12 stocks of Christmas Pt 1 | TCL, GL1, WMT, BOE & more!

Candice: [00:00:12] Welcome. This is Talk Money To Me, our financial podcast. Thanks so much for tuning in. I'm Candice Bourke. 

Felicity: [00:00:17] And I'm Felicity Thomas, and we're very excited to bring you a special 12 Stocks for the 12 Days of Christmas over two episodes. Now, if you're a regular on our show, you'll definitely know about our o\Order p\Pad episodes. Now, in these episodes, we pitch a stock idea, something we're liking in the current market. So today we're doing a Christmas spin on our Order Pad. 

Candice: [00:00:38] That's right. So when we were researching, we sat down together and we thought, what are some great stock ideas for our listeners to add to their Christmas stocking? Felicity and I debated a couple of themes. Obviously, what's been going on the market, it's keeping it very much on our toes. So we settled on the following themes, which we think are 12 stocks for the 12 Days of Christmas, perfectly for within. So those themes include resources, the health care sector, retail, future facing commodities. So the ESG play there. And then my favourite recession proof blue chip income, more defensive names like property, transportation and infrastructure. I think Felicity would be really great. Also, if we just give a quick recap on what's been going on in the market, like with the inflation number that's just come. 

Felicity: [00:01:24] Out looking at month over month data rather than a year, it's actually point one and it's so it's basically flat. If you look at the month to month growth rate, which is really an encouraging sign that inflation's grip on our economy is weakening or the US economy is weakening. We're recording the 14th, the 12th, 2022, so we're thinking that it's going to be another 50 basis points if you actually look at the Fed dot plot. But essentially, they don't really know what they're going to do next year. You know, the market's kind of flirting with another 25 basis points, potentially a pause in the Feb early March. Overall, what we kind of think is the print takes the pressure off the Fed to keep the pedal to the metal with its rate hikes. I mean, after all, October's call, a CPI rating could have been dismissed as a single data point. But with November's CPI showing cooling as well, the Fed can point towards an encouraging trajectory showing up in the data. 

Candice: [00:02:18] Exactly. I think another point or quote I read only this morning was that this is a consecutive, you know, kind of, I think three or four months now where we've seen the inflation number come down enough to build a trend, which is exactly what you're saying there, Felicity. And it's coming definitely in the US off the peak in June. So once I guess the central banks around the world figure this out, this is really them signalling inflation's cooling. Where can we then look to invest? How many people can we hire in the business sense? Then you can plug that risk reward and I guess the risk premium in the market into your investment portfolio to make decisions from there. But as we turn the corner in 2023, it's still very much uncertain. So hence those more defensive kind of sectors make up the 12 stocks of Christmas. Alright, now let's just quickly get the disclaimer out of the. 

Felicity: [00:03:08] Way before we get into the stock ideas. Remember today our chat 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. So Candice, what is your first stock for the 12 days of Christmas? 

Candice: [00:03:33] Okay, so my first stock is Transurban for the Christmas stocking. The code on the ASX is T-C-L and the market cap is 43 billion. Transurban is Australia's largest toll road company, with essentially the rights to own and operate the toll road networks around Australia. Following a number of investments, the company has ownership in several toll roads, mainly in the Melbourne, Sydney, Brisbane cities, but also offshore in Virginia, in the United States and Montreal in Canada. The key toll roads that I want to focus on though are the Australian assets. So you've got CityLink, M2 and the WestConnex, which I drive on the North Connect, West Connect at least twice a week. So I'm very frequent on that road.

Felicity: [00:04:17] All right. So why do you want to add Transurban to the order pad? 

Candice: [00:04:21] So those three tolls in particular, Felicity, those roads, they actually equate to about 60% of the group's equity value. So they're super significant. And Transurban is obviously an infrastructure stock, a transportation stock. So it's one of the reasons why I think in this climate that we're facing in, you know, 2023 that it's going to be tough out. The business model is really going to benefit from high inflation that we're all feeling. In fact, about 68% of those tolls are linked to CPI, so it's clearly a beneficiary for the business in the current climate.

Felicity: [00:04:56] So I mean, tell me a little bit more about their balance sheet.

