18 Share Tips – 18 March 2019

Michael Gable, Fairmont Equities
BUY RECOMMENDATIONS
Goodman Group (GMG)
Chart: Share price over the year

We’ve been positive about this commercial property group for some time and the chart continues to show plenty of positive momentum. GMG is one of the best quality stocks on the ASX, let alone among the REIT (real estate investment trusts) sector. It has low debt and stable earnings.
FlexiGroup (FXL)

This diversified financial services firm was recently trading on an undemanding price/earnings multiple of about 7 times, so we believe it offers value. The chart for FXL has provided us clues that a low might now be in a place. We expect the share price to spike higher from here. The shares finished at $1.355 on March 13.
HOLD RECOMMENDATIONS
BHP Group (BHP)

We retain our long held view that this global miner would trade up towards $40 once it broke the $35 level. In our view, recent share price weakness was due to profit taking. The shares of risen from $32.82 on December 31 to close at $36.87 on March 13.
Newcrest Mining (NCM)

We’ve been bullish on this gold miner after it broke out of a long term consolidation pattern on the share price chart earlier this year. Gold prices appear to have found support and are set to head higher again, which means the NCM share price should continue rising from here. NCM shares closed at $25.19 on March 13.
SELL RECOMMENDATIONS
Fletcher Building (FBU)

The funeral operator’s recent result was better than I expected, with deaths starting to move back towards longer term trends. However, increasing competition is still a concern. In our view, the stock is now fully valued, and the share price chart is showing signs of weakness.

This KFC and Taco Bell franchisee is expected to benefit from growth in its Western Australia stores. We also expect momentum to build in the company’s European KFC stores. Early signs from the roll out of Taco Bell in Australia have been positive. We see substantial longer term upside from this addition to the business.
Seven Group Holdings (SVW)

This diversified operating and investment group has an investment in WesTrac Group, an authorised Caterpillar dealer in Western Australia, New South Wales/ACT service territories and in its North Eastern China service territory. WesTrac has benefited from a strong cyclical recovery in mining and we believe this is likely to continue. The company also owns Coates Hire, which is poised to benefit from a cyclical upswing in rental demand for equipment.
HOLD RECOMMENDATIONS
Ramsay Health Care (RHC)

The private hospital operator showed earnings growth during the first half of 2019, an encouraging sign. The outlook for France is positive and the company may benefit from synergies given the recent Capio hospitals acquisition. Results in UK operations were weak and this may continue for another 12 to 18 months.
Sonic Healthcare (SHL)

The international medical diagnostics company’s first half 2019 result showed Australian growth had continued. Growth was also strong in the US and Switzerland. There were signs that volatility in the company’s German operations had subsided. The delivery of cost savings and new contract ramp up should support the share price.
SELL RECOMMENDATIONS
Retail Food Group (RFG)

The company continues to see declines in domestic franchise (new and renewal activity) and international licences. The company announced a statutory net loss after tax of $111.1 million for the six months to December 31, 2018. Its performance is also hampered by ongoing difficult retail trading conditions and negative sentiment towards the franchise model. High gearing levels add to the company’s challenging outlook.
InvoCare (IVC)

The funeral homes, cemeteries and crematoria operator is experiencing declines in case volumes amid tougher market conditions. Full year 2018 net profit after tax fell 57.7 per cent to $41.2 million. Increasing costs and capital expenditure as part of its Protect and Grow strategy contributed to an earnings decline during the period.

PTM is a good example of a non-conflicted wealth management exposure. This subsector is receiving support, and Magellan Financial Group (MFG) is another example. This clean structure may appeal to shareholders seeking to move away from vertically integrated financial companies. Additionally, PTM could enter a virtuous cycle, with its bottom up investing style attracting more funds. This could lead to higher earnings, which, in turn, could potentially attract further funds.
Galaxy Resources (GXY)

The share price of this global lithium company has fallen from around $4.50 levels to close at $1.98 on March 13. The company’s been subjected to short selling given uncertainty surrounding the timing and methodology of developing its main Argentinian project. However, completing of the sale of a package of tenements to POSCO leaves it better placed to reach an investment decision about developing the mine, with or without a partner. We also see technical support between $1.80 and $2.
HOLD RECOMMENDATIONS
BHP Group (BHP)

Higher iron ore, crude oil and copper prices are potential support despite recent capital initiatives. Bears abound in the commodity markets, and if these commodities continue to rise, BHP shareholders may benefit through revaluation and multiple expansion. oOh!media (OML)

The out of home advertising group could be a significant beneficiary of state and federal elections this year, particularly given the higher number of parties vying for seats. Happy to hold at this much reduced share price. SELL RECOMMENDATIONS
Myer Holdings (MYR)

The department store chain bounced strongly on results that showed online (multi-channel) sales grew by 19 per cent last half. However, overall and like for like sales fell. In my view, the bounce is an opportunity to exit this legacy retailer, as more radical  – and therefore risky – change is required in its business model. Brambles (BXB)

The huge rally since December recently put BXB on a price/earnings to growth ratio of around four times. The recent result was satisfactory. However, the growth outlook is modest, in my view. Consequently, it makes this one too rich for me, despite it breaking through recent highs. Investors may consider selling around current prices to possibly buy back closer to $10. Shares in this supply chain logistics company finished at $11.82 on March 13.

Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.