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Peter Russell, Intersuisse

BUY RECOMMENDATIONS

Clough (CLO)

One of Australia’s largest multi-disciplinary engineering, construction and asset management groups, focusing on offshore and onshore oil and gas, petrochemicals, minerals and infrastructure. Clough has significant capability and is well placed to win a fair piece of the engineering, procurement and construction work to flow from the oil and gas projects planned for Australia and the Asian region in the years ahead.

Industrea (IDL)

Industrea’s mining products, such as gas drainage and collision avoidance systems, are needed to improve safety and productivity in China’s largest coal mines. Growth in mining services contracts in the Bowen Basin and at Mount Isa has been good for equipment sales and services and this looks like continuing. Its products dominate key mining equipment fields in the “sweet spots” of coal and China.

HOLD RECOMMENDATIONS

SAI Global (SAI)

SAI publishes Australian and international standards and provides certification and training. It’s a global player in a niche, but fast-growing field. Demand for services across information, compliance, assurance and risk management are increasing. A record first half saw earnings per share rise by 23 per cent and growth is expected to continue.

Toll Holdings (TOL)

Bullish growth expectations were dashed by interim results. This sliced 20 per cent off the share price. Its express activities, with high fixed costs, are exposed to world trade changes. A China-led recovery looks promising, as do Toll’s long-term prospects. Accumulate now for growth.

SELL RECOMMENDATIONS

Foster’s Group (FGL)

Australia’s iconic beer and wine producer is facing very tough times. CUB, the beer engine that has cranked out strong cash flows and profits for years, has received inadequate attention and investment. Its brands are losing share in a changing market. Wine, an uphill challenge from the start, faces a domestic over supply and stiff competition overseas, with the high Australian dollar slicing margins in the US and UK.

Gunns Limited (GNS)

It’s coming up six years since its all time high of $4.45 at the end of 2004. Gunns, it appears, can’t resist a challenge. This financial year, in “extremely difficult” conditions, it bought ITC Timber and a stake in Forest Enterprises Australia, became responsible entity of several Great Southern MIS (managed investment scheme) operations, bid for Timbercorp and made another major share issue. All this while profit was decimated. It continues to fight to set up its Bell Bay timber project in Tasmania.

Michael Heffernan, Austock

BUY RECOMMENDATIONS

ANZ Bank (ANZ)

Produced a glistening trading update recently and is on track to post a very strong profit result in a few weeks’ time. Expect a reduction in bad debts amid an improving economy to paint a cautious but bright outlook.

Mineral Resources (MIN)

This producer delivered an impressive half-year result, has undemanding sharemarket fundamentals and multiple growth options in iron ore and manganese. The recovery and growth in South East Asian economies and demand from China are positive for its medium term prospects.

HOLD RECOMMENDATIONS

Wesfarmers (WES)

Surprised the market with a better-than-expected half year result, with most of its “Coles businesses” now performing well.  An improving economy will enhance its prospects, particularly as its business model encompasses coal to the robust Bunnings hardware operation.

Computershare (CPU)

Consistently delivers sound results in challenging times. With global equity markets rebounding from the depths of the global financial crisis, Computershare should reap the benefits, as it’s a key player in delivering post trade equity transactions in major economies around the world.

SELL RECOMMENDATIONS

Foster’s Group (FGL)

Recently produced a disappointing result as traditional beer sales stalled and wine markets remain over supplied. Until investors see positive results from the company’s strategic wine review, and material benefits from separating wine and beer businesses, a short-term turnaround still looks elusive.

BlueScope Steel (BSL)

BlueScope is finding the going tough in the steel business, and its recent report was disappointing. While its long-term prospects are reasonable as it benefits from a global economic recovery, its short-term outlook remains uncertain. 

Alex Beer, State One Stockbroking

BUY RECOMMENDATIONS
 
QBE Insurance (QBE)

The insurance giant reported net profit after tax of $1.97 billion for full-year 2009, up 6 per cent on 2008. Gross written premiums increased 10 per cent to $14.5 billion. With short term interest rates likely to increase from these low levels (worldwide), expect QBE to generate rising investment income as  most of its $23 billion insurance float is largely invested in short term cash and income securities.
 
Amalgamated Holdings (AHD)

Reported a strong first half 2010 result with net profit after tax up 50 per cent to $76.2 million. The result was driven by Australian Cinema operations (Greater Union & JV’s), which benefited from the release of blockbusters like Avatar and Harry Potter and the Half-Blood Prince. AHD has recently completed a $100 million capital raising and is well placed given strong demand for 3D movies.
 
HOLD RECOMMENDATIONS
 
BHP Billiton (BHP)

The global miner recently reached an agreement on hard coking coal volumes for 2010. Media reports suggest a healthy price increase on last year. BHP produces 37 million tonnes of coking coal a year and retains an excellent balance sheet with gearing of 12.3 per cent. But the stock appears fully priced at these levels.
 
Toll Holdings (TOL)

Its first half 2010 net profit after tax of $107 million was down 17 per cent on the previous corresponding period. As a result, the stock was punished. Toll retains an excellent balance sheet with gearing of 22 per cent. As the economy recovers, margins on global forwarding should bounce back, but the stock appears fully priced at current levels.
 
SELL RECOMMENDATIONS
 
Gunns Limited (GNS)

This forest products company has suffered under a strong Australian dollar and weak wood fibre demand from Japan. Gunns has about $660 million of net debt, even after its $145 million capital raising to fund the acquisition of ITC Timber from Elders. Gunns may require a further capital injection to secure the long-term future of the business.
 
Alesco Corporation (ALS)

Alesco has revised down full-year 2010 earnings per share guidance (before amortisation and significant items) to between 24 and 27 cents a share from 34-to-36 cents a share. Water products earnings were well below expectations and the company is reviewing its carrying value in the division. We believe Alesco may have over paid for Total Eden McCracken’s Group. Despite a low price/earnings ratio, we would still avoid Alesco given its imminent writedowns and deteriorating performance.

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.

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