Candice: [00:04:59] They were kind of in a lot of trouble throughout COVID. However, the debt is now well managed. They fixed it at 4%, so that's pretty good in the rate rise environment that we're. In. And clearly COVID wasn't great for toll road businesses. After losing lots of revenue, they lost about $1,000,000,000 as we all worked from home and we clearly weren't driving as much as we are today. But now the offices are back opening which kind of balancing these hybrid reopened trade. And so I think there's going to be a beneficiary there. Another point also, apart from the balance sheet that I just want to quickly bring up before I get to valuations is I am a good example. We're going through a baby boom at the moment. You know, my daughter's now one. There's that trend going globally. So increase in population means more congestion on the roads, which means we need more than ever really good infrastructure to support that population growth. And what do governments do in times of stress? They pump the infrastructure because that's good for jobs. So I think it's a good one to add to the Christmas stocking. It's trading around $14. And UBS, who we use for our LARGE-CAP research, has a valuation of 15.28% or so upside. 

Felicity: [00:06:08] Great. And what about the dividend? 

Candice: [00:06:09] Nice, cheeky 3%. Because what they endeavour to do as a business is, you know, they try and basically push out 100% of the annual free cash flow to investors, which I really like. 

Felicity: [00:06:20] Awesome. So first one, Transurban, add.

Candice: [00:06:22] It to the stocking. Okay, so what are you going to bring to the Christmas special? A lot of hard. 

Felicity: [00:06:28] Okay. So I've decided in the first half of what iPad I'm going to do. Future facing commodities. 

Candice: [00:06:34] What a shocker.

Felicity: [00:06:35] Surprise, surprise. Right. I mean, I've spoken about it before. We are heading into a commodity supercycle 2030 Paris decarbonisation goals. It's impossible to be met because there's not enough supply and there's not enough reinvestment into resources. So my first one is Global Lithium. The ticker is G.-L-1 current market cap is 430 million. It's actually in a trading halt as of our recording right now. So it'll be interesting to see what kind of news comes out. Essentially, they're a rapidly growing lithium exploration company with a focus on two highly prospective W.A. projects, the Marble Bar Lithium Project. I quite like that name in the Pilbara region and the Manna Lithium Project in the Goldfields region. 

Candice: [00:07:19] I know GL1 really well, but just for the benefit of our listeners, give us a kind of the recap of any recent announcements. You know, why are you thinking it's a good one to add to the Christmas? 

Felicity: [00:07:30] Yeah, absolutely. So they continue to go from strength to strength. Additional positive drilling results at the Metal Lithium project, which was really good tick there as well as major shareholder mineral resources has actually increased their shareholding from 5.1% to 8%, which is absolutely fantastic. So we're very excited about that. Another point that I want to point out is essentially hard rock lithium in stable. It's a tier one jurisdiction in the right theme. So essentially it's really the time to start developing these assets. Now, lithium deposits are technically and economically viable to exploit are relatively rare. So lithium deposits fall into three broad categories. So you've got hard rock, soft rock and brines. So we believe that deposits similar to GL1 in a similar region are incumbent, the best type of deposit for commercial production, which is what we want to do when we're investing in a company, right, something that's going to be commercial. They've also got a really good team, so highly experienced management in the sector. You've got the managing director, Ron Mitchell. His previous role was actually at Tin Aqua Lithium, which is the JV partner of IGO, another stock that I've already put on the order pad. They're also strategically positioned commercially, so the assets are adjacent to mine resources. 

Candice: [00:08:48] Well, it's no wonder the men have 8% stake right there. 

Felicity: [00:08:51] The neighbour, that's it. 

Candice: [00:08:52] So that's a pretty good, compelling three point argument there. But let me ask you this question. I guess, why now, Abi? I mean, physically we can't buy today's in a trading halt, but that'll be lifted soon. So why are you liking it right now? 

Felicity: [00:09:04] Okay, so why right now? They've recently announced a ten year offtake agreement with one of China's largest electric vehicle battery makers, which is amazing. It's in the right sector at the right time. Future facing commodity. Like I said, now our price target for GL1 is 3.10. Consensus is actually a bit higher at 3.36. Now this price target is based on the company successfully doubling its current lithium resource base to 390 kilo tonnes and trading at a lithium price trading at Australian 1500 per tonne per medium over the next 12 months. So what is your stock, Candice? 

Candice: [00:09:44] My second stock to the Christmas stocking for 12 stocks for Christmas is really a beneficiary of what we're all doing now. Racing around trying to madly shop for Christmas presents. So it's a Santa beneficiary. I would say it's the largest retailer on the planet, if you haven't yet guessed it. I'm going to go with WalMart for my second stocks. 

Felicity: [00:10:07] Year going into national. Going international, creeping back into the international market. 

