18 Share Tips – 29th January 2024

Jabin Hallihan, Morgans

BUY RECOMMENDATIONS

BUY – Sigma Healthcare (SIG)

Sigma Healthcare has demonstrated share price strength since announcing a proposed merger with Chemist Warehouse Group Holdings on December 11, 2023. A merge will create a healthcare wholesaler, distributor and retail pharmacy franchisor. The proposed merger may unlock significant efficiencies and generate cost synergies. The proposed merger is subject to conditions. We suggest it may be a good time for investors to start building a position in SIG. The merger prospects support our recommendation.

BUY – South32 (S32)

The diversified global miner posted a soft operational result in the 2023 December quarter, in our view. The share price has fallen from $4.76 on March 3, 2023, to trade at $3.36 on January 25, 2024. We believe the share price was recently trading at a significant discount to its valuation. We expect a stronger performance to follow an anticipated recovery in Chinese and global growth and metal prices. We hold an add recommendation.

HOLD RECOMMENDATIONS

HOLD – Liontown Resources (LTR)

LTR is an emerging tier-1 battery minerals producer. Recently, the company confirmed that the Kathleen Valley lithium project is on track for first production in mid 2024. However, LTR announced it had started a review of the planned expansion and associated ramp-up of Kathleen Valley to preserve capital and reduce the near-term funding requirements of the project. Lithium prices were slashed in 2023. Monitor developments and re-assess based on evolving market conditions.

HOLD – Transurban Group (TCL) 

The company remains a quality investment with a defensive and growth-oriented portfolio of toll roads. Expect the company to benefit from long term traffic growth as its assets service increasing urban population centres. The company expects to increase distributions to 62 cents a share in fiscal year 2024, about a 7 per cent increase on fiscal year 2023.

SELL RECOMMENDATIONS

SELL – Fortescue (FMG)

Despite FMG sanctioning green energy projects, the conservative initial capital commitment suggests lower risk. The company shipped 45.9 million tonnes of iron ore in the first quarter of fiscal year 2024, a fall of 3 per cent on the prior corresponding period. It shipped 48.7 million tonnes in the second quarter of fiscal year 2024, down 1 per cent on the prior corresponding period. The shares appear fully priced. The shares have risen from $19.40 on September 8, 2023, to trade at $29 on January 25, 2024. We recommend trimming positions amid further evaluating sanctioned projects.

SELL – Whitehaven Coal (WHC)

On October 18, 2023, the company announced an agreement that it was acquiring the Blackwater and Daunia metallurgical coal mines in Queensland from the BHP Mitsubishi Alliance (BMA). The acquisition transforms WHC into a metallurgical coal producer. It increases diversification and scale. However, recent share price strength reflects these developments. The shares have risen from $6.74 on November 17, 2023, to trade at $8.05 on January 25, 2024. Investors may want to consider cashing in some gains by trimming their holdings.

Harrison Massey, Argonaut

BUY RECOMMENDATIONS

BUY – FireFly Metals (FFM)

FireFly, formerly known as AuTECO Minerals, completed the acquisition of the Green Bay Copper-Gold project in Newfoundland, Canada in October 2023. The asset includes a significant ready-to-go underground copper deposit, which, in our view, offers considerable upscale potential amid a history of high-grade copper production. Assets also include existing infrastructure. The recent resource is 39.2 million tonnes at 1.83 per cent copper and 0.5 grams a tonne of gold.

BUY – Turaco Gold (TCG)

Turaco recently agreed to acquire 70 per cent of the Afema Gold Project in Cote d’Ivoire. Afema is in the prolific Birimian greenstone belt near countless other major discoveries. Four major Ghanian shears, which control multi-million-ounce deposits or mines, converge in the TCG tenement package, of which only one to date has been tested with drilling. The acquisition is contingent on government approval, but we soon expect a favourable outcome.

HOLD RECOMMENDATIONS

HOLD – Pilbara Minerals (PLS)

Despite weaker spodumene concentrate prices, Pilbara remains a premier producer of the commodity. The company recently expanded its existing offtake agreement with Chinese lithium heavyweight Ganfeng. PLS will increase spodumene concentrate supplies from 160,000 tonnes a year up to 310,000 tonnes a year over a three-year period, starting in calendar year 2024. PLS retains a strong cash position.

