12 stocks for 12 days of Christmas Pt 2 | ECF, SRG, TSI, UNH & more!

Candice: [00:00:12] Welcome. This is Talk Money To Me. Thanks for tuning in to our last episode for 2022. I'm Candice Bourke. 

Felicity: [00:00:18] And I'm Felicity Thomas. Now, what a year it has been. Now, if you tuned into our episode last week, we went through our first six of our 12 days of Christmas stocks. As a quick recap, the stocks were Transurban, global Lithium WalMart, Cyrus Corp, lendlease and Boss Energy. 

Candice: [00:00:38] As a reminder, guys, if you didn't tune in, we have picked these 12 stocks to add to your Christmas stocking that incorporate the themes of resources, health care, retail, ESG or future facing commodities. And then one of the ones that we keep talking about as a thematic that you should definitely consider in 2023 are more kind of recession proof or resilient, you know, income, defensive names like property, transportation, infrastructure. So we didn't really talk about health care last time. Felicity We're definitely going to be adding a company that's very interesting in that space. And also Felicity's going to be adding, I believe, a really interesting retail company. So lastly, we have a little surprise to wrap this final episode. Our lovely assistant Herschel, the face behind Instagram, will be pitching her very first investable idea to add to this order pad. 

Felicity: [00:01:30] That's it and it's going to be her voice this time, not her face. But we're very excited to have you, Herschel, on our podcast. 

Herschel: [00:01:36] I'm excited to be here too. 

Felicity: [00:01:38] Please note in these two special Christmas episodes, Candace and I will be discussing listed companies which have caught our eye. And remember, our chat today is not personal advice, even though we're registered financial advisors at shore and partners. Please note that this podcast and the content discussed does not constitute financial advice, nor is it a financial product. The content on this podcast is general in nature and you should seek appropriate professional advice before making any financial decisions. 

Candice: [00:02:05] That's right. And all the companies discussed on the show today by US three are based on the facts known at the time and don't contain relevant information in respect to their financial products to which they relate. The facts which we're going to be chatting about are based on the date of recording being the 20th of December. Alrighty, so disclaimers is done. Who wants to go first? [00:02:24][18.9]

Felicity: [00:02:25] I'll kick us off. So continuing on with the 12 Days of Christmas special order pad, I'm actually pitching Eleanor commercial property. Now the code is ECF. ECF is an externally managed office focussed real estate investment fund, targeting high quality commercial office assets in metropolitan regions underpinned by strong potential cash generation. Now, these assets have actually proven very resilient throughout COVID. Over the past years, you know, reflecting on their sustainable competitive advantages. And we really do expect the ECF experience management team to drive outcomes to the current economic rents. 

Candice: [00:03:06] Okay, so you're going property more defensive. I like, I like let's go through some catalysts I guess looking ahead for the next 12 months or longer. 

Felicity: [00:03:14] Exactly. So what I'm looking at over the next 12 months is they continue to pay a competitive distribution underpinned by portfolio asset performance, looking at the renewal and extension of their leases, potentially some value add opportunities at existing assets, maybe even potentially acquisitions of new assets and possible sale of assets and recycling activity. So we're really looking at strategic opportunities within their corporate activity and we're seeing this is going to likely increase over the next 12 months. 

Candice: [00:03:45] Yeah, and interesting, I guess as we head into the new year with a high rate environment, there's a lot of concerns from the banks perspective on the real estate market. So why do you think it's a buy? 

Felicity: [00:03:56] We believe the Australian commercial real estate market remains appealing in a regional context and we really see Asia as providing an attractive yield while offering above average potential for capital growth over time, actionable to active management of the portfolio. While leased renewals remain a key risk alongside macro economic factors, we really see this as manageable, noting the low level of upcoming lease expiry, so it's about under 6.5/%. We also see potential for greater value creation at the garima core through tenant renewals, repositioning, marine leasing. All right, so given ACF's attractive yield and resilient cash flows and the potential growth opportunities, that's why I think it's a really strong buy in a strong segment of the office market. So we actually have a price target of a dollar 20 and it's paying a dividend yield of about 10%, which is absolutely fantastic in this market. Now it's trading around $0.97 at the moment and it actually goes ex-dividend in five days time. So my first stop for the remaining six is Eleanor commercial property. 

