18 Share Tips – 23rd December 2024

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Stuart Bromley, Medallion Financial Group

BUY RECOMMENDATIONS

BUY – NexGen Energy (Canada) (NXG)

More than 50 nuclear modular reactors are under construction, mostly in China and India. NXG has a big, high grade uranium asset in mining friendly Canada. NXG is positioned to be a low cost producer and long term beneficiary of the nuclear energy transition. Once operational, the Rook I project aims to deliver 30 million tonnes of high grade uranium a year.

BUY – DigiCo Infrastructure REIT (DGT) 

DGT is a diversified owner, operator and developer of data centres. We expect global demand for data centres to increase, driven by artificial intelligence based services. Shares in DGT were priced at $5 in the initial public offering. The company listed on the ASX on December 13, 2024. The shares were trading at $4.42 on December 19. We believe the discount provides an opportunity to buy a quality exposure. We like the company’s longer term outlook.

HOLD RECOMMENDATIONS

HOLD – Xero (XRO)

This global accounting software company posted impressive half year figures in fiscal year 2025. Revenue grew 25 per cent on the prior corresponding period year to $NZ996 million, with EBITDA up an even more impressive 51 per cent to $NZ312 million. Management isn’t just focused on growth, but also profit and a strong balance sheet. We expect the share price to increase as the company keeps progressing into additional avenues.

HOLD – Opthea (OPT)

Opthea is a clinical stage biopharmaceutical company. The company is seeking US Food and Drug Administration approval for a drug that aims to treat wet age-related macular degeneration. If approved, the company’s drug would be the first new one in the wet age-related macular degeneration space in more than a decade. The company has raised enough cash to safely navigate its phase 3 clinical trials, with results expected in mid-2025. We would expect to see significant share price upside if the results are as positive as phase 2 trials.

SELL RECOMMENDATIONS

SELL – Commonwealth Bank of Australia (CBA)

Australia’s largest bank was recently trading on a price/earnings ratio above 28 times, making it among the most expensive banks in the world on a valuation basis. CBA’s recent dividend yield of about 2.9 per cent on December 19 pales in comparison with its capital note offering a yield of about 7.45 per cent and reduced risk as its higher up the capital structure. CBA recently breached $161 a share to trade at an all-time high. The shares were trading at $155.815 on December 19. Investors may want to consider cashing in some gains.

SELL – Telstra Group (TLS)

Telstra operates in a highly competitive industry, which we believe hinders the company’s ability to achieve margin improvement. Its recent operating margin was lower than past years. In our view, Telstra has consistently underperformed for a long time. Reported net profit after tax of $1.8 billion in fiscal year 2024 was down 12.8 per cent on the prior corresponding period. Reported EBITDA of $7.5 billion was down 4.2 per cent. We can’t see a turnaround in company performance any time soon.

Tony Locantro, Alto Capital 

BUY RECOMMENDATIONS

BUY – Everest Metals Corporation (EMC)

Gold processing has started at the Revere gold project in Western Australia. More than 8000 tonnes of primary and secondary crushed gold-mineralised material has been stockpiled and is ready for processing through the Gekko plant. A 5500 metre regional air core drilling campaign will start in early 2025, with a view to releasing a maiden JORC mineral resource estimate, as work advances on the Mt Edon rubidium resource in WA. The company recently raised $3.993 million via a share placement to professional and sophisticated investors at 11 cents each. The shares were trading at 13.5 cents on December 19. Company plans are progressing, but the stock can be considered highly speculative.

BUY – Red Metal (RDM)

The Sybella Magnet Rare Earth Oxide discovery has been announced as an inferred resource of 4.795 billion tonnes, which underlines its global significance. RDM is prioritising early stage mining, metallurgical and infrastructure studies and has started discussions with governments and potential end users. RDM retains a 44 per cent holding in Maronan Metals, with exposure to the Maronan lead-silver-copper-gold resource in the Cloncurry region of Queensland. A speculative buy as the share price can be volatile. The shares were trading at 10 cents on December 19.

HOLD RECOMMENDATIONS

HOLD – Syntara (SNT)

Myelofibrosis is a rare type of bone marrow cancer that disrupts the body’s normal production of blood cells. This drug development company’s lead candidate is SNT-5505. Positive interim data from a phase 2 clinical trial evaluating SNT-5505, in combination with ruxolitinib, suggests that SNT-5505 has potential as a breakthrough therapy for treating myelofibrosis. The shares have been enjoying favourable momentum, rising from 1.5 cents on May 2 to trade at 6.2 cents on December 19. We regard Syntara as a high risk and high reward company.

HOLD – Saturn Metals (STN)

Saturn is a gold exploration company. It’s developing the Apollo Hill gold project in Western Australia, which has a resource of 1.84 million ounces. In early December, the company advised of a site incident at Apollo Hill that resulted in the fatality of an employee of a drilling contractor. The shares fell from 25.5 cents on December 4 to close at 16.5 cents on December 17. The shares were trading at 20 cents on December 19. In our view, Apollo Hill has the potential to grow beyond 1.84 million ounces. Also, Saturn has a joint venture in the prospective West Wyalong gold field in New South Wales.

