18 Share Tips – 7th October 2024

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Peter Day, Sequoia Wealth Management 

BUY RECOMMENDATIONS

BUY – Brambles (BXB)

Brambles is an integrated supply chain logistics giant. At its recent full year results, the company announced a $US500 million share buy-back. Sales revenue of $US6.545 billion in fiscal year 2024 increased by 8 per cent on an actual foreign exchange basis compared to the prior corresponding year. The company’s outlook anticipates sales revenue growth of between 4 per cent and 6 per cent at constant currency in fiscal year 2025 and underlying profit growth of between 8 per cent and 11 per cent.

BUY – Incitec Pivot (IPL)  

IPL has businesses involved in commercial explosives and fertilisers. The explosives subsidiary Dyno Nobel recently revealed it had renewed two long term contracts with miner Peabody in Australia and across its US operations. The contracts to provide technology solutions are effective from January 2025 for five years. In July, IPL announced it had ceased negotiations to sell its fertilisers business to PKT. But another selling opportunity may arise. The shares have risen from $2.12 on January 2 to trade at $3.005 on October 3.

HOLD RECOMMENDATIONS

HOLD – AMP (AMP)

At its first half results in early August 2024, the company revealed it had returned $963 million in capital to shareholders since August 2022. AMP had reduced shares on issue by 20 per cent between August 2022 and June 2024. It had reduced debt by $191 million in the first half of fiscal year 2024. The shares have risen from 93 cents on January 2 to trade at $1.33 on October 3. After the buy-back finishes, we expect the company to focus on re-establishing a dividend payout ratio at the 2024 full year result.

HOLD – National Storage REIT (NSR)

NSR is a big self-storage provider in Australia and New Zealand. It recently announced a successful settlement of the issue of $300 million guaranteed exchangeable notes priced at a coupon of 3.625 per cent per annum. The notes will mature on September 19, 2029. The proceeds are expected to repay existing debt and to provide flexibility for further growth and for general corporate purposes. The company generated total revenue of $349 million in fiscal year 2024, up 7 per cent on the prior corresponding period. The shares have risen from $2.12 on May 1 to trade at $2.53 on October 3.

SELL RECOMMENDATIONS

SELL – Core Lithium (CXO)

The company owns the Finniss lithium operation in the Northern Territory. The operation remains on hold until studies on a re-start are completed and lithium market conditions stabilise, according to an update in late September. Lithium prices have plunged since 2023. CXO’s share price has fallen from 40 cents on October 12, 2023, to trade at 12.5 cents on October 3, 2024. The outlook for other stocks is more appealing at this stage of the cycle.

SELL – Fortescue (FMG)

The iron ore producer’s share price fell from $29.39 on January 2 to close at $15.88 on September 10. The shares rebounded on China’s stimulus measures to close at $20.68 on September 30. The shares were trading at $20.19 on October 3. The market is hoping for more stimulus in China. But we remain cautious as to whether more stimulus will increase demand for steel and its inputs.

Toby Grimm, Baker Young 

BUY RECOMMENDATIONS

BUY – Cleanaway Waste Management (CWY)

This waste management services provider is trading at a discount despite a strong outlook for revenue growth and underlying earnings. The company’s defensive characteristics are appealing. We expect cyclical upside from increasing construction volumes and government infrastructure and residential construction policies. The shares have been edging higher since August.

BUY – BHP Group (BHP)

Recent stimulus measures from central banks in the US, Europe and China provide a more supportive backdrop as we exit the seasonally weaker part of the year. Continuing cost management efforts are likely to yield results for this global miner in fiscal year 2025, generating increasing profitability after several challenging years.

HOLD RECOMMENDATIONS

HOLD – Iluka Resources (ILU)

Recent easing measures by the People’s Bank of China signal increasing intent to foster a housing construction market recovery, which would be particularly positive for Iluka, a mineral sands producer. Additionally, we expect the company to reach an agreement with the Australian Government in coming months around funding for its Eneabba Rare Earths project, which should help provide a pathway to a structurally advantaged new market.

HOLD – Codan (CDA)

This global technology company continues to take advantage of its strong balance sheet to execute modest acquisitions, such as the purchase of US army supplier Kagwerks. The binding agreement to acquire Kagwerks is expected to happen in December 2024, subject to regulatory conditions. The acquisition will diversify CDA. We expect the acquisition to grow revenue and earnings outside Codan’s highly cyclical, but more historically riskier metal detection business.

SELL RECOMMENDATIONS

SELL – Johns Lyng Group (JLG)

The group delivers building and restoration services in Australia and the US. Group revenue in fiscal year 2024 fell about 9.55 per cent on the prior corresponding period. We’re concerned about softer underlying core business trends. Projected catastrophe re-building work is below market expectations. The shares have fallen from $5.80 on August 1 to trade at $3.73 on October 3.

SELL – Aristocrat Leisure (ALL)

Shares in this gaming machine developer have surged from $40.95 on January 2 to trade at $57.12 on October 3. Operating revenue rose 6.1 per cent in the first half of fiscal year 2024 when compared to the prior corresponding period. But revenue at Pixel United, the mobile first games portfolio, was down by 1.8 per cent. We see the stock as increasingly expensive and suggest investors consider taking part profits around these levels.

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BUY RECOMMENDATIONS

BUY – Bannerman Energy (BMN)

BMN has one of the world’s largest undeveloped uranium mines in Namibia. I am bullish about the prospects for uranium as I expect a supply shortfall during the next few years at precisely the same time that demand for nuclear power is increasing. The shares are cheap compared to its peers, and the price chart indicates the low is now in place and there could be significant upside from here.

BUY – Resolute Mining (RSG)

RSG is an African based gold miner and explorer with a market capitalisation of about $1.53 billion on October 3. I am bullish about the gold price due to falling US interest rates, a weakening US dollar and increased central bank buying of gold. RSG is highly leveraged to an increasing gold price. The shares have risen from 45.5 cents on January 2 to trade at 71 cents on October 3. RSG has been outperforming most of its peers.

HOLD RECOMMENDATIONS

HOLD – BHP Group (BHP)

Resource stocks have been enjoying a recovery in response to China’s stimulus measures. Apart from iron ore, BHP has a major exposure to copper. We expect copper prices to rise in response to global growth and a recovery in the Chinese economy. Fund managers had been too underweight in resources, so plans to rectify the imbalance should put upwards pressure on BHP’s share price.

HOLD – Mineral Resources (MIN)

MIN had been heavily shorted by hedge funds. But as markets continue to realise how cheap and oversold resource stocks are, the short sellers may need to buy more MIN shares to cover their positions. MIN has bounced off share price lows and we expect the price to continue its recovery. MIN’s main exposures are iron ore and lithium. China’s stimulus measures recently lifted these commodity prices.

SELL RECOMMENDATIONS

SELL – National Australia Bank (NAB)

There has recently been a rotation of funds out of banks and into resources. And this may continue, at least in the short term. NAB’s share price is cheaper than the CBA, but I prefer the CBA in terms of quality. NAB shares have fallen from $39.70 on September 23 to trade at $36.915 on October 3. Investors may want to consider cashing in some gains.

SELL – Ramsay Health Care (RHC)

RHC is Australia’s biggest private hospital operator. It also operates in the UK and Europe. Earnings before interest and tax of $997.6 million in fiscal year 2024 were down 1.8 per cent in constant currency on the prior corresponding period. I expect margins to remain under pressure. In my view, the outlook continues to look difficult as pricing for services isn’t keeping pace with inflation. The share price chart is also looking negative due to a downtrend that has been in place for the past two years.

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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.