18 Share Tips – 10 March 2014

Janine Cox, Wealth Within

BUY RECOMMENDATIONS

Skycity Entertainment Group (SKC)

Chart: Share price over the year to versus ASX200 (XJO)

Looking back, the price has been overall bullish since 2009.  But more recently the trend is sideways as resistance is tested at around $3.80. A strong close above this level would indicate that SKC is likely to trade to around $4.10 or $4.30 this year. SKC’s low liquidity means trading knowledge is a must. The shares were trading at $3.70 on March 6.

Wesfarmers (WES)

Chart: Share price over the year to versus ASX200 (XJO)

If looking for opportunities in the consumer staples sector paying good dividends then Woolworths and Wesfarmers rank highly. However, one is likely to hold pace ahead of the other this year and I believe it will be WES. A rise above $43.94 will signal the probability is high for the price to rise to between $48 and $49 in 2014. The shares were trading at $42.86 on March 6.

HOLD RECOMMENDATIONS

Caltex Australia (CTX)

Chart: Share price over the year to versus ASX200 (XJO)

After being sold down heavily in early December, the buyers returned later in the month to inflate CTX’s sails. I was surprised at how quickly the share price recovered, as I expected the stock to remain well below resistance at around $19.50 for some months. Given the recovery, shareholders have $19.50 as a solid base for further upside.

Coca-Cola Amatil (CCL)

Chart: Share price over the year to versus ASX200 (XJO)

It’s often said that the best buying occurs when the worst news is known. Or, when anyone who was going to sell has done so. A stock that comes to mind in this category is CCL. Provided the CCL board has no further surprises, the price is likely to settle down and then gradually rise to fill the gaps on the weekly chart at around $12 to $12.60.

SELL RECOMMENDATIONS

Iluka Resources (ILU)

Chart: Share price over the year to versus ASX200 (XJO)

Famous trader William Gann once said that the two most important levels are 50 per cent of the all-time high price and the all-time range – stocks will often hit these levels and bounce away. ILU’s share price has come up to test one of these levels after previously falling through and therefore a fall below $8.86 would be detrimental.

Insurance Australia Group (IAG)

Chart: Share price over the year to versus ASX200 (XJO)

IAG had a very nice run in 2012. However, in the past 12 months, it has merely traded sideways above $5.30 and now appears poised to drop to around $4.80 or $5. Now might be the time to take some money off the table and look to buy at lower prices. The shares were trading at $5.42 on March 6.

Peter Moran, Wilson HTM

BUY RECOMMENDATIONS

Amcor (AMC)

Chart: Share price over the year to versus ASX200 (XJO)

The packaging giant reported results marginally below our forecasts. Nevertheless, we remain attracted to AMC’s strong underlying earnings growth driven by organic growth and acquisitions. With a sound balance sheet and increasing free cash flows, we see recent share price weakness as an opportunity to buy.

Oil Search (OSH)

Chart: Share price over the year to versus ASX200 (XJO)

OSH reported results 4 per cent ahead of our forecasts courtesy of lower than expected operating costs. OSH also announced the acquisition of minority interests (23 per cent) in the Elk/Antelope oil field, the largest undeveloped gas field in Papua New Guinea. We believe the purchase price will prove attractive if the gas resource is sufficient to establish two new LNG trains.

HOLD RECOMMENDATIONS

Woodside Petroleum (WPL)

Chart: Share price over the year to versus ASX200 (XJO)

The oil and gas giant reported an impressive profit, providing an 80 per cent payout ratio (6 per cent yield) and a reduction in net gearing to just 9 per cent. In our view, the issue for WPL is a lack of medium term growth options. With the share price trading close to our valuation, we retain a hold recommendation.

David Jones (DJS)

Chart: Share price over the year to versus ASX200 (XJO)

The retail environment has improved and like-for-like sales growth for DJS is the best in years. However, with the share price up 10 per cent this year, partly on expectations of a bid from Myer, DJS is now trading on a price/earnings multiple of 18 times next year’s earnings per share.

SELL RECOMMENDATIONS

SP AusNet (SPN)

Chart: Share price over the year to versus ASX200 (XJO)

Following the recent strong run up in the share price, SPN’s dividend yield has fallen to about 6 per cent, only partially franked. With little growth and several risks, including ongoing bushfire litigation, we recommend selling for better opportunities.

ALS Limited (ALQ)

Chart: Share price over the year to versus ASX200 (XJO)

ALQ, a laboratory services provider, released a trading update, confirming weak conditions in mineral and coal markets along with a shift from exploration drilling for oil and gas to production drilling (less coring so negative for ALQ). Management has guided to fiscal year 2014 net profit after tax of between $160 million and $170 million (11 per cent below consensus forecasts). With conditions likely to remain difficult for some time, we recommend investors sell. They can do better elsewhere.

John Rawicki, PhillipCapital

BUY RECOMMENDATIONS

Transpacific Industries (TPI)

Chart: Share price over the year to versus ASX200 (XJO)

The company provides integrated industrial cleaning, recycling and total waste management solutions in Australia and New Zealand. TPI’s New Zealand and Australian businesses are trading at attractive price/earnings valuations (8.6 times and 6.7 times EBITDA respectively). TPI is focused on reducing its debts and de-risking the balance sheet. TPI will have substantial capacity to create a fully integrated waste business in Australia.

Independence Group (IGO)

Chart: Share price over the year to versus ASX200 (XJO)

An explorer and miner of nickel, copper, zinc and gold in Australia. Production at its Tropicana gold mine in Western Australia is ramping up, with calendar year 2014 production guidance upgraded by 6 per cent. Tropicana has strong potential to surprise on the upside with better than expected production levels. Rising gold prices rise in 2014 would be a key catalyst for the company’s earnings.

HOLD RECOMMENDATIONS

Boral (BLD)

Chart: Share price over the year to versus ASX200 (XJO)

The housing sector is one of the few components of the domestic economy showing clear signs of improvement. I expect BLD to report strong earnings growth in fiscal years 2014 and 2015. However, with the stock trading towards the higher end of its historic price/earnings valuation, I believe the upside is largely factored into the current share price and I am happy to hold existing positions.

ASX Limited (ASX)

Chart: Share price over the year to versus ASX200 (XJO)

Besides operating securities exchanges, it also provides market data services and investor education courses. Equity values traded in February were up on January, but down on the prior corresponding period. Options volumes in February were up on January, but also down on the previous corresponding period. While the stock has solid dividend yield support at 4.6 per cent, generating capital growth will be challenging in this competitive environment.

SELL RECOMMENDATIONS

Aurora Oil & Gas (AUT)

Chart: Share price over the year to versus ASX200 (XJO)

Aurora didn’t update its 2014 production or capital expenditure guidance. The market had little interest in the result given the recent bid for Aurora by Baytex Energy Corporation at $4.10 a share. I believe the share price will remain capped unless a higher bidder emerges, which, in my view is unlikely. Consider selling your holding and finding value elsewhere.

Virgin Australia (VAH)

Chart: Share price over the year to versus ASX200 (XJO)

I expect the airline will continue to face a difficult trading environment into 2015. The company demonstrated that it’s seeing an increase in revenue as its customer mix changes, but operating expenses have also risen. Virgin’s costs are rising as the airline establishes itself for growth. I expect the stock to trade around 30 cents during the year, and remain cautious on the outlook for VAH’s profit over the next 12-to-18 months. The shares closed at 36 cents on March 5.

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18 Share Tips – 10 March 2014: 18 Share Tips to BUY, SELL & HOLD from…

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