Ishan Dan, Wattle Partners
People Infrastructure (PPE)
Provides contracted staff and HR outsourcing services to clients across Australia and New Zealand. PPE delivered a strong fiscal year 2018 result. It easily met consensus forecasts and delivered pro-forma EBITDA growth of 26.8 per cent to $13 million. We believe there is further upside potential following the Network Nursing Agency acquisition.
Despite the proposed TPG Telecom and Vodafone Hutchison Australia merger deal, Telstra is still the number one telecommunications company. If approved, a merged TPG/Vodafone could end aggressive discounting, which would be positive for Telstra. We think Telstra will remain the dominant player because it’s investing to maintain its network advantage.
Cleanaway Waste Management (CWY)
Chart: Share price over the year
The company posted a better than expected full year 2018 result by increasing revenue and earnings in the second half. The result was driven by the acquisition of Toxfree Solutions. CWY didn’t provide guidance, but we believe the company is almost fully valued.
Its latest result beat expectations. The JacTravel acquisition proved to be an excellent move. WEB is among the fastest growing business-to-business online agents in the world. WEB is expected to provide guidance at its AGM on November 21, but we think there is already further upside potential.
Bendigo and Adelaide Bank (BEN)
BEN’s full year result was below market expectations, impacted by higher than expected funding costs and weaker trading income. The bank cut customer fees to remain competitive amid challenging conditions. It remains focused on luring new customers from the big four banks. We’re cautious about its outlook. The shares have fallen from $11.62 on August 30 to trade at $10.71 on September 6.
Retail earnings have already been impacted by unseasonally dry conditions across many parts of Australia, which has reduced chemical input demand. Cattle prices have also softened. Shares in this agribusiness have fallen from $9.39 on June 6 to trade at $6.73 on September 6.
Michael Gable, Fairmont Equities
The A2 Milk Company (A2M)
The recent full year results led A2M to break the downtrend line that had been forming since February. This, in our view, means A2M is going to move up from here and is likely to be trading at a new high very soon. Any price dip is a buying opportunity. The shares finished at $10.82 on September 6.
This company specialises in preventing infection. In the past few weeks, NAN has broken above its two year trading range. Volume is returning to the stock and it’s now resuming a longer term uptrend. It should continue to edge higher from here, and we expect levels above $4 soon. The shares closed at $3.36 on September 6.
This paint making company has spent the past 10 months forming an ascending triangle on the chart. It’s testing resistance again near $8 and it appears the share price is getting ready to continue the uptrend. A break above $8 should see DLX rally further. The shares finished at $7.76 on September 6.
Mayne Pharma Group (MYX)
Ever since this pharmaceutical company broke out of a base formation earlier this year, the MYX chart has looked most bullish. We expect it to edge back up towards $1.30 before consolidating its great run. We would then look to its half year results for the next catalyst to move higher. The stock closed at $1.135 on September 6.
Adelaide Brighton (ABC)
In early July, this building products company formed a reversal signal on the chart, meaning the prior uptrend was coming to an end. It was sold off heavily on a result that disappointed the market. The bounce since then has been feeble and we expect ABC to head lower and retest $6. The stock closed at $6.31 on September 6.
In our view, the supermarket giant’s shares ran too hard into its full year results. Selling pressure emerged after what we consider was a relatively soft result. The volume on the sell side indicates the pain isn’t over and we expect WOW to drift back towards support near $26. The shares closed at $28.24 on September 6.
Michael Kodari, KOSEC
BUY RECOMMENDATIONS BlueScope Steel (BSL)
The steelmaker is poised to benefit from any boom in the US construction sector and property market in response to fiscal stimulus and lower company taxes. A stronger US dollar is also beneficial to BSL. We expect the business to get stronger during the next six months. The shares closed at $17.17 on September 6.
An objective of this funeral provider’s protect and grow strategy is to offer a more modern and upmarket service. Refurbished centres will return to operations in coming months, with the potential to generate higher margins. We believe the business is undervalued at current levels. The shares have fallen from $14.51 on August 14 to close at $12.72 on September 6.
HOLD RECOMMENDATIONS CSL (CSL)
This blood products group continues to devote significant capital to research and development and continues to grow revenues in the lucrative US market. Demand for plasma treatments is likely to grow worldwide. This company has an enviable track record of growing revenues, protecting margins and devising new treatments, which are world class. Cochlear (COH)
Cochlear ear implants are highly regarded worldwide among the medical fraternity. Cochlear devices are functional, aesthetically pleasing and unobtrusive for patients. Company research and development is working on new designs in a bid to increase international market share. Cochlear benefits from any weakness in the Australian dollar. SELL RECOMMENDATIONS Harvey Norman (HVN)
The discretionary retail space in Australia faces challenges, including a lack of wages growth and the diminishing wealth effect arising from softer house prices. Harvey Norman faces increasing competition from online retailers, such as Kogan and Amazon, which I expect to have an impact on market share going forward. G8 Education (GEM)
Lately, the childcare centre operator has struggled with organic growth and much of its revenue accretion has come from acquiring competing centres. This approach is expensive and loads the balance sheet with debt. The sector is exposed to regulatory risk, which can dampen profitability. There’s also an oversupply of childcare spaces at this point.
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