Mike Bigwood, Patersons Securities

BUY RECOMMENDATIONS

MACA Limited (MLD) – click code or chart for stock quotes

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

A mining services company leveraged to mid-tier WA miners. The company listed in November 2010, and its share price surged to $2.73 on February 16. The company recently announced its first contract win outside WA. Earnings guidance is expected to exceed prospectus forecasts. With a forecast return on equity of between 25 and 30 per cent in coming years, I believe the stock is undervalued at current levels.

Company website: Maca Ltd (MCD)

Investor Centre: Maca Ltd (MLD)

 

Forge Group (FGE)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

Forge provides engineering and construction services to mining and civil clients. Both revenues and earnings have grown strongly in the past few years, and the company has managed to maintain a high return on equity over the same period. A recent earnings upgrade shows the business is well managed. The shares appear undervalued at current levels.

Company website: Forge Group (FGE)

Company announcements: Forge news & announcements

 

HOLD RECOMMENDATIONS

Ausdrill (ASL)  

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

Ausdrill provides mining, drilling, blasting and exploration services in Australia and Africa. With the Brandrill acquisition bedded down, ASL has recently announced the acquisition of hydro-geological contractor, Connector Drilling. ASL currently trades above my valuation, but I am happy to hold as mining companies continue expanding existing projects and developing new ones.

Company website: Ausdrill (ASL)

Annual report: Ausdrill (ASL)

 

DuluxGroup (DLX)  

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

DLX holds a market leading position in paints and home care products. With return on equity  above 70 per cent, I believe DLX is a high quality company offering capital growth and the potential for income from a growing dividend profile.

Company website: Dulux Group (DLX)

Latest results: Dulux Group (DLX)

SELL RECOMMENDATIONS

CSL Limited (CSL)  

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

This recommendation is more from a shorter-term perspective as I continue to rate the company highly. Any retreat in the Australian dollar will be beneficial as the company generates 85 per cent of its sales offshore. Closing at $37.02 on February 16, I see limited upside and believe there’s better opportunities elsewhere in the market.

Company website: CSL Limited (CSL)

Investor centre: CSL Limited (CSL)

 

BlueScope Steel (BSL)  

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

I calculate the return on equity for BSL of between 2 and 5 per cent over the next two years, with a resulting valuation well below $2. The stronger Australian dollar has increased competition from cheaper imports and high raw material costs will continue to impact margins.

Company website: Bluescope Steel (BSL)

Investor centre: Bluescope Steel (BSL)

 

 

Steve Collette, Calibre Investments

BUY RECOMMENDATIONS

Commonwealth Bank (CBA)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

The bank has just reported a profit of $3.33 billion, up 13 per cent on last year’s corresponding period. It’s continually reported good earnings irrespective of broader economic conditions and difficult credit markets. Buy on any weakness.

Company website: Commonwealth Bank (CBA)

Investor centre: Commonwealth Bank (CBA)

 

Boral (BLD)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

Strong results were reported by this building materials supplier, beating consensus expectations.

Profit was up 28 per cent to $98 million, while debt’s been halved and the loss making scaffolding operations have been discontinued. Recent flooding in Queensland and an improving US housing and construction industry also work in Boral’s favour.

Company website: Boral (BLD)

Investor centre: Boral (BLD)

HOLD RECOMMENDATIONS

Newcrest Mining (NCM)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

A world class gold miner with a burgeoning interest in copper. A retreat from highs across $43.50 and a subsequent test and hold of supports across $36 dictate that NCM is a hold at current levels. A  move up above $38 implies higher levels to come. The stock finished at $38.25 on February 16.

Company website: Newcrest Mining (NCM)

Investor centre: Newcrest Mining (NCM)

 

Woolworths (WOW)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

A quality and diversified retailer with a robust operating model. The company continues to expand aggressively, and with significant barriers to its captive markets, Woolworths is also ideally positioned to retain market share. Despite modest price weakness of late, it remains a hold.

Company website: Woolworths (WOW)

Investor centre: Woolworths (WOW)

 

SELL RECOMMENDATONS

Bradken (BKN)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

Earnings guidance from this mining and rail equipment supplier wasn’t in line with market consensus. A high Australian dollar and floods in Queensland will continue to hamper future earnings. Now is an opportune time to take profits over any gains made in the past 12 months.

Company website: Bradken (BKN)

Investor centre: Bradken (BKN)

Myer Holdings (MYR)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

The department store giant is operating in a changing and challenging retail environment. A high Australian dollar means Myer is losing out to shoppers importing directly. Spending more than $42 million on acquiring fashion label sass & bide, and redeveloping its flagship store doesn’t guarantee the desired returns in the short term. Yet the share price has dipped on lower profit guidance.

Company website: Myer Holdings (MYR)

Investor centre: Myer Holdings (MYR)

www.calibreinvest.com.au

 

 

Simon Bond, RBS Morgans

BUY RECOMMENDATIONS

Iluka Resources (ILU)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

An increase in our zircon price forecasts reflects sustained market tightening, and what we see as a preliminary pricing response. Iluka will provide an update on mineral sands markets as part of its full-year result on February 25, which we expect to be positive. We move to a buy recommendation.

Company website: Iluka Rsources (ILU)

Investor centre: Iluka Resources (ILU)

Cardno Limited (CDD)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

Despite adverse weather and currency effects, CDD’s first half result demonstrated how robust its business is. This consulting engineering services company has increased geographical diversity, with almost 60 per cent of earnings made in North America. Undemanding valuation metrics and strong dividend yield highlights there’s still further upside.

Company website: Cardno Limited (CDD)

Investor centre: Bluescope Steel (BSL)

 

HOLD RECOMMENDATIONS

AXA Asia Pacific (AXA)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

The recent result beat our expectations with net profit after tax of $602 million. Looking forward, we conclude that the life/wealth operating environment in Australia is challenging, but AXA is confident about achieving $40 million in platform synergies.

Company website: AXA Asia Pacific (AXA)

Investor centre: AXA Asia Pacific (AXA)

 

ASX Limited (ASX)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

ASX Limited and the Singapore Stock Exchange have made several new concessions and commitments in a bid to gain regulatory and political approval. While we view these adjustments as relatively minor, and further may be required, the chances of a successful deal have increased.

Upside potential is large, but risks remain. Hold.

Company website: ASX Limited (ASX)

Investor centre: ASX Limited (ASX)

SELL RECOMMENDATIONS

Sims Metal Management (SGM)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

Ferrous scrap prices to Turkey have fallen about 8 per cent since early January, and heavy snow in the US has persisted since the start of 2011. With near-term margins likely to remain impacted by harsh weather conditions in the current quarter, we see few signs of a significant improvement in margins in the 2011 second half.

Company website: Sims Metal Management (SGM)

Investor centre: Sims Metal Management (SGM)

James Hardie Industries SE (JHX)

Chart: Share price over the year to 20/02/2011 versus ASX200 (XJO)

We believe the market is looking for signs that the company’s recent market share losses have stabilised and will be reversed. Historically, market share gain has been key to the company’s growth thesis. However, this has been challenged by recent results.

Company website: James Hardie (JHX)

Investor centre: Jame Hardie (JHX)

 

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