Rudi’s View: ALS, Bega, Coles, Elders, Light & Wonder, Lovisa, Telix & More

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This story features AMCOR PLC, and other companies.
For more info SHARE ANALYSIS: AMC
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

Updates on Model Portfolios, Best Buys, Top Picks, Sector favourites and Conviction Buys.

By Rudi Filapek-Vandyck, Editor

Amidst all the attention about quarterly results in the US, investors better not forget corporate Australia has its own mini-results season in November.

It starts with Amcor ((AMC)), ResMed ((RMD)) and two mining companies on October 31^st and ends with Metcash ((MTS)) and Collins Foods ((CKF)) in early December.

In between we’ll hear from tech stalwarts such as TechnologyOne ((TNE)) and Xero ((XRO)), as well as from the likes of Elders ((ELD)), Fisher & Paykel Healthcare ((FPH)), Smartpay Holdings ((SMP)), Webjet ((WEB)) and numerous others.

The FNArena Monitor usually finishes the calendar year with circa 55 post-August financial result updates and thus far the teller shows 11 results monitored.

That’ll become 12 by Friday when Newmont Corp ((NEM)) is scheduled to release Q3 financials, implying the coming six weeks or so will see more than 40 financial releases being updated.

Let’s hope underlying trends and the final balance will turn out a lot better than what August had to offer (pretty disappointing).

Thus far, those 11 early updates haven’t exactly been heartwarming either (five disappointments versus two positive surprises).

Local strategists at UBS are optimistic. The outlook continues to improve for commodities and producers and those companies operating in their slipstream (so to speak) should enjoy some of the benefits too.

For November results, UBS is thus expecting positive commentary from the likes of Orica ((ORI)), Dyno Nobel ((DNS)) and ALS Ltd ((ALQ)).

With US consumers still under pressure, the message is investors should probably not expect too much from the likes of Amcor and James Hardie ((JHX)).

The big revival in the price of gold (if we can call it that) is injecting a lot of momentum into capital raisings by miners and ALS Ltd’s geochemistry testing volumes should be one logical beneficiary.

The ALS share price, the strategists highlight, is closely correlated with the pricing of gold and copper and both are reaching for record highs.

Extra observation: it is for this same reason analysts at Citi are toying with the idea ALS could be in the early stages of a multi-year upgrade cycle for its Commodities business.

Incidentally, Imdex ((IMD)) is equally often highlighted as a beneficiary of increased activity among gold explorers and producers.

UBS’s three Key Buy recommendations for the season are ALS, Orica and Amcor.

Dyno Nobel’s share price is not far off from UBS’s price target ($3.35) and Amcor post-Berry merger is potentially cum double digit EPS growth over the next three years, but the market wants proof of execution.

Clearly, UBS thinks the market is too hesitant, which makes the share price look ‘cheap’ and attractive.

FNArena’s Results Monitor: https://fnarena.com/index.php/reporting_season/

Aussie Healthcare

The ASX-listed healthcare sector only has a few companies participating throughout the November results season, most notably ResMed and Fisher & Paykel Healthcare ((FPH)).

Sector analysts at Morgan Stanley believe there are plenty of other potential catalysts on the short-to-medium term horizon, such as CSL’s ((CSL)) capital markets day on November 5.

It’s essentially a day of briefings to analysts who are hoping management has positive insights to share about the proposed Seqirus de-merger, the outlook for immunoglobulins and whatever the new plans are for further margin improvement.

Morgan Stanley rates the event as ‘Highly Important’, potentially providing investors with modestly positive insights.

For ResMed, apart from quarterly results, the attention shifts to February next year, when key competitor Philips in the Netherlands is organising its capital markets day.

Philips is still not allowed to sell competing CPAP machines in the US market and ResMed continues to reap the extra benefits in the meantime.

Post today’s AGM update, well-received, Cochlear’s ((COH)) share price direction could be impacted by quarterly results from competitor Med-El as well as trial data from Moderna’s CMV vaccine.

Moderna’s mRNA-1647 vaccine in development is focused on the prevention of CMV infection in females aged 16-40, which could impact on hearing loss and thus on Cochlear’s addressable audience.

An update of the Fair Work Commission work value case is expected to be released before the end of the calendar year and Morgan Stanley believes there could be a negative flow on impact for Ramsay Health Care ((RHC)).

In the event of increased award rates, it is the analysts’ understanding any wage increase should be funded by insurers, but a less than full offset has the potential to impact Australian earnings and margins for the private hospital operator.

