ADVISOR WATCHLIST
Michael Burrell
Associate Director Advisor - Individually Managed Portfolios mburrell @ burrell . com . au ( 07 ) 3006 7226
There have been many corporate events over the last period . Some key events that clients should consider are :
‐ Woolworths ( WOW ) has spun off its drink business Endeavour Group ( EDV ). Any WOW shareholder will have received an allocation of EDV shares . The most recognisable brand in EDV is Dan Murphy ’ s . I would recommend clients top up their EDV holding in a few tranches , which my first buy trigger being EDV below $ 6.20 . The EDV price has not yet settled , clients should be prepared to top up a second tranche on any market weakness . Our research initial fair value on EDV is $ 6.10 .
‐ Seven Group Holdings ( essentially Kerry Stokes ) bid for Boral ( BLD ) is underway . The bid is complex , and there is some risk the current price level around high $ 7.30s falls away . Clients should discuss with their adviser , and decide if lightening BLD on market is appropriate . Clients should balance positive themes in the building and infrastructure environments , vs the risk of Seven Group gaming for control , and the unknown of what they do with the company moving forward . Our research fair value on BLD is $ 7.35 ;
‐ Telstra ( TLS ) announced it is selling a 49 % stake in its Tower Unit business . On this news the TLS stock price has risen to high $ 3.70s . Positives for TLS shareholders is a percentage of the proceeds will be returned to them . There is also analysis that suggests the market is undervaluing the infrastructure assets within Telstra . Despite these positives , many headwinds still exist for the telco , compressed margins from the NBN structure , in my opinion poor management , increasing competition . I would maintain a position in Telstra , but I would suggest clients consider lightening any overweight position if the stock reaches the high $ 3 mark . Our research fair value on TLS is $ 3.80 ;
‐ Link Market Services ( LNK ) has spun off a stake in Pexa Group ( PXA ), which is an e-conveyancing company . LNK has maintain a maximum 47 % stake in PXA . On a valuation basis , our view is LNK has a more attractive entry point and I would recommend clients consider adding to any LNK position . Our research fair value on LNK is $ 6.90 .
‐ Bank of Queensland ’ s purchase of ME Bank has been completed . Although there are tailwinds for the banks , low interest rates etc , there has been little news about the execution plan for the ME integration . Client should consider lightening BOQ . Our research fair value on BOQ is $ 8.50 .
In the last few Bourses I have recommended Amcor ( AMC ). I continue to hold a bullish position on AMC . Morningstar research has a price target of $ 16.50 , AMC will pay around a 4.5 % dividend , has a forward PE estimate of 13.9 .
In a previous Bourse I also recommended Lendlease ( LLC ). In recent days a ‘ downgrade ’ was announced by the new global CEO . COVID impacts , especially in London , were cited as impacting results . Long term , my opinion remains unchanged that LLC looks attractive . Gearing is low at around 12.9 % and LLC has a pipeline of around $ 110 billion in projects . Other major firms have a price target of $ 13 , our research has a price target of $ 14.45 .
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