Steve Collette, Calibre Investments
There’s potential for good upside given exposure to domestic construction. Concerns about housing shortages are likely to generate more press in an election year. So the major parties are more likely to address the stock issue.
Paladin Energy (PDN)
A former market darling that’s been sin-binned along with the uranium sector. We’re targeting a price of $4.45 in the short term, but this uranium producer has the potential to run up to $5 in response to consolidation and the Obama’s Administration commitment to nuclear energy generation.
Westpac Bank (WBC)
It’s toeing the line at significant resistance across $27.50 after a strong run-up from lows across $22.50. The St. George Bank integration appears on track. The bank is determined to outperform despite negative press about it possibly lifting interest rates by more than the Reserve Bank.
With recent corporate activity elsewhere in the sector, the company’s suite of assets is likely to generate attention. Despite a recent rally of about 10 per cent from recent lows across $13, this oil and gas producer remains a hold on both fundamental and technical rationale.
The recent rally to almost $3.20 a share represented a selling opportunity amid the potential for NBN (National Broadband Network) talks to remain unresolved through this year’s election. Without dividend cover amid questionable defensive attributes – given recent price action – a re-test of recent lows below $3 appears a possibility.
The stock has bounced with the broader market, but there appears to be significant resistance ahead. It may be time to take some profits. The market was recently updated on a pending class action against Amcor, and the company is vigorously defending the claim.
Grant Dwyer, Patersons Securities
Cue Energy Resources (Cue)
Cue’s oil and gas producing assets of Maari, Oyong and SE Gobe provide a solid earnings base. In mid 2011, Cue will bring the Wortel gas field into production, further enhancing earnings. Drilling of the Artemis prospect in the Carnarvon Basin is targeting 7 trillion cubic feet of gas, which, if successful, could add 82 cents a share to Cue’s valuation.
Troy Resources NL (TRY)
Successful commissioning of the Casposo mine in the third quarter should cause Troy’s gold production costs to fall. The Sandstone mine has closed and the Andorinhas mine is moving to higher grade ore in the second quarter.
Mermaid Marine Australia (MRM)
We have upgraded our full-year 2010 EBIT (earnings before interest and tax) forecast by 9.3 per cent in response to new vessel purchases and growing supply base utilisation, but valuation risks are emerging. A competitor, Miclyn Express Offshore, will float on the ASX shortly, offering investors another alternative exposure to this sector.
Aquila Resources (AQA)
While we continue to rate Aquila’s management and projects highly, the stock has run up to our valuation. Aquila is in dispute with its joint venture partner Vale over which port the Eagle Downs hard coking coal project should use – Abbot Point or Dalrymple Bay. The dispute could lead to stgelopment delays.
GPT Group (GPT)
Adjusted earnings per share fell 71 per cent after significant dilution caused by the recent re-capitalisation. The balance sheet is strong, but the cost of debt to the group has risen from 6.8 per cent to 8.2 per cent over the half year. This is having a detrimental effect on earnings.
Foster’s Group (FGL)
Its wine division exposes Foster’s to a strong Australian dollar. Tax scheme planting of vines has contributed to an over supply of grapes at the same time economic conditions have led to a fall in demand for wine. The core beer business saw profit improve, but market share decline. Group profit will remain under pressure while Foster’s restructures its wine division.
Andrew Inglis, Shadforth Financial Group
National Australia Bank (NAB)
NAB is trading at a significant discount to its peers due to its UK banking exposure and proposed AXA acquisition. NAB’s core business is strong and it’s a market leader in Australia’s high margin business banking sector. Today’s share price adequately prices in additional risk, and NAB is a long term buying opportunity at today’s levels
Sims Metal Management (SGM)
Sims is the largest metals recycler in the world, is debt free and has cash available for further acquisitions. Sims is a very cyclical business, but management is adept at managing the cycles. At today’s price, Sims provides good leverage to an international economic recovery as a higher risk trading stock.
New refineries in Asia have dampened the short term pricing outlook for refined petroleum products, but strong growth in Asian car demand should soak up this capacity over time. Under new and highly regarded chief executive Julian Segal, Caltex has reduced its cost base. It’s investing selectively in growth regions and is generating half its revenue from the growing convenience store sector. Caltex has rallied strongly since Christmas, but is well below its record highs and investors should continue to hold.
The share price is starting to gain traction under new management, which, we believe, has better operational credentials than its predecessors. Pallet quality issues in North America appear to have been addressed, albeit with higher ongoing costs. Cash flow has remained strong during the global financial crisis, and Brambles will benefit from the international economic recovery as a world leader in pallet supply.
Nufarm is offering existing shareholders the opportunity to sell 20 per cent of their shares at $14 through a share tender offer to Japanese chemical company Sumitomo. The Nufarm share price has been languishing around high $8 levels, so this is an offer too good to refuse.
Pacific Brands (PBG)
Pacific Brands faces structural problems in its branded clothing business as the major retailers continue to build their private labels and directly source products from Asia. The company’s well-known brands face a long-term decline if this international retail trend continues to roll out.
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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