Equities Analyst Julia Lee from Bell Direct likes the New Zealand-based accounting software company Xero (XRO) this week.
The company not only has an app platform that can be streamlined with the major banks, it’s also one of the fastest growing software as a service (SaaS) companies globally, according to Lee.
“While the company is expensive, that’s to be expected at this part of the late bull market cycle,” said Lee.
“It has impressive growth rates and potential, especially from North America. The company should see positive free cash flow in the next financial year,” she said.
Featuring on her not-so-hot list is Baby Bunting Group (BBN), pointing to recent troubles striking baby product brands such as ‘Babies R US, Baby Bounce and Baby Savings.
“While this might be a positive in the longer term for BBN, there looks to be short-term pain, as heavy discounting is a feature of the industry to wind up companies and clear inventory,” she said.
Michael Wayne of Medallion Financial has kitchen appliances and consumer products company Shiriro (SHM) on his ‘buy’ list this week.
According to him, while the company has matured in the Australian and New Zealand market, it’s expanding into the US and is showing positive early signs.
“The Everdure BBQ brand is targeting a 1% market share in the US and German BBQ markets respectively, which has the potential to increase earnings significantly,” said Wayne.
“SHM is priced as a mature business, trading on only 9x earnings and paying an 8% fully franked dividend, indicating to us that investors are essentially getting a free option on the expansion into the US and German BBQ markets,” he said.
On his ‘sell’ list this week is Australian retail grocer and consumer goods distributor Metcash Limited (MTS), which he said is facing headwinds despite hitting a 3-year high.
“Competition is fierce in the retail grocery segment. International entrants Aldi and Costco are formidable competitors to the long-established supermarket giants,” said Wayne.
“In our opinion managements cost cutting program and the strong performance of Mitre 10 won’t be enough to preserve margins moving forward,” he noted.
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