact of oil prices on the QAN share price. Currently, QAN shares are holding position above 50 per cent of the all time high of $6.06 (adjusted for corporate actions) in October 2007, which is a good sign. However, a strong weekly close below a support level at around $2.90 would turn the outlook to short term bearish. The shares were trading at $3.375 on December 8. Tassal Group (TGR)
Chart: Share price over the yearTGR was recently down around 22 per cent from its high of $5.10 in January 2016. TGR must trade back above $4.26 to be heading out into calmer waters. A fall below $3.68 would indicate a further decline is likely, and it may be time to consider selling and waiting for a better opportunity. Shares in the Atlantic salmon producer closed at $3.97 on December 8.
Darren Jackson, Sanlam Private Wealth
BUY RECOMMENDATIONS Nuheara (NUH)
Chart: Share price over the year
Nuheara has developed wireless earbuds, known as IQbuds, which have been gaining traction with global consumers and retailers. The company recently completed a capital raising and is fully financed for initial commercial production. We expect further milestones and re-ratings to be achieved in 2017.
Pioneer Resources (PIO)
A lithium, gold and base metals explorer that’s fully financed for its current campaign through successive capital raisings managed by Sanlam. The company has just started drilling at Canadian lithium projects, which look the most promising and have strong historical drill results. Pioneer’s valuation is attractive compared to earlier this year.
HOLD RECOMMENDATIONS
Pilbara Minerals (PLS)
A lithium developer. Its Pilgangoora project is a world class deposit with run of ore mining expected to start in next year’s second quarter, allowing it to capitalise on currently high lithium prices.
Metals X (MLX)
We’re bullish on base metals, as tin and copper have been rising on Donald Trump’s plan to invest in US infrastructure. After spinning off Westgold, Metals X is a pure base metals play with much exposure to tin and copper prices.
SELL RECOMMENDATIONS
Paladin Energy (PDN)
The uranium miner is in a precarious position with the uranium spot price at a 10 year low. The company is due to pay back a $US212 million convertible bond in April 2017. A potential part asset sale to finance the debt repayment appears unlikely – at least in 2016. From an investment perspective, the stock is best avoided.
Gateway Lifestyle Group (GTY)
Provides homes in a community environment mostly for senior citizens. We reiterate our sell recommendation published in late January when the share price was $2.79. It closed at $2.23 on December 7. The stock still exhibits downside risk, as we believe it relies too much on Federal Government funding for rent assistance and acquisition costs.
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.
