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Jeremy Hook, TMS Capital 

 

BUY RECOMMENDATIONS

 

AP Eagers (APE)

Chart: Share price over the year

APE is a leading motor vehicle dealership group that’s 104 years old. Organic growth and acquisitions have delivered an impressive track record of earnings growth. Vehicle sales and service is a consistent business across Australia. Recently, trading on a forecast 2018 price/earnings multiple of 14 times, and a 4.4 per cent fully franked dividend yield, we believe APE offers upside in the medium term.

 

Elanor Investors Group (ENN)

Chart: Share price over the year

A funds management and investment group involving former Macquarie Group property guru Bill Moss. ENN owns hotel assets, including the Cradle Mountain Lodge in Tasmania, and other eclectic property holdings, such as Featherdale Wildlife Park and John Cootes Furniture. Growth from development prospects suggest upside.

 

HOLD RECOMMENDATIONS

 

Woodside Petroleum (WPL)

Chart: Share price over the year

The energy giant has made a solid start to 2017. WPL is a quality LNG producer with a top management team. Without any substantial production growth, it appears more of a yield play. A recent grossed up dividend yield of 4.8 per cent is a good reason to hold. Also, we expect the stock to provide trading opportunities.

 

CSL (CSL)

Chart: Share price over the year

This blood products group has been one of our best performers for many years. But we think it’s time to move to a hold given a strong share price performance since its profit upgrade in January. We’re still positive about the long term outlook, but expect the price to consolidate. It’s a premium stock, but is now trading on full multiples.

 

SELL RECOMMENDATIONS

 

Flight Centre (FLT)

Chart: Share price over the year

This travel agency giant has rallied strongly in the past two months, and we feel this can be a good trading stock. The company continues to expand, effectively buying revenue growth in what we believe is a rare growth environment. We think the stock is fully valued. Take a short term profit and look to buy below $28. The stock was trading at $37.16 on May 25.

 

Mirvac Group (MGR)

Chart: Share price over the year

A potential housing sector slowdown leaves this property group looking fully valued, in our view. Despite a recent upbeat investor presentation, we view it as trading on stretched multiples and a below average yield. 

 


Peter Moran, Wilsons

 

BUY RECOMMENDATIONS

 

Link Administration Holdings (LNK)

Chart: Share price over the year

Link is Australia’s biggest funds administration business and the second largest share registry provider. We’re particularly attracted to the funds administration business in anticipation of stronger earnings. Link’s most recent trading update showed it tracking ahead of expectations, with cost outs driving growth in the 2017 first half. Our price target is $8.70. The shares were trading at $7.85 on May 25.

 

Telstra (TLS)

Chart: Share price over the year

Telstra’s share price was punished in recent months over concerns about the impact of TPG’s new mobile network. While we expect the new network to impact average revenue per user, we believe it will be mostly offset by Telstra’s superior network, loyal customers and generally different target market. We now see the share price as attractive and have upgraded to a buy. The shares were trading at $4.465 on May 25.

 

HOLD RECOMMENDATIONS

 

Macquarie Group (MQG)

Chart: Share price over the year

Delivered another good result, with fiscal year 2017 net profit after tax up 7.5 per cent to $2.217 billion, 5 per cent above our estimate and well ahead of its own guidance on fiscal year 2016. We have increased our earnings per share forecasts by 5 per cent for fiscal year 2018 and 1 per cent for fiscal year 2019. 

 

Orora (ORA)

Chart: Share price over the year

Although the packaging company retained its full year guidance for higher underlying earnings – subject to global economic conditions – ORA faces potential headwinds, such as higher power and recycled cardboard costs in fiscal year 2018. We see the shares as fairly priced.

 

SELL RECOMMEMNDATIONS

 

Newcrest Mining (NCM)

Chart: Share price over the year

The gold miner confirmed its Cadia operation, recently impacted by a seismic event, would recommence operations in the first quarter of fiscal year 2018. However, we still have concerns about costs and the delay to production. On our forecasts, the shares were recently trading on a 2019 price/earnings multiple above 30 times. In our view, other gold producers offer better value.

 

DuluxGroup (DLX)

Chart: Share price over the year

The first half 2017 result was above expectations. But we’re concerned about the risk of rising input costs, the impact of plant commissioning costs and a potential slowdown in the housing market. On our numbers, the recent share price implies a 2018 price/earnings multiple above 20 times, which is too high in our view, when weighed against the risks. 

 


Darren Jackson, Sanlam Private Wealth

 

BUY RECOMMENDATIONS

 

Australian Agricultural Company (AAC)

Chart: Share price over the year
 

Recently, we noticed a large spike in US live cattle futures, while Australia’s Eastern Young Cattle Indicator continues to trend higher. This paints a bright outlook for this premium Australian beef producer. Earlier this month, AAC reported strongly, with prices up and costs down resulting in a much healthier margin.

 

Galaxy Resources (GXY)

Chart: Share price over the year

GXY is one of our preferred larger cap lithium stocks. We expect the overhang from its $61 million capital raising in February to have subsided. The company should benefit if demand for lithium stays strong and pushes up prices.

 

HOLD RECOMMENDATIONS

 

Primary Health Care (PRY)

Chart: Share price over the year

Shanghai listed Jangho Group holds almost a 16 per cent stake in Primary Health Care and has an acquisitive nature after taking over Vision Eye Institute. Operating synergies exist between Primary Health Care and Vision Eye Institute. 

 

Northern Star Resources (NST)

Chart: Share price over the year

Northern Star is one of Australia’s pre-eminent gold producers. The shares rose during 2014 and 2015 when the price of gold was going down. Changes to the VanEck Junior Gold Miners ETF means NST is a potential candidate to be included. If included, NST could benefit from significant share buying.

 

 

SELL RECOMMENDATIONS

 

Genworth Mortgage Insurance (GMA)

Chart: Share price over the year

In a recent outlook, Genworth warned that increasing mortgage stress in certain regional economies was likely to drive elevated mortgage delinquencies in 2017. We’re concerned about the impact a possible widespread housing downturn would have on GMA.    

 

Carsales.com (CAR)

Chart: Share price over the year

In our view, this company is now a mature business. Global automotive solutions provider Cox Automotive, which owns CarsGuide and Sell My Car, is a growing force in Australia. Going forward, stronger competition across the board has the potential to eat away at the healthy margins enjoyed by Carsales.  

 

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