Author: therawinformant

Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX 200 shares are in the buy zone:

CSL Limited (ASX: CSL)

According to a note out of Citi, its analysts have retained their buy rating and $334.00 price target on this biotherapeutics company’s shares ahead of its full year results release. Although it has concerns about the impact of the coronavirus on plasma collections, it isn’t enough for a change of rating. It believes CSL’s shares are good value after their recent pullback and holds firm with its buy rating. I agree with Citi on CSL and would be a buyer of its shares today.

Corporate Travel Management Ltd (ASX: CTD)

Analysts at Morgans have upgraded this travel company’s shares to an add rating with a $12.85 price target. According to the note, the broker made the move on valuation grounds after a sharp pullback in the Corporate Travel Management share price. This has left it trading at a sizeable discount to the broker’s valuation. In addition to this, it believes that corporate travel demand has been stronger than expected recently and it could surprise to the upside in FY 2021. Another positive is its current liquidity. The broker estimates that this will be enough to last until the end of FY 2022 if necessary. While I think Morgans makes some great points, I’m staying clear of the travel sector until the crisis passes.

Ramsay Health Care Limited (ASX: RHC)

A note out of the Macquarie equities desk reveals that its analysts have retained their outperform rating but trimmed the price target on this private hospital operator’s shares to $72.50. Although the broker notes that Ramsay is operating in an environment where elective procedures are being pushed back because of the pandemic, it feels investors should overlook this and focus on the future. Macquarie’s analysts remain very positive on Ramsay’s long term outlook and believe it is well-positioned for growth once the pandemic passes. I agree with Macquarie and feel Ramsay would be a great buy and hold option.

More reading

• Why the Treasury Wine share price is sinking today
• ASX marching higher despite COVID-19: Where should you invest?
• Why this ASX miner that’s missing the rally is one of my key picks for FY21
• ASX 200 down 1.15%: NAB downgraded, Telstra asset sale, gold miners rocket
• Coronavirus: What does lockdown mean for ASX retail shares like JB Hi-Fi?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Treasury Wine Estates Ltd (ASX: TWE) share price is marching lower today, down by 2.37% to $10.73 at the time of writing

This drop is likely being somewhat driven by the broader losses associated with the S&P/ASX 200 Index (ASX: XJO) today, but a top broker’s rating of “Overweight” for the stock this morning is definitely adding to the Treasury Wine share price’s woes.

What did the broker say?

A note out of Morgan Stanley revealed that wine exports to China were down by as much as 16% in the June quarter on a year-on-year basis. Notably, Morgan Stanley saw this as a better than expected result, and in fact an improvement relative to the previous March quarter.

Although the broker didn’t specify the likely causes behind this, the 2 that come to mind are the diminished consumption of premium wines in Asian markets due to COVID-19 restrictions, as well as heightened Australia–China diplomatic tensions generally creating a headwind for exports.

The company has forecast a 14% decline in FY20 operating income for its Asian markets to reflect the greater difficulty in one of its key operating environments.

Despite lower consumption, Morgan Stanley retained a current price target on Treasury Wines at $13.50, suggesting the stock may be currently undervalued by as much as 25%.

In providing a forecast for the coming 12 months over FY21, the broker expected full-year dividends of 29.70 cents per share, and earnings per share of 46 cents. On this basis, Treasury Wines could foreseeably pay out a 2.7% fully-franked dividend yield to its shareholders over the next year.

Should you invest?

I’m a big fan of the brands sold by Treasury Wine, including most famously Penfolds, Wolf Blass and the less well-known 19 Crimes brand.

While the company has been hard-hit by this year’s bushfires and Australia–China diplomacy, I see a lot of upside for the company to perform strongly over the medium to long-term. The Penfolds brand has been liquid gold for Treasury Wine for decades, and I expect this to continue to a large extent moving forward.

Notwithstanding this, I expect the wine-maker to take a short-term hit for FY20 and FY21 due to the current economic recession and the impact this has on consumers’ willingness to spend on luxury goods such as expensive wines.

Thus, now may be the time for prospective investors to buy into Treasury Wine, with the hope the Treasure Wine share price may get back to its September 2019 highs of as much as $19.47.