SELL RECOMMENDATIONS

SELL – JB Hi-Fi (JBH)

The consumer electronics giant continues to generate sales growth. Total sales growth for JB Hi-Fi Australia was 4.9 per cent in the first quarter of fiscal year 2025. The Good Guys grew total sales by 5.3 per cent. JB Hi-Fi New Zealand generated total sales growth of 19.6 per cent. The share price has soared in fiscal year 2024. The shares have risen from $54.40 on January 2 to trade at $94.59 on December 19. The share price at these levels leave little or no room for disappointment. Locking in some gains might be prudent.

SELL – Guzman Y Gomez (GYG)

This Mexican themed restaurant chain has continued to perform strongly, with the share price trading at $40.80 on December 19 following the initial public offering at $22 in June 2024. One of the risks outside the broader economy is the release of shares from escrow in fiscal year 2025, in our view. The company’s strong performance in a short period of time provides an opportunity to take some profits in a challenging Australian economy experiencing a cost of living crisis.

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BUY RECOMMENDATIONS

BUY – Perpetual (PPT)

Perpetual was established in 1886 as a trustee company and has since built a strong reputation as a diversified asset manager. It reported operating revenue of $1.355 billion in fiscal year 2024, up 32 per cent on the prior corresponding period. Asset management revenue rose to $887.6 million. On May 8, 2024, PPT entered into a scheme implementation deed with an affiliate of Kohlberg, Kravis Roberts & Co to sell its corporate trust and wealth management businesses for $A2.175 billion via a scheme of arrangement. In an update on December 17, 2024, Perpetual announced it had been informed by the Independent Expert that the risk and magnitude of the increased potential tax liabilities, if the transaction was implemented, meant that it wouldn’t be able to form an opinion that the scheme is in the best interests of shareholders. Whatever the outcome, Perpetual will remain a strong operating business, in our view. Our fair value estimate is $24.50, so we believe the shares offer an attractive buying opportunity. The shares were trading at $19.97 on December 19.

BUY – Brambles (BXB)

This supply chain logistics company reported sales revenue from continuing operations of $US1.679 billion in the first quarter of fiscal year 2025, a 3 per cent increase on the prior corresponding period. It was driven by 5 per cent growth at constant foreign exchange rates in the Americas. The company’s circular business model of sharing and re-using pallets, crates and containers creates a competitive advantage that protects the company’s market position over the long term. Our fair value estimate is $22 a share, so Brambles presents a buying opportunity. The shares were trading at $19.11 on December 19.

HOLD RECOMMENDATIONS

HOLD – Sigma Healthcare (SIG)

This pharmaceutical wholesaler and distributor is proposing to merge with Chemist Warehouse. Shareholders of Chemist Warehouse will vote on the proposed scheme at a meeting planned for January 29, 2025. Investors reacted positively to the proposed merger. Sigma’s shares have risen strongly this year to the point they are fully priced, in our view. We expect a successful merger to be earnings per share accretive. The transaction is, in effect, a reverse acquisition of Sigma by Chemist Warehouse. A successful merger would leave Chemist Warehouse shareholders with 85.75 per cent of the merged entity, with 14.25 per cent taken up by Sigma shareholders.

HOLD – ANZ Group Holdings (ANZ)

ANZ Group is experiencing a leadership change following the announcement that Nuno Matos will succeed Shayne Elliott in July, 2025, who is retiring after nine years in the role. The focus remains on integrating recent acquisitions and cost savings. ANZ was recently trading on a reasonable price/earnings ratio of about 13 times, with a partially franked dividend yield above 5 per cent. Our fair value estimate is $32 a share. The shares were trading at $28.71 on December 19.

SELL RECOMMENDATIONS

SELL – Platinum Asset Management (PTM)

Regal Partners, which launched a bid for Platinum Asset Management earlier this year, won’t be pursuing a combination with PTM after completing due diligence. Platinum experienced net outflows of about $841 million in November 2024. This figure includes the loss of an institutional mandate of $537 million and net outflows from the Platinum Trust Funds of $239 million. Consistent outflows and limited product diversification leaves Platinum vulnerable to competition, in our view. The shares have fallen from $1.30 on March 26 to trade at 64.7 cents on December 19.

SELL – GQG Partners Inc. (GQG)

This asset management firm manages global equity portfolios for institutions and individuals. Shares fell significantly in November in response to GQG’s exposure to Adani Group companies, where several Adani executives are at the centre of bribery allegations in the US. GQG remains well diversified. Total funds under management of $US159.5 billion at November 30, 2024 were marginally up on the $US159.4 billion at October 31, 2024. The shares have fallen from $3.09 on July 24 to trade at $2.22 on December 19. It may be prudent to consider cashing in some gains.

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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.