Stock Tips (SYD "Short", CM8 & AWC)

Stock tips are collated from different analysts around Australia.

The aim is to have a variety of aggressive traders and conservative investors.

Australian Stock Report

Online Research

Chris Conway

Head of Research & Trading

Stock Tip: Sydney Airport (SYD) as a "short/sell" trade

Editor's Note: Read this tutorial to learn about "shorting".

Whilst we don't mind SYD fundamentally, we're concerned about rising bond yields amid expectations that central bankers around the globe are likely to start raising interest rates.

In the past two weeks, interest rates have already been rising and this is not good news for SYD.

The higher the discount rate applied to a company's future cash flows, the lower the valuation and target price.

It is projected that just a 50bps rise in the discount rate would have a circa 7% negative impact on the share price target for SYD, whilst a 1% jump would have a 13% negative impact.

Add to the mix that SYD has a long way to fall technically, and we’d be happy to take on the risk on the short side.

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Online Research

Simon Herrmann

Equity Analyst & Client Advisor

Stock Tip: Crowd Mobile Ltd (CM8)

Valuation: $0.29

Crowd Mobile Limited (CM8) is an Australian technology company focused on mobile software and mobile marketing services. Its principal asset is a Question and Answer platform (‘Q&A’) and a mobile payments network spanning 160 telco carriers, 54 countries and 30 languages. In addition, the Company launched a new division, Crowd Media, to take advantage of the growth in digital influencers. We initiated coverage on Crowd Mobile in February 2015 and our last advice was a ‘hold’ recommendation in May 2017.

Following a $5.4m capital raising in April at a premium to market, Crowd Mobile has significantly improved its balance sheet, and surplus cash will increasingly be directed to expansion initiatives such as marketing within its rapidly growing Q&A unit. The April placement secured cornerstone institutional support, which is an early validation of its ‘digital influencer’ growth strategy. After a challenging integration period, the Track (aka ‘Subscriptions’) business appears to be stabilising.

Despite the Company’s improved liquidity, its reliance on external capital may not be entirely eliminated. Whilst performance of the Subscriptions business unit has stabilised, there is no guarantee against further erosion of its earnings base. A lack of growth within the Subscriptions division may challenge Crowd Mobile’s ability to attract an appropriate valuation for its growing Q&A division. Crowd Mobile does not own any patents to its technology and may be subject to increasing competition.

Investment View
Crowd Mobile provides profitable exposure to mobile software and services trends. We are attracted to the Company’s improved balance sheet and capital structure, and believe that liquidity can now be reinvested in the business to foster sustainable growth. Whilst risks include recent volatility of the Subscriptions business and competition, Crowd Mobile’s extensive distribution assets provide a strategic foundation to take advantage of industry tailwinds favouring mobile and social commerce. After updating our forecasts our valuation of $0.29 per share represents a 120%+ premium to recent trade, prompting an upgrade of our recommendation from ‘hold’ to ‘spec buy’.

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Market Matters

Online Research

Nick Forsyth


Stock Tip: Alumina (AWC)

Market Matters are looking to buy Alumina (AWC) around current levels (~$2.03).

AWC is a compelling buy for growth and income and is expected to pay a healthy fully franked dividend of 6.1% in late August.

2016 was a big year for AWC with a restructuring of the business, a new CEO appointed and what seems like clear air ahead for this ‘non-traditional’ dividend stock. The restructure positions them to capitalise on any increase in the alumina price and maintain a steady earnings stream.

AWC isn’t your typical income stock. They own 40% of the world’s largest Alumina business and are shaping up to be a very strong income producer over the next few years with the parent company (AWAC) now ex-capex and with high free cash flow. AWC is likely to get a good stream of earnings, 80/90% of which land in investor pockets.

We are keen on AWC at current levels for income and growth.

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