Ben Potter, RBS Morgans
Asciano Group (AIO)
This transport infrastructure company provides ideal leverage to an improving Australian economy as it benefits from exposure to the resources sector via its Queensland railway assets. It recently signed a 10-year contract with Anglo America, signalling growing confidence in AIO’s ability to deliver.
Oz Minerals (OZL)
This cashed up gold and copper company has announced an underground expansion at its Prominent Hill mine. With no exposure to the new mineral resources rent tax, the bigger miners may be eyeing a potential takeover target.
Equinox Minerals (EQN)
The latest quarterly production result was its best to date, setting records for mine production, recovery and production of contained metal. We continue to like this copper company, but the good news flow appears to be factored into the share price.
Westpac Bank (WBC)
Having underperformed the banking sector since its first half 2010 profit result, valuation support is beginning to emerge. Coupled with early signs that pressure in wholesale funding markets is easing, we have upgraded WBC from a sell to a hold.
Energy Resources of Australia (ERA)
Heavy rain, together with ongoing pit wall stability issues, inhibited access to higher grade material, leading to a disappointing first half 2010 profit result. With few positive catalysts on the horizon, we see more value in BHP Billiton and Rio Tinto for uranium and broader energy exposure.
With a larger than expected earnings downgrade, limited transparency, structural changes to the business and premium multiples, we expect further share price underperformance.
Michael Heffernan, Austock
Oz Minerals (OZL)
A second tier low cost copper and gold producer with plenty of cash, and its minerals are exempted from the proposed mining rent tax. Its recent report revealed higher than expected gold production, increasing production guidance and lower cash costs.
This wholesale grocery and fresh produce distributor has shown resilience, particularly during recent market turbulence. Its acquisition of the Franklins supermarket chain adds significant scale to its operations. Although the Australian Government’s stimulus package boosted trading results last year, Metcash has shown an uncanny ability to adapt to difficult circumstances.
The Reject Shop (TRS)
A solid performer during recent economic and market troubles, its business model benefits considerably from a stronger Australian dollar. Catering for budget conscious spenders, this company is well placed to weather any possible economic slowdown.
Coca-Cola Amatil (CCL)
The soft drink giant has been a strong performer in the past year, and diversifying into boutique beers adds particular appeal. Coca-Cola Amatil is well equipped to deliver reasonably consistent earnings regardless of the prevailing economic conditions.
We don’t expect this CHEP pallet company to make any consistent recovery until the US economy rebounds, and this is unlikely to occur on a sustained basis until well into 2011. Investors should seek other shares offering better medium term outlooks.
A sluggish residential construction sector is likely constrain medium term growth opportunities. Recent housing finance commitments and building approval figures, both key forward indicators of the housing sector, provide little comfort for solid short-term profit strength.
Peter Russell, Intersuisse
Campbell Brothers (CPB)
More than 140 laboratories in 41 countries provide analytical testing and certification across mineral exploration, coal mining, environmental monitoring and electronics manufacturing. A conservative track record of rapid organic and acquisition growth continues. The annual general meeting on July 27 confirmed guidance of another record half-year to September.
Imdex provides drilling fluids and instrumentation to the global resources sector. It’s in a sweet spot for growth after a tough period during the GFC-induced resources downturn. Rig utilisation is rising, and a new suite of instrumentation equipment should be progressively rolled out. We expect strong results guidance later this month.
Navitas runs a wide range of university programs in Australia and overseas. Growth remains exceptional due to a clear focus, strong campus relationships and a cash-generating model of up-front fees. A global industry leader with strong prospects.
Mitchell Communication Group (MCU)
Australia’s top diversified media buying group, and a clear leader in the rapidly growing online advertising market. Government spending on advertising has been strong is likely to continue. Mitchell is our sector pick for its positioning and rapid online growth. Add ahead of results in an election year.
Intoll Group (ITO)
In January 2010, Macquarie Infrastructure Group was split into Intoll and Macquarie Atlas Roads (MQA). Intoll took the “good” toll roads, the 407 ETR in Toronto and the M7 in Sydney. A Canadian pension fund has made an attractive, indicative non-binding bid at $1.535. This may be pushed a bit higher, but cash is a safer option. The Macquarie managed MQA is speculative and trading near its high of $1.20. Sell both.
We have liked this global crop protection group for a long time, but it has faltered through the GFC. Traditional but well-managed gearing wasn’t unwound and it took a long position in glyphosate. Both have weighed on the stock. A Chinese offer wasn’t consummated and a 20 per cent investment by Sumitomo Chemical hasn’t overcome its problems.
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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