Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Two of the most bullish bets on the ASX
Markets around the world are still in freefall as losses mount as a result of investors moving out of risk partly due to inflation fears and supply chain disruptions partly due to the crisis in Ukraine and Covid lockdowns in China. The market is yet to become comfortable with the rate hike cycle that is only in its infancy.
The move away from risk has seen some large falls across the board, especially in the tech sector. The indiscriminate selling has however thrown up some great buying opportunities. We’ve selected three companies that the brokers have given a Buy recommendation.
AGL Energy (ASX:AGL)
AGL has been one of the benefactors of rising wholesale electricity prices which have lifted the outlook for the hard-hit energy company. The rising energy prices have been the biggest driver for the company’s earnings. It has also lowered the hurdles for either a demerger or takeover by tech billionaire Mike Cannon-Brookes. According to UBS, “AGL Energy needs to secure shareholder approval for the strategy to demerge via the scheme vote on 15 June 2022. Cannon-Brookes wants to block the demerger securing 11.28 percent stake in the company.
- Credit Suisse have an Outperform recommendation with a target price of $9.30. The broker has doubts as to whether the standalone businesses as viable on the other side of the company’s proposed demerger. Nevertheless the company expects AGL to benefit from rising energy prices and has upped its NPAT forecasts by 9 percent for FY23 and 32 percent for FY24. High energy prices should at least cover shortfalls in the near-term.
The proposed split doesn’t help reduce carbon emissions, is Cannon-Brooke’s main argument. The Atlassian co-founder has brought to light the merits of a takeover or otherwise the dangers of the demerger. It needs 75 per cent approval by shareholders at a June 15 vote to go ahead.
Graincorp (ASX:GNC)
Strong demand for grain and surging prices due to Ukraine’s important role in the supply chain has given GrainCorp a bumper profit. The company posted its FY22 results this week delivering a record performance. GNC posted underlying NPAT of $246m up 382 percent on the previous corresponding period. EBITDA was $427m up from $140m, a 205 percent improvement. Cash in the bank sits at $129m. Business is absolutely booming and it’s outlook is even better. NPAT is expected to hit $310m-$370m.
Macquarie has an Outperform recommendation with a target price of $11.10. The broker says Graincorp’s profit result was a beat on expectations and reflects the ongoing demand for Australian grain & oilseeds and current strong supply chain margins for grain exports. Macquarie is confident earnings momentum will continue into the next financial year, and guidance can be met. Planting conditions are favourable and likely to support another above average winter crop.