More reading

• Top brokers name 3 ASX 200 shares to buy today
• ASX marching higher despite COVID-19: Where should you invest?
• Why this ASX miner that’s missing the rally is one of my key picks for FY21
• ASX 200 down 1.15%: NAB downgraded, Telstra asset sale, gold miners rocket
• Coronavirus: What does lockdown mean for ASX retail shares like JB Hi-Fi?

Motley Fool contributor Toby Thomas owns shares of Treasury Wine Estates Limited. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The De Gray Mining Limited (ASX:DEG) share price has bolted more than 6% in early trade after the company released strong drilling results.

Highlights from De Gray’s results

Earlier today, De Gray released drilling results from the western extension of the Aquila site at the Hemi Gold Discovery in Western Australia. The results were collected from shallow aircore and RC drilling at the western end of Aquila.

The report highlights included;

• 16m @ 3.7g/t Au from 43m including 10m @ 5.4g/t in HERC141 (ending in mineralisation)
• 16m @ 2.1g/t Au from 44m in BWAC783 including 4m @ 3.5g/t
• 13m @ 1.8g/t Au from 71m in BWAC908 including 2m @ 3.8g/t
• 8m @ 1.6g/t Au from 56m in BWAC800

The results confirm shallow gold mineralisation over approximately 400 metres in the north-south direction. De Gray’s management noted the potential in a larger extension of the Aquila gold system. As a result, further drilling is planned for Aquila with the strike potential now spanning more than 1.6km.

What does De Gray Mining do?

De Gray is a mining company based in Western Australia that focuses in gold exploration and development activities. The company has 100% ownership of the Mallina Gold Project in the Pilbara region and is also the site of the Hemi Gold Project.

The Hemi Project is made up of various zones including; Aquila, Brolga, Brolga South and Crow. De Gray has noted thick and high-grade mineralisation across the project and expects the site to deliver high value given the size, grade continuity and growth potential.

In late April, De Gray completed a $31.2 million capital raising in order to fund the ongoing exploration of the Hemi Project. The company’s share price has reflected the optimisim of the new project, having rallied more than 280% since late April. The De Gray share price has also been assisted by the surge in the spot gold price in 2020.

At the time of writing, the De Gray share price is trading more than 5% higher for the day at around 84 cents after hitting an intra-day high of 85.5 cents.

More reading

• De Grey share price rising following mine extensions
• Azure Minerals share price rockets 24% on acquisition news
• Why De Grey, Openpay, Woodside, & Zip shares are dropping lower
• De Grey Mining share price plunges another 13% lower today
• Why the De Grey share price rocketed more than 107% in June

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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One area of the share market which I believe is home to a number of promising small caps is the healthcare sector.

Thanks to positive tailwinds and their impressive technology and products, I believe there are companies at this side of the market that are well-placed to grow at a strong rate over the next decade.

Two which I rate highly are listed below. Here’s why they could be worth adding to your watchlist:

Telix Pharmaceuticals Ltd (ASX: TLX)

The first small cap healthcare share to look at is Telix Pharmaceuticals. It is a clinical-stage biopharmaceutical company developing an advanced pipeline of molecularly-targeted radiation (MTR) products. MTR is an approach which chemically links radioactive isotopes to targeting molecules specific to cancer cells.

Telix has an advanced pipeline of therapies which address clear unmet medical needs in high-value oncology segments. This includes areas such as renal cancer, prostate cancer, and glioblastoma. One of the key products in its pipeline is TLX591. This is a metastatic prostate cancer radionuclide therapy, which management estimates provides Telix with a $2 billion sales opportunity in late-stage disease alone. I believe the company has a lot of potential and could prove to be a great long term investment.

Volpara Health Technologies Ltd (ASX: VHT)

Another small cap healthcare share to look at is Volpara. It is a medical technology company which has been growing at an incredible pace over the last few years. This strong form continued in FY 2020 when Volpara delivered a 153% year on year increase in revenue.

