Adam Spicer, Baillieu Holst
BUY RECOMMENDATIONS
Magellan Financial Group (MFG)
 Chart: Share price over the year

This high quality funds manager has pulled back from its recent high of $28 and represents an attractive entry point. MFG is benefiting a domestic market rotation into international equities and is also likely to benefit from strong inflows during the next few years from the offshore institutional market. Magellan has delivered an average return on equity of about 60 per cent per annum over the past five years. The shares were trading at $23.82 on March 29.  The Reject Shop (TRS)
 Chart: Share price over the year

Reported a 2018 first half net profit after tax of $17.7 million, an increase of 1.1 per cent on the prior corresponding period. The result beat previous management guidance and TRS announced a fully franked interim dividend of 24 cents a share. Sales were up 1.1 per cent to $437.6 million due to improving merchandising and distribution strategies. Management is projecting recent positive sales momentum to continue into the second half. TRS has a healthy balance sheet and generates strong operating cash flows. The price/earnings ratio should re-rate. HOLD RECOMMENDATIONS
Wesfarmers (WES)
 Chart: Share price over the year

The industrial conglomerate will spin off the Coles business and retain up to a 20 per cent stake in a separately listed ASX company. Wesfarmers has turned around the Coles performance in the past five years. Coles is a mature business with modest growth prospects, so it makes sense to demerge the retailer. That will enable WES to focus on its most profitable businesses and enhance shareholder value. Mineral Resources (MIN)
 Chart: Share price over the year

MIN is an Australian based mining service, contracting, processing and commodities production company. MIN is growing its lithium business, which should contribute to the group’s earnings in future years. MIN has a sound balance sheet and its recent fully franked dividend yield was 4.2 per cent. It offers exposure to growing demand for lithium.  SELL RECOMMENDATIONS
Spark Infrastructure Group (SKI)
 Chart: Share price over the year

The objective of this infrastructure fund is to invest in regulated electricity distribution businesses in Victoria and South Australia. Despite SKI paying a growing dividend stream in the past six years, SKI, in our view, is expensive relative to the prospect of higher interest rates and bond yields. If higher interest rates and bond yields emerge, SKI has to retain its dividend growth rate to justify its price. Altium (ALU)
 Chart: Share price over the year

Develops and sells computer software for the design of electronic products. ALU reported a strong 2018 interim result of 30 per cent revenue growth and net profit after tax growth of 51 per cent compared to the prior corresponding period. On March 27, the market was paying about 56 times prospective fiscal year 2018 earnings. This is too rich for my liking. It may be prudent to take some profits.

Tony Paterno, Ord Minnett
BUY RECOMMENDATIONS
Transurban Group (TCL)
 Chart: Share price over the year

This toll road operator has reached an agreement to acquire 100 per cent of the equity interests in the A25 toll road in Montreal, Canada. The company’s $9 billion development pipeline and management initiatives should grow toll revenues and EBITDA at a rate in excess of local economies in the near term. More acquisition growth could result from a potential stake in WestConnex.
Boral (BLD)
 Chart: Share price over the year

In Australia, we expect this building supplier’s earnings will be largely driven by the success of road infrastructure spending and price increases in heavy construction materials. Clear signs have emerged that activity has picked up in this space, particularly in the eastern states. Offshore, BLD’s acquisition of US firm Headwaters will be a key driver of future growth.
HOLD RECOMMENDATIONS
Woodside Petroleum (WPL)
 Chart: Share price over the year

The share price isn’t factoring in much of this energy giant’s growth portfolio. These include small scale, near term projects, such as Senegal and Myanmar, and larger longer term projects, such as Scarborough and Browse. The stock is looking more attractive on a valuation basis. The risk is a significant lift in capital expenditure in the medium to long term.
Coca-Cola Amatil (CCL)
 Chart: Share price over the year

We believe structural issues remain in Australian Beverages and the container deposit scheme adds uncertainty. Indonesia remains an attractive long term growth opportunity, although near term challenges with the non-alcoholic ready-to-drink market exist. Alcohol and coffee is performing well and management is exploring growth opportunities. Valuation support is limited at the current share price, although the dividend yield can be seen as attractive.
SELL RECOMMENDATIONS
Qantas Airways (QAN)
 Chart: Share price over the year

We believe persistent headwinds from a weaker domestic air travel market and challenging international conditions present an opportunity to take a profit. The shares were trading at $5.815 on March 29.
Medibank Private (MPL)
 Chart: Share price over the year

Industry volume growth has turned negative, and there’s considerable political pressure for lower premium rates and lower profits, to the point where the federal opposition has made 2 per cent caps on rate increases a part of its election promises. It’s losing share and it will still take some time to fix these trends.

James Bryce-Lind, Patersons
BUY RECOMMENDATIONS Reliance Worldwide Corporation (RWC)
Chart: Share price over the year

The company’s SharkBite fittings are revolutionising behind the wall plumbing in commercial and residential markets. RWC offers strong global earnings growth, increasing EBITDA margins and robust distribution channels in Northern America. RWC’s resilience during recent market volatility has kept its rising trend intact. Domain Holdings Australia (DHG)
Chart: Share price over the year

DHG had been bottoming for the past three months, but recently began to show positive price action. This indicates the stock overhang from the Fairfax Media demerger is as good as gone. As competition in the housing market intensifies, sellers will begin to use more of DHG’s premium offerings and extend the time houses are listed on the site. Both will be good for DHG’s bottom line. HOLD RECOMMENDATIONS Medical Developments International (MVP)
Chart: Share price over the year

This healthcare stock has run hard since early December and is perhaps getting ahead of itself. I’m confident its pain relief product Penthrox will receive US Food and Drug Administration approval, which should trigger the next leg higher. But for now the stock seems extended. CSL (CSL)
Chart: Share price over the year

This blood products company has enjoyed a strong run in the past six months to close at $155.46 on March 29. The stock seems over bought in the short term. But our long term view is positive.
SELL RECOMMENDATIONS Afterpay Touch Group (APT)
Chart: Share price over the year

We believe this technology driven payments company is overvalued at these levels. I like the theme moving forward, but the stock needs time to cool given its market cap has soared in the past 12 months. The stock broke its rising trend line after a few large volume distribution days in February. AMP (AMP)
Chart: Share price over the year

We’re concerned about the company’s debt. Yet it still paid between 70 per cent and 90 per cent of underlying profit as dividends in fiscal year 2017. The share price is again trending down. The shares were priced at $5.47 on March 8. The shares closed at $4.99 on March 29. The chief executive is retiring at the end of the year, adding to uncertainty.

 

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