Patrick Trindade, PhillipCapital
BUY RECOMMENDATIONS
ANZ Bank (ANZ)
Chart: Share price over the year to versus ASX200 (XJO)
With more than $1.8 trillion in bank deposits across Australia, investors will continue to chase the big fully-franked dividends paid by the banks. With its considerable Asian footprint, ANZ, unlike the other three majors, offers exposure to several new growth areas within emerging Asian economies.
Rio Tinto (RIO)
Chart: Share price over the year to versus ASX200 (XJO)
The so-called hard landing in China is most unlikely and the iron ore price held up well in the past quarter. I expect several analysts to upgrade their numbers on RIO in the next six months. New management cost initiates should also start flowing to the bottom line over the same period.
HOLD RECOMMENDATIONS
Telstra (TLS)
Chart: Share price over the year to versus ASX200 (XJO)
While some uncertainty surrounds the new Federal Government’s intentions regarding the NBN and the continuing rollout program, investors holding TLS will continue to enjoy the 28 cents a year fully-franked dividend. The company has also flagged a possible dividend increase, albeit a small one going forward.
Iluka Resources (ILU)
Chart: Share price over the year to versus ASX200 (XJO)
A recovery in China and OECD growth bolsters the case for an improvement in zircon and titanium feedstock prices. Lower operating costs, solid sales volumes and a weaker Australian dollar should boost net profit after tax in the 2013 second half. NPAT in the half to June 2013 plunged 88 per cent on the previous corresponding period. Higher iron ore prices and a lower Australian dollar will assist royalty receipts from Mining Area C in the current half.
SELL RECOMMENDATIONS
David Jones (DJS)
Chart: Share price over the year to versus ASX200 (XJO)
The sales growth recovery the market is expecting is yet to materialise. I think gross margin gains will be harder to achieve from here. The company faces rising costs. Competitors prepared to discount present retailing challenges for David Jones.
Leighton Holdings (LEI)
Chart: Share price over the year to versus ASX200 (XJO)
Once a market darling, investors recently wiped $950 million off its market capitalisation after allegations emerged of widespread bribes and corruption within some divisions. A class action, on behalf of 10,000 shareholders, is being brought against Leighton. While only allegations at present, which the company strenuously denies, the uncertainty is going to drag on for months and that won’t be good for the share price.
Boe Campion, Ord Minnett
BUY RECOMMENDATIONS
CSL (CSL)
Chart: Share price over the year to versus ASX200 (XJO)
CSL’s engine room continues to be immunoglobulin and albumin. CSL has been supported by new jurisdictions, expanding label claims, new formulations, increasing market share and price strength in key markets. CSL continues to deliver at the expense of competitors.
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Treasury Group (TRG)
Chart: Share price over the year to versus ASX200 (XJO)
Treasury Group holds minority stakes in several high profile fund managers. We see significant value in RARE and Investors Mutual in response to growth and higher margin fees. We see Treasury Group trading with the highest proportionate management fee outlook in its history leading into fiscal year 2014.
HOLD RECOMMENDATIONS
Telstra (TLS)
Chart: Share price over the year to versus ASX200 (XJO)
Telstra reported a solid 2013 full year profit result, wrong-footing the skeptics. We think operational momentum into fiscal year 2014 is strong enough to meet management’s low single-digit growth guidance.
Woolworths (WOW)
Chart: Share price over the year to versus ASX200 (XJO)
WOW remains a quality company that generates a high return on funds employed. We await evidence of further improvement in Australian Food & Liquor like-for-like sales growth. We are keeping a close eye on the performance of its Masters hardware chain.
SELL RECOMMENDATIONS
SCA Property Group (SCP)
Chart: Share price over the year to versus ASX200 (XJO)
Our investment thesis remains cautious for a company that owns a diversified shopping centre portfolio. We expect SCP’s earnings growth to be flat in the near term as none of the Woolworths tenancies from the initial public offering are likely to reach turnover thresholds for at least another five years. Lighten holdings.
Ten Network Holdings (TEN)
Chart: Share price over the year to versus ASX200 (XJO)
The challenge is to lift ratings and generate revenue in the fiercely competitive metropolitan markets. It’s shifting focus to a marginally older audience and sport. But, in our view, there’s no quick fix to its operational issues. Lighten holdings.
Joshua Stega, JAS Wealth
BUY RECOMMENDATIONS
Regis Resources (RRL)
Chart: Share price over the year to versus ASX200 (XJO)
One of the better quality gold miners to emerge in recent years with an experienced management team, reasonable life assets, low costs and a significantly expanding production profile. After the recent gold price correction, some stability appears to be moving into the market. Expect improving profitability if gold prices rise and RRL is our preferred exposure.
Corporate Travel Management (CTD)
Chart: Share price over the year to versus ASX200 (XJO)
Provides travel arrangements for clients across Australia and the U.S. While Australia’s corporate market is relatively stable, CTD continues to win market share from its rivals and also has a good track record of making earnings per share accretive acquisitions. Recently trading on a price/earnings ratio of about 20 times, we believe CTD’s share price should be higher given its relative growth prospects.
HOLD RECOMMENDATIONS
Insurance Australia Group (IAG)
Chart: Share price over the year to versus ASX200 (XJO)
IAG has a portfolio of general insurance businesses in Australia and overseas. IAG’s share price has enjoyed a strong run, but we believe the underlying tail winds will begin to slow down. Noting the cyclical nature of insurance markets, we rate IAG a hold at current levels.
Independence Group NL (IGO)
Chart: Share price over the year to versus ASX200 (XJO)
IGO is a diversified metals miner with nickel, zinc, copper and silver operations and an upcoming gold project. While it has a solid portfolio of production and development assets, a lack of catalysts and weak fundamentals for nickel and zinc make it difficult to become overly bullish on IGO in the short-to-medium term.
SELL RECOMMENDATIONS
BWP Trust (BWP)
Chart: Share price over the year to versus ASX200 (XJO)
A listed property trust focused mostly on warehouse retailing properties. Much of its income is secured by long leases to the Bunnings hardware chain and other subsidiaries of Wesfarmers. We believe capital growth and income are limited.
Fairfax Media (FXJ)
Chart: Share price over the year to versus ASX200 (XJO)
One of the biggest integrated print and online media companies in Australia. While the growing digital profile is appealing, this is partially offset by declines in print media circulation. It carries too much industry specific risk for our liking.
Click on the links below to read other articles from this week’s newsletter
18 Share Tips – 8 October 2013: 18 Share Tips to BUY, SELL & HOLD from…
Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.
