Nicholas Brooks, RBS Morgans
Incitec Pivot (IPL)
Following a high quality result on November 15, global fertiliser prices look to be steadily rising. Combine that with record high soft commodity prices and improving climate conditions and IPL’s operating environment appears to be looking very positive. Not the cheapest stock, but looks to be entering an upgrade cycle.
BlueScope Steel (BSL)
A year ago, the shares were pushing through the $3 mark. Since then, gearing has been reduced to 11 per cent from 36 per cent. Permanent cost saving initiatives amount to more than $304 million and production utilisation has risen to almost 100 per cent – from 40 per cent 12 months ago. Good bottom of the cycle buying to be done here. On November 19, the share price was trading around $2.
Fear of locusts taking over the nation is waning. Some concerns remain over the late rains affecting crop quality, but given GNC is an east coast, volume based business, it should see significant upside from this season’s crops compared to the last few years. Hold through the harvest period.
Riversdale Mining (RIV)
This coal company is experiencing a solid late year rally, giving some investors a cause to contemplate profit taking to fill the Christmas stockings. Riversdale is heading into an exciting period, with a capital raising completed and stgelopment underway at one of its major sites. I still think there’s a good chance for corporate activity with competitor Vale looking over their shared boundary.
With numerous headwinds facing the telecommunications giant, I see risk continuing to remain on the downside for Telstra. Questions continue to circulate about whether current earnings per share can cover its exorbitant dividend payouts. Expect tighter margins in mobile and broadband retail markets going forward.
Energy Resources of Australia (ERA)
Weak production figures in October, downgrades to guidance outlook and ERA needing to buy uranium in order to meet contracts paints a bleak investment landscape. It’s trading on price/earnings multiples above some of its commodity peers in the more highly preferred iron ore and copper space.
Michael Heffernan, Austock
Rio Tinto (RIO)
A global and diversified minerals company benefiting from continuing strong demand for iron ore and sharp increases in price. The prospect of stronger economic growth in Asian economies helps underwrite continuing growth in Rio’s profitability over the medium term.
Oz Minerals (OZL)
This copper and gold producer, with its major asset at Prominent Hill in South Australia, delivered a workman-like production report recently. It has almost $2 billion in cash, and is benefiting from strong price increases for gold and copper. Because of its large cash holdings, it’s in a strong position to take advantage of any well priced opportunities which may arise.
Flight Centre (FLT)
This shopfront-based travel agency has performed exceptionally well in recent times after being battered in the wake of the global financial crisis. Its management demonstrates admirable adaptability to confront adverse economic and market circumstances. A stronger Aussie dollar will encourage more Australians to travel overseas to the benefit of Flight Centre.
Woodside Petroleum (WPL)
The recent sell down by Shell saw the share price slump by almost 8 per cent when its fundamentals had not changed one iota. The current share price represents an opportunity for medium term investors.
Energy Resources of Australia (ERA)
Australia’s major uranium producer has recently fallen on hard times. Should the focus return to alternative energy sources, ERA could benefit. But right now other sectors look more promising.
Downer EDI (DOW)
This infrastructure services company has faced difficulties in recent times. The most prominent has been the cost over-runs with its NSW rail contract, which has been reflected in a softer share price. Better growth opportunities exist elsewhere in the market.
John Rawicki, State One Stockbroking
Nkwe Platinum (NKP)
With two extensive platinum projects in South Africa, the sheer size of its deposits and an imminent release of a final BFS (bankable feasibility study) make NKP attractive. Xstrata has a binding call option to buy a 50 per cent stake in NKP’s projects in return for stgeloping a platinum mine, which would value NKP well above its current market capitalisation.
Hot Chili (HCH)
This company holds the largest and most advanced uranium project (Productora) in Chile under a very pro-mining government. The copper and gold deposits on its land will help cover costs, and with $9.9 million in cash, the company’s current market capitalisation appears undervalued. Chile has no regulatory issues for uranium mining. It entered a trading halt on November 19 and is expected to resume trading on November 23.
Endocoal is the fourth largest tenement holder in Queensland’s Bowen Basin and has focused on exploring its Orion Downs and Rockwood tenements in 2010. Exploration is continuing to define a JORC (Joint Ore Reserves Committee) resource with more than 30 drill holes planned for the fourth quarter. A low-cost explorer with reputable management.
ANZ Bank (ANZ)
Trading on an attractive price/earnings ratio compared to the other banks, its Asian expansion strategy in Hong Kong, The Philippines, Indonesia, Taiwan, Singapore and Vietnam should give the bank plenty of upside and strong growth prospects. ING gives it more exposure to the lucrative wealth management sector.
This stock is trading at a relatively high price/earnings ratio, which may be difficult to justify given the challenging business conditions in Europe and the US. Current profit margins are suffering despite strong growth in emerging markets, but it may take some time before profitability recovers to the company’s previous level.
Elders is unlikely to pay any dividends until early 2012 and, in our view, will remain a speculative investment until core earnings improve. The company faces challenging and highly cyclical markets in the agricultural and automotive sectors. It’s struggling to retain market share in the rural services space and has to deal with lower fertiliser and agricultural chemical prices.
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.