18 Share Tips - 27th May 2024 - The Bull

18 Share Tips | 27th May 2024 | The Bull https://thebull.com.
au/18-share-tips/27-may-2024/
ANTHONY BLACK
26 May 2024
John Edwards, Novus Capital
BUY RECOMMENDATIONS
BUY – Meteoric Resources NL (MEI)
The company recently upgraded the resource estimate for its Caldeira rare earth element
project in Brazil after completing additional infill diamond and aircore drilling. The global
mineral resource now stands at 545 million tonnes at 2561 parts per million total rare earth
oxides. These results support the Caldeira project’s potential to become a significant long-life
supplier of rare earths, which are crucial for global electrification. I own shares in MEI. Our
12-month price target is 50 cents.
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18 Share Tips | 27th May 2024 | The Bull https://thebull.com.au/18-share-tips/27-may-2024/
BUY – Renegade Exploration (RNX)
RNX has started diamond drilling at its Mongoose Deeps magnetic anomaly within the
Cloncurry project. The anomaly is located beneath the Mongoose copper deposit. Anomaly
interpretation outlines a magnetite rich breccia pipe, with a similar configuration to the Ernest
Henry copper mine with annual production of 80,000 ounces of gold and 50,000 tonnes of
copper. Drilling will test to a depth of 1600 metres. Successful drilling would paint a bright
outlook. I own shares in this high risk, speculative stock.
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HOLD RECOMMENDATIONS
HOLD – BHP Group (BHP)
This mining giant’s takeover proposal for Anglo American was recently rejected for a third
time. The latest revised proposal was increased to about $74 billion, about $10 billion more
than the second bid on May 7. BHP has been granted an extension until May 29 to announce a
firm intention to make an offer, or announce it does not intend to make an offer for Anglo
American. The market is concerned BHP may be offering too much for Anglo American. On
the positive side, Anglo American has some of the best copper mines in the world.
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HOLD – James Hardie Industries PLC (JHX)
JHX is a building products maker. The company reported record net sales of $US3.936 billion
in full year 2024, up 4 per cent on the prior corresponding period. Moving forward, JHX is at
risk of margin pressure from rising costs of pulp and cement. Delayed interest rate cuts have
deferred the timing of a broad-based recovery in renovations.
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SELL RECOMMENDATIONS
SELL – Commonwealth Bank of Australia (CBA)
Operating income fell 1 per cent in the third quarter of fiscal year 2024. Net interest income
was 1 per cent lower and net interest margins slightly fell. We expect margin pressure on
earnings to impact the full year results. CBA shares have risen from $111.86 on April 19 to
trade at $120.815 on May 23. We expect the share price to fall substantially following full year
results expected in August. In the meantime, investors may want to cash in some gains.
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SELL – Pilbara Minerals (PLS)
A large physical lithium surplus has been forecast due to weaker demand for electric vehicles
in the US and Europe. The PLS share price is highly correlated to lithium prices, and the stock
is highly liquid. The forecast for a lithium market surplus and consequent lower prices during
the next 12 months are behind our sell recommendation.
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Christopher Watt, Bell Potter Securities
BUY RECOMMENDATIONS
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BUY – Aristocrat Leisure (ALL)
This gaming content creation company delivered strong earnings that exceeded consensus
estimates in its first half 2024 results. The strong operational result was driven by lower-than-
expected corporate costs. The stock remains one of the highest quality growth names on the
ASX.
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BUY – Woodside Energy Group (WDS)
The recent share price pullback in this energy giant presents an attractive entry point for
investors, in our view. The shares have fallen from $30.59 on April 11 to trade at $27.45 on
May 23. Although first quarter 2024 production fell by 7 per cent on the fourth quarter of
fiscal year 2023, the company retained full year 2024 guidance of between 185 million and 195
million barrels of oil equivalent. Woodside remains Australia’s premier oil and gas exposure.
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HOLD – ResMed Inc (RMD)
The sleep apnoea device maker’s better than expected third quarter results in fiscal year 2024
showed a marked improvement in gross margins, which had previously been a reason for the
stock’s declining share price. Weight loss and diabetes drugs didn’t impact demand for RMD’s
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treatment products. The recent share price rally leaves us with a neutral rating.
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HOLD – Pro Medicus (PME)
The company provides medical imaging software and services to hospitals and health care
groups across the world. The shares have risen from $59.44 on May 25, 2023, to trade at
$117.80 on May 23, 2024. A concern is intensifying scrutiny on a weakening macro outlook