The key driver of this growth was the increasing demand for its software which leverages artificial intelligence imaging algorithms to assist with the early detection of breast cancer. At the end of the financial year, the company’s installed software base covered over 27% of US women screened for breast cancer. I’m confident that its growing footprint and recent acquisitions will lead to similarly strong growth in FY 2021.

More reading

• Volpara share price on watch as strategy update announced
• 3 exciting small cap ASX shares to put on your watchlist immediately
• ASX 200 down 0.4%, Credit Corp and Temple & Webster impress
• 3 quarterly updates you might have missed: Alcidion, Mach7, & Telix
• 4 top small cap ASX shares to watch in FY 2021

James Mickleboro owns shares of TELIXPHARM DEF SET. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of VOLPARA FPO NZ. The Motley Fool Australia has recommended VOLPARA FPO NZ. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) is off its lows but remains on course to finish the day in the red. At the time of writing the benchmark index is down 0.6% to 6,002.8 points.

Four shares that are falling more than most today are listed below. Here’s why they are tumbling lower:

The Cochlear Limited (ASX: COH) share price is down 3% to $191.84. This may have been driven by a broker note out of UBS this morning. Its analysts are bearish on the hearing solutions company and expect it to report a sharp decline in profits later this month. It also sees risks around FY 2021 due to rising infection numbers, which could push back elective surgeries. As a result, it has retained its sell rating and $160.50 price target on its shares.

The National Australia Bank Ltd (ASX: NAB) share price is down 2% to $16.79. Weakness in the banking sector and a broker note out of Macquarie appear to be weighing on its shares today. According to the note, the broker has downgraded NAB’s shares all the way from outperform to underperform with a $17.50 price target. It notes that NAB has a high weighting to the SME market, which is struggling during the pandemic.

The Tabcorp Holdings Limited (ASX: TAH) share price has dropped 3% to $3.50. This may also have been driven by a broker note out of Macquarie. This morning the broker downgraded the gambling company’s shares to a neutral rating from outperform. It made the move amid concerns over the challenges facing its wagering and media businesses.

The Telstra Corporation Ltd (ASX: TLS) share price is down 1.5% to $3.43. This follows the announcement of the sale of its data centre complex in Clayton, Victoria, to Centuria Industrial REIT (ASX: CIP). According to the release, the two parties have agreed a price of $416.7 million. Telstra’s CEO, Andrew Penn, notes that the sale is part of the company’s T22 strategy which is cutting costs and simplifying its business. Telstra has secured a long term lease at the compex.

More reading

• ASX 200 down 1.15%: NAB downgraded, Telstra asset sale, gold miners rocket
• ASX shares that could get a boost from Victoria’s shutdown
• Telstra share price on watch after major asset sale announcement
• ASX 200 jumps 2% higher, Afterpay soars
• 3 high quality blue chip ASX 200 shares to buy

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Pharmaxis Ltd (ASX: PXS) share price has surged 8.24% today at the time of writing, after the pharmaceutical research company announced a US$7 million payment milestone had been brought forward.

The payment will now be made on the date the United States FDA approves Pharmaxis’ drug Bronchitol. The drug is used in the treatment of cystic fibrosis and is already approved and marketed in Australia, Europe, Russia, and several other countries. 

What does Pharmaxis do? 

Pharmaxis is a pharmaceutical research company focused on drug development for inflammation and fibrotic diseases. The company has an expertise in amine oxide inhibitors, which has attracted interest from leading pharmaceutical companies looking to partner in this area of medical need. Pharmaxis has a number of approved products which it manufactures and exports from its facility in Sydney. 

How does the milestone payment work? 

Pharmaxis entered an agreement with Chiesi Farmaceutici SpA (Chiesi) for the commercialisation of Bronchitol in the United States. Chiesi funded US$22 million of the cost of the phase 3 trial of Bronchitol, which was required to seek FDA approval. Chiesi has now agreed to pay Pharmxis US$7 million of a US$10 million milestone payment when Bronchitol is approved by the FDA. This is expected to occur on 1 November 2020. Another US$3 million is payable to Pharmaxis on shipment of commercial launch stock in the first quarter of 2021. 

