Michael Gable, Fairmont Equities
Aristocratic Leisure (ALL)
The gambling company is a high quality company. It has built a solid track record of double-digit earnings growth over the years. Although the broader stock market bottomed in June, Aristocrat stock is already up from its May bottom. Since then, the stock price has continued to rise despite broader market volatility. From a chart perspective, this is a bullish sign.
Santos will continue to benefit from what I believe will be rising energy prices for some time. The share price has fallen from its June peak in response to a short-term drop in crude oil prices. However, this presents a buying opportunity as the stock price has recently firmed and is resuming its uptrend.
This company is benefiting from higher thermal coal prices, which I believe will remain high going forward. TER’s valuation remains attractive compared to other larger listed companies. In my view, the upward trend in share prices is strong and sustainable.
Earnings prospects remain positive as investments in the oil and gas sector drive demand for Worley’s services. The share price has recently turned away from the strong upward trend in the first half of this calendar year. However, good buy support is now evident at these levels and we expect the share price to continue its upward trend.
Pilbara Minerals (PLS)
Trading stocks in the lithium sector has paid off. But sometimes, stock prices can reflect too much optimism about lithium’s future. PLS’ share price has risen from $2.24 on July 1st to $4.69 on September 15th. I believe that vertical price action up is unsustainable, especially when profit takers make their move.
This infection prevention company’s share price still looks expensive given NAN’s expected earnings growth. Any potential benefit from a change in the company’s distribution model will take time. The chart profile has looked relatively weak due to the lack of buy support at recent prices.
Tim Haselum, Catapult Wealth
Bank of Queensland (BOQ)
We believe banks are facing a reduction in lending, but we are not concerned about impairments as households appear to be in sound financial shape. We like ME Bank’s recovery story and see more synergies in the future. Potential improvements in net interest margin given the company’s undemanding price-earnings multiple present a buying opportunity.
Investors may consider buying this employment and education company on weakness as it recently traded below pre-COVID-19 levels during a period of tight labor markets. The company invests in its IT systems. Revenue from continuing operations increased 47 percent in fiscal 2022. Shares have fallen from $24.64 on Aug. 11 to $20.96 on Sept. 15. We believe SEK offers value at this level.
Grain Corp (GNC)
This diversified Australian agribusiness company expects underlying net income after tax (NPAT) for the full year ended September 30, 2022 to be between $365 million and $400 million. It previously forecast an NPAT of between $310 million and $370 million. However, GNS operates in a cyclical sector, so returns can be negatively impacted by adverse weather conditions and external events such as the war in Ukraine.
The a2 dairy company (A2M)
This baby food company’s share price has performed strongly since mid-June. The company is pressing ahead with its international strategy, but we believe there is a lot of upside priced into the share price. The company operates in highly competitive markets, which could potentially put pressure on margins. Keep an eye on the flow of messages.
Australian agribusiness delivered a strong first half result. Sales revenue of $1.541 billion was 38 percent higher than the same period last year. The stock price has increased from $11.52 on August 4th to $12.77 on September 15th. Given the cyclical nature of the sector, investors should consider taking some profits.
Lendlease Group (LLC)
This integrated international real estate and investment group reported a statutory after-tax loss of $99 million for the year ended June 30, 2022. We are concerned about the outlook for the construction industry given higher interest rates, supply constraints and the potential impact of COVID -19.
Peter Moran, Wilsons
ARB Corporation (ARB)
This four-wheel drive accessory supplier has been impacted by a shortage of new vehicles, supply chain issues and sick leave due to COVID-19. However, growth is expected to pick up again when these problems abate. There is potential for additional growth through a recently announced commercial partnership with Toyota North America. This complements the partnership with Ford, which is still in its infancy. We maintain our overweight position.
Pepper Money (PPM)
This non-bank lender reported pro forma net income after tax of $73.1 million for the first half of 2022, an increase of 11 percent from the same period last year. This is despite a 30 basis point decline in the net interest margin. We assume that rising interest rates will contribute to a partial recovery in margins in the second half of the year. While a general economic slowdown poses a potential risk for lenders, we believe this is overpriced as shares recently traded at 4.5 times earnings. We maintain our overweight position.
The a2 dairy company (A2M)
The infant nutrition company delivered strong results in fiscal 2022. Sales increased by 20 percent compared to the corresponding period of the previous year. Net profit after tax increased by 42.3 percent. However, due to increasing competition and a low birth rate in China, market conditions remain challenging. Consequently, we currently view the company as trading around fair value. We maintain a market weight rating.
Motorcycle Holdings (MTO)
Australia’s largest motorcycle dealer announced respectable full-year 2022 results amid the disruption caused by COVID-19. Underlying EBITDA decreased 4 percent and underlying EBITDA margin decreased 11 percent. Shares appear reasonably valued at current levels. However, with discretionary spending likely to come under pressure next year, we rank MTO as a market weight.
Bravura Solutions (BVS)
This provider of software services to the wealth management and fund management industry has failed to meet investors’ growth expectations, in our view. The company has experienced delays in expected new sales, compounded by rising costs. This has led to a strategic review. Our rating is underweight.
The stock closed at $2.02 on Aug. 25, a day ahead of full-year earnings. Shares have fallen, trading at $1.39 on September 15th. The core wound care company’s sales growth for the June quarter appears to have fallen short of investor expectations, in our opinion. We believe investors are still overly optimistic about the prospects at current prices. We remain underweight.
The above recommendations are general advice and do not take into account an individual’s goals, financial situation, or needs. Investors are advised to seek their own professional advice before investing. Please note that TheBull.com.au only publishes broker recommendations on this site. The publication of these recommendations in no way constitutes an endorsement by TheBull.com.au. You should seek professional advice before making any investment decisions.