Stock tips are collated from different stockbrokers and analysts around Australia. The aim is to have a variety of aggressive traders and conservative investors.
Feel free to ask a question in the comments below.
Equity Analyst & Client Advisor
Bulletproof Group Ltd (BPF)
Target: $0.65 Stop: $0.19
Bulletproof Group Ltd (“Bulletproof”, “the Company”) is an Australian software company providing end-to-end and managed cloud services to business and government customers.
Customers are billed up front for consulting and implementation and then charged on an ongoing basis for hosting and management.
Bulletproof listed on the ASX in January 2014 via a reverse takeover of Spencer Resources Limited.
Since the reverse takeover, Bulletproof has recorded accelerating revenue. During FY15 Revenue has increased 59%, while operating cash flow has improved 53% y-o-y. Approximately 75% of its revenue is of recurring nature providing somewhat income stability.
The $3.5m acquisition of Infoplex Pty Ltd is expected to be FY16 earnings accretive and generate in excess of $2m EBITDA annually.
Management has a favourable track record in the internet and software industry and are major share holders in the Company.
Bulletproof’s acquisition strategy creates integration and funding risks. There is no guarantee that new businesses will generate sufficient earnings to justify the investment. Additional capital raisings and further dilution of shareholders are the primary risks.
Bulletproof provides profitable exposure to the managed cloud service industry. Integration of acquisitions and further capital raisings are the primary risks. However accelerating revenue and earnings are near-term drivers.
With managements proven track record in the industry, we initiate coverage with a ‘buy’ recommendation.
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Australian Stock Report
Head of Research & Trading
Qantas Airways Ltd (QAN)
The stars appear to be aligning for Qantas once again.
We expect FY earnings to be up in the order of 20-25%, with the company poised to make a record profit, underpinned by low oil prices.
On that front, whilst oil prices have been stronger of late, Saudi Arabia recently made deep reductions to the prices it charges for its oil, hard on the heels of cuts last month by rival producers in the Gulf.
With U.S. production still increasing despite lower oil prices, members of the Organisation of the Petroleum Exporting Countries are battling to keep their share of the last growing markets in Asia.
The move comes as Iran, Iraq and other countries in the Middle East made deeper cuts in their official prices than Saudi Arabia last month.
Saudi Arabia has vowed to keep pumping at high levels as it hopes lower oil prices will stimulate Asian demand and hit rival production in the U.S. that is expensive to produce.
More recently, OPEC's monthly report said the group pumped 31.57 million barrels per day in September, up 110,000 from August, and almost 2 million more than its demand prediction for this year. This is a trend that is likely to continue.
These factors should keep oil prices lower for longer.
Back to Qantas, with no tax payable, low capex requirements and surplus liquidity, we believe that it is possible the company could hand back $2.4bn to shareholders in FY16.
On the technical front, QAN is showing us everything we could want to see.
We have a solid bullish structure in place, with the price action well supported by the 125-period EMA.
Momentum is strong and the stock is not yet in overbought territory, suggesting prices could press higher.
With $3.50 being tested and respected as support recently, we see potential upside outweighing downside and would happily be buyers at current levels (around $3.75), targeting a move as high as $4.50.
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Full Service Stockbroker
Equities and Derivatives Advisor
Woodside Petroleum Ltd (WPL)
Price Target $34.00
Woodside Petroleum Limited (WPL) is an Australian oil and gas company with a global presence involved in hydrocarbon exploration, evaluation, development, production and marketing.
As we have seen over the past 12 months, the oil price has fallen from its highs around $105.00 US/brl to be currently trading at $46.58. With the sharp move lower in the oil price, we have seen WPL share price plummet in accordance.
My view is that we have seen the bottom in the oil price and the price will look to consolidate in the $45-$50 region before looking to move higher towards the $60 level in the next 6 months.
WPL is highly correlated to the WTI Oil price as indicated in the chart below and we should see the WPL share price increase as the oil price does.
From a technical perspective, in my opinion, the stock may look to test the old highs of $30.00 made in September as a new support, which also coincides with a 50% retracement of the move from $27.43 to $32.63, before looking to push towards my target price of $34.00. The $30.00 support level is represented by the horizontal line.
With the hunt for yield on in these low interest rate environments, WPL is offering an impressive dividend yield of 8.81% p.a. With the RBA indecisive about when they will cut interest rates again, yields like this can’t be overlooked. Pair this with a recovery in the oil price and I think a move towards the $34.00 level is imminent after looking to test the old resistance levels around $30.00.
Look to buy under $30.50 and then possibly incorporate a covered call strategy to increase returns on the move higher.
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Oil Search Ltd (OSH)
Editor's Note: Market Matters sent out a "buy" alert on OSH in recent days.
Recently Woodside (WPL) made a bid for OSH that on yesterdays prices comes in at $7.71
Oil Search (OSH) at $7.14 – The market is basically ignoring the WPL bid with OSH trading over 7% below WPL's offer.
While we had no doubt that OSH would reject the bid considering it opportunistic after the fall in oil prices its what comes next that's interesting. We simply cannot imagine that WPL made the initial bid, that was always going to fail, without a next step planned out that would involve a higher price potentially around $8.50 which would allow a few major investors to get their $$ back - a good result after the oil price has halved.
We think the markets wrong on their opinion on a higher bid from WPL.
Buy with stops under $6.60 – see chart.
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