Following our assessment of results and market announcements, here are our three top picks for today (Friday 17 August 2018):
Telstra Corporation (TLS) – No bad news is good news
TLS's FY18 result and FY19 outlook was uninspiring, but this had been well flagged to the market. It's tough, but not getting worse and the possibility of an NBN related upgrade, seems to be enough to reignite investor interest and cause the share price to rally.
We retain our Add and have revised our share price target (Morgans clients can login to view the revised share price target and detailed research note).
OZ Minerals (OZL) – Time to accumulate
OZL's 1H was 3-4% ahead of our P&L expectations, but a touch soft on the dividend. The moderated dividend strategy reflects OZL's upcoming capital commitments and the need to add debt (conservatively) to the funding mix. The market is dramatically under-appreciating OZL's valuation uplift as Carra transitions from peak capex this year, into substantial cash generation from 2021.
We maintain our Add rating. Our target price moderates slightly (Morgans clients can login to view) and we think that macro fears are overdone, presenting a compelling buy opportunity.
IPH Limited (IPH) – Turning the corner with the AIA out of the way
IPH reported a solid FY18 result which was ahead of consensus expectations and should restore investor confidence in the outlook for the group. The company grew patent filings ahead of the Australian and Singapore markets and saw substantial growth in filings in China, up 44% on FY17. Over 80% of ex-vendor Principals from the Pizzeys and the FAKC businesses recommitted to IPH while the company promoted 13 new Principals during FY18.
With a 12m forecast TSR of 13% and the stock trading on a FY19 PE of 17x our blended target price increases (Morgans clients only) and we retain an Add rating.
Morgans clients can access our further analysis in our latest reports on Telstra Corporation, OZ Minerals and IPH Limited. Alternatively, please contact your nearest Morgans office for access.
Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.