Macquarie's top share picks for the next phase of the recovery

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Star Entertainment, SeaLink Travel and Austal are three of the best-placed stocks to reward investors should a coronavirus vaccine be delivered early next year, according to Macquarie.

In research naming the broker's top picks for the year ahead, Macquarie said the three companies are expected to outperform under a rotation into the stocks that were at the centre of the COVID-19 fallout.

With casinos still operating under the cloud of the health risks for indoor entertainment providers, Star Entertainment is seen as a better bet than Crown Resorts and SkyCity Entertaiment, according to Macquarie.

Naming the company as "a key vaccine beneficiary", Macquarie said the outlook is boosted by the conclusion of gaming revenue tax negotiations with NSW in June that also saw the state's government hand the company exclusivity over the poker machine market for casinos for the next 20 years.

Shares in the group jumped 6.1 per cent on Monday to $3.15 after AstraZeneca said on Saturday that it had resumed clinical trials for its vaccine candidate after suspending the study last week.

Taking the gains into account, shares in Star Entertainment have only recovered about half of the value lost since the start of 2020.

And although state border closures remain the centre of a partisan-political storm, Macquarie expects SeaLink to be one of the stocks to perform when they are eventually lifted.

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Macquarie says there are a number of possible developments that could push Austal's share price higher over the next year.  AP

While the company's commuter travel exposure has seen it significantly outperform leisure travel providers since the market low in March, the return of interstate tourism is seen as one of a number of factors expected to support SeaLink's share price over the coming year.

The company's shares closed at $5.03 on Monday, up 0.6 per cent.

Macquarie also named shipbuilder Austal as a top pick, citing the fact that its share price continues to trade at a material discount to where it was before the pandemic, despite the low impact on its revenues.

The stock remains 14.7 per cent below where it started the year after closing 3.3 per cent higher on Monday at $3.26.

"We estimate greater than 85 per cent of consensus FY21 to 22 revenues are contracted," Macquarie said.

In the core US business, "ongoing improvements in operational efficiency combined with higher margin vessels now under construction creates significant upside risk to consensus FY21 earnings before interest and tax estimate of $128 million".

The assumptions that inform Macquarie's assessment of the recovery include ongoing support for shares from historically low interest rates, that weigh on the potential returns from other asset classes and have pushed investors into equities because "there is no alternative" (TINA).

"While high valuations and the fiscal cliff [as JobKeeper is cut] are risks, we suggested the TINA trade is likely to continue with central banks likely to
remain accommodative as they continue to support the recovery," Macquarie said.