James Georges, Patersons Securities
Prana Biotechnology (PBT)
The Prana-discovered compound PBT-2 treats Alzheimer’s Disease. The company confirmed that a re-elected Victorian Labor Government would commit $15 million to the Medical Health Institute, of which Prana is a long-standing partner. The grant will enable testing of 525 patients with Alzheimer’s Disease. Along with other endorsements by the medical community, this stock offers potential if commercialisation is successful.
Golden Rim Resources (GMR)
Golden Rim is an early stage gold exploration company in East Africa. It has more than 3800 square kilometres in the highly prospective Birimian greenstone belts of Mali and Burkina Faso. Its current drilling campaign may potentially prove up its resource base, with upgrades due shortly. Patersons Securities has acted as corporate adviser to this company and has received fees for raising capital in the past.
Qantas Airways (QAN)
It appears the bad news has been factored into the share price. With a potential buyback of its shares and seat numbers showing a turnaround over the holiday period, this stock may improve.
ConnectEast Group (CEU)
ConnectEast owns a 39 kilometre toll road in Melbourne. The balance sheet is now in reasonable shape and operating cash flow is positive. High barriers to entry should help generate long-term revenue growth on rising traffic and tolls, which grow in line with the consumer price index.
Billabong International (BBG)
This surfwear, sports apparel and accessories producer now has a presence in more than 60 countries. In February, the group advised that it expected 10 per cent growth, but effectively missed its own guidance by 7 per cent. Management’s visibility regarding its operations concerns us. Sell on rallies.
Foster’s Group (FGL)
Foster’s plans to demerge its beer and wine assets after years of failed attempts to consolidate both into a single business. Wine distractions have seen beer earnings grow only modestly, while competitors circle the market. Its beer business remains solid, with recent restructuring yielding positive results. Lifting wine margins is the main short-term challenge in an industry experiencing over supply.
James Cooper, Morningstar
Austereo Group (AEO)
A leading Australian radio operator via ownership of the FM radio brands – the Today and Triple M networks. The fully franked dividend yield above 6 per cent is attractive. The stock only suits investors prepared to accept an earnings stream exposed to cyclical advertising markets.
AWE Limited (AWE)
AWE joined the ranks of serious oil and gas companies in 2006 with production at Casino, Cliff Head and BassGas. Production from New Zealand’s Tui field began in July 2007. AWE is a suitable energy exposure for investors comfortable with higher risk. Strong management, low sovereign risk, a healthy balance sheet and exploration upside all appeal.
Bradken has large market shares in mining and rail equipment, and much of its revenue base is recurring. Increasing mining and rail activity provides a positive backdrop for the next few years. But Bradken is low margin, capital intensive and cyclical. It should be regarded as a higher-risk trading stock.
Cardno Limited (CDD)
Cardno provides a range of civil, structural and environmental engineering services. It also provides urban design and project management, with limited exposure to mining and resources. Managing director Andrew Buckley recently confirmed market conditions across the global business continue to improve.
For many years, this stock has been highly rated for growth. But it has failed to meet expectations despite a series of managing directors promising renewal. It should achieve a cyclical upturn as the stgeloped world economies recover, but major questions remain over the quality of the business.
Duet Group (DUE)
This group owns 60 per cent of the Dampier-to-Bunbury pipeline, 66 per cent of United Energy, 80 per cent of Multinet and 26 per cent of WA Gas Networks. It also owns all subordinated debt in these assets. In our view, Duet Group is unattractive due to its low quality earnings, high gearing and major upcoming debt maturities. An equity raising or distribution cut may be required.
Richard Batt, Shadforth Financial Group
Due to its leading position in product, platform and distribution channels, AMP will continue benefiting from Australia’s forced superannuation contributions. The market has been negative on AMP since the Government’s announcements regarding financial services reforms. However, AMP with its size, scale and product suite should be in a solid position to deal with the margin pressures that will more than likely eventuate.
Woodside Petroleum (WPL)
The recent announcement that Royal Dutch Shell had sold a portion of its holding in WPL led to a fall in the company’s share price. This drop provides the perfect opportunity to buy into Australia’s largest publicly-traded oil and gas producer to gain exposure to the growing energy sector and potentially benefit from any corporate activity.
Blackmores, an industry leader in the distribution of vitamins and supplements in Australasia and South East Asia, focuses on quality. The company is well positioned to benefit from an ageing population and health-conscious consumers. Management has an established reputation, and it provides shareholders with potential for growth and a solid fully franked dividend.
A well-managed company with competitive advantages in its Australian and global explosives businesses. The company recently announced its full year result, which was marginally ahead of expectations, as each division continued to report improving margins and returns. Orica’s outlook is positive as forecast demand for its products increases amid capital expenditure in the mining sector continuing to grow.
Southern Cross Media Group (SXL)
Owns radio and television stations in regional Australia. Its shares have performed well in recent times, with a recovery in the national advertising market boosted by the federal election. However, the earnings recovery is now factored into the share price. Radio revenues continue to grow but at lower levels compared to the first quarter of this financial year. We prefer other investments.
Crane Group (CRG)
Makes and distributes building and pipeline products in Australia and New Zealand. The impact of higher interest rates and reducing stimulus may potentially hurt the Australian housing market. In this case, demand for CRG’s products would weaken and earnings may be impacted. Better investment opportunities exist elsewhere, in our view.
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