Peter Day, Wilson HTM
Cleveland Mining (CDG)
A gold explorer focusing on developing projects into mines. It’s five prospective targets are in Brazil. The projects are located besides tenements held by AngloGold Ashanti, Kinross Corporation, Yamana Gold and Vale in a well-known gold region. Its Premier Project is close to the world-class Serra Grande gold mine operated by AngloGold Ashanti and Kinross Corporation. It expects to start producing gold soon. A speculative buy.
Bandanna Energy (BND)
This company is an emerging coal producer, with five projects at advanced stages in Queensland. It holds a 100 per cent interest in its Bowen Basin projects, and will retain a 50 per cent stake in South Galilee. It’s poised to grow as it makes the transition to a producer. First coal shipment from the planned Wiggins port terminal is expected in February 2014. Another speculative buy.
Kingsgate Consolidated (KCN)
This company owns and operates the Chatree gold project in central Thailand. Keep an eye on this company as it may struggle to achieve its downgraded full-year 2011 production targetof between 110,000 and 120,000 ounces. We see 100,000 ounces as more likely.
Whitehaven Coal (WHC)
Develops and operates coal mines in NSW. We retain our hold recommendation despite pressure on this year’s profitability from wet weather and servicing legacy thermal coal contracts. The prospect of a takeover outweighs the pressure on 2011 profitability.
Paladin Energy (PDN)
A uranium company, with two operating mines in Africa. The company’s focus is on Langer Heinrich in Namibia and Kayelekera in Malawi. Second quarter production was below our forecasts. Annual production guidance has been cut. The Kayelekera mine operated at only 65 per cent of its capacity and sales were below our forecasts. Nufarm (NUF)
A crop protection company selling herbicides, fungicides and pesticides. The company also sells glyphosate under licence from Monsanto. Glyphosate prices are impaired and show no signs of improving.
Chris Elliott, Shadforth Financial Group BUY RECOMMENDATIONS ASX Limited (ASX) A flurry of IPO (initial public offering) and corporate activities to end 2010, together with renewed investor confidence in the mining sector this year, should see ASX report a healthy interim profit. Add to this a potential merger with the Singapore Stock Exchange, and the ASX offers a good yield and capital upside. The stock was trading at $ 38.26 on February 10, 2011, well below the takeover price of $48 a share. However, the deal is subject to regulatory approvals. Coca-Cola Amatil (CCL) With a late start to summer, CCL still expect to deliver a 10 per cent increase in NPAT (net profit after tax). Revenue growth appears to be a result of new products. The ready-to-drink (RTD) beverages and premium beers are already included in its extensive distribution network. Expect more value to be extracted from the SPC Ardmona acquisition. HOLD RECOMMENDATIONS Incitec Pivot (IPL) A recent strong run up in the IPL share price makes it look expensive. But we expect strong fertiliser demand from the farming sector in the next 12 months, as they take advantage of ground moisture. IPL supplies more than 50 per cent of Australia’s agricultural nutrient needs. Wesfarmers (WES) This industrial conglomerate reported strong sales figures for the December quarter, driven mainly by its retail operations. Coles food and liquor is outperforming competitor, Woolworths. In the past few weeks, WES has rallied almost 10 per cent and is currently trading on a high price/earnings multiple. But current prices reflect fair value. SELL RECOMMENDATIONS David Jones (DJS) Expect challenging times ahead for retailers, as consumer spending contracted last year as higher mortgage interest rates hit shoppers, including the DJS-targeted demographic of higher income earners. While Myer is looking to aggressively expand its market share, the maturity of the DJS operation may squeeze earnings in the next 12 months, thereby reducing share price growth. Gunns (GNS) The company has been restructuring its business in the past 18 months as other forestry groups fall by the wayside. However, with tough trading conditions remaining and continuing delays regarding financing and construction of the Bell Bay pulp mill, GNS carries more downside risk than upside.
James Cooper, Morningstar
ASB is a world-class designer and manufacturer of aluminum passenger, commercial, military and cruise vessels. Competitive advantages include ship building skills and a rare US Defence security clearance. The US Navy has awarded ASB a fixed price contract for 10 (Independence Class) littoral combat ships, which should generate revenues of about $3.5 billion over five years.
Panoramic Resources (PAN)
The full-year 2011 exploration program will be the biggest yet for this nickel sulphide company, with a budget of more than $12 million. Early near-mine drilling has discovered depth extensions to the Helmut South deposit. It’s ideally located for development, close to the large Deacon ore body. The other key near mine focus is depth at Savannah. Some excitement around PAN suggests value.
Ardent Leisure Group (AAD)
This leisure property owner and operator has large businesses in Australian theme parks, bowling alleys and health clubs. It has smaller businesses in Australian marinas and US family entertainment centres. Record rainfall on the Gold Coast during the school holidays is expected to impact theme parks earnings for full-year 2011.
Boart Longyear (BLY)
Boart Longyear is one of the world’s largest drilling services and product providers. Expect the full impact of high utilisation rates and improving pricing with mining companies to secure rigs in advance to ensure projects proceed.
Campbell Brothers (CPB)
Provides laboratory services across more than 35 countries. Services include laboratory testing to the environmental, minerals, coal and food market segments. The business continues to recover from the GFC, booking convincing volume growth across most divisions. However, the strong outlook is more than reflected in the share price.
Aquila Resources (AQA)
Aquila has significant undeveloped iron ore and coal assets. Both are key components required for steel manufacturing, and Australia’s two largest exports by value. But the share price assumes too much success and ignores a lack of development funds and considerably high project development risk.
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