Rudi’s View: BHP, Capstone Copper, NextDC, WiseTech & Woodside

Rudi's View | Feb 13 2025

By Rudi Filapek-Vandyck, Editor

This month's update on Morningstar's Best Stock Ideas has seen the fresh inclusion of Woodside Energy ((WDS)) which probably comes as no surprise given the energy sector's last hurrah dates from 2023 and Morningstar's choices tend to have a predilection towards underpertforming, "cheaply" priced equities.

But then things are not by default that simple given Santos's ((STO)) shares have hardly shot the lights out over the past number of years, and that stock has now been removed. Morningstar explains the decision by stating it still thinks Santos is undervalued, but Woodside shares, having weakened by almost one third since mid-2023, are seen as better value.

In comparison, Santos shares have merely trended sideways for the past seven years, if we casually ignore a deep dive in 2020 when the world locked down and a subsequent steep recovery from that temporary bottom.

FNArena's consensus price target is currently some 9% above Woodside's slumbering share price, with an estimated 8.2% dividend yield for 2024 (though this is expected to fall to 5.3% for 2025) while the consensus target for Santos remains more than 16.5% above today's share price while offering 5.8% and 5.0% respectively in comparable yields.

I guess this means Morningstar's opinion on Woodside versus Santos is not widely shared across the market.

The analysts' selection of Best Stock Ideas contains 14 other nominations:

-APA Group ((APA))
-ASX ((ASX))
-Aurizon Holdings ((AZJ))
-Bapcor ((BAP))
-Brambles ((BXB))
-Domino's Pizza ((DMP))
-Dexus ((DXS))
-Endeavour Group ((EDV))
-Fineos Corp ((FCL))
-IDP Education ((IEL))
-IGO Ltd ((IGO))
-Ramsay Health Care ((RHC))
-SiteMinder ((SDR))
-TPG Telecom ((TPG))

When RBC Capital analysts select their global best ideas for the energy sector, they too include Woodside Energy as the one and only nomination from the ASX.

Sector analysts at Jarden reported this morning they are looking for a positive update from Woodside management on the Louisiana LNG sell-down process and whether the company has retained its 80% payout ratio.

The latter could be possibly assisted via other funding options such as the reintroduction of a dividend reinvestment plan, this broker suggests.

In terms of the outlook for crude oil prices, usually a rising energy price is required to get share prices going, analysts at Morgan Stanley noted this week that with all the uncertainty weighing on the sector currently, it is probably likely OPEC-Plus will refrain from loosening current production quotas anytime soon and this might actually prove great news for oil pricing in the second half this year.

As noted, only two technology companies are making the list (unless we define IDP Education as technology) and Fineos Corp and SiteMinder wouldn't be on many an investor's radar. The first has yet to deliver a convincing growth trajectory since listing in 2019 and SiteMinder has yet to turn a profit, though at least more analysts covering this company share the enthusiasm.

The situation is remarkably different internationally with Morningstar's Global Best Stock Ideas now also including Microsoft and NXP Semiconductors, with PayPal Holdings already selected.

As noted in weeks prior, SiteMinder is put forward by multiple analysts as potentially one of the surprise performers of the current February results season. The share price has risen in response (of course!) but most price targets are still higher. On current projections, this company will deliver its first statutory profit in FY26.