Candice: [00:05:05] Very good. Add that to your watch list, guys. 

Felicity: [00:05:08] That's it. All right, so, Candice, what is your next doc? 

Candice: [00:05:10] So I'm going back into the more kind of resource fanatic, but it's not a direct, you know, material or resource company. So the company is Sergiy Global and the ticker on the ASX is Saatchi. Nice and original for us. 

Felicity: [00:05:25] That's it. That's easy to remember. 

Candice: [00:05:26] Yeah. Now this one's up your alley. It's a smaller cap, so more kind of high growth conviction. 300 million. But the business is profitable and takes another one of my books. It pays a nice little cheeky dividend of about 4% currently. 

Felicity: [00:05:39] Well, that's nice when you have a small cap, right, with that growth and that also pays a dividend. So Candace, what does this company actually do? 

Candice: [00:05:47] So it's an engineering led global specialists, asset service and mining company. So it's really embedded in the construction group here, operating across the entire asset lifecycle of the engineering construction sector in industry. If you drill down to the operations and revenue model of this business, there's a few key segments. Firstly, asset services, mining services and then construction. So really a, you know, kind of blue chip in my mind. Infrastructure resource services company, really helping the whole supply chain. 

Felicity: [00:06:22] So it's diversified, which is great. 

Candice: [00:06:24] Tick, tick, tick. So what they do is they provide services to mining clients and ground solutions, including, you know, production drilling, ground and slope stabilisation design, engineering and monitoring services. And on their construction side, they've got segments that do like integrated products and services to customers along the whole construction supply chain and infrastructure. This is not an overnight success. The company was founded back in the sixties, 1961, to be exact. 

Felicity: [00:06:52] Wow, that's a long time ago. If anyone is listening and keen on Sergiy Candace, what can we expect in the new year? Is there any stock news or any upside potential in the share price? 

Candice: [00:07:02] Well, I hope there's a lot of upside, hence why I picked it right. So fingers crossed. But there has been a recent Catalyst event which actually the company announced they have been awarded a 30 million specialist contract with another one of my Christmas stocks that I pitched last week, which is Lendlease. So together, these two companies, they're going to be working together and sadly won the contract to work in Melbourne, Victoria. So that's a nice little positive catalyst as we, you know, round out this year heading into next. But the numerous contract wins that the company has actually achieved so far in FY 23, to date they total about 580 million. It reinforces our positive view here at Shaw and why we like this company and the outlook for the broader engineering construction sector. So what do economies typically do when they are worried about, you know, recessions and other things like that? If they really want to protect the workers at the end of the day. So we think there's going to be quite a bit of upside in this sector. Currently, it's trading around $0.68 is kind of floating at $0.69. We have a price target of a dollar 85 and consensus is pretty much the same at a dollar four. So about 50% upside from where it's trading right now.

Felicity: [00:08:19] That's great. We love double digit upside. 

Candice: [00:08:22] We definitely do. So add that one. Now we are up to stock number nine. So Felicity, I think you're going down the retail Christmas Avenue for this one, right? 

Felicity: [00:08:32] Absolutely. So this is my last one for the 12 stocks of Christmas. It's called Top Shelf Holdings. Now the code is Tsai traded on the ASX. Now they actually manufacture and distribute alcoholic beverages. So it's perfect for around this time of year it's brands actually include Ned Whisky which you would have heard about grains shaker vodka and they're also in the process of creating their own tequila or which what we call our guys now the company was founded by Drew Fairchild and Jason Redfern in 2013 and is actually headquartered in Campbellfield in Australia. 

Candice: [00:09:08] Interesting. Went down the alcohol route. I love it, I love it. So talk to us about, you know, recent highlights and I guess lead us into what you're thinking for the next 12 months as well. Absolutely. 

