Brett Schreuders, Alto Capital
Challenger Infrastructure Fund (CIF)
Provides access to a global portfolio of utility and infrastructure investments, offering long-term income streams and potential capital growth. A share buyback, on top of December’s dividend, reinforces management’s optimism about the future. We believe the share price will more accurately reflect net asset backing of $2.19 a share in the future.
Leighton Holdings (LEI)
A big engineering services contractor, with infrastructure, contract mining and construction businesses in Australia, Asia and the Middle East. With economies in these regions returning to stronger growth, Leighton appears to be in the box seat. With sound financial management funding a large and growing order book, long-term commodity bulls should consider this stock.
Resolute Mining (RSG)
Resolute is now Australia’s second biggest gold producer. Recent improvements at the Syama gold project in Mali, helped by higher grades and a cost saving proposal to link the project to Mali’s electricity grid, support further upside for shareholders. Further drilling results in Queensland’s Welcome Breccia deposit are also pending.
BHP Billiton (BHP)
The global recovery appears to be gaining traction. Mixed with top management and a cashed up balance sheet, BHP is a cornerstone investment, even for more conservative portfolios.
JB Hi-Fi (JBH)
Management’s aggressive expansion plans have paid off handsomely to date. A tremendous growth story that almost defies belief in the current economic climate. But we think it’s time to lock in some profits. Consider maintaining a core holding.
Flight Centre (FLT)
A sound business that’s benefiting from a strong Australian dollar. The share price has enjoyed a tremendous run over the past two years and we think it’s prudent to lock in some profits.
Sean Conlan, Macquarie Private Wealth
This paint company’s defensive qualities position it well in an environment of shorter, sharper cycles. The company has solid market share, strong cash flow generation and sound balance sheet metrics.
Kingsgate Consolidated (KCN)
Kingsgate remains our preferred small-cap gold stock. The key value driver for Kingsgate is the Chatree complex in central Thailand and the imminent plant expansion in the first quarter of the 2012 financial year.
Telstra Corporation (TLS)
Poor operational momentum, NBN uncertainty and the Future Fund overhang are likely to continue weighing on the stock. Our price target has been reduced from $3.15 a share to $2.95.
Toll Holdings (TOL)
We continue to believe this transport and logistics group will benefit from a gradual improvement in Australia’s retail environment. But given the share price increase in the past month, we feel much of the potential upside has already been captured.
This crop protection company is still to finalise a new banking structure and there’s uncertainty regarding its strategic review. We don’t expect major changes to come from Nufarm’s strategic review. However, management changes and a fresh external set of eyes are a possibility.
PMP Limited (PMP)
The outlook looks tough for PMP for at least the next 12 months. The stock may be perceived to be cheap, but considering earnings uncertainty, we believe PMP will underperform the market until clear signs emerge of increasing print and catalogue volumes.
Ben Potter, RBS Morgans
Ridley Corporation (RIC)
Management continues to successfully turn around the stockfeed and salt businesses. This is represented in its latest net profit after tax result, which was marginally above our expectations at $29.1 million, up 43 per cent on the previous corresponding period. The company also announced a bigger dividend for the first time in four years.
Westlink M7 has refinanced the $500 million debt tranche that was due in December 2010, highlighting the strength of the asset, as well as others in TCL’s portfolio. With the CityLink upgrade in Melbourne largely complete, volume growth is expected to remain strong well into the 2011 financial year.
Alumina Limited (AWC)
Owns 40 per cent of Alcoa World Alumina and Chemicals (AWAC). Expect long term share price outperformance, but we have moved from a buy to a hold recommendation after the recent share price rally.
Toll Holdings (TOL)
We met with TOL management recently, and despite a soft consumer discretionary trading environment, we believe this a key cyclical pick as the macro environment improves. We suggest long term growth investors buy this transport logistics stock on any share price weakness.
Aquila Resources (AQA)
Aquila’s full-year 2010 result was below our forecast on higher operating and corporate costs. We remain cautious on the company’s stgelopment timeline and prefer Fortescue Metals and Gloucester Coal for iron ore and coal exposure.
Nomad Building Solutions (NOD)
A new managing director and bank support is encouraging for this property, manufacturing and building business company. However, we downgrade to a sell recommendation until there’s some evidence of a growing order book and profitable contracts.
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