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James Cooper, Morningstar

BUY RECOMMENDATIONS

Ardent Leisure Group (AAD)

Owns and operates Australian theme parks, bowling alleys and health clubs, with smaller businesses in Australian marinas and US family entertainment centres. On a forecast 13 per cent plus unfranked dividend yield, the stock has appeal. With exposure to discretionary leisure spending, volatile domestic and international travel activity and south-east Queensland weather, the stock only suits investors comfortable with high share price, earnings and dividend volatility. 

Austereo Group (AEO)

A leading Australian radio operator via its Today and Triple M networks. It generates radio EBIT (earnings before interest and tax) margins of more than 30 per cent, has strong interest cover and cash flow that supports a high dividend payout. Expect the radio advertising market to be relatively strong in the first half of 2011. The stock suits investors prepared to accept an earnings stream that’s exposed to cyclical advertising markets.

HOLD RECOMMENDATIONS

Campbell Brothers (CPB)

A diversified industrial company, first half 2011 NPAT (net profit after tax) guidance of between $63 million and $68 million is above the record $57 million booked in the first half of 2009. This year’s result benefits from recent acquisitions.

Carsales.com (CRZ)

Australia’s leading online classified aggregator for cars, boats and motorbikes, and a powerful cash generator. After capturing the big brands, CRZ can now afford to move down the advertising curve and broaden the potential pool of funds from a wider market. Cheaper ad rates for niche content will attract smaller customers.

SELL RECOMMENDATIONS

Adelaide Brighton (ABC)

Management expects national cement demand to lift significantly in 2010, with concrete up between 4-to-5 per cent and lime sales marginally higher. While housing is set for a recovery during full-year 2010 amid an upturn in approvals, we expect commercial construction to be soft for much of the year, with resource and government infrastructure activity providing support. But there’s too much optimism factored into the current share price.

Amcor (AMC)

Ongoing global restructuring will ease raw material cost pressures. But Amcor has few competitive advantages in an industry with limited pricing power. A global restructure that reduces the impact of raw material cost pressures may drive some earnings growth. Cash flows are sound, but dividends are usually unfranked. Acquisitions add execution risk to an already challenging business.

Richard Batt, Shadforth Financial Group

BUY RECOMMENDATIONS

BC Iron (BCI)

An iron ore exploration company, with a project located in the Pilbara region of Western Australia. The company’s core asset is the Nullagine iron ore project.  A joint venture enables Fortescue Metals Group to provide port and rail infrastructure access for the life of the mining operation. The outlook for the iron ore sector is positive. 

West Australian Newspapers Holdings (WAN)

Expect advertising revenues to improve as the Western Australian economy continues to benefit from the resources sector. As the dominant player in the market, the risk of competition is low, and the ability to leverage off this position should provide strong rewards for investors.

HOLD RECOMMENDATIONS

Computershare (CPU)

Computershare is the world’s largest share registrar, administering more than 100 million shareholder accounts. The company has grown, mostly by acquisition, enabling it to expand its service offerings and geographical reach. With operational scale and a strong balance sheet, expect CPU to generate solid growth. This stock should be a part of any long-term portfolio.

Ansell (ANN)

Ansell is able to shift existing brands to new regions, while expanding distribution channels and launching inventive high-margin products. This will improve earnings going forward and it has a solid balance sheet.
 
SELL RECOMMENDATIONS

Insurance Australia Group (IAG)

IAG is Australia’s biggest domestic general insurer, providing services through a range of brands. Although IAG has a large market share, it has no particular competitive advantage and margins remain under pressure. Better opportunities exist elsewhere.

Suncorp-Metway (SUN)

A Queensland-based financial services company, offering general insurance, retail and business banking and wealth management services. The company has a strong regional banking franchise in Queensland, but faces stiffer competition from the major banks in other states. The general insurance business is also facing increasing competitive pressures, which may affect margins. We prefer the four major banks.

Brendan Fogarty, Alto Capital

BUY RECOMMENDATIONS
 
Woodside Petroleum (WPL)
 
We have consistently advocated overweight positions in the resources sector this year mostly due to Asian-led demand for commodities. Woodside holds quality oil and gas assets, highlighted by the recent large gas find in its 100 per cent owned Larsen Deep field in the Carnarvon Basin. Woodside is our preferred blue chip exposure to energy.
 
Atomic Resources (ATQ)
 
This emerging coal company has reached an exciting stage after spending the past 18 months proving up its Tanzanian coal project. We expect a conservative resource estimate in excess of 400 million tonnes, with initial production due in coming months. Atomic is well ahead of most other listed junior coal companies. 

HOLD RECOMMENDATIONS
 
AWB (AWB)

This local agribusiness company has been the centre of a merger proposal from GrainCorp and a subsequent unsolicited bid from Canadian group Agrium. Hold and await confirmation of a formal bid by Agrium and the possibility of GrainCorp upping its offer.

Carsales.com (CRZ)

Australia’s leading online auto sales company has just reported a healthy net profit after tax profit of $43.2 million. Carsales.com is well placed, so look to accumulate on share price weakness.

SELL RECOMMENDATIONS

Amcor (AMC)

For many years, this global packaging business has underperformed from a growth perspective. While it’s maintained a yield of about 5 per cent, recent acquisitions to drive growth involve execution risk.

Telstra (TLS)

Most investors tend to hold Telstra for its high dividend yield.  With a forecast fall in free cash flow from $6.2 billion to below $5 billion, even the high yield is now in question. 
 

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.

Other articles in this week’s newsletter

Portfolio Watch: Top Property Trusts For Your Portfolio

18 Share Tips – 23 August 2010

Is it better to be a buyer or a seller of an option?

How To Build A Great Share Portfolio

Why Investors Stick With Proven Failures

The Big Silver Rally

4 Steps To Creating A Better Investment Strategy

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