since January 1 impacting the valuation of equities at the growth end of the market. PME
remains a quality technology company, but keep an eye on the news flow at these levels.
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SELL – Cochlear (COH)
The hearing implants maker has delivered significant earnings growth in the past few years,
driven by an increase in service revenues and new products. COH is a quality business. The
shares have risen from $244.04 on May 25, 2023, to trade at $322.93 on May 23, 2024. We
remain cautious about the current valuation, so investors may want to consider cashing in
some gains.
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SELL – National Australia Bank (NAB)
The bank recently delivered a first half 2024 result that largely met expectations. We don’t
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believe the current valuation is justified and remain cautious about the near-term earnings
outlook. While lending pressures are moderating, we expect deposit-led margin headwinds to
persist.
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Tony Paterno, Ord Minnett
BUY RECOMMENDATIONS
BUY – Helloworld Travel (HLO)
HLO operates a travel distribution company in Australia and New Zealand A trading update
10 of 19 18/06/2024, 7:48 am
HLO operates a travel distribution company in Australia and New Zealand. A trading update
for the March quarter of 2024 revealed that unaudited total transaction value of $854.9
million was up from $596.2 million in the prior corresponding period. Unaudited underlying
EBITDA of $14.6 million was up from $14.2 million. The company re-affirmed full year
guidance. It has no debt. A weaker share price in the past month provides a buying
opportunity.
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BUY – Smartgroup Corporation (SIQ)
SIQ provides salary packaging and fleet management services. A first quarter trading update
in fiscal year 2024 highlighted increasing demand for electric vehicles. These accounted for 42
per cent of new car lease orders. As expected, costs also increased, but the net result was about
3 per cent ahead of our expectations. Earnings in the second half of fiscal year 2024 should
improve once the South Australian Government contract starts, supported by further growth
in novated leasing volumes across the rest of SIQ’s business.
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HOLD – Transurban Group (TCL)
We are downgrading our fiscal year 2024 proportional EBITDA forecast for this toll road
operator, as traffic volumes are softer than we expected. Longer term forecasts are largely
unchanged, and we continue to forecast a five-year EBITDA compound annual growth rate of
about 7 per cent. Management says it will focus on extracting cost efficiencies and improving
profit margins, but TCL always has an eye on expanding via acquisitions and developments.
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HOLD – Commonwealth Bank of Australia (CBA)
The bank reported an unaudited 2024 third quarter cash net profit after tax of $2.4 billion,
down 3 per cent on the quarterly average in the first half. The decline is tracking marginally
better than we expected. Operating expenses were well contained, up by 2 per cent. In the next
five years, we assume pricing on loans and customer deposits will enable a modest margin
improvement and a return to loan growth in line with the market.
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SELL – JB Hi-Fi (JBH)
Shares in this consumer electronics giant are materially overvalued, in our view. We believe
we’re more cautious than the market on the outlook for maintaining operating margins.
Discounting has gripped the consumer electronics and household appliance retailing
categories as competition intensifies amid weaker demand. We expect promotional activity to
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stay elevated and potentially weigh on JB Hi-Fi’s sales and gross profit margins in the second
half of fiscal 2024.
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SELL – BlueScope Steel (BSL)
We believe the stock is overvalued. Steelmakers are price takers and have no control over
steelmaking spreads, which have historically demonstrated significant volatility. End market
demand for steel is driven by construction activity, which is cyclical. Import tariff regulations
can impact BlueScope’s earnings.
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18 Share Tips | 27th May 2024 | The Bull https://thebull.com.

John Edwards, Novus Capital

BUY – Meteoric Resources NL (MEI)

BUY – Renegade Exploration (RNX)

HOLD – BHP Group (BHP)

HOLD – James Hardie Industries PLC (JHX)

SELL – Commonwealth Bank of Australia (CBA)

SELL – Pilbara Minerals (PLS)

Christopher Watt, Bell Potter Securities

IG - Extensive product array and user-friendly platforms - Read our review

BUY – Aristocrat Leisure (ALL)

BUY – Woodside Energy Group (WDS)

HOLD – ResMed Inc (RMD)

HOLD – Pro Medicus (PME)

SELL – Cochlear (COH)

SELL – National Australia Bank (NAB)

Tony Paterno, Ord Minnett

BUY – Helloworld Travel (HLO)

BUY – Smartgroup Corporation (SIQ)

HOLD – Transurban Group (TCL)

HOLD – Commonwealth Bank of Australia (CBA)

SELL – JB Hi-Fi (JBH)

SELL – BlueScope Steel (BSL)

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