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Transcript

Ben Clark: Welcome to Buy Hold Sell. Today we’re going to be looking at some of the standout results we've seen through August and joining me today, we've got Andrew Mitchell from Ophir and Jun Bei Liu from Tribeca. Andrew I want to start with you. This company has not put a toe wrong since listed on the market, Wisetech (WTC). Buy hold or sell?

Andrew Mitchell: I'm going to say sell from us. Look this company's trading at a nosebleed valuation, thirty times gross profit. It's made a lot of acquisitions. Obviously, you get integration risk with that sort of valuation if anything goes wrong, you get very harshly penalised. And for us we think the downside risk is a lot larger than the upside risk at this point in time. So a sell from us. Although it's a great company.

Ben Clark: Yeah. Jun Bei, Wisetech it's hitting all time high today. Buy, hold or sell?

Jun Bei Liu: Oh, it's absolutely a sell for me. Look I think it's a great company, it has bought so many businesses in the last few years. I was bit surprised the result was actually better than I expected. But it was in line with the expectations, even the guidance in line. But a 180x PE, I think it's way too expensive for what it delivers.

Ben Clark: Okay. Treasury Wine (TWE), they delivered it as well. It has been a bit of a short case behind this stock. Buy, hold or sell?

Jun Bei Liu: Yeah, so for me it's a hold to Treasury. We held the position into the result and its done very well. Cash conversion was strong. You know the future growth target continues to be intact, which is felt, it has rallied quite hard and then it's becoming a little bit expensive. So it's more on the hold side for us at this point.

Ben Clark: Okay. Andrew, Michael Clarke was pretty fired up on the call. Buy, hold or sell?

Andrew Mitchell: As he always is. It's a hold from us. Look the cash-flow was great and that was what the market was looking for. We see this as a really exposed however to Penfolds, which is working well for it and the agricultural risk. He's obviously doing a great job. Business is going well. But we want to see, I guess more indication that Penfolds can really drive those brands through China and increase its penetration rather into China, so hold from us.

Ben Clark: Okay. One of the surprising areas in the market is the auto sector. SmartGroup (SIQ) had a result that was well received. Buy, hold or sell?

Andrew Mitchell: It's a buy from us. Look, putting this business in context, you're looking at 45 percent margins, which is very high. Return on capital, a measure of quality, is very high. It’s growing at 10 percent, it gets easier to grow because it really came off this time last year. So we see it growing at 10 percent and you're paying 16 times forward earnings multiple, which is below the market. So you're getting a higher quality business than the average market company, you're getting more growth than the market and you're paying a lower price. So from our perspective, we think it's a buy. It's got great management team. Although, there is a risk we saw a director sell a lot of stock recently. And that same director bought very well at a lot lower price. So I would just have a little bit of caution but it's a buy from us.

Ben Clark: Okay. Jun Bei, Smart group. Buy, hold or sell?

Jun Bei Liu: It's a hold for me. The reason is simply because of the regulatory risk that will always play in the background. Salary packaging is a place where a lot of politics can play. Arguably, less risk at this point. But it will always be there. So this is a company that multiple would never go too high. And also another thing is, single larger shareholder, potentially that stake could come through, so for me it's a hold.

Ben Clark: Okay. Now I asked you both to bring along a stock, you thought had a stand out result, what’s your view on that?

Jun Bei Liu: Look, can I say 2?

Ben Clark: Very quickly

Jun Bei Liu: Very quickly, okay. So Altium (ALU) delivered one of the best results. Great growth, continue to take share, on track to deliver huge margins, a lot of leverage in the earnings, we will touch on little bit later on what this is. But the company is really on the path to global dominance in what it does. It's a stand out for us.

Ben Clark: Okay

Jun Bei Liu: Now the other one really quickly

Ben Clark: Yes

Jun Bei Liu: It's actually IDP Education (IEL). I believe this stock was is a buy very strongly. The result was very strong. It’s a student placement business, it’s got IELTS testing, but student business is incredible, it’s global. It used to be just Australia and then the growth in students through UK, through everywhere has been phenomenal. Company's delivering very strong double digit growth. And the market misunderstood when the result came through. So the share price actually fell, it's becoming cheaper with very strong growth.

Ben Clark: Okay. Andrew stock you brought along. Maybe the market missed it but what's the standout result for you?

Andrew Mitchell: Well, I thought maybe the one I just saw couple hours ago, City Chic (CCX). Look, it's a small company, but it's a retailer with, I think, a very good management team and boards surrounding it. Michael Kay is the chairman, you have also got the Cotton On guys actively involved with that business. We saw the sales growth accelerate, in the second half and we saw the US business also accelerate dramatically in the second-half. You are only paying about 18-20 times forward for that business. And when it's going through that acceleration phase, it really owns the plus size women's wear in Australia. It's growing through category growth, we see a big room for it to grow further in Australia and off-shore. So that's my stock.

Ben Clark: Okay. Well, there's earning for the market is paying up for earnings momentum, but you've got to be careful of valuation.