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 John Rawicki, State One Stockbroking
BUY RECOMMENDATIONS
Shaw River Resources (SRR)
Its Namibian manganese project looks promising as it approaches production of 270,000 tonnes a year from 2012. It has backing from Atlas Iron, which owns a significant holding in SRR. In our view, its Namibian project is conservatively valued between 30 cents and 40 cents a share. The stock closed at 19.5 cents on January 25, 2011. A speculative buy.
Diatreme Resources (DRX)
A mineral sands explorer focusing on the highly prospective Eucla Basin in Western Australia and South Australia. This speculative stock offers an opportunity to buy relatively cheaply as we believe it’s undervalued. On January 25, 2011, it closed at 9.6 cents. Demand for mineral sands is strong, and DRX is in a good position to become a near term producer. Its cyclone deposit is lucrative as it contains a very high ratio of the valuable zircon mineral.
HOLD RECOMMENDATIONS
Equinox Minerals (EQN)
Record copper prices paint a bright outlook for Equinox as it owns a big mine in Zambia It’s in the process of acquiring Citadel Resources, which has a rich copper deposit in Saudi Arabia. With a mine life of 27 years, EQN has plenty of upside. It has the potential to be a takeover target.
Toll Holdings (TOL)
TOL is an integrated supplier of transport and logistics services in Australia, New Zealand and, increasingly, Asia. Cash flow has been exceptionally strong, and management appears confident of growing revenues at a high rate. A wide network of logistic assets across the Asia Pacific gives TOL a considerable competitive edge.
SELL RECOMMENDATIONS
Ausenco (AAX)
An engineering and project management solutions company to the energy and resources sectors. The mining and resources boom provides opportunities through growing demand. However, project timing can be difficult to forecast, and deferral of any large, early stage contracts can pressure earnings and expose the company to higher risk. 
Metcash (MTS)
The company’s first half 2011 result was modest, with underlying earnings per share up 2 per cent amid underlying EBITDA (earnings before interest, tax, depreciation and amortisation) growth of 7.7 per cent. This grocery, liquor and hardware wholesaler is operating in very competitive industries. Shoppers may tighten their belts if interest rates move higher.   
Hamza Habib, Patersons Securities
BUY RECOMMENDATIONS
Bandanna Energy (BND) 
This coal company has increased reserves and secured a large export allocation at the planned Wiggins port terminal in Queensland. BND is one of the few listed companies in both the Bowen Basin and at South Galilee. With a potential resource of 1.8 billion tonnes and BND looking to prove this up over the next 12-to-18 months, the company is trading at a significant discount to its peers.
QBE Insurance Group (QBE)
Exposure to the Queensland floods is minimal as its Australian operations only contribute about 25 per cent of written premium. Adding to this, QBE retains an excellent business model. A recovering US economy works in QBE’s favour and potentially presents a significant share price rise in 2011. 
HOLD RECOMMENDATIONS
OZ Minerals (OZL)
In the past six months, OZL’s share price has enjoyed an excellent run due to its strong operating performance and copper price increases. Although positive for its share price, OZL seems to be struggling to find growth. Our calculations, based on current reserves, show a nine-year mine life remaining and it would need to prove up further reserves by spending more cash to enable growth.
Goodman Fielder (GFF)
Peter Margin, who was instrumental in modernising operations and plant facilities, has unexpectedly resigned as chief executive officer and leaves on April 30, 2011. This departure presents challenges for GFF, which is currently trading below its 2005 IPO (initial public offering) price of $1.85. GFF closed at $1.345 a share on January 25, 2011. The bad news is factored into the share price and investors should consider holding for a recovery. 
SELL RECOMMENDATIONS
Bannerman Resources (BMN)
Uranium sector stocks have risen in response to higher spot prices reaching $US70 a pound on January 25, 2011. In our view, BMN needs a uranium price around US$80 a pound to make it worth its while. A lack of water at its Namibia facility needs addressing. Competitors located nearby have significantly higher uranium grades. 
Incitec Pivot (IPL)
Due to high local and global demand for fertiliser, IPL’s share price has almost doubled since July 2010. It closed at $4.30 a share on January 25, 2011. The Queensland floods had a negative impact on its other businesses, such as explosives. The floods are expected to have a negative impact on short-term fertiliser sales, of which IPL is a major supplier to east coast farmers.   Michael Feller, Lincoln Indicators
BUY RECOMMENDATIONS
Forge Group (FGE)
After the share price more than doubled in the past 12 months, FGE may seem an unusual buy recommendation, but this WA-focused mining services firm has a knack for surprising on the upside. Our most recent valuation upgrade to $5.93 came on the back of yet another order win – a $23 million contract at Ravensthorpe. Since August, FGE has secured more than $190 million in contracts and is forecasting between $25 and $27 million in profit before tax for the half year to December.
Webjet (WEB)
Despite what many feared to be a dud year for domestic travel, with the Australian dollar reaching parity with the US, WEB is outperforming expectations. The company recently announced ticket sales growth of 15 per cent and fee growth of 25 per cent for the half year to December – double the industry average and it’s also expanding offshore. The online flight booking service recently announced deals in Europe, Asia and North America. We have a price target of $2.95. On January 25, 2011, Webjet closed at $2.48 a share.
HOLD RECOMMENDATIONS
Cochlear (COH)
This bionic ear maker is trading near our valuation of $80.73. But it’s a useful stock to own if the Aussie dollar falls as it receives the bulk of its income offshore. In the healthcare sector, it’s also highly defensive. The company is cash rich and this poses attractive scope for an increase in dividends. 
Ramelius Resources (RMS)
This gold producer is also trading near our $1.02 valuation, having doubled in the past 12 months. Nevertheless, should gold prices rise further in an environment of commodity inflation, RMS is set to benefit. Following its strong quarterly production update to December, the company is on track to topping its full year production target of 80,000 ounces. 
SELL RECOMMENDATIONS
Computershare (CPU)
This global share registry company has grown on the back of merger, acquisition and listing activity in the past, but with analysts expecting a slowdown from emerging markets in 2011, earnings are likely to be lower. CPU is a good business, but now isn’t the time to be in it. We see better value below $10. It finished at $10.28 on January 25, 2011.
Seven Group Holdings (SVW)
Despite its transformation into that strangest of hybrids – a television station with a Caterpillar franchise – SVW has had a respectable year on the market. Nonetheless, with competition strong on both sides of its business straddle, we don’t believe its high forward P/E ratio is justified. Dividend yields are still good, and the company may still have further to grow, but it only begins to look interesting below $7.50. SVW closed at $8.99 on January 25, 2011. 

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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