Peter Russell, Intersuisse
SAI Global (SAI)
A global player in the expanding compliance and training fields, SAI builds margins as it grows. A capital raising to acquire Integrity Interactive for US$170 million is complete, subject to US anti-trust clearance to cap four acquisitions in full-year 2010. This stock is an aggressive and defensive investment. Full-year 2010 return on equity was 19 per cent.
A strong full-year 2010 result showed this IT solutions consultant is back on track and well placed to lift performance this year and beyond. Underlying sound growth and yield won’t be diverted by a client dispute under arbitration. Oakton’s well functioning and fast expanding Indian operation gives differentiation and margin benefits.
Expect continuing growth and 5 per cent franked dividend yields from this online travel bookings leader: Add to positions for long-term upside as online bookings become second nature amid Webjet continuing to enhance the user experience of airline and accommodation coverage on its website.
Mermaid Marine Australia (MRM)
Strategically placed to grow with increasing oil and gas work on the North West Shelf. It has supply bases at Dampier and Broome and about 30 specialist support vessels. Earnings and dividends are growing. Add to positions as work on Pluto and Gorgon ramps up and drilling on other key projects intensifies.
Austar United Communications (AUN)
Austar’s television and telecommunication networks are adding subscribers. Revenue is growing annually by about 6 per cent. Earnings per share may double this year and continue at 25 per cent. But we expect no dividends for several years, so it offers relatively slim pickings for retail investors.
ConnectEast Group (CEU)
Melbourne’s EastLink toll road is seeing rising traffic and cash flows that will continue to grow. Costs are under tight control, there’s no imminent funding needs and connecting roads should add to prospects in the long term. But yield and growth opportunities are much better elsewhere.
Michael Heffernan, Austock
ConnectEast Group (CEU)
Owns and operates the EastLink tollway in Melbourne. Expect benefits over the medium term from its network enhancements, urban sprawl and completing the Frankston bypass. Its recent report was impressive and the stock represents good value at its current price of 40.5 cents on August 27, 2010.
Rio Tinto (RIO)
The global miner produced an excellent half-year report. Its latest US$790 million investment in the Pilbara region of Western Australia underlines Rio’s confidence about the future. The BHP Billiton bid for Potash Corporation of Saskatchewan in Canada adds to the relative attraction of Rio Tinto.
Westpac Bank (WBC)
Australia’s banks have performed strongly, but Westpac’s strong foothold in NSW means it should benefit the most from a recovery in the state’s real estate market. Its share price has tended to lag the other three majors so it offers more upside in the short-to-medium term.
McMillan Shakespeare (MMS)
This salary packaging business has been a solid sharemarket performer. It has low debt, pays a reasonable dividend and offers attractive growth prospects. Its recent report and buoyant outlook statement were reassuring, and the area it operates in is ripe for growth as the outsourcing trend continues.
A sharemarket favourite whose share price has increased substantially over the past year, and it again provided an impressive report. Nevertheless, trading oriented investors might like to take some profits
Centennial Coal (CEY)
This stock is currently under a takeover offer from Banpu Ltd at $6.20 a share. But given the conditions and regulatory hurdles, selling now at a discount may be a preferable option. Sometimes it’s more prudent to take the cash and run – as they say a bird in the hand is worth two in the bush. Centennial Coal was priced at $6.02 in morning trade on August 27, 2010.
Ben Potter, RBS Morgans
Bendigo and Adelaide Bank (BEN)
The bank’s funding looks well placed, asset quality risks are diminishing and capital is strong. The stock appears fundamentally cheap, trading on 9.3 times forward (12 months) consensus earnings, well below its long-term average of 14.1 times.
This industrial conglomerate delivered a solid full-year 2010 result, which was above expectations. Management sent positive signals by increasing the dividend and ramping up capital expenditure, reflecting the opportunity to extract superior returns within the existing portfolio of businesses.
The share price was punished recently as full-year 2011 management guidance for earnings per share was 5-to-10 per cent lower than last year. The sell-off appears overdone and longer-term value is emerging. The company continues to generate excellent cash flow and has a strong balance sheet.
Leighton Holdings (LEI)
This project stgelopment and contracting group may only produce modest growth in full-year 2011 given headwinds in Australian civil construction and continuing depressed property markets. However, Leighton continues to execute strongly on its opportunities and finds new markets to grow.
Paladin Energy (PDN)
The lack of excitement in the spot uranium market is likely to see Paladin underperform and we recommend investors switch into base metal and bulk commodity exposures.
Fundamentals supporting a retail sales recovery are in place, although a clear catalyst for improving sentiment still isn’t apparent. We see short-term earnings risk due to possibly slower sales for this grocery giant and the recent share price rally provides an opportunity to exit the stock and switch to cheaper retailers.
Anthony Black footnote: ConnectEast is a buy and a sell in this week’s edition. The stock has appeal, but analysts take different considered views about its outlook, a feature of the market. Before making any investment decision, other professional stock market advice should be sought.
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