Gavin Wendt, MineLife
BUY RECOMMENDATIONS
Clean Global Energy (CGV)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
Its aim is to become a major global alternative energy company by utilising underground coal gasification (UCG). It involves exploiting coal that’s typically uneconomical to mine through conventional processes. Recent agreements place the company at the forefront of commercialising UCG across the world. In the US, Clean Coal Energy has a partnership with energy multinational, AES Corporation, while in India CGV has a binding heads of agreement with energy major, Essar.
Corazon Mining (CZN)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
An advanced nickel explorer with a JORC (Joint Ore Reserves Committee) compliant resource in one of Canada’s oldest historic nickel provinces. The aim is to increase the resource to commercial status and a drill program is underway. CZN’s Lynn Lake nickel sulphide project is situated in Canada’s third largest nickel mining region, with 22 million tonnes of nickel/copper/cobalt ore mined between 1953 and 1976. There has been only minimal exploration since this time.
HOLD RECOMMENDATIONS
Poseidon Nickel (POS)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
An emerging nickel producer looking to revitalise the famous Windarra project in WA. Poseidon has been approved for underground development. A JORC resource of 97,331 tonnes of nickel sulphide has been identified. I estimate an initial seven-to-10 year mine life, but with considerable scope for expansion over time. I’m expecting production of 10,000 tonnes a year at a low operating cost of US$3.20 a pound at full output.
Consolidated Tin (CSD)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
This company has an advanced project with a JORC resource near Cairns in Queensland. A full feasibility study will be completed soon, with first production scheduled for the fourth quarter in 2012. Tin was the best-performing LME (London Metals Exchange) metal in 2010, with pure market fundamentals driving the price surge. Shrinking global inventories combined with dwindling supplies from Indonesia, the world’s largest exporter of the metal, have put big upward pressure on prices.
SELL RECOMMENDATIONS
Bathurst Resources (BTU)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
A New Zealand coal company that’s generated a 60 per cent return in the past three months. BTU owns a premium coking coal deposit in NZ that can be developed on a modest scale to generate very strong earnings. Now is the right time to lock in some profits. Sell half, but retain exposure to first coal production in this year’s fourth quarter and strong coal prices.
Cobar Consolidated Resources (CCU)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
A silver producer that’s generated a 40 per cent return in the past three months. CCU owns Wonawinta, which hosts Australia’s largest undeveloped silver resource near Cobar in NSW, comprising more than 50 million ounces. Now is the right time to pocket profits. Again, sell half, but retain exposure to first silver production in this year’s fourth quarter and record silver prices. There’s more upside ahead.
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Shawn Uldridge, William Shaw Securities
BUY RECOMMENDATIONS
Woodside Petroleum (WPL)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
Woodside’s shares are still in a long consolidation phase. But with the oil price above $US100 a barrel, we can expect significant upside. On our numbers, Woodside will more than double total output per annum over the next ten years, while our forward price expectations are positive for oil and gas. At these prices, WPL is a mid-to-long term buy and hold.
AMP (AMP)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
Now that the takeover for AXA Asia Pacific is done, AMP shares can begin to do what they have done historically – follow the S&P/ASX 200 index. Because of the usual hedge fund related short selling, which is common on bidding companies in large takeover plays, AMP, before the Japan earthquake, did lag the upside price activity for the Australian index. We forecast AMP shares to climb to $6 in coming months.
HOLD RECOMMENDATIONS
BHP Billiton (BHP)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
The share price should be bounce after an excellent profit result and strong forward earnings predictions. BHP is unlikely to fall too significantly unless the Chinese economy falls out of bed. However, in the next six months we could see BHP trade as high $55 a share. It’s in almost everyone’s portfolio, so hold for higher levels.
QBE Insurance (QBE)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
Its result was largely in line with expectations. We have previously recommended QBE as a buy, with a view to higher prices as international interest rates rise. Hold for an attractive dividend yield and long-term growth.
SELL RECOMMENDATIONS
BlueScope Steel (BSL)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
The recent profit result came in below expectations and the forward outlook was also downgraded. Although steel prices are good, volumes have been low. BSL’s factories are operating well below capacity and their input prices (iron ore and coal) are rising. With a soft outlook and no way of telling when things might improve, BSL could continue to fall away. Avoid.
Qantas (QAN)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
Rising oil prices are bad for airlines. Qantas recently announced another increase in the fuel surcharge levy to balance higher input costs. In our view, this can only hurt demand for seats from people who are already hurting from higher petrol prices. Sell.
www.williamshaw.com.au
Hamza Habib, Patersons Securities
BUY RECOMMENDATIONS
Ausdrill (ASL)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
This diversified mining and services company reported a 71.7 per cent increase in interim 2011 earnings on the previous corresponding period. Management has increased earnings guidance and expects to provide the market with positive news flow regarding new contract wins moving forward. ASL’s African business exposure has been strengthened by its strategic alliance with Barminco, which is expected to grow the company’s revenue during the next two years.
Cape Lambert Resources (CFE)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
This company offers shareholders exposure to its unique business model based on capitalising on early stage growth assets. Resource opportunities are identified early. They are acquired, further developed then sold at a premium. CFE is predominately a venture capitalist involved in iron ore, gold and copper. A well managed company that has the right commodity mix at the right time.
HOLD RECOMMENDATIONS
David Jones Limited (DJS)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
Retail sector sales and customer traffic across the board have been weak in the past few months. A concern for David Jones is the high Australian dollar in terms of pricing and competition from other stores and online retailers.
QR National (QRN)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
The outlook for the Australian metallurgical and thermal coal sectors is positive, which is also positive for QRN’s valuation. Any share price re-rating is possible if the company reduces labour costs, increases efficiency and outperforms on its current coal haulage guidance.
SELL RECOMMENDATIONS
Downer EDI (DOW)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
Although Downer’s revenue increased 20 per cent, its underlying EBIT (earnings before interest and tax) was down 6 per cent. The company has offered a 1-for-4 fully underwritten renounceable entitlement offer to raise $279 million. Although this would enable the balance sheet to fund growth, the Waratah Rail project is a major cause for concern.
Mincor Resources NL (MCR)
Chart: Share price over the year to 18/03/2011 versus ASX200 (XJO)
The company missed analyst expectations across its nickel and coal production levels. Both mines, Mariners and Miitel, experienced significant delays and lower production mostly due to manpower shortages. The company has renegotiated mining agreements to develop higher-grade ore bodies, which will increase mining costs by about 15 per cent. Investors will most likely be able to buy the stock at a lower price in the future.
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.
