Michael Gable, Fairmont Equities
Mineral Resources (MIN)
After peaking around $22 in January, MIN then consolidated the prior uptrend. The stock has broken free of that consolidation and is rallying strongly on high volume. We expect the stock to head to a new high. A preferable entry point would be on short term weakness back towards support near $19. The shares closed at $19.84 on May 9.
Lynas Corporation (LYC)
This rare earths company has broken above key resistance near $2.60. Price action and volume have been very bullish in the past few months. Any dip is a buying opportunity. The stock is on track to hit our next upside target of $3.50. The shares closed at $2.83 on May 9.
Oz Minerals (OZL)
This copper producer broke a key resistance level above $10 on May 9. Recent price action has been strong and we believe it could rally above $11. The shares closed at $10.07 on May 9.
Westpac Bank (WBC)
A strong support level has been established in WBC. Despite the upcoming dividend potentially causing the stock to fall in the short term, we still believe WBC can trade higher from here during the next few months. The shares finished at $29.75 on May 9.
We rated this accounting software company as a hold in February, as we expected it to rally strongly towards $40. Now it has hit our target, we expect profit taking. Traders could consider taking profits with a view to buy back in on a dip. The shares closed at $41.28 on May 9.
St Barbara (SBM)
Jeremy Hook, TMS Capital
IMF Bentham (IMF)
The global litigation funder has reinvented itself. The lumpy cash flow of the past is behind IMF, as it’s becoming more of a funds manager rather than a pure investor. We expect a re-rating to follow. Good for growth and income. Elanor Investors Group (ENN)
ENN is a niche property funds management and investment group. ENN manages eclectic property holdings, such as Featherdale Wildlife Park, John Cootes Furniture Warehouse and the Cradle Mountain Lodge. Growth from development prospects together with a 6.2 per cent yield suggests there’s upside in ENN. HOLD RECOMMENDATIONS
Woodside Petroleum (WPL)
The energy giant has enjoyed stronger gas prices and made a solid start to 2018. Its $1 billion acquisition of Exxon Mobil’s 50 per cent stake in the Scarborough gas field was completed in March and is positive for growth. The price has rallied and, at this level, we recommend to hold. LendLease Group (LLC)
This international property and infrastructure group was sold off after what we believe was a miss at its February result. But the stock has recovered given its strong offshore portfolio and the ongoing buyback. Trading around $18, LLC is well priced and we expect it to go higher in the medium to long term. The shares were trading at $18.14 on May 10. SELL RECOMMENDATIONS
Market consensus estimates suggest zero earnings growth for the next two years. We expect this real estate investment trust to underperform its peer group and the market. In our view, better options exist elsewhere. Iress (IRE)
This financial services information provider has been volatile and earnings have slowed. In our view, results in 2017 and 2018 suggest there may be structural elements clouding the outlook. We see recent price strength as an opportunity to sell, as risks to earnings in key offshore markets grow.
Adam Spicer, Baillieu Holst
Woodside Petroleum (WPL)
Four year high oil prices are supporting Woodside’s strong cash generation. WPL has a strong balance sheet. If oil prices continue to trend higher, this energy giant should deliver earnings and dividend growth. Woodside’s share price hasn’t kept pace with rising oil prices. Buy at current prices. The shares closed at $32.35 on May 9. AVJennings (AVJ)
Involved in land and apartment development, integrated housing and home improvements. AVJ is likely to benefit from a shortage of dwellings in major cities. On our numbers AVJ is cheap, and is on track to deliver about 20 per cent earnings per share growth for fiscal year 2018. It’s trading on a price/earnings multiple below 7 times. Furthermore, the stock is trading at a significant discount to net tangible assets. HOLD RECOMMENDATIONS
CPU is generating strong free cash flows, coupled with recurring revenues. CPU’s ongoing cost out program is going well and lower maintenance capital expenditure is likely to contribute to continuing earnings growth in the future. CPU trades on a prospective fiscal year 2018 price/earnings multiple of 21 times and remains a hold on our metrics. JB Hi-Fi (JBH)
JBH recently downgraded fiscal year 2018 net profit to $230 million. JBH noted challenging conditions in its home appliance market, which is expected to impact short term performance. With the recent acquisition of The Good Guys, JBH is likely to benefit from additional scale and synergies. JBH has posted double digit earnings per share growth in the past two years. At recent prices, JBH trades on a prospective fiscal year 2018 dividend yield of 5.2 per cent. SELL RECOMMENDATIONS
Makes and distributes implantable devices for the hearing impaired. COH is a high return on equity business, which has generated an average earnings per share growth rate of around 25 per cent over the past three years. The stock is trading on a prospective fiscal year 2018 price/earnings ratio of about 45 times, which, in our view, is excessive relative to forecasted earnings growth. Flight Centre (FLT)
The travel agency giant is a profitable business, but is vulnerable to online competition and structural changes in the industry. Our discount cash flow valuation of $45.43 a share provides a fair value multiple of about 16 times, broadly in line with the market. Flight Centre shares closed at $60.03 on May 9.
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