A rebirthed and well-known toy store chain, a plus-sized women’s clothing group and a gold explorer are among this year’s top stock buying tips.
Canaccord Genuity released its Top Australian Stock Picks report for this calendar year on Tuesday, highlighting 26 firms across a diverse group of sectors.
Here, we’ve focused on a few in the consumer/retail sectors you may have already heard of, plus two others in the resources sector you may not be familiar with.
* Mighty Craft (target price 51 cents, currently 31 cents ) is rapidly growing its alcohol brand portfolio currently consisting of more than a dozen craft businesses operating across the spirits, beer and ready-to-drink categories.
It also has multiple stand-alone pubs attached to breweries and distilleries around Australia to show the brands off.
Canaccord Genuity says Better Beer, its latest partnership with social influencer duo The Inspired Unemployed, has “the potential to disrupt the mainstream beer industry”.
“Early signs are extremely encouraging, with initial stock selling out within the first week,” its analysts said.
“We believe this puts Better Beer on the trajectory to become one of the largest independent beer brands over the near term. We think the market is severely undervaluing this asset.”
* City Chic Collective (target price $7.50, currently $4.47 ) holds a stable of plus-sized women’s fashion brands including City Chic and Avenue in Australia, New Zealand, the US, Canada, UK, Europe, the Middle East and Africa.
“We believe City Chic will exit FY22E with substantial sales momentum across its businesses and an opportunity to accelerate brand awareness via a number of major marketplace partnerships that it has signed during the year,” Canaccord Genuity said.
“Recent concerns regarding UK supply chain (about 15 per cent of group sales) are overdone, in our view.”
* Toys “R” Us ANZ (target price 25 cents, currently 15.5 cents ) changed its name from Funtastic Limited in June and recently acquired the Hobby Warehouse Group including Australian e-commerce websites Toys “R” Us, Babies “R” Us and Hobby Warehouse.
Canaccord Genuity said the company was in the embryonic phase of relaunching the Toys “R” Us and Babies “R” Us brands in Australia and New Zealand, with recent trading updates illustrating building momentum.
“We expect CY22 to see meaningful delivery against its medium-term target of having 5 per cent domestic market share (about $300m revenue in five years), while the UK adds significant growth optionality, in our view.”
* Marley Spoon (target price $3, currently 85 cents) is a meal-kit provider operating in Europe, the US and Australia, offering a budget product Dinnerly, as well as its namesake service rivalling HelloFresh.
Canaccord Genuity said the company’s stock had slumped during a tough December quarter, with 65 per cent of its revenue base coming out of lockdown (US/Europe), resulting in increased skip rates as summer holidays were extended, combined with logistical issues, food price inflation and labour shortages.
“We expect these issues to somewhat abate in CY22, with the added tailwind of the rapid emergence of the Omicron Covid-19 virus that should see consumer behaviour shift in preference of meal kit providers,” the analysts said.
“We believe the company would be a valued strategic target by HelloFresh or a global consumer brand, given its customer reach and market positioning.”
* Bellevue Gold (target price $1.45, currently 82.5 cents) is currently developing its namesake first mine in Western Australia, with the maiden gold pour planned for mid-2023.
The company says it is forecast to be one of the nation’s highest-grade, lowest-cost mines.
Canaccord Genuity noted Bellevue Gold was fully funded through to first production.
“And with the recent appointment of a new chief executive and general manager, both ex-Northern Star, we believe the company is well positioned to have the 183,000 ounces per annum at A$1014/oz project in production in less than two years,” the analysts said.
“This will place Bellevue Goldin the top 20 largest gold producing mines in Australia, with some of the highest margins in the sector.”
* Allkem Ltd (target price $12, currently $10.88) was formed from the merger of lithium miners Orocobre and Galaxy Resources, with a portfolio including lithium brine and borax operations in Argentina, a mine in WA and a lithium hydroxide conversion facility in Japan.
Development and design work in Argentina and Canada is also underway.
“We continue to observe strong market fundamentals for lithium, with increasingly aggressive electrification targets and higher electric vehicle adoption rates,” Canaccord Genuity said.
“As such, we believe Allkem is the top pick to play the thematic as it looks to emerge a top 5 lithium chemical producer by 2025.”