Pharmaxis CEO Gary Phillips said, “the development and commercialisation of Bronchitol reaches a pivotal point on November 1st. Approval by the FDA for Bronchitol would see the business segment generate immediate cash and move into profitability.”

The approval will also provide the opportunity to investigate different ways of structuring the business and funding drug development activities.  

What’s next for Pharmaxis? 

Chiesi is the exclusive distributor of Bronchitol in the US, as well as 11 countries in the European Union. Pharmaxis and Chiesi are preparing for the US launch of Bronchitol, subject to FDA approval. This will see the business segment generate immediate cash and move to profitability. According to Pharmaxis, this provides the opportunity to structure the business and activities that drive shareholder value in a much more significant way. Pharmaxis advises it is in discussions with its business partners about how to shape the future, post-FDA approval.

At the time of writing, the Pharmaxis share price is up by 8.24% to 9.2 cents per share, with a market capitalisation of $36.36 million.

More reading

• De Gray Mining share price lifts on strong results
• These small cap ASX healthcare shares could be destined for big things
• Why Cochlear, NAB, Tabcorp, & Telstra shares are tumbling lower
• Reliance Worldwide operations to continue in Victoria
• ASX marching higher despite COVID-19: Where should you invest?

Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pharmaxis Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Reliance Worldwide Corporation Ltd (ASX: RWC) share price could receive a boost after the company provided the market with an update on its Victoria operations.

Green light for Reliance manufacturing facilities

Earlier today Reliance updated shareholders on its Melbourne operations in light of Victoria’s second coronavirus lockdown. The company assured shareholders that its Melbourne operations were classified as a ‘permitted industry’ and would continue to operate, based on the guidelines provided by the Victorian Government.

With the government introducing Stage 4 restrictions in Victoria on business activities, Reliance was forced to assess the impact of the new constraints on its manufacturing and distribution facilities in the state.

The company has 4 plants in Melbourne which supply products for the domestic Australian market and Asia Pacific region. In addition, some complementary products are also manufactured in Melbourne and exported to the company’s North American operations.

In an update yesterday, Reliance assured investors that the company maintained sufficient inventory levels to mitigate any supply disruptions. The company also noted that the new restrictions in Victoria would not have any short-term impact on sales in North America.

How has Reliance performed during the pandemic?

Reliance is a plumbing supplies company and the world’s largest manufacturer of push-to-connect (PTC) plumbing fittings. The company’s flagship product ‘SharkBite’ has been embraced by plumbers who prefer the PTC technology over soldering traditional brass fittings.

In the company’s most recent trading update released in early May, Reliance noted that manufacturing operations in Australia had been scaled back. The company said that new housing construction in Australia was expected to decline over the next year, resulting in reduced manufacturing operations.

Reliance also noted that 40% of its workforce in the UK had been placed on leave, as demand in the region was down 35% to 40% on  pre-COVID-19 levels due to restricted services. However, the company also highlighted that operations in North America remained unaffected, with sales in the US continuing to track in line with expectations.

Foolish Takeaway

The Reliance share price has bounced more than 60% from its lows in late March of $1.63. At the time of writing, the company’s share price is trading slightly higher at around $2.68 following the recent update.

More reading

• How will Victoria’s stage 4 lockdowns impact ASX shares?
• Why the Reliance Worldwide share price is one to watch today
• The rocketing Aussie is shaping up as a new threat to the profit season
• Top broker picks the cheapest ASX stocks to buy today
• Broker warns Afterpay and these ASX stocks are caught in an overcrowded trade

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Reliance Worldwide Limited. The Motley Fool Australia has recommended Reliance Worldwide Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you ignored all the other news and focused solely on the Australian share market’s performance since its 23 March low, you’d have no idea the nation was in the grips of a historic pandemic. No clue that a quarter of Australians are largely confined to their homes, or that all non-essential businesses in Victoria are shuttered.

Though slipping today — down by 0.66% at the time of writing — the All Ordinaries Index (ASX: XAO) is up 35% since 23 March.

Australia’s largest 200 companies by market cap have also come roaring back. Despite a somewhat weaker performance by the big four banks, the S&P/ASX 200 Index (ASX: XJO) is up 32% in that same time.

