Home Impact producer 18 Sharing Tips – October 17, 2022

18 Sharing Tips – October 17, 2022

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John Athanasiou, Red Leaf Securities

PURCHASE RECOMMENDATIONS

Ansell (ANN)

During inflation, companies with pricing power tend to outperform. Ansell, a leading manufacturer of industrial and medical protective gloves, was able to pass on rising production costs without any significant impact on demand. Therefore, we expect the stock price to outperform.

Energy Paladin (PDN)

The uranium company owns a 75% stake in the Langer Heinrich mine in Namibia. The stock price is strongly correlated to the price of uranium. The political momentum for uranium as a clean and reliable source of energy, particularly in Europe, is accelerating. Therefore, we expect rising uranium prices to translate into improved stock prices going forward.

MAINTENANCE RECOMMENDATIONS

Whitehaven Coal (WHC)

The coal producer’s share price rose from $2.76 on January 4 to $10.80 on October 13. Energy supply problems related to the conflict in Ukraine contributed to the increase. While we don’t expect the energy supply issues to be resolved in the short term, we don’t recommend pursuing WHC at these prices. Better to hold and monitor the energy supply crisis before changing your position, in our opinion.

Transurban Group (TCL)

The company owns and operates toll roads in Australia and overseas. More than half of its income is linked to the rise in the consumer price index. Motorists may reduce their vehicle trips in response to rising fuel prices and rising costs of living. In our view, it is best to hold and assess the economic outlook going forward.

SALES RECOMMENDATIONS

Pilbara Minerals (PLS)

The Australian lithium producer’s share price fell from $2.28 on June 2 to $5 on October 13. The company benefited from higher lithium prices. In fiscal 2022, the company generated revenue of $1.2 billion, an increase of 577% over the prior corresponding period. Investors may consider cashing out some gains.

West African Resources (WAF)

This unhedged gold producer is based in Burkina Faso, where there has been a change in military leadership. The stock price rose from $1.40 on August 10 to $1.047 on October 13. Risk is an investment consideration. We prefer more attractive and stable opportunities elsewhere.

Harrison Massy

Harrison Massey, Argonaut

PURCHASE RECOMMENDATIONS

Centaurus Metals (CTM)

Centaurus owns and operates the Jaguar nickel project in Brazil. Jaguar has a JORC nickel resource of 80.6 million tonnes at 0.91% nickel. The company expects to release an updated mineral resource estimate at the end of October. The update can upgrade the resource. The company is well funded with $50 million in cash reserves.

Ramélius Resources (RMS)

This Australian gold producer has flagship assets in Western Australia. Despite producing 258,625 ounces of gold in fiscal 2022 at a competitive all-in sustaining cost of $1,523 per ounce, the company was sold due to lower profit margins and an increase input and labor costs. We believe RMS will have a stronger 2023 by offering new reserves. We expect better than expected cash returns.

MAINTENANCE RECOMMENDATIONS

Newcrest Mining (NCM)

Increased cost pressures in fiscal 2022 reduced the gold producer’s profit margin compared to prior periods. An environment of high inflation and rising interest rates is generally difficult for gold producers. But given the size and scale of Newcrest, we think it’s still worth holding onto for gold exposure.

Pilbara Minerals (PLS)

Pilbara owns and operates the Pilgangoora lithium project in Western Australia. The company produced 377,902 dry metric tons of spodumene concentrate in fiscal 2022. It generated revenue of $1.2 billion, an increase of 577% over the prior corresponding period . The share price doubled between July and October 13. It may not be worth adding more stocks at this point, but we suggest keeping exposure to lithium.

SALES RECOMMENDATIONS

Harvey Norman Holdings (HVN)

The retail giant posted net profit after tax of $811.53 million in fiscal 2022, down 3.6% from the previous corresponding period. Inflationary pressures and rising interest rates are expected to impact discretionary consumer spending going forward. It may be worthwhile for investors to consider reducing their exposure to the retail sector.

Temple & Webster Group (TPW)

The online furniture and homewares retailer’s share price rose from $2.97 on July 12 to $5.26 on October 13. It may be time for investors to consider cashing in on some gains as the economic outlook points to a likely reduction in discretionary spending as consumers grapple with higher increases in the cost of living.

Jed Richards, Shaw and partners

PURCHASE RECOMMENDATIONS

CSL (CSL)

This blood products company has demonstrated for more than 25 years that it can generate a high rate of return. It leads the global plasma industry and dominates the market. The company’s research and development program will allow CSL to maintain its position as a leader in innovation. The healthcare sector performs well in various economic conditions because it is a non-discretionary expense.

ResMed Inc (RMD)

The breathing apparatus company’s popularity surged after competitor Philips announced a product recall last year. The Philips recall was factored into RMD’s share price. But, in the longer term, we still expect the impact of the recall to allow RMD to increase and maintain its market share in the respirator market.

MAINTENANCE RECOMMENDATIONS

Brambles (BXB)

The share price of this global logistics supply chain company fell from $13.10 on August 22 to $11.28 on October 13. However, the company’s defensive earnings are attractive. Additionally, the ability to pass on higher input costs makes BXB an attractive investment proposition in this inflationary and volatile environment. We expect the benefits of automation to further improve profit margins over the medium term.

Telstra Company (TLS)

The company’s infrastructure generates predictable, annuity-like cash flows. TLS dominates the Australian telecommunications market. It has the best network and a mobile market share of around 50%. While company earnings are reliable, we believe the stock is fully valued at these levels.

SALES RECOMMENDATIONS

Pilbara Minerals (PLS)

We believe in the lithium story. Supply shortages have driven lithium prices higher. But the PLS share price rose more than 100% between early June and October 13. In our view, the stock is overvalued. More attractive opportunities exist elsewhere. Recession fears could impact commodity prices over the next 12 months.

Woodside Energy Group (WDS)

WDS has strongly outperformed the market this year. It benefited from the rise in energy prices in response to the war in Ukraine. High crude oil prices are expected to fall if the Ukrainian conflict is resolved. Longer term, we expect crude oil prices to fall as the transition to renewable energy accelerates.

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.