Grant Dwyer, Patersons Securities
Adamus Resources (ADU)
First production from the 90 per cent owned Nzema Gold Project in Ghana, West Africa, is due in the first quarter of 2011. Cash operating costs are forecast to be US$485 an ounce over a 10-year mine life and about 290,000 ounces have been hedged at US$1075 an ounce, which is about 50 per cent of production during the first five and a half years of operation.
Antares Energy (AZZ)
Antares Energy has amassed an interest in more than 32,586 acres in the Eagle Ford shale, providing more than 350 potential drilling locations. Because considerable condensate content accompanies the natural gas produced from the Eagle Ford shale, it improves the economics of the project. The first well is now in production and Anatres Energy has committed to numerous well programs in the years ahead.
Leighton Holdings (LEI)
Leighton’s result for the nine months to March 2010 was in line with our expectations, with the company retaining NPAT (net profit after tax) guidance above $600 million for the full year. Work on hand stood at $37.5 billion.
Westside Corporation (WCL)
Westside is making the transition from explorer to producer after acquiring the Dawson Coal Seam Methane field. The alliance with Mitsui will provide longer term access to LNG markets. The Dawson acquisition was completed at a low price, with Westside gaining significant infrastructure and producing reserves.
Nexus Energy (NXS)
The Longtom gas field, which came on stream in late 2009, is currently offline while mercury stripping beds are installed due to unacceptable mercury levels in the gas produced. Project and corporate debt total $296 million. Quarterly interest payments, administration costs and forecast expenditure will eat into current cash reserves until Longtom comes back online. Development of the Crux gas/condensate field appears unlikely in the short term.
Gunns is struggling on all fronts, and is unlikely to see any significant recovery in earnings until there’s improving demand for pulp and paper products. Also, a short-term recovery in the managed investment scheme sector seems unlikely.
Gary Glover, Novus Capital
ANZ Bank (ANZ)
The bank’s recent acquisitions and expansion program into Asia positions it well to take advantage of future growth in this region. The recent nine-month price lows offer a good opportunity to enter this stock at a discount. We expect a rally towards the $24.50 region in the medium term.
Westpac Bank (WBC)
Another of Australia’s biggest banking and financial services group, offering strong exposure to the retail, corporate and institutional sectors. Again, it’s well short of its recent $28.40 price high and represents good value at today’s levels. We expect a rally towards $27 a share in the medium term.
CSL makes, markets and distributes pharmaceutical and allied products. Recent news that major competitor Baxter International cut its full-year forecast due to a sales slowdown may be a dampener for CSL. However, the recent fall in the Australian dollar should be positive for CSL as it earns a lot from overseas.
Uncertainty surrounds this life insurer and wealth manager. The AXA Asia Pacific deal is far from complete, but if AMP is successful, then it could take time for the business to be absorbed and synergies gained. History has shown that an acquisition this size takes time before full value is realised. We retain a hold recommendation.
This hearing implants maker is one of the biggest healthcare stocks on the ASX. Recent price action shows it re-testing 2007 highs in the $78 region. We believe it will face strong resistance at this level.
Brambles is a global provider of support services through its pallet business CHEP and information management solutions business RECALL. Adapting to new technologies in the logistics business has been slow compared to its peers, and the CHEP business will struggle to grow at past rates in our opinion. We believe the stock is heading lower towards the $5.50 region in the medium term.
Scott Marshall, Shaw Stockbroking
The blood fractionation sector is attractive, and CSL is a true leader within this industry and our top pick in the healthcare sector. What makes CSL unique relative to other global blood fractionators is its chromatography technology, resulting in higher volume and purity. Plus there’s high profit margins for these extracted blood products. A lower Australian dollar is positive for CSL.
This commercial explosives firm offers strong leverage to improving bulk commodity volumes mined in its key markets, including the US. We have assumed relatively flat earnings in 2010, then profit growth in 2011. The lower Australian dollar adds support to Orica. Gearing is low, and cash flow was very strong during the global financial crisis. Demand for ammonium nitrate remains strong.
The ASX has reported an increase of more than 20 per cent in equity trading volumes this financial year compared to the previous corresponding period. Derivatives volumes are up 9 per cent this year. Shaw is forecasting 8 per cent revenue growth for 2010. The outlook for 2011 will depend on the ramp up of competitive trading platforms, and how the ASX adjusts. There’s a real risk the ASX will report a revenue decline in either 2011 or 2012, depending on how successful the ASX is in containing competition.
Coca-Cola Amatil (CCL)
CCL expects high single-digit earnings growth for the first half, but hasn’t provided guidance for the full year. Indonesia remains a long-term growth market with a low per capita spend on carbonated beverages. The new PET bottle plant will cut costs and the Bluetongue Brewery in NSW will provide a platform for growth in premium beer. Shaw has forecast profit growth above 9 per cent for 2010. CCL remains a well managed, market dominant, high profile branding company with identified opportunities for growth.
Woodside Petroleum (WPL)
Reports of $13 billion in Train-1 capital costs for the Pluto LNG project (compared to earlier expectations of $11.2 billion) are hurting the share price. We think the most important short-term issue the company faces is the timely delivery of this project. Other key factors include securing customers, and the potential oversupply of gas in the Asian region, including from Papua New Guinea. We believe the super profits tax will be relatively benign for Woodside. The oil price is likely to be weak due to lower global economic growth.
Hastie Group (HST)
The Hastie Group business model remains under pressure with falling margins. While management of this refrigeration systems company believes it’s at the bottom of the cycle, the rate of recovery is hard to determine. The construction cycle tends to be long, implying a gradual recovery ahead.
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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