What’s next for ASX shares?

Predicting the daily, weekly or even monthly market moves is mug’s game in the best of times. In the age of COVID-19, it’s an even bigger gamble.

But as a long-term investor you can, and should, look beyond these temporary moves. Doing so will save you a lot of stress.

You should also look beyond the broader indexes’ performance to understand which sectors and specific stocks are struggling, and which are doing the heavy lifting.

I’ll get to some of those specifics shortly. But first, a look at some of the tailwinds helping to support global share markets during the pandemic.

A wall of easy money

As much as markets hate uncertainty, they thrive on easy money. And never in history have the money taps flowed so freely in major economies across the globe.

In Europe, EU ministers hammered out a fresh 750 billion-euro (AU$1.2 trillion) bailout package at the end of July. And the European Central Bank’s base interest rate remains at 0.00%.

The United States (US) Congress is still engaged in last minute negotiations on the US’s next mammoth stimulus package. The Republican’s Help, Economic Assistance, Liability Protection and Schools (HEALS) Act will pump an additional US$1 trillion (AU$1.4 trillion) into the economy…and share markets. The Democrat’s stimulus package would deliver a whopping US$3 trillion.

Interest rates in the US also remain at all-time lows, with the Federal Reserve maintaining a range of 0.00–0.25%. That’s unlikely to change anytime soon. Nor is the Fed’s quantitative easing (QE). As reported by the Australian Financial Review (AFR):

Fed policymakers repeated a pledge to use their “full range of tools” to support the economy and keep interest rates near zero for as long as it takes to recover from the fallout from the epidemic, saying the economic path will depend significantly on the course of the virus.

Here in Oz, the Reserve Bank of Australia (RBA) is unlikely to raise the official cash rate from the current record low 0.25% for a long while yet. And yesterday the RBA announced it will resume bond buying. From Bloomberg:

Reserve Bank Governor Philip Lowe announced the resumption of bond buying in Tuesday’s policy statement, when the board kept its interest rate and yield target unchanged at 0.25%. Three-year yields have been “a little higher than 25 basis points over recent weeks,” he said, adding that “further purchases will be undertaken as necessary.”

Which ASX shares stand out?

Easy money or no, not all stocks in every sector are going to deliver big gains. Some, of course, will lose money.

Real estate and the banks are all under pressure. Their time will come again. But the current situation looks unlikely to improve in the coming months. Meanwhile the share price of many leading healthcare, resources and technology stocks have gone ballistic. And I believe many have a lot more growth left ahead of them. Though, obviously, not in a straight line higher.

Companies able to capitalise on the massive surge in online shopping have really sparked investor interest. That’s a trend Wilson Asset Management was quick to jump onto.

Oscar Oberg is the lead portfolio manager at Wilson Asset Management’s microcap fund WAM Microcap Ltd (ASX: WMI). Here’s an excerpt of what he told the Australian Financial Review:

City Chic and Temple & Webster were both inaugural investments in the WAM MicroCap investment portfolio, and we are actually more positive in our outlook for these stocks today than when we first invested three years ago.

Both companies are benefiting from a structural shift to online shopping that we believe will continue to accelerate as lockdown measures are enacted to combat a second wave of coronavirus in Australia and the rest of the world.

Both companies have strong balance sheets and we see acquisitions as a strong catalyst for each business in FY2021.

The City Chic Collective Ltd (ASX: CCX) share price is up 28% year-to-date.

And leading homewares online retailer Temple & Webster (ASX: TPW)’s share price is up an eye-popping 202% so far in 2020.

Temple & Webster’s growth potential also caught the eye of The Motley Fool’s own Scott Phillips. He recommended the stock to members of his Share Advisor service on 28 May. Since then the share price is up almost 82%.

More reading

• Why this ASX miner that’s missing the rally is one of my key picks for FY21
• 2 of the best online shopping ASX shares to buy in August
• ASX 200 down 1.15%: NAB downgraded, Telstra asset sale, gold miners rocket
• 3 ASX shares I’d buy if the ASX crashes again
• ASX shares that could get a boost from Victoria’s shutdown

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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