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

This story features WOODSIDE ENERGY GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: WDS

The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

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.

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Don’t you worry about a thing, is the key message analysts at Wilsons are communicating with their clientele this week. Gen.Ai is the real thing and demand for cloud services and data centres is not only firmly supported, it still stands to accelerate.

As one of the chapters in this week’s report reads: Cloud Is Great, But GenAI Will Be Gen-Sational’

Wilsons’ preferred ASX-listed exposures to the theme are (in order of preference) NextDC ((NXT)), Macquarie Technology ((MAQ)), then DUG Technology ((DUG)). The report makes an explicit point of the fact Wilsons does not cover NZ-based Infratil ((IFT)).

In the analysts own words: “We see NextDC as the pre-eminent, Australian-listed data centre pure-play and the highest quality listed way to play the data centre, cloud computing and GenAI thematics. Macquarie Technology Group is another solid player, but is a concentrated opportunity, needing to develop a portfolio approach for to justify a sustained move higher.”

Most investors probably are not yet familiar with Wilsons’ third choice, but DUG Technology has developed a liquid immersion cooling technology that potentially can also be applied by data centres, where direct-to-chip cooling dominates the sector today, but this solution is expected to become insufficient as centres become larger and more complex.

Analysts at RBC Capital expressed a similarly positive view for NextDC and Macquarie Technology this week, arguing that contrary to all the hullabaloo about DeepSeek and possible ramifications, Hyperscaler investments are continuing, and they are on a trajectory that will beat current market projections.

If anyone needs an explanation about Hyperscalers or their importance for data centre operators, I highly recommend reading up on the subject via FNArena’s own dedicated AI section: https://fnarena.com/index.php/tag/gen-ai/

We have a Special Report on the subject too. Paying subscribers can download it via the Special Reports section.

RBC Capital has Outperform ratings for NextDC and Macquarie Technology, and a Sector Perform/Speculative assessment for the much more volatile Megaport ((MP1)).

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When it comes to mining companies, Citi analysts remain Buy rated on the coal and uranium names, with selective Buy calls elsewhere including for BlueScope Steel ((BSL)), Capstone Copper ((CSC)) and BHP Group ((BHP)). Citi continues to prefer Pilbara Minerals ((PLS)) for ASX100 lithium exposure.

In separate research, specifically zooming in on dividend payments this February results season, Macquarie analysts believe Rio Tinto’s ((RIO)) payout announcement is likely to surprise, with Fortescue ((FMG)) expected to meet expectations and both BHP Group and South32 ((S32)) likely to disappoint.

Those expectations are based on BHP conserving cash to compensate for outflows related to Samarco and the Vicuna deal. South32’s result is thought to be weaker than expected, with impact on the dividend.

Those forecasts were backed-up by analysts at UBS who add Mineral Resources ((MIN)) will likely pay out zilch.

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Consumer sector analysts at Jarden see upside risk for corporate results from JB Hi-Fi ((JBH)) –confirmed by now– and Temple & Webster ((TPW)) –equally confirmed. The third one mentioned doesn’t report until later this month; Harvey Norman ((HVN)).

Have been nominated for a negative surprise: Endeavour Group ((EDV)) and Woolworths Group ((WOW)).

Their peers at UBS have only two Sell ratings for the sector; JB Hi-Fi (too expensive) and Lovisa Holdings ((LOV)), with the latter expected to disappoint this month.

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Lastly, the tech desk at Morgan Stanley has the highest conviction in the upcoming results release by WiseTech Global ((WTC)) while singling out Domain Holdings Australia ((DHG)), TPG Telecom ((TPG)) and Seven West Media ((SWM)) as Least Preferred options.

FNArena Talks

In good tradition, I was yet again interviewed by Livewire Markets about the upcoming February results.

The interview (22 minutes) can be accessed via the LivewireMarkets website: https://www.livewiremarkets.com/wires/3-asx-growth-stocks-to-watch-as-earnings-hit-a-turning-point

or via YouTube: https://www.youtube.com/watch?v=PKTJbuIaJk8

This is not the calmest time of the year for FNArena (understatement) but we’ll try to have a written version ready by Monday.

For Best Buys & Conviction Calls: see last week’s https://fnarena.com/index.php/2025/02/06/rudis-view-agl-energy-bega-cheese-brg-harvey-norman-imdex-superloop/

(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.

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