Felicity: [00:09:20] I mean, they continue to provide record an impressive six month trajectory with the recent AGM actually providing a really solid ahead set of figures and settling the setting the group up in its seasonality strong period with further growth in volumes, new brands and distributions to be launched because they actually have quite a few brands of the net whisky. And in the last 12 months brand revenues were 23.3 million. So that's a 97% growth year over year. And that actually infers that Taci has a running rate of 3.6 million monthly sales in the second quarter of 23, so essentially within a short period. Of time, the really successfully launched two brands to the net whisky and grain shaker, which are now impressively number seven and number ten respectively within their individual Australian categories. And they're actually taking material market share, growing over 100% annually and the only minor national stocking of around 30% of the market. So this huge total addressable market here. 

Candice: [00:10:24] Yeah, every Aussie guy I know loves a nice whisky that's for sure. 

Felicity: [00:10:28] That's it. And I think what's really important to know is to size results. Now have the group outselling popular brands like Jim Beam, Starwood, Cougar and also the possibility to go past Gentleman Jack and make his mark in the next six months, which is huge right now. Tears. I could also be a target potentially of mergers and acquisitions. So our previous analysis on the global market actually provided evidence that Diego and Pan and Richard and Anheuser-Busch have collectively acquired over 120 companies in the last seven years alone. So there could potentially be an M&A situation going on here. I also really, really like the strategic partnerships that they've actually flagged with their Argo asset. So a little bit about our gave a sense a little bit about our gave you know, TCI now has the 25th largest agricultural supply of our gave globally and the largest outside of Mexico with up to one 1 million litres per annum of capacity. Now what I'll give slash tequila is a lesser known category in Australia. It's actually one of the fastest growing in the US with over 45% right of market share. People love tequila, you know, I love a spicy tummy margarita. Now the number two spirit has also minted a number of celebrity and corporate billionaire operations. So you can see a lot of celebrities launching their own tequila products. 

Candice: [00:11:54] That is really interesting, actually. When you said that last point, it reminded me of Ryan Reynolds, how he has successfully launched a gin company. I think it's called aviation. So that's really fascinating. So then to round us off with this stock, why is it a buy and give us some upside, give us valuations? 

Felicity: [00:12:10] I think the recent AGM, they've materially come in ahead of expectations. You know, the sales are really good, strong growth 100% for the last 12 months. You know, as well as a potential strategic interest in our gave and broader operations, it's really paying off and the wheels are in motion for a really, really, really good next 12 months. So price target is a dollar 80. It's currently around dollar ten to a dollar 20. It has been sold off in the microcap small cap sell off. So significant upside here and a really interesting space to be and potentially go and buy and try their whisky. 

Candice: [00:12:46] Yeah, buy it for a Christmas present if you're looking for one last minute idea, that's it. 

Felicity: [00:12:51] Now in a moment, we're going to hear three more ideas here from Hirscher, but we're going to take a quick break and hear from our sponsors. So, Candace, what is your next stop? 

Candice: [00:13:02] Yes. So this is my second last one and I think I've saved my two favourites for the end. So it's future facing energy. It's actually in old energy and new energy and I'm going offshore for this. So the company's called Energy Transfer and the code is 80 on the U.S. Stock Exchange market cap is 35 billion USD. And you today, you know, along with a lot of other energy names, the stock has rallied 32% as we close out 2022. So it is a Texas based energy company founded back in 1996 and through its expansive network of US based pipelines covering about 38 different states with a smaller Canadian exposure but also growing, the business has four primary activities, mainly running in a group for us. So we've got midstream interstate transportation, tech. So it's kind of more recession proof why I like it. Storage of natural gas, crude oil, natural gas liquids, NGL. So that's old energy, refined products and fraction and then turning services and acquisition plus a little cheeky fees that I'll leave to the end. So you probably. 

Felicity: [00:14:12] Won't forget this code because it sounds like an 80 phone home. So definitely easy to remember. Now this stock also falls under your transportation I guess more recession resilient thematic for 2023. 

Candice: [00:14:25] And also what I like about this company is that it's really well established. So the company's robust network and prime positioning means it's connected to the most high demand regions in the US, which has propelled it to be really the leading number one position. Also, it has approximately about 90% EBITDA driven from long term fee based contracts have really predictable earnings. It's really clear what they're going to do and how they communicate that to the market. And so that's really strong in my opinion. Plus the commodity price volatility is well contained. They do a great job there. So the company also another reason why I really want to add it to the Christmas or iPad is it's really vertically integrated very, very well. So they call it wellhead to water, which enables it to create and extract value at each stage of the value chain from gathering their products, you know, at the source of transportation to fraction and to export all through the whole supply chain. They're completely vertically integrated, so they're not wasting any opportunity there. 