Candice: [00:10:12] 100%. So the code, if you don't know it is WMT just a cheeky market cap of 400 billion so pretty big player and I think that Wal-Mart stands for really well positioned in the really messy backdrop that we've got going on. And I say that because a key message from their recent announcement was that the company noted that it's seeing signs that some of the economic pressures are starting to cool out, you know, with inflation cooling as well. Hopefully a pause in the rates that will be nice, particularly in the middle to upper income consumers. So it's resulting in lots of shopping spree, like the consumers still really frantically spending a lot of their savings that they have over the last two years in COVID. And what are the shoppers doing? They're seeking value. 

Felicity: [00:11:00] Absolutely. I really kind of wish that we had a Walmart here. 

Candice: [00:11:03] Hopefully the Walmart company board of directors and CEO and management team are listening right now. That's it. And they bring it to Australia. 

Felicity: [00:11:10] We need a Walmart. Yeah. 

Candice: [00:11:11] Because who doesn't love a value shop? Right. Because I think many retailers are really you know, really it's tough, right? We've got lots of inventory stock. We don't know what's really going to happen after the Christmas sales with the consumer. But if you think about Walmart, they're in a really good spot to help consumers navigate through the difficult times like this because they're known as the value kind of offering. 

Felicity: [00:11:34] Okay. And so what are you thinking from a price target perspective? I mean, has it been sold off as much or not really? I mean, what are we thinking for the next 12 months? 

Candice: [00:11:43] I mean, yeah, if you look at any large cap, you know, us stock in particular, it's definitely been sold off like the rest of the market. But what I feel is that it's, you know, Black Friday sales and the holiday spending will be a beneficiary and a nice bump to warm up overall. And importantly, when I look at retailers, they really manage the inventory levels really well. So the company, you know, made its commitments for the first half of next year, 2023. They literally said on the call, we're going to be really conservative on our stock levels. So they haven't gone out crazy. They are expecting a slowdown and they're managing their stock levels really well. And it's such a big, you know, retailer that if they're wrong on that call, they can easily ramp up their inventory purchases in the event that demand is stronger than they expected. So it's current, to answer your question, I'm going to get there. 

Felicity: [00:12:35] So they're flexible. 

Candice: [00:12:36] Really flexible. Yeah. So that's why I see, you know, kind of 15% upside to where it is at the moment. It's trading around $147 US. Right? We have a UBS price target of 170 and then consensus is 159, so about 8% on consensus upside. 

Felicity: [00:12:55] Awesome. That sounds really good. So Walmart is your second one for their stocking. Now we're going to take a quick break, but don't go away as we're going to be revealing the next three stocks for the 12 stocks for 12 days of Christmas. 

Candice: [00:13:10] So, Felicity, what else are you adding to the Christmas Order Pad special episodes? 

Felicity: [00:13:15] So I've got a microcap here and it's actually one that we've actually just put under coverage. So it's called Cyrus Corporation. The code is C79 and the market cap is 200 million. They've developed a novel, gold assigned technology for the global mining and geochemistry lab industry. Okay, so highlights for this company and why I think it should go on the order pad. Essentially, that contracted unit pipeline supports rapid growth into a large addressable opportunity. Now they've contracted a deployment pipeline of 49 units to be rolled out by 2025, which already accounts for about 88% of our FY 25 forecast 56 units in the field. Now C 79 discloses TCV of 703 million from its deployment pipeline, which provides significant visibility into medium term revenue growth. So quite confident that they're going to hit their numbers. Point two is T1 Customer Success Highlights Potential for future expansion. So essentially, they've had early successes in signing leading labs and major gold mining customers, which provides significant opportunity for future expansion. And then my third highlight is their very attractive revenue model provides strong unit economics and downside protection. So what they do is they lease and minimum volume commitment model functions as a take or pay mechanism, providing a high quality minimum recurring revenue base, which we love, allowing for upside leverage to excess as CI volumes.

Candice: [00:14:46] So here's a question. If you can tolerate the risk because it is a smaller microcap rise, got that kind of speculative risk to it. Why buy now, do you think? 

Felicity: [00:14:55] Why it's a buy now. They've got a significant opportunity ahead to continue expansion into the large addressable market supported by the relationship with major lab customers, which could account for a lot of the revenue that we've already factored in. Now C-79 is further leverage to upside potential from a CI volume such as float on ACI, becoming the de facto gold ACI technology over time driven by its efficiency, cost, safety and ESG advantages. I thought you'd like that. Be it price target is 5.40 and that's the price that we actually initiated our buy. Now a price target is based on a ten year DCF. Our price target also implies 5.3 times FY 25 AVEDA sales, which we consider as appropriate benchmark given they've already contracted unit deployment pipeline and actually already extend to 2025. So it's pretty guaranteed there. So current price is 3.17 and consensus is actually higher than ours at 6.35. So that's quite a lot upside there. 