HOLD – JB Hi-Fi (JBH)

Investors are pricing in interest rate cuts in the 2024 calendar year, which should boost discretionary incomes and retail spending. Inflation continues to decline, which will also lift investor confidence in the near term. JBH shares have performed strongly since late October 2023. We regard JBH as a worthwhile hold, as it should benefit if the Reserve Bank of Australia cuts interest rates.

SELL RECOMMENDATIONS

SELL – Rio Tinto (RIO)

Shares in this global miner rose from $103.65 on August 16, 2023, to $136.57 on January 2, 2024. Better-than-expected iron ore prices contributed to the share price rise. The shares were trading at $132.33 on January 25. In our view, the Chinese economy appears subdued, led by a weaker real estate market and a recent deflationary environment. Investors may want to consider taking a profit at this stage.

SELL – Commonwealth Bank of Australia (CBA)

Australia’s biggest bank was recently trading at all-time highs as optimistic investors factor in several interest rate cuts in calendar year 2024.  The shares have risen from $96.87 on November 1, 2023, to trade at $114.96 on January 25, 2024. However, several market analysts are leaning towards rate cuts starting in 2025. At recent price levels, investors may want to consider cashing in some gains.

Tony Locantro, Alto Capital

BUY RECOMMENDATIONS

BUY – Lion Selection Group (LSX)

LSX invests in emerging junior resource companies. In October 2023, LSX invested $3 million in Saturn Metals, a company that’s developing the Apollo Hill gold project in Western Australia. In our view, LSX is trading at a significant discount to net tangible assets. LSX held net cash of $69.6 million at December 31, 2023. LSX is diverse and offers a lower risk profile. It suits longer-term and patient investors.

BUY – Betashares US EQY Strong Bear – CH (Hedge Fund) (BBUS) 

BBUS provides a positive return when the S&P 500 index in the US loses value, but this is reversed on any gains. The fund increases between 2 per cent and 2.5 per cent for every 1 per cent decline on the S&P 500. The S&P 500 gained more than 20 per cent in 2023. However, in our view, there is now downside risk based on US earnings, anticipated interest rate cuts and positive news already factored in to valuations. BBUS is highly liquid and can provide index insurance to investors with major exposure to more speculative shares.

HOLD RECOMMENDATIONS

HOLD – Aurumin (AUN)

After a challenging 2023, AUN has emerged with a stronger balance sheet, significantly reduced debt and a gold resource of 946,000 ounces at the Sandstone Gold Project in Western Australia. AUN has sold the Mt Dimer mining tenements to Beacon Minerals for $3 million, with a 2 per cent smelter royalty on gold production above 12,000 ounces and on all other minerals. In our view, AUN is a highly speculative gold growth opportunity.

HOLD – Nyrada Inc. (NYR)

In December 2023, the drug development company received a cash rebate of $3.54 million from the Australian Federal Government’s research and development tax incentive program. The company’s cash position was $4.65 million at December 31, 2023. The cholesterol lowering program’s drug candidate NYX-1492 isn’t proceeding to human clinical trials. The brain injury program with lead drug candidate NYR-BI03 offers an improved safety profile and is progressing. NYR is high risk, but offers recovery prospects.

SELL RECOMMENDATIONS

SELL – JB Hi-Fi (JBH)

On December 11, 2023, law firm Maurice Blackburn announced it had launched a class action against JBH in relation to the sale of extended warranties to consumers. JBH announced it intends to vigorously defend the proceedings. Shares in this consumer electronics giant have continued to perform despite higher interest rates and fears of a decline in retail spending. The shares have risen from $44.47 on October 30, 2023, to trade at $57.32 on January 25, 2024. Investors may want to consider cashing in some gains.

SELL – Paladin Energy (PDN)

Uranium prices recently exceeded $US100 a pound as the bull run continues. Uranium company Paladin has been a beneficiary, with the share price rising from 54.5 cents on May 31, 2023, to trade at $1.222 on January 25, 2024. PDN owns a 75 per cent interest in the Langer Heinrich mine, which is soon expected to resume commercial production in Namibia. In our view, the strong share price performance provides an opportunity to take some profits.

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The above recommendations are general advice and don’t take into account any individual’s objectives, financial situation or needs. Investors are advised to seek their own professional advice before investing. 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.