Peter Day, Wilson HTM

BUY RECOMMENDATIONS

Newcrest Mining (NCM) 

Lihir shareholders and the PNG Court have approved the Lihir Gold acquisition by Newcrest. We expect Newcrest to offer considerable upside on the back of a strong management team and production growth of between 5 and 6 per cent per annum through to full-year 2014.

Santos (STO)  

Negotiations regarding the sale of a 15 per cent stake in the Gladstone LNG project appear well advanced. Expect contracts and capital expenditure to be announced before the end of 2010. Gladstone offers growth potential and, with Santos trading at a discount to our valuation, we retain our buy rating.

HOLD RECOMMENDATIONS

Fairfax Media (FXJ)  

Solid cost management against the backdrop of a cyclical recovery delivered a credible full-year 2010 group result. We expect management to focus on repositioning the group for the challenges of a digital world. With guidance in line with market expectations, we expect the stock to trade in a fairly narrow range.

Harvey Norman (HVN)  

The retail giant reported full-year 2010 earnings broadly in line with our forecasts. We share the group’s view that full-year 2011 should be better. But we have concerns about the group’s ability to successfully compete in a rapidly evolving category, which favours more nimble operators.

SELL RECOMMENDATIONS

Transfield Services (TSE)  

This essential services provider faces pressure in most of its markets as customers reduce contract volumes and competitors bid aggressively to win work. We believe the stock is overvalued given it faces stiffer competition and limited potential margin improvement. We have downgraded to a sell.

Equinox Minerals (EQN)   

Expect a reduction in ore processing and lower grades in this year’s second half for this copper and uranium explorer and stgeloper. Look elsewhere in the resources sector for better investments.

 

Cleo Nanni, Novus Capital

BUY RECOMMENDATIONS

Austex Oil (AOK)

An oil and gas producer focusing on stgeloping and reworking oil and gas leases in Kansas and Oklahoma. Austex offers an opportunity to own a well-managed debt-free business with excellent growth potential. The company is producing oil and has doubled its revenue for the past four quarters. Ramping up oil and gas production in Oklahoma will underpin growth opportunities in Kansas.  Our 12-month price target is 28 cents. In early morning trade on September 3, the share price was 13.5 cents.

Woolworths (WOW)

The supermarket giant posted a 10 per cent increase in NPAT (net profit after tax) to $2.02 billion for the 12 months to June 30, 2010. Group sales rose 4.2 per cent to $51.7 billion, while earnings per share increased 9 per cent to $1.63. The price action indicates further upside potential. Our 12-month target is $30.25. The stock was priced at $28.78 in early morning trade on September 3.

HOLD RECOMMENDATIONS

Ramsay Healthcare (RHC)

Ramsey reported a 22 per cent increase in NPAT to $178.5 million, which met market expectations. It posted earnings per share growth of 14 per cent. Guidance for full-year 2011 indicates mild NPAT and earnings per share growth. This cautious guidance approach leaves room for an upgrade.

Harvey Norman (HVN)

NPAT from underlying business operations was $290 million for 2009/10, an increase of 15 per cent on the previous year. Consumer sentiment should improve under stable government so we expect the next 12 months to bring a solid result.  

SELL RECOMMENDATIONS

Fairfax Media (FXJ)

EBITDA (Earnings before interest, tax, depreciation and amortisation) for full-year 2010 was up 7 per cent to $639 million. The share price has fallen from $1.85 earlier this year to $1.49 in early September, 2010. Avoid this stock in the short term due to poor price action and uncertainty.

Crown (CWN)

Crown’s operating revenue grew 6 per cent in full-year 2010, but underlying gaming revenue growth was flat. NPAT was up 2.7 per cent to $288 million. The share price looks over done in the short term based on the fundamentals. Sell and look to buy below $8.

 

Mark Goulopoulos, Patersons Securities

BUY RECOMMENDATIONS

Transurban Group (TCL)

Strong cash flow and solid revenue growth underpin the investment case. The recent profit result highlighted the strength of the monopoly toll roads owned by Transurban, and the long duration nature of these assets. Dividends are also attractive and will increase over the medium term as growth projects come on stream.

BHP Billiton (BHP)

The takeover bid for Potash Corporation highlights BHP’s strong balance sheet. Share price weakness is due to concerns that BHP may pay too much, but the lack of competing bids makes this unlikely. Should the acquisition proceed, it will drive strong profit growth in the years ahead.

HOLD RECOMMENDATIONS

Wesfarmers (WES)

The Coles turnaround continues to gain momentum with market share gains and operational improvements. This is complemented by ongoing strength in the Bunnings hardware chain and solid results in other divisions.  Although this is reflected in the current share price, any share price dips should be bought.

Westfield Group (WDC)

The profit result was solid and in line with expectations, but earnings growth won’t be meaningful until 2012 when stgelopment projects begin to contribute.  In the interim, the stock is fully valued.

SELL RECOMMENDATIONS

Foster’s Group (FGL)

The company has underperformed for many years due to poor returns from its wine division. The most recent result showed encouraging signs from wine, but the normally resilient beer division struggled.  This is indicative of a company continuing to struggle, notwithstanding potential corporate appeal.

James Hardie (JHX)

Existing US home sales fell to historical lows last month. Also, housing starts fell to their lowest levels since the property collapse began.  This building materials company is likely to underperform until evidence emerges of a recovery in new home construction.

 

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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