Candice: [00:15:58] That will definitely be one to watch and see how it progresses through next year because it's really interesting for Matic. 

Felicity: [00:16:04] To summarise my few minute points there, it's mining technology. All right. So what is your third and final stock for today? 

Candice: [00:16:12] So similar to Transurban, I'm going another defensive infrastructure kind of, you know, property play and it's Lendlease. So the code on their ASX is LLC coming back to Australia for this one. But staying in the large cap market because it has a market cap of about 5.1 billion as we record this. So for our listeners not familiar with Lendlease, they are a property development and investment company that engage in designing, developing, constructing, funding, owning, co-investing and managing property assets. They are one of the biggest property managers here in Australia and the company operates through its three different business segments development, construction and investments. Now interestingly, you might be thinking, why is she picking a stock? If you look at the chart in the last year, it's you know, it underperformed. And if you go further out, it's really been a laggard in terms of our preferred ASX real estate coverage names on a 3 to 5 year rolling basis with a notable deriding really since the 2018 engineering downgrade and more significant, obviously COVID disruptors to the way rate peers like Goodman Group.

Felicity: [00:17:20] Yeah. Why are you pitching Lendlease? I was literally about to ask you that. 

Candice: [00:17:25] Look, it's been rightfully oversold to a point, but I think there is going to be a recovery story here. Obviously, we've had recent concerns around global growth and credit availability, rate rises. All that plays into it, right? However, I do think that Lendlease could provide investors with the potential for a revision of both the earnings and the valuation multiples to go back to normalised levels after a few challenging years.

Felicity: [00:17:53] You know, I hope you're right. I mean, we've had a recent recovery story with A2 Milk. Perhaps Lendlease could potentially be in the same boat. So can you give us a little bit of what's happened lately for you to kind of get more confidence back in the stock? Because I know investors took a while to get back into A2 Milk. 

Candice: [00:18:09] Yeah. And the other thing that you've quite rightly pointed out is like the story could be there and the fundamentals could turn around, but we need sentiment as well. And sentiment turns around once you start getting leads on the board and you get a track record. So here's how I think they can really turn around the perspective on the markets. Recently, they appointed CEO Tony Lombardo, and he outlined a strategic new plan in 2021 to restore the performance over three phases. We really love good management when they're really clear to the market on their plans to revitalise or grow the business. Right.

Felicity: [00:18:43] We did have that with Mike Ellison as well with Elders, his 12 point plan.

Candice: [00:18:47] Correct. So phase one is to reset in 2022, which, you know, has since completed the sale of the engineering and services business, a material cost out, which is good, and they've had a bit of a portfolio review there. The second phase is to really roll out in 2023, slash 2024, and that's moving projects into production to achieve over 8 billion per annum of completions we are predicting by FY 24. And the final phase to really revitalise the company is really going to play out in 2025 and beyond and that is to consistently, you know, push the development into production over the 8 billion that I've just explained to exceed their financial targets and funds under management of about 70 billion by FY 26. So I'm saying it's a recovery story. I'm hoping and hold on until at least FY 26 to really see these three phases and the strategic plan play out. 

Felicity: [00:19:45] I really hope you're right. Otherwise whoever's put this in their stocking might feel like they've got a little bit of coal. So tell me what's the price target and what kind of revenue you're expecting to come in.

Candice: [00:19:58] So it's currently trading around 7.42. We have a valuation of it reaching 11.15 and consensus is a little bit less than that at about ten point and $0.07. So about 36, 37% upside. As we're chatting right now, chalk it in the stocking. We're hoping for an infrastructure, defensive, you know, kind of property more play. And the good news is that Lendlease does have a track record and development at a currently 18.2 billion as of June 2022. And we're estimating it's actually more valued over 20 billion. So I think there'll be a quick amount of, you know, numerous upside and projects to factor in.

Felicity: [00:20:36] Absolutely. Especially if rates stop increasing inflation calls. That makes a lot of sense. And double digits, which we all love. 

Candice: [00:20:43] That we do. We do indeed. Okay. So to finish off this part, one, you mentioned you're going to do all the resources. So what's the final one to add to the order pad? 

