Rudi’s View: Ramsay Health Care, Xero And Computershare

This story features CLEANAWAY WASTE MANAGEMENT LIMITED, and other companies. For more info SHARE ANALYSIS: CWY

In this week’s Weekly Insights (this is Part Two):

-Looking For Answers
-Conviction Calls
-Rudi On TV
-Rudi On Tour

[Note the non-highlighted items appear in part two on the website on Thursday]

Conviction Calls

By Rudi Filapek-Vandyck, Editor

Stockbroker Morgans has added Cleanaway Waste Management ((CWY)) to its selection of Conviction Calls in the Australian share market. Cleanaway joins Suncorp ((SUN)), Link Administration ((LNK)), BHP ((BHP)), Westpac ((WBC)) and Oil Search ((OSH)) among large caps, and Senex Energy ((SXY)), PWR Holdings ((PWH)) and CML Group ((CGR)) outside of the Top100.

Cleanaway joins the selection after a presentation by the CEO which “helped reinforce confidence” in the stockbroker’s positive outlook for the company.

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Ord Minnett also has used a general update on investment matters -Investment Insights June Quarter Update- to line up its favourites among listed Australian entities.

Among so-called blue chip stocks, still considered “core” for longer term investment portfolios, Ord Minnett has selected the following nine:

AGL Energy ((AGL)), ANZ Bank ((ANZ)), CSL ((CSL)), GPT Group ((GPT)), Oil Search ((OSH)), Ramsay Health Care ((RHC)), Rio Tinto ((RIO)), Transurban ((TCL)), and Westpac ((WBC)).

For Value investors, the following selection of favourites applies:

AMP ((AMP)), APA Group ((APA)), Charter Hall ((CHC)), Event Hospitality and Entertainment ((EVT)), National Australia Bank ((NAB)), Suncorp, and Wesfarmers ((WES)).

Growth oriented investors have the following seven favourites to choose from:

Aristocrat Leisure ((ALL)), Boral ((BLD)), Caltex Australia ((CTX)), Macquarie Group ((MQG)), Magellan Financial Group ((MFG)), Orora ((ORA)), and Treasury Wine Estates ((TWE)).

Ord Minnett’s selected favourites among small caps include:

Afterpay Touch ((APT)), Austal ((ASB)), Corporate Travel Management ((CTD)), Hansen Technologies ((HSN)), Hub24 ((HUB)), People Infrastructure ((PPE)), Pinnacle Investment Management ((PNI)), RCR Tomlinson ((RCR)), Service Stream ((SSM)), Steadfast Group ((SDF)), and WorleyParsons ((WOR)).

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Here’s one casual observation in relationship to the list of Conviction Calls published by Wilsons; components tend to drop off not because their share price has rallied hard, but because of operational disappointment which then leads to significant weakness in the share price. The latest victim, so to speak, has been Opthea ((OPT)), small cap biotech trying to develop commercial solutions in ophthalmology (eye diseases).

With the share price down approximately by -50% over the year past, Wilsons has now kicked Opthea off its Conviction Calls list. Reason: “A lack of consistent catalysts … could cause short-term underperformance“.

Remaining on the list: Afterpay Touch, Bravura Solutions ((BVA)), Melbourne IT ((MLB)), Ruralco ((RHL)), Collins Foods ((CKF)), Ridley Corp ((RIC)), ImpediMed ((IPD)), Nanosonics ((NAN)), Citadel Group ((CGL)), and Pinnacle Investment.

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CLSA updated their local favourites through the Australia Top15 selection. The following new members have been added: Qantas ((QAN)), Transurban, Link Administration, CYBG ((CYB)), Xero ((XRO)) and Mirvac Group ((MRG)). The following names have been removed: AGL Energy, Scentre Group ((SCG)), Challenger ((CGF)), Ramsay Health Care, Sydney Airport ((SYD)), and Computershare ((CPU)).

This leaves the following components retaining their inclusion: Rio Tinto ((RIO)), a2 Milk ((A2M)), Speedcast International ((SDA)), Macquarie Group, National Australia Bank, CSL, Tabcorp Holdings ((TAH)), Treasury Wine Estates, and OZ Minerals ((OZL)).

Also, on Monday CLSA issued two 60 page reports on Incitec Pivot and Ramsay Health Care respectively. Both exercises in in-depth analysis resulted in positive revisions. Regarding Incitec Pivot, CLSA analysts note how over-supply concerns for fertilisers in Australia have kept a lid on the share price, but it is their prediction the market is migrating towards under-supply. Hence an upgrade to Buy from Outperform, with a price target of $21.

For Ramsay Health Care, investors should expect below average growth in FY19, but with momentum projected to pick up again into double digit percentage thereafter. The number of new operating theatres is expected to pick up again, while competitors are looking the other way, and current problems with regard governments in the UK and in France are expected to be resolved by then as well. On a three year horizon Ramsay shares look significantly undervalued on CLSA’s projections. Hence the upgrade to Buy from Outperform, with a rise in price target to $77.80 from $74.50.

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And finally, the latest update on Citi’s High Conviction list contains Aristocrat Leisure, ALS ltd ((ALQ)), BlueScope Steel ((BSL)), Computershare, Downer EDI ((DOW)), Incitec Pivot, Galaxy Resources ((GXY)), Star Entertainment Group ((SGR)), and Xero on the “long” side (positive view), with JB Hi-Fi ((JBH)) the only one listed on the “short” side (negative view).

Rudi On TV

This week my appearances on the Sky Business channel are scheduled as follows:

-Tuesday, 11.15am Skype-link to discuss broker calls
-Thursday, noon-2pm
-Friday, 11am Skype-link to discuss broker calls

Rudi On Tour

-An Evening With Rudi, Paddington, 11 April (sold out)
-Presentations to ASA members and guests Gold Coast and Brisbane (2x), on 12 & 13 June
-ATAA members presentation Newcastle, 14 July
-AIA National Conference, Gold Coast QLD, late June-August 1
-Presentation to ASA members and guests Wollongong, in September
-Presentation to AIA members and guests Chatswood in October

(This story was written on Monday 9th April and the first part was published on the day in the form of an email to paying subscribers at FNArena, and again on Wednesday as a story on the website. This is Part Two).

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views are mine and not by association FNArena’s – see disclaimer on the website.

In addition, since FNArena runs a Model Portfolio based upon my research on All-Weather Performers it is more than likely that stocks mentioned are included in this Model Portfolio. For all questions about this: info@fnarena.com or via the direct messaging system on the website).

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(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.) 

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(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.) 

P.S. I – All paying members at FNArena are being reminded they can set an email alert for my Rudi’s View stories. Go to My Alerts (top bar of the website) and tick the box in front of ‘Rudi’s View’. You will receive an email alert every time a new Rudi’s View story has been published on the website.

P.S. II – If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided.

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