Simon Herrmann, wise-owl.com
Regis Resources (RRL)
This gold miner’s fundamentals are sound in a positive operating environment that enables the company to generate free cash flow. Gold prices may consolidate or even retreat at some point this year, but the long term outlook is bullish. Gold Road Resources (GOR)
The Gruyere joint venture – owned by Gold Road Resources and Gold Fields – is a high quality project that’s been de-risked via funding arrangements. Infrastructure construction will start in the March 2018 quarter. GOR is one of the least volatile gold stocks and is an attractive value proposition. We also see potential for a takeover.
Gale Pacific (GAP)
This branded screening and shading products maker recently upgraded its guidance after trading conditions improved in late 2017. Management is forecasting a strong second half on the back of new business opportunities in the Americas region. We believe Gale is worth holding due to recent business momentum, an attractive dividend yield and an improving balance sheet.
The diversified retail giant is tracking broadly in line with expectations and remains a suitable investment for investors seeking capital growth and income. Trading momentum is positive and could further drive sales and earnings growth.
G8 Education (GEM)
We’ve been a supporter of this childcare operator for a long time. In our view, a subdued operating environment may continue for some time. While the dividend remains attractive, we believe better opportunities exist elsewhere. We may look at GEM again in six months.
Peninsula Energy (PEN)
In our view, uranium prices are still too low despite major supply cuts. We see little upside in the uranium industry in the medium term. PEN’s share price has risen from 28 cents on November 3 to trade at 41 cents on January 25. Investors can consider taking a profit in this uranium company.
Darren Jackson, Sanlam Private Wealth
Alumina owns 40 per cent of Alcoa World Alumina and Chemicals (AWAC) in partnership with Alcoa. Aluminium and alumina commodity prices remain robust, partially in response to Chinese pollution reforms limiting production. We like AWC as it produces high purity alumina that’s used in electric vehicles, mobile phones and semi conductors. Myanmar Metals (MYL)
Lead and zinc prices recently hit five year highs. Myanmar Metals recently secured an option for a controlling interest in the Bawdwin project, which may turn out to be a lead-zinc deposit of global significance. Mark Creasy is a renowned prospector and his company Yandal Investments is number one shareholder in MYL. The company is now embarking upon an aggressive drilling campaign. HOLD RECOMMENDATIONS
Westfield Corporation (WFD)
This shopping centre giant has agreed to be acquired by Unibail-Rodamco in a cash and scrip deal. In the absence of a superior bid, we believe the deal will proceed given financing is in place. The scrip component of the deal will give WFD investors exposure to a combined 56 shopping centres across the globe.
Lynas Corporation (LYC)
Operating performance continues to improve and it recently delivered another record sales quarter. The company expects strong demand for rare earths going forward and we continue to hold.
Sydney Airport (SYD)
Operating performance and passenger numbers continue to be outstanding. However, given rising bond yields in the US, we believe this company’s earnings multiple may be pressured if bond like equities are sold off on macro flows. McGrath (MEA)
The real estate services provider has again downgraded earnings guidance. The company expects EBITDA for the half year to December 31, 2017 to be $1.63 million before one off items. It expects an EBITDA loss of $50,000 post one off items. In our view, McGrath’s operating performance has been disappointing with the company consistently downgrading earnings guidance.
Robert Makdissi, Baillieu Holst
BUY RECOMMENDATIONS AGL Energy (AGL)
The energy giant reported underlying profit after tax of $802 million in its last full year result. It has forecast a stronger 2018 full year result subject to normal trading conditions and the absence of any adverse impacts from policy and regulatory uncertainty. We believe the company’s commitment to wind projects will lift EBITDA going forward. The impact of government policy intervention is manageable. The Star Entertainment Group (SGR)
On August 1 last year, the shares were priced at $5.04. The shares were trading at $5.93 on January 25. Successful execution and earnings accretion from large capital works projects are key to Star’s outlook, particularly the Gold Coast casino project which we expect will significantly contribute to EBITDA growth going forward. HOLD RECOMMENDATIONS Macquarie Group (MQG)
Our investment case for MQG is supported by an annuity style business, which represents about 70 per cent of MQG’s revenue. Outside Australia, the company’s geographically diverse revenue streams – Asia, the Americas and Europe – also appeal. James Hardie Industries PLC (JHX)
We expect this building products company to deliver stronger earnings growth going forward. This should be underpinned by improving macro conditions leading to new housing and renovations. This company is most competitive and enjoys strong market share. SELL RECOMMENDATIONS DuluxGroup (DLX)
The company’s share price has risen from $6.60 on August 1 last year to trade at $7.37 on January 25. But forecasts of 5 per cent earnings per share growth are too modest for us to be more bullish. However, we do acknowledge the company’s strong track record of growth. Investors can consider taking a profit. Medibank Private (MPL)
On our forecasts, the private health insurer’s price/earnings multiple was recently trading at about a 10 per cent premium to the market. Earnings growth has been more resilient than expected. However, the industry risk is policy holders dumping private health cover in response to rising premiums.
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