Felicity: [00:15:28] Yeah, that's good to hear. And I guess when it comes to energy stocks, you kind of need to consider how the war in Ukraine is actually playing out for it. So do you have any comments there? 

Candice: [00:15:39] Yeah, that's a very good point. So I guess a direct impact between the conflict is that it's increase the demand and pricing for alternative energy sources by pretty much all of Europe and some Asian countries. So it has cleverly already expanded its robust export capacity. So it currently represents about 40% of all US NGL export volumes, while its global market share has more than doubled in the last 24 months to growing about 20% of the global export market now making it a really big global player. It's also important to note that their asset, Lake Charles LNG export terminal, is yet to still come online. So it's already got signed contracts. Like I said, long term fee contracts with customers like Ian, an energy group, GUNVOR Group, S.K. Gas and China Gas. 

Felicity: [00:16:31] Okay, so you've spoken a bit about the old energy. What about new energy? 

Candice: [00:16:35] So they have the old energy covered, but they also have the new energy, which I alluded to is their fifth kind of segment in. And how they do that is the company maintains strong environmental initiatives through the utilisation of renewable energy, dual drive compressions, carbon capture and solar purpose.

Felicity: [00:16:53] Candace to wrap it in white to buy, they're essentially a well-established energy company with predictable earnings in sight, which is important in this environment of long contracts, and they're winning more. Plus, they're investing into new energy and renewable space. What about the price target? I mean, this is what we want to know. Dividend and. 

Candice: [00:17:10] Upside. Yep, that's right. And also a little side fun fact, this stock also falls within Assurant Partners Global Income Small portfolio. And that portfolio has really been designed to give investors access to the global market, attractive companies offering a pretty decent yield. So that's why this stock falls within this model portfolio. It's currently offering about 8.7% dividend yield. So a really nice attractive yield. They're trading around 11.50. Remember, this is all US dollars. UBS, who we use to cover this stock, has a $21 price target and consensus is about 1624. So if we go on the street, it's about 41% upside on what we're currently trading at. So that's a wrap. Add it to the portfolio, watch it, see what happens in I think in the next, you know, coming early months of two. I'm 23. Hopefully that's it. We see some nice upside. 

Felicity: [00:18:03] And another double digit pick for the order pad. 

Candice: [00:18:06] Yeah, fingers crossed. Now, Herschel, I'm excited to hear your stock idea. I know you've done lots of research, so without any further ado, what is your stock idea and why do you like it? 

Herschel: [00:18:18] All right. So just continuing in the defensive territory there, I have chosen Kub Holdings. The ticker code is to you B as my pick for the order pad. So Kub Holdings, the Logistics and Infrastructure Company, which engages in the provision of import and export logistics services with a market cap of around $5 billion. As one of Australia's largest integrated providers of import and export logistics, it operates in over 160 locations across Australia, New Zealand and Southeast Asia. So Cube is composed of two core divisions being the operating division and Cube's 50% interest in Patrick Terminals, which is Australia's leading container terminal operator. And they also provide services that cover logistics infrastructure's ports and both material handling. 

Felicity: [00:19:11] So are there any upcoming catalysts or any highlights that you've noted?

Herschel: [00:19:15] When looking at the catalysts? Cube has a strong execution track record in the port to show supply chain, and it has diversified earnings in customer sectors and geographies, which I think justifies Cube's valuation. And then there's also a growth in container trade volumes and resource share of total container movements. So this could be a really good catalyst for the company. Then there has been an increase in demand for bulk exports, which is driving contract wins as they try to get corporate activity going to grow the company. And there's also been development of logistic infrastructure and new bolt on acquisitions. 

Candice: [00:19:57] I love it. I love I get excited talking about infrastructure long term contracts, which is exactly what I think you're keen on for Cube. So to wrap it up her shop, what are your thoughts on, you know, the next 12 months valuation upside dividend yields all the attractive investment catalysts. 

