18 Sharing Tips – March 14, 2022

Jabin Hallihan, Morgans

PURCHASE RECOMMENDATIONS

Challenger (CGF)

This financial services company offers retirement products to investors, such as annuities and other income funds. One of the main features of these products is that they distribute cash flow and protect against market fluctuations and inflation risks. These products are attractive for their stability, especially in times of market volatility. The dividend yield was recently 3.7%. Our 12-month price target is $7.74.

Silk Logistics Holdings (SLH)

The company provides port logistics, warehousing, quayside trucking, distribution and supply chain services in capital cities across Australia. SLH uses a flexible, technology-based, lean business model that protects against rising costs when passed on to customers at a margin. The company generated revenue of $182.5 million in the first half of 2022, an increase of 18.5% compared to the previous corresponding period. The outlook for the full year is one of solid growth. Our 12-month price target is $3.31 per share.

MAINTENANCE RECOMMENDATIONS

InvoCare (IVC)

We maintain a positive long-term view of this funeral service provider given the aging population. The fundamentals of the company are solid. However, the recent strength in the share price since late January leaves IVC almost fully priced, in our view. Therefore, we are downgrading from a recommendation to add to a suspension. We will revise our rating if the share price declines.

Flight Center Travel Group (FLT)

The global travel agency’s underlying EBITDA loss in the first half of 2022 was worse than consensus estimates. This despite a better performance in turnover. However, management is confident that travel will return to pre-COVID-19 levels by 2024. The stock is trading broadly in line with our price target, so we maintain a holding rating.

SALES RECOMMENDATIONS

TPG Telecom (TPG)

Several one-time and early initiatives have accelerated capital spending, driving our near-term numbers lower. We recognize that TPG is investing to grow the business and that these results will create long-term value. But, in the short term, we have revised down our recommendation to reduce positions.

Delorean Corporation (DEL)

DEL produces renewable energy and is an energy retailer in Australia and New Zealand. It reported a loss of nearly $2.3 million in the first half of 2022 as the business was impacted by COVID-19. We expect DEL to continue to experience a challenging operating environment in the second half. The company’s balance sheet also tightened, with the cash balance falling to $4 million due to large operating outflows in the first half. Investors may consider reducing their positions.

Tony Locantro, Alto Capital

PURCHASE RECOMMENDATIONS

Chimeric Therapeutics (CHM)

CHM is a clinical-stage cell therapy company. The company recently announced encouraging results from the Phase 1 trial of its CORE NK platform in blood cancers and solid tumors. According to CHM, the trial saw all three patients treated with blood cancers achieve better stable disease response at day 28. CHM is a speculative buy. The shares were trading at 15.5 cents on March 10.

Godolphin Resources (GRL)

This explorer specializing in gold, copper and base metals from New South Wales has announced a farming agreement for the Narraburra Rare Earth Element (REE) project. It has been identified as one of Australia’s largest resources of zirconium, REE and rare metals, which also contains significant amounts of lithium. The Australian Trade and Investment Commission classifies it as a critical mining project. Results from recent drilling at the Gundagai Gold Project are expected shortly.

MAINTENANCE RECOMMENDATIONS

Pacgold (PGO)

PGO has announced a significant expansion of the high-grade F1a zone of the Alice River Gold Project in North Queensland. The results include 43 meters at 3 grams of gold per tonne, including 6 meters at 17.5 grams of gold per tonne and 1 meter at 79.1 grams of gold per tonne. PGO is expanding its 2022 drilling program, with two rigs ready to resume towards the end of the rainy season. We view PGO as a highly speculative growth opportunity in the gold sector.

Mako Gold (MKG)

Mako Gold holds significant gold interests in Côte d’Ivoire in West Africa. It recently announced encouraging drill results on the Tchaga and Gogbala prospects. A mineral resource estimate is expected in mid-June 2022, after 60,000 meters of drilling at both prospects. Several high-grade gold targets have been identified at the Korhogo project, and drilling is expected to begin in April 2022. We view MKG as a growth opportunity in the gold sector.

SALES RECOMMENDATIONS

Woodside Petroleum (WPL)

The conflict between Russia and Ukraine has seen the price of crude oil soar above $100 a barrel, sparking renewed interest in the energy sector. WPL’s stock price recently hit a two-year high. The strong share price performance offers investors the opportunity to consider locking in some of the profits.

Genworth Mortgage Insurance Australia (GMA)

GMA reported statutory net profit after tax of $192.8 million for the year ended December 31, 2021. Net profit after tax was supported by a strong underwriting result of $295.8 million. The result was driven by strong growth in house prices, falling defaults and a low number of mortgages in possession. We expect the real estate market to slow as higher interest rates loom.

Peter MoranWilson

PURCHASE RECOMMENDATIONS

Silk Laser Australia (SLA)

The laser clinic operator achieved a positive result in the first half of 2022 despite the negative impacts of COVID-19. The company also benefited from the acquisition of Australian Skin Clinics (ASC), which came under the control of SLA in September. The 56 ASC clinics are being smoothly integrated and provide an opportunity for growth in Victoria and New Zealand, which previously lacked the ALS footprint. We maintain an overweight recommendation.

Integrated diagnostics (IDX)

This diagnostic imaging services company recently undertook a fundraising of 90 million dollars to finance the acquisition of Peloton Radiology. Net operating profit after tax for the first half of 2022 decreased by 21.7% compared to the previous corresponding period. The result was impacted by the restrictions related to COVID-19. However, with the easing of restrictions, we expect profitability to recover as margins improve and recent investments in their business begin to yield a return. We maintain an overweight recommendation.

MAINTENANCE RECOMMENDATIONS

Costa Group Holdings (CGC)

In our view, CGC reported a strong result for fiscal 2021 given the challenges the business faced earlier in the year. As Australia’s largest grower, packer and distributor of fresh fruit and vegetables, Costa has been able to manage the supply chain and working conditions more efficiently than its smaller competitors. The company expects the outlook to improve in 2022. We consider the shares to be fairly valued at current prices. We hold a market weight rating.

Rural Funds Group (RFF)

This real estate investment trust produced a strong six-month result for the six months ending December 31, 2021. The company’s recent acquisition of macadamia properties is a smart move. The leasing of two cattle properties to the Australian Agricultural Company is proof of their appeal. At recent prices, RFF shares were yielding slightly above 4%. We hold a market weight rating because stocks are fairly valued.

SALES RECOMMENDATIONS

Avita Medical Inc. (AVH)

This regenerative tissue company has developed and commercialized its product RECELL for the treatment of burns. Valuation multiples of other wound care companies fell. AVH faces challenges in this environment as the company recently announced a net loss. Profitability is still a long way off, in our opinion. We hold an underweight rating.

Bravura Solutions (BVS)

This provider of wealth management and fund administration software has published a result for the first half of 2022 below previous forecasts and market expectations. The company cited delayed revenue growth as a problem. Rising labor and cloud costs present challenges. In today’s market, we believe there are better alternatives. We hold an underweight rating.

The recommendations above 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 merely publishes broker recommendations on this page. The publication of these recommendations does not constitute an endorsement by TheBull.com.au. You should seek professional advice before making any investment decision.