Philippe Bui, Medallion Financial Group
IDP Education (IEL)
Provides international student placements and English language testing services. It also owns and operates several English language schools in South East Asia. We believe the company continues to take advantage of a fragmented industry and offers strong underlying growth.
Supplies and distributes automotive aftermarket parts, with operations in Australia and New Zealand. With guidance of 30 per cent growth in net profit for fiscal year 2018, the company continues to deliver growth via its acquisition strategy. Share price momentum since early February continues. The shares have risen from $5.88 on February 2 to trade at $6.905 on August 2.
A global biotechnology company focusing on developing, making and marketing devices for treating sleep apnoea. December and March quarter earnings came in above market expectations, with international sales outside the US driving outperformance.
Janus Henderson Group PLC (JHG)
A leading global asset manager listed on the ASX and the New York Stock Exchange. Although net outflows have recently been disappointing, the company currently trades on a most reasonable multiple compared to the rest of the sector. Formerly known as Henderson Group, we believe it can still extract synergies from its merger with Janus Capital Group.
A wholesale distribution and marketing company, with a diversified business across food, hardware and liquor services. In our view, it posted a disappointing result in June. Consequently, we believe it may be difficult for MTS to build momentum in the short term, with strong margin pressure continuing to affect the business.
A wealth management company with retail banking operations. With longer term systemic issues uncovered during the banking royal commission, the extent of downgrades linked to fee reductions and the downsizing of certain businesses still remains unclear. The shares have been punished and finished at $3.53 on August 2.
Ishan Dan, Wattle Partners
Suncorp Group (SUN)
Many analysts are expecting this financial services company’s full year result to beat expectations on August 9. Investors will be keenly awaiting an outcome on its life insurance review, and perhaps an announcement of a potential sale. Investors will be looking for a strong performance in general insurance, while thoroughly examining costs. The shares were priced at $13 on February 15. The shares closed at $15 on August 2.
We’re expecting this global packaging company to post a solid full year result on August 9. With a strong balance sheet, steady revenue and earnings growth and rising free cash flow, we think ORA will continue to do well. It should benefit from Amazon’s entry into Australia as demand for corrugated boxes increases.
Cleanaway Waste Management (CWY)
We continue to like Cleanaway. A recent joint venture agreement with ResourceCo provides the company with a waste disposal solution in New South Wales. A new recycling factory will turn a quarter of a million tonnes of garbage and plastic into fuel every year. The company is due to post its result on August 20.
Customers paying 15 cents for each plastic bag at the checkout should boost WOW’s gross profit. The stronger 15 cents bags recently replaced the free-of-charge lighter bags. The company should also benefit from reduced costs, as the stronger bags are reusable. We expect WOW’s like-for-like sales to be higher than competitor Coles.
Afterpay Touch Group (APT)
Operates a buy now, pay later scheme that’s proving popular with the millennial age group. The shares have soared from $7.55 on February 2 to close at $13.75 on August 2. However, we expect tighter regulations governing these buy now, pay later schemes to be introduced going forward. This may have an impact. The stock has enjoyed a great run and is now looking expensive, in our view. Investors could consider locking in some profits.
Netwealth Group (NWL)
BT Financial Group’s Panorama platform was the first to cut fees on its superannuation platform. The move sent shockwaves through the sector and almost every platform was hit hard. Increasing competition may squeeze NWL margins. We think the risks are now to the downside. NWL shares were priced at $9.67 on July 20. The shares closed at $7.59 on August 2.
Jabin Hallihan, Morgans
Rio Tinto (RIO)
The global miner reported a half year profit of $US4.4 billion for the first half. The shares were sold down as the market was looking for $US4.45 billion. We set a price alert at $78 a share to accumulate. We’re comfortable with the outlook for higher quality iron ore and from capital management upside. We’re forecasting a gross dividend yield of 7 per cent for fiscal year 2019. Shares in the global miner closed at $77.65 on August 2. Our price target is $84.42 a share.
Ramsay Health Care (RHC)
Confidence in the private hospital operator should start to return if we see reliable full year results due on August 30. In June, the company advised that fiscal year 2018 core earnings per share growth was expected to be about 7 per cent compared to previous guidance of between 8 per cent to 10 per cent. We will thoroughly examine the result. Investors may want to consider buying a few shares ahead of the result on the presumption of a brighter outlook. Our price target is $62.28. The shares closed at $57.36 on August 2.
Commonwealth Bank (CBA)
We remain cautious as the bank may potentially post a softer full year result as its undergone a leadership transition. However, we see a potential accumulation opportunity on weakness. We’re forecasting a gross dividend yield of 8.3 per cent for fiscal year 2019.
The telecommunications giant has already provided forward guidance, so we’re not expecting any surprises when it’s due to report full year results on August 16. We’re forecasting a gross dividend yield of 8.6 per cent for fiscal year 2019. Our price target is $3.42 a share. The shares finished at $2.83 on August 2.
The share price has performed strongly in recent months ahead of the Coles demerger, but now trades at a marginal premium to our fair value. We retain a core exposure, but have taken advantage of a higher share price to pocket some profits and build the cash balance for potential opportunities. Our target price is $47.34. The stock closed at $49.72 on August 2.
Domino’s Pizza Enterprises (DMP)
We expect the next update from Domino’s will guide the market towards net profit after tax growth of about 15 per cent in fiscal year 2019. This is still strong growth, but it’s 3 per cent below current consensus growth forecasts. On our analysis, we expect broker downgrades.
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