Les Szancer, Kinetic Securities
Prima BioMed (PRR)
Like most biotechnology stocks, Prima can be considered a speculative buy on share price weakness. It focuses on stgeloping anti-cancer therapeutics based on the emerging technology of immunotherapy. Trials involving its CVac product continue regarding its potential to reduce relapse in ovarian cancer patients, control the metastasis of the cancer and increase life expectancy of patients. The sharemarket responded positively after Lucy Turnbull was recently appointed chairwoman.
Arafura Resources (ARU)
Arafura Resources is well positioned to become a producer of rare-earth oxides. It plans to test and optimise parts of the separation process by the end of the 2011 financial year. Expect first production by mid 2014. Its demonstration-testing program is a key to success. A positive outcome will most likely trigger a share price re-rating. An opportunity exists for investors to take a position ahead of time.
We are forecasting 8 per cent volume growth for IVIG (intravenous immunoglobulin) in the 2011 financial year. But keep in mind a higher Australian dollar could impact earnings. We retain our neutral recommendation for this biopharmaceutical company and our 12-month price target is $36.30. The share price was trading at $34.07 on November 5.
Downer EDI (DOW)
Downer recently announced that it had won a contract to expand and upgrade a fleet of high-speed passenger tilt trains servicing the Cairns-to-Brisbane rail line. The $190 million contract is a positive outcome and highlights the strengths of client relationships. Our 12-month price target is $5.50. In early morning trade on November 5, the share price was $5.07.
Perpetual Limited (PPT)
Perpetual’s share price soared following a takeover proposal of up to $1.75 billion from private equity firm KKR. This fund manager has since deemed the bid too low. It may be time to lock in some profits. Also, similar to other wealth management businesses, the loss of any key investment personnel may result in the loss of investment mandates.
GPT Group (GPT)
This diversified property group has announced that its third quarter distribution will be 4.1 cents. This is in line with the second quarter and implies a slightly higher 4.2 cents distribution will be payable in the fourth quarter to December to meet management’s recent full-year guidance of 15.9 cents. Better investment opportunities exist elsewhere.
Peter Addison, Intersuisse
Westpac Bank (WBC)
Posted an impressive full-year net profit of $6.35 billion for the 12 months to September 30, 2010. Westpac offers a major banking franchise in Australia and New Zealand and is a significant provider of retail and Institutional products and services. It has a major presence in the wealth management sector via a majority holding in the BT Group. Projected yield for 2010/2011 is above 5.5 per cent.
M2 Telecommunications Group (MTU)
M2 is an independent provider of fixed line, mobile and data communication services, (principally provided by Telstra, Optus and Vodafone) focusing on small and medium sized businesses in Australia and New Zealand. Market capitalisation is $300 million, with projected earnings growth of 40 per cent this year for a dividend yield of 5 per cent. Management is considered very sound.
The largest diversified group in Australia, with operations including hardware retailing (Bunnings), supermarkets (Coles), liquor, petroleum, department stores, office supplies, coal mining, fertilisers, chemicals and insurance services. Market capitalisation is $33 billion, while strong cash flows should enable a projected yield of 4 per cent.
Duet Group (DUE)
Utility assets include a majority shareholding in an electricity distribution network in Melbourne and major shareholdings in gas distribution businesses in Melbourne and Perth. The group also has a majority holding in the Bunbury-to-Dampier pipeline. Projected dividend yield of 11.5 per cent is considered most attractive.
News Corporation (NWS)
An international media group engaged in publishing newspapers, magazines and books. It also produces and distributes movies and is involved in cable and satellite subscriber services. With most business operations competing outside Australia, a dividend yield of about 1 per cent isn’t considered attractive.
A global provider of support services operating two key businesses. CHEP consists of pallets and container services, while Recall is an information management solutions provider. Operations cover 45 countries across six continents. The strong Australian dollar will have adverse impacts on overseas businesses, while a yield of 3.8 per cent isn’t compelling.
Steven Hing, Novus Capital
Alchemy Resources (ALY)
The company is focusing on gold exploration in WA’s Murchison region. The company has announced the start of a major drilling program, targeting five key gold prospects and a copper-gold target adjacent to Sandfire Resources’ (SFR) DeGrussa discovery. Speculation exits that Alchemy’s tenements may have a similar geology to Sandfire Resources. If so, the stock may be a target of Oz Minerals. The stock has bounced off 35 cents to be trading at 65 cents on November 5, 2010.
Hunnu Coal (HUN)
Hunnu is currently stgeloping coal prospects in Mongolia and recently raised $40 million to undertake an aggressive drilling program in order to confirm JORC (Joint Ore Reserves Committee) resources of 100 million tonnes of coking coal. The stock rose above $1 after the capital raising, suggesting the company has a lot to offer. The all time high has been $1.15, so the price movement is strong and suggests it will at least retest this level in the short term.
ASX Limited (ASX)
The recent announcement of a proposed merger between the Singapore Stock Exchange (SGX) and ASX valued ASX at $8.2 billion ($48 a share). The stock was trading at $37.15 on November 5. But the merger still has to get over regulatory hurdles. Until then, the stock is in play.
Northern Energy Corporation (NEC)
The share price jumped from $1.10 to $1.60 following a takeover bid from New Hope Corporation at $1.50 a share. NEC management advised shareholders to reject the bid. There’s speculation that NEC management is looking for a bid closer to $2. I’m expecting a higher bid, so continue holding.
Macquarie Group (MQG)
I can’t envisage Macquarie’s share price returning to $90 levels as it continues to rationalise its own business. And, it’s hard to see a return of the old business model of buying cheap and selling for NAV (net asset value), as gearing is mostly out of the equation. I expect the share price to fall.
Pacific Brands (PBG)
A diversified manufacturer of clothing, underwear and sporting goods, the company announced it’s selling its foams and mattress (Sleepmaker) divisions. The company is struggling in the current market environment as margins are squeezed amid a stronger Australian dollar making imports cheaper. Charts suggest that any retreat below $1 will see the share price fall to about 80 cent levels.
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