Felicity: [00:20:54] Okay. So I am going to go with BOSS Energy. The code is BOE on the ASX now. I'm going to quickly tell you why I'm going to go with the pass. It is a uranium mine. They're not in production yet, but essentially this is a huge, huge investment opportunity when it comes to nuclear power. Now the uranium is not traded on the spot market like other commodities, it has long term contracts. Now, a lot of the old contracts are being rolled off and the new contracts have been drawn up in an extremely bullish uranium market for 2023 and probably actually one of the busiest years in terms of contracts. So there's huge supply deficits in uranium. Again, it's something that we've spoken about before and further demand has exacerbated this issue. Now, nuclear power demand growth is accelerating at multi-decade highs. So that's why I'm going with uranium. 

Candice: [00:21:49] So Boss Energy, I'm just going to ask you a couple of questions on that. Firstly, just more of a rap on what it does. And then I want you to also address the fact that the market knows that the new ESG future facing commodities are traditionally more expensive. So how are they bringing down the costs, too? Because that's a big factor, is that renewables are too expensive to go full commercial yet. 

Felicity: [00:22:12] Boss energy is actually positioning their honeymoon project. So it's 100% in South Australia and it'll be Australia's next uranium producer. Now the honeymoon quite like that name is unique in that it contains a fully permitted uranium mine with 170 million of established infrastructure, including a plant in good condition under care and maintenance that has produced and exported uranium in the past. Now it also continues to hold approved heritage and native title mining agreements and can be fast tracked into production in a short 12 month time span to seise upon improved market fundamentals and uranium prices. So I've got a few highlights, right? So why Boss? It's got the potential to be the lowest cost production of uranium in the Western world. Now Boss Energy is 100% owned, fully permitted. Honeymoon project requires low upfront capital and less than 12 months to restart. So they've recently secured key approval for restart at honeymooned uranium projects. So we're ready to go, right? Boss Key Asset is in Australia, which means it has jurisdiction advantages versus its peers. Australia is really a stable and neutral location with established supply routes to all major Western convention facilities. Now we believe this is really important given uranium is such a geopolitically sensitive commodity, especially in light of the Russian Ukraine war. 

Candice: [00:23:40] What about the return on investment or you know, once we're in production, what are the fundamentals that you're seeing come through there? 

Felicity: [00:23:46] See it? So I've said that it's going to be fast tracked once there's final investment decision, but they've basically done their enhanced feasibility study, which actually details out the Honeymoon project, and it has an NPV post-tax of USD 240 million, which is a 37% IRR, which is great, right? Double digits. 

Candice: [00:24:06] Why now? Why buy now and talk about the valuation that you can say in the next sort of 12 months? 

Felicity: [00:24:11] Why is Boss a buy? Essentially there's a strong tailwind for uranium and nuclear equities. I continue and we continue to like BOE for its operations based in Australia, its very strategic uranium inventory. So it's currently valued at Australian 95 million and it's a leverage to the uranium sector upcycle. So I really think it's just kind of the beginning for uranium and uranium stocks. Now the Sean Sean partner's price target is 3.20, consensus is three TL 28. So again, more bullish than Sean Partner's and current price is 2.19. So again, this is going to give you some significant double digit returns. 

Candice: [00:24:51] All will have another cheeky future facing commodities how high growth, you know commodity name to add to the stocking. So going back to the themes, right, we said we were going to cover resources, take full season three of those health care. We haven't yet given you one. So stay tuned for part two. Retail, obviously warm up, but I think Felicity's going to bring a retailer to the stocking as well. And then obviously ESG has been covered through the future facing commodities like uranium. 

Felicity: [00:25:18] I'm actually going to do retail and I'm going to do a property play, which you haven't had for me before. 

Candice: [00:25:24] So she's going defensive. 

Felicity: [00:25:25] You better tune in. 

Candice: [00:25:27] Tune in, tune in. All right. So just before we sign off on today's episode, please remember, although we are registered financial advisors at and partners, obviously all the companies we've spoken about are based on the facts, not at the time. And this is not to be considered personal advice. Please note our discussion, as always, is genuine and you should go out and seek your own professional advice before making your investment decisions.

Felicity: [00:25:51] So free to reach out to us on our social media channels or send us an email which is displayed in our show notes below. Make sure you follow us on @TalkMoneyToMe podcast for daily market updates. Until next time. 

Candice: [00:26:02] Well until next week for part two. See you then.