Herschel: [00:20:17] All right. So looking at the recent performance, cube has seen a strong performance in logistics and infrastructure business units, together with a more modest underlying earnings growth from the ports and bulk business unit. And this saw the revenue growth of 28.1% to $2.56 billion, and underlying EBITDA growth of 19.1% to 252.4 million. While there have been weather impacts and labour shortages and port congestion, they've had positive earnings growth and the consensus target price is looking at a tweet dollars and $0.33. While it's currently trading at $2.82, this target price implies an upside of 18%. The share has a dividend yield of 2.2%. But being in a defensive logistics and infrastructure space, I think there's operational growth that can be expected. 

Felicity: [00:21:13] Absolutely. I think all these bottlenecks, you know, end up I think if all these bottlenecks kind of loosen over the next year or two, there should be some significant upside for Cube. So that's a great pick for the order. Herschel, thank you so much for sharing that with our listeners. 

Herschel: [00:21:29] Thanks, guys. It was great being here. 

Felicity: [00:21:31] Awesome. Now, Candice, we've got your last stock now. So this is the final stock of the 12 stocks of Christmas. So what do you have for us? 

Candice: [00:21:40] So we're going so we're staying overseas and I'm pitching a large cap. In fact, giant really when it comes to the health care sector. So it's UnitedHealth Group and the code has a market cap just shy of 500,000,000,489 at the moment. US So if you haven't heard about this one, UnitedHealth is the largest health care company by revenue standards and it offers a diverse array of health care benefit plans through the whole company. It really has various amounts of health services, but really through its optimum line of business. What it offers is commercial and government health plans in the US, which is really important because we know that they don't have compared to other countries like in Australia, a really good health care system and that really their government health plans accounts for the main part of the company earnings and its optimum line of business makes up the rest of the earnings, which is split into three segments. 

Herschel: [00:22:37] So again, is what are the three segments of the company operating in? 

Candice: [00:22:40] So you've got the first one which is optimum are X and that is pharmacy care services in the US. The second is OptumInsight, which provides tech focussed consulting to the health care industry. And then the third one is Optimum Health, which is the diversified health and wellness business. 

Herschel: [00:22:58] So is coming back to the number. What does the upside look like and are there what are the valuation metrics that you're looking at? 

Candice: [00:23:05] There has been already quite a nice little cheeky rally to this stock ride. Health care is recession proof a bit more than other sectors. So the stock has rallied about 8% as we close out this year. But I still think there's more upside to come here. So I say that because we use UBS for the large cap stocks, as you know, and they have a price target of 590. Their price target in valuation is based on 22 times forward p e multiple, which is pretty, you know, pretty fair value for a giant company like this. Before I get to the upside in the numbers, I will just quickly flag a couple of risk factors that we all need to remember. So obviously earnings upside driven by any capital development and deployment. If it goes wrong, that could be a risk to our valuation stronger than expected membership growth. You know, hopefully it does actually achieve more than what the company's flagging. So that'll be a nice upside to our valuation. And then, you know, things like their CapEx and the overall market of next year is really uncertain. So it'll be interesting to see how this plays out. But if it's trading around $523 at the moment and UBS places a 590, the street's pretty much the same at $593. That's about 13 and a half percent upside from where it's currently trading plays. 

Felicity: [00:24:26] Remember that although Candice and I are financial advisors at Shaw and Partners, our order pattern episodes discussed are not considered personal financial advice. Please seek professional financial advice before making any investment or financial decisions. 

Candice: [00:24:41] That's right. It's almost sad to say goodbye to everyone for this year. But don't worry, we'll be back next year in the new year. So as always, feel free to reach out to us on our social media channels. Now, you've heard the voice of her show. She is the face and the brains behind our Instagram, and we'll be back next year with our first episode dropping on Friday, the 27th of January. We're actually going to bring to you 23 investable ideas for 2023. We're so excited to have her to join us on our last episode of the. 

Felicity: [00:25:12] Year 23 Stocks for 2023. Just like our 22 stocks for 2022 until next time. 

Candice: [00:25:18] Have a merry Christmas and see you in the New Year.