18 Share Tips – 19 June 2011

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Shawn Uldridge, William Shaw Securities

BUY RECOMMENDATIONS

BHP Billiton (BHP)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO)

The global miner’s share price has retreated due to a downturn in equity markets, a modest rise in the Australian dollar and a mild fall in commodity prices. But with interest rates on hold given recent weak jobs numbers, we expect the Australian dollar to drift towards parity with the greenback in the medium term. This is positive for BHP, and the weaker share price offers an opportunity.

Stock code: BHP

Charts: BHP Billiton Limited

More news: BHP Billiton Limited

AMP (AMP)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

Offers exposure to wealth management and life insurance via its extensive financial planning network, buoyed by the recent purchase of AXA Asia Pacific. AMP has been trading on a price/earnings multiple of about 13 times, and around current prices is paying an historical dividend yield of 6 per cent. With no major negative news from the company, buying the stock at current prices represents good value.

Stock code: AMP

Charts: AMP Limited

More news: AMP Limited

HOLD RECOMMENDATIONS

Woodside Petroleum (WPL)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

Woodside Petroleum has been in our portfolio for a long time, trading in a low-to-high $40 range. WPL has a number of large LNG projects being developed and expanded in Western Australia. Increasing production from these projects in the next three years make Woodside an attractive long term buy and hold. Buy on dips.

Fortescue Metals Group (FMG)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

This iron ore producer plans to triple production from 55 million tonnes this year to 155 million tonnes by mid 2013. It’s good timing given high iron ore prices and strong Chinese demand. Although the share price has enjoyed a good run up of late, hold for potentially higher upside. In our view $10 a share is possible.

SELL RECOMMENDATIONS

Iluka Resources (ILU)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

The share price of this mineral sands producer has risen from $3 two years ago to $17.23 during trading on June 16, 2011. We believe any price increases likely to be achieved from what it produces are well and truly factored into the share price.

Stock code: ILU

Charts: Iluka Resources Limited

More news: Iluka Resources Limited

BlueScope Steel (BSL)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

It’s caught between a rock and a hard place. Higher commodity prices have left it out of pocket on the input-cost side of the ledger, while a higher Australian dollar is hurting sales. Its already high debt is mounting and we believe BSL will conduct another capital raising. On June 16, 2011, it was trading at $1.175 a share. In our view, if you sell now, an opportunity will arise to buy it below $1.175. 

Stock code: BSL

Charts: Bluescope Steel Limited

More news: Bluescope Steel Limited

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James Georges, Patersons Securities

BUY RECOMMENDATIONS

Gold Road Resources (GOR)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

Gold Road Resources has achieved a maiden high-grade JORC (Joint Ore Reserves Committee) gold resource for the central bore deposit, boosting the resource at its 100 per cent-owned Yamarna gold project to more than 1 million ounces. Recent results suggest the drill zone is still under explored, and this company is potentially shaping up to a multi-million ounce resource.

Stock code: GOR

Charts: Gold Road Resources Limited

More news: Gold Road Resources Limited

BHP Billiton (BHP)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

Well managed, a global resource leader, a balanced portfolio of world class, long life assets and a full suite of conventional energy products. A stake should be part of any balanced portfolio. The company has many prime assets well located to service Asia. The recent share price retreat represents a good opportunity to buy or accumulate.

Stock code: BHP

Charts: BHP Billiton Limited

More news: BHP Billiton Limited

HOLD RECOMMENDATIONS

Bank of Queensland (BOQ)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

The combination of slower revenue growth and increasing bad debts is due to a weak property market, particularly in south-east Queensland. Natural disasters, a slowdown in economic activity across eastern Australia and a tourism slump have also contributed. In our view, catalysts for an upgrade will be improving credit quality, the successful transition to a new CEO and clear signs the non-resource sectors of the Queensland economy are on the mend.

Wesfarmers (WES)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

Due to the recent natural disasters, there’s been delays in company business units, including export coal sales and insurance claims. But as a conglomerate with many business units, it has the advantage of diversification and these temporary setbacks are a bump in the road on what is a core portfolio holding.

SELL RECOMMENDATIONS

Macquarie Group (MQG)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

Macquarie hasn’t seemed to gain any meaningful traction, particularly in mergers and capital raisings, which prior to the GFC was the mainstay of its business. On an earnings per share basis, Macquarie has fallen 13 per cent in the year to March 2011. It’s not demonstrating signs of a recovery. Sell on rallies.

Stock code: MQG

Charts: Macquarie Group Limited

More news: Macquarie Group Limited

BlueScope Steel (BSL)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

Strong headwinds face steelmakers in terms of excess capacity, the strong Australian dollar and hostile government policy. We’re not sure how these headwinds will ease. Or why they will. In February, BSL expected breakeven NPAT (net profit after tax) in the 2011 second half after a first half loss. It now forecasts another loss, citing weak steel prices, high raw materials costs and a rising Australian dollar.

Stock code: BSL

Charts: Bluescope Steel Limited

More news: Bluescope Steel Limited

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Warwick Grigor, BGF Equities

BUY RECOMMENDATIONS

Havilah Resources (HAV)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

Havilah is a deep value asset play with copper, gold and iron ore projects in South Australia. We believe its project pipeline could support a much higher share price. On June 16, 2011, the share price was 68 cents. Our detailed research note has nominated a share price target of $2.80. The Adelaide management is highly regarded for its exploration skills and integrity. A good opportunity exists here.

Stock code: HAV

Charts: Havilah Resources Limited

More news: Havilah Resources Limited

Kimberley Rare Earths (KRE)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

KRE is a recent IPO (initial public offering), giving shareholders exposure to the Cummins Range rare earths deposit in Western Australia. The stock has come onto the bourse in a seasonally weak market, providing an opportunity to acquire the shares at close to cash backing. We believe the shares are likely to be strong performers due to the advanced nature of the Cummins Range project, new opportunities under consideration and the strong cash balance. It’s the cheapest rare earths stock on the boards.

Stock code: KRE

Charts: Kimberley Rare Earths Limited

More news: Kimberley Rare Earths Limited

HOLD RECOMMENDATIONS

Bandanna Energy (BND)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

The