ADVISOR WATCHLIST
Michael Burrell
Associate Advisor - Individually Managed Portfolios mburrell @ burrell . com . au ( 07 ) 3006 7226
Many investors are continuing to consider investment alternatives to term deposit rates of 0.5 % p . a . While we need to be cautious of value traps , the property sector , food , quality tech , and the major banks present opportunities .
The property sector continues to offer higher yields and many of the COVID risks appear to be factored into current prices . I am favouring Mirvac ( MGR ) as well as Lendlease ( LLC ). Mirvac is forecast to pay a yield above 4 % on a PE of around 12 , research has a fair value around $ 2.65 . Mirvac has less exposure to retail space than other competitors , and it is well positioned to benefit from a post COVID rally in the property sector as investors looks to alternatives to cash , and first homer owner incentives and easier lending standards flow through .
Lendlease ( LLC ) was trading over $ 18 before the COVID crash , and is currently in the low $ 13 ’ s . Research has LLC ’ s fair value around where it is trading , however certain houses have price targets over $ 16 . LLC has $ 113 billion in its development pipeline , and is well placed globally to benefit from fiscal policy post COVID . Yield is lower than pure property companies at 2.8 %, however I believe the growth prospects are higher .
I continue to like food as an investment theme for obvious reasons of benefiting from population growth . Tassal Group ( TGR ) continues to look attractive at current levels . TGR is a midcap stock that produces predominantly salmon and prawns . The yield is over 5 % and valuations are mid $ 4 with the stock trading in the mid $ 3s . TGR has a more domestic focus , so is less susceptible to Chinese tariffs or political games for example . Having some exposure to quality tech for growth is prudent . Computershare ( CPU ) under $ 13 is attractive . CPU has a somewhat defensive revenue stream from it registry business . Research has fair value of $ 17 , with a yield of 3 %. For those looking for a more pure tech focus I like Technology One ( TNE ) in the mid $ 8 range , IRESS ( IRE ) under $ 10 , and Appen ( APX ) under $ 32 . With pure tech , investors need to be more active as stocks tend to be volatile . Investors looking for less active tech exposure could consider the ETF HACK under $ 7.50 .
Many investors already have sufficient exposure to financials and the major banks . However those who are underweight could consider topping up . The banks will continue to pay some level of dividend , valuations are higher than current prices , and the majors are well capitalised to weather the storm . In its recent results NAB reported that Australian home loan deferrals as a percentage of total home lending dropped from 12.3 % in June to 9.6 % in September , business loan deferrals also dropped . This is positive and the banks still represent a good alternative to pure cash . I don ’ t think they will shoot the lights out , but I expect them to at least hold current levels in the short term , and dividends will exceed TD rates .
Robert Chan
Buy Over The Wire Limited ( OTW ) provides data network , Internet , voice , cloud and managed data services in Australia and New Zealand . They have recently acquired 2 new businesses- Digital Sense and Fonebox . A capital raising was done at $ 4.00 for the acquisition of Digital Sense which was heavily oversubscribed . We see good synergies from these acquisition and cross selling offerings to their new and existing client base . The stock is trading on a below market FY21 PE ratio of 16x with a target price of $ 5.23 and currently trading around $ 4.40 .
Director – Wealth Management RChan @ burrell . com . au ( 07 ) 3006 7220
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