Others, including Ansell ((ANN)) and Sonic Healthcare ((SHL)), should provide trading updates when addressing shareholders.

Elsewhere, Morgan Stanley has selected a2 Milk ((A2M)), Coles Group ((COL)), Harvey Norman ((HVN)) and JB Hi-Fi ((JBH)) for expected positive AGM updates over the weeks ahead.

Have been identified for likely not so positive AGM updates:

• Domino’s Pizza ((DMP))
• Endeavour Group ((EDV))
• Woolworths Group ((WOW))

Sigma Healthcare ((SIG)) had equally been nominated for a positive AGM update that was duly delivered this week.

Wilsons On Healthcare

The local healthcare sector is equally in focus at Wilsons Advisory where portfolio strategists very much like Quality and Growth and local healthcare, despite years of underperformance, is still seen offering exactly that.

Three reasons why local healthcare’s underperformance may not have that much longer to run:

–Valuations across the board look a lot more attractive, in particular relative to the rest of the market

–Earnings growth looks above-average for the three years ahead (Wilsons estimates double the market’s average growth)

-Wilsons thinks the sector offers compelling bottom-up growth stories, including for its two sector favourites; ResMed and Telix Pharmaceuticals ((TLX))

Wilsons’ Focus Portfolio retains an Overweight allocation to the sector, also including CSL (together with the two mentioned favourites).

Bell Potter On Agriculture

GrainCorp ((GNC)) is no longer included in Bell Potter’s Top Picks selection for ASX-listed agricultural companies.

In its place has come Select Harvests ((SHV)) with Bell Potter commenting that share price has been flat lining recently despite softer US almond crop deliveries offering the potential for better pricing in AUD.

Remain on the Top Picks list:

• Bega Cheese ((BGA))
• Elders ((ELD))
• Nufarm ((NUF))
• Rural Funds Group ((RFF))

Elsewhere, Bell Potter’s Key Picks for exposure to consumer budgets via the ASX are:

• Bega Cheese
• Coles Group ((COL))
• JB Hi-Fi ((JBH))
• Harvey Norman ((HVN))
• Universal Store Holdings ((UNI))
• Light & Wonder ((LNW))

Macquarie On Gaming

In contrast with the rather lackluster share price performance from gaming operators Aristocrat Leisure ((ALL)) and Light & Wonder, Macquarie analysts have returned from their US visit “with conviction” in both companies’ outlook.

Having spent time in Las Vegas and after visiting venues in Kentucky, the analysts found improving trends/sentiment with some segments to benefit from regulatory/legislative tailwinds.

The conclusion: both Aristocrat and Light & Wonder deserve to trade on higher multiples, with Macquarie highlighting attractive earnings growth and specific catalysts.

Morgans’ Best Ideas

Stockbroker Morgans recently updated its strategy update. In a broad overview, the preference is tilted toward superior risk/return opportunities among mid/small caps and quality cyclicals.

In contrast, Morgans’ strategists would recommend reducing exposure to expensive defensives including banks and telcos.

Current preferred equity sectors include Industrials, Consumer Discretionary and Resources, extending to Healthcare and Energy when global macro-economic forces normalise.

In terms of individual Best Ideas:

Financials

• Pinnacle Investment Management ((PNI))
• Qualitas ((QAL))
• MA Financial ((MAF))
• Tyro Payments ((TYR))

Consumer Staples

• Treasury Wine Estates ((TWE))
• Collins Foods ((CKF))

Healthcare

• CSL ((CSL))
• ResMed ((RMD))
• EBR Systems ((EBR))

Infrastructure & Utilities

• Dalrymple Bay Infrastructure ((DBI))

A-REITs

• Goodman Group ((GMG))
• DigiCo Infrastructure ((DGT))
• HomeCo Daily Needs REIT ((HDN))

Consumer Discretionary

• Universal Store Holdings ((UNI))
• Lovisa Holdings ((LOV))
• Guzman Y Gomez ((GYG))
• Light & Wonder ((LNW))

Industrials

• Amcor ((AMC))
• ALS Ltd ((ALQ))
• Orica ((ORI))
• ARB Corp ((ARB))
• PWR Holdings ((PWH))

Travel

• Corporate Travel Management ((CTD))

Technology

• WiseTech Global ((WTC))
• Megaport ((MP1))

Agriculture

• Elders ((ELD))

Mining & Energy

• Woodside Energy ((WDS))
• Northern Star ((NST))
• Capstone Copper ((CSC))

(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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