Jeremy Hook, TMS Capital
BUY RECOMMENDATIONS
Washington H. Soul Pattinson (SOL)
Chart: Share price over the year
It may be unfairly viewed as a boring stock, but this diversified investment firm has delivered top capital and income returns for a long time. Management has plenty of skin in the game, and the recent Hunter Hall deal shows its skillful deal making capacity.
Healthscope (HSO)
Chart: Share price over the year
This private hospital operator has performed well since listing in July 2014, but during 2016 it became too expensive for us. However, the shares plunged following a profit warning in October last year. We now see value at current levels. The shares closed at $2.20 on February 1.
HOLD RECOMMENDATIONS
Wesfarmers (WES)
Chart: Share price over the year
WES is a carefully managed conglomerate with best of breed businesses. It offers a strong balance sheet and its recently rising grossed up dividend yield of 7 per cent will enhance portfolio income. We expect it to perform solidly going forward.
IMF Bentham (IMF)
Chart: Share price over the year
The investment book of this global litigation funder has just exceeded $3 billion following growth offshore. Offsetting typically lumpy earnings is a history of paying good franked dividends. Recent performance suggests now is the time to hold.
SELL RECOMMENDATIONS
DUET Group (DUE)
Chart: Share price over the year
The CKI Consortium recently increased its bid for DUET to $3.03 and it’s worth taking up. This has been a great result for anyone holding DUE stock. Shares in DUET, which owns power and gas networks in Victoria and Western Australia, closed at $2.80 on February 1.
Bank of Queensland (BOQ)
Chart: Share price over the year
BOQ is trading at a premium to our valuation and is a smaller player in a sector that rewards scale. We see better value in non bank financials or NAB among the majors.
Peter Moran, Wilsons
BUY RECOMMENDATIONS
Santos (STO)
Chart: Share price over the year
After several tough years, the worst may be behind this energy giant. Santos has recently raised capital to reduce debt. It will also separate non core assets into a stand alone business to improve capital allocation. Santos is positioned to benefit from a recovering oil price, which will further reduce debt. The shares trading at a discount to our valuation of $4.85 is behind our recommendation. The shares closed at $3.99 on February 1.
Afterpay Holdings (AFY)
Chart: Share price over the year
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Provides a product enabling retailers to offer their customers a buy now, pay later service. Since listing in May 2016, Afterpay has delivered a constant stream of upgrades. AFY now has more than 375,000 end users, up from 250,000 in November. About 2100 merchants now offer Afterpay. We expect EBITDA to be positive this financial year.
HOLD RECOMMENDATIONDS
Oz Minerals (OZL)
Chart: Share price over the year
Production, sales and costs were all better than we expected in the final quarter of 2016 for this copper and gold company. Also, we believe the developing Carrapateena deposit can now be comfortably funded out of cash flows from the Prominent Hill mining operation, with OZL still able to pay a dividend. However, with the share price soaring almost 300 per cent last year, we see OZL as fully priced.
Select Harvests (SHV)
Chart: Share price over the year
Industry feedback suggests softening almond prices between 5 per cent and 10 per cent in recent weeks, as the market appears to be responding to developing favourable seasonal conditions for the 2017 Californian almond crop. We expect lower prices to impact earnings for the next two years. But SHV’s increasing production capacity offers long term value.
SELL RECOMMENDATIONDS
Bellamy’s Australia (BAL)
Chart: Share price over the year
Despite significantly reducing our forecasts following the recent downgrade, we see too much uncertainty in this infant formula company. The share price has been slashed. Forecasting future earnings is particularly difficult. Another performance distraction is management changes and a possible board upheaval. We believe a capital raising is a strong possibility.
Alumina (AWC)
Chart: Share price over the year
We expect the recent strong alumina price to subside. More capacity in Chinese refineries, spurred by recent higher prices, will move the Chinese market into surplus. As such, we view the 45 per cent share price increase since September as overdone. As the company is trading above our valuation of $1.70, we have moved to a sell. The shares closed at $1.94 on February 1.
Les Szancer, AXL Capital Partners
BUY RECOMMENDATIONS
Winha Commerce and Trade International (WQW)
Chart: Share price over the year
Listed on the ASX on January 5, 2017, this diversified Chinese food company made a successful debut. After an IPO of 35 cents, the Guangdong-based company soared to 70 cents, but has since retreated to close at 45.5 cents on February 1. The outlook appears bright, but I suggest investors take a look at its website.
Dongfang Modern Agriculture Holding Group (DFM)
Chart: Share price over the year
The share price of this major Chinese agricultural company has been on a roller coaster since listing in October 2015. It rapidly shot to $2.49, but was trading at 79 cents on February 2. Perhaps a major player dumping stock amid weather issues are possibly to blame. However, it still looks like posting a second half profit and paying a dividend. The company has finished its latest harvest and anticipates record revenue.
HOLD RECOMMENDATIONS
Mount Ridley Mines (MRD)
Chart: Share price over the year
It could potentially find nickel, copper, cobalt, lead, zinc, silver and gold in the Fraser Range region of Western Australia. Equipment problems have caused delays. It’s a speculative stock that would benefit from a bit of luck.
Lepidico (LPD)
Chart: Share price over the year
This lithium company has projects in Australia, Canada, Brazil and Argentina. The company says its L-Max technology has been an important exploration tool in unlocking new opportunities. This may be the catalyst for holding a speculative stock that requires an appetite for risk. The share price has been disappointing for several years.
SELL RECOMMENDATIONS
Aconex (ACX)
Chart: Share price over the year
The shares of this software company were priced at $5.65 on January 27, 2017. After slashing its full year profit forecast, the share price plunged 45 per cent in a day to $3.10. The shares were trading at $2.915 on February 2. The market can be unforgiving when it comes to downgrades. Prefer others.
Fairfax Media (FXJ)
Chart: Share price over the year
Online continues to change the media landscape. The company’s 12 month high was $1.06, while its low was 72 cents. The shares were trading at 91.5 cents on February 2, 2017. On February 2 last year, the shares were priced at 90 cents. While Fairfax is nicely diversified, I don’t see much share price growth, at least in the short term. The dividend doesn’t excite me.
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.
