The Bull: Buy – Hold – Sell 30.4.18

BUY RECOMMENDATIONS

Technology One (TNE)

Chart: Share price over the year

 

Australia’s largest provider and consultant of enterprise software. TNE has delivered many consecutive years of record revenues, licences and profit, which has been driven by its cloud and mobile first strategy. The transition into cloud product is gaining momentum as more customers move away from customised software.

Speedcast International (SDA)

Chart: Share price over the year

 

SDA buys satellite capacity from operators and then resells the satellite usage and telecommunication services to more than 100 different customers primarily operating in remote locations, such as ships and offshore oil rigs. The company continues to reduce debt and is winning new global contracts in a growth industry.

HOLD RECOMMENDATIONS

Credit Corp Group (CCP)

Chart: Share price over the year

 

CCP is a quality business and Australia’s largest receivables management group. The business exerts high asset turnover and a low cost to collection ratio that’s enabled the company to increase earnings and dividends each year for the past 10 consecutive years. For a business with an earnings per share compound annual growth rate of 28 per cent, a price/earnings ratio below 20 seems cheap.

Fisher & Paykel Healthcare Corporation (FPH)

Chart: Share price over the year

 

FPH has a dominant global position in the respiratory and acute care market. Margin expansion of this high quality business has been underpinned by increasing production in Mexico, which now accounts for 35 per cent of the company’s total manufacturing output.

SELL RECOMMENDATIONS

Metcash (MTS)

Chart: Share price over the year
The stock has risen from $2.75 on December 1 to close at $3.53 on April 26. However, international entrants Aldi and Costco are formidable competitors to the long established supermarket giants. In our opinion, management’s cost cutting program and Mitre 10’s strong performance won’t be enough to preserve margins moving forward.

Coca-Cola Amatil (CCL)

Chart: Share price over the year

 

The stock has been trending up since November 2017 to close at $9.24 on April 26. However, we feel the structural trend of consumers moving away from fizzy drinks will remain a headwind for some time. In our view, competitor pricing pressure and intense competition across the grocery industry have the potential to further compress margins.
By | 2018-08-27T04:50:17+00:00 May 2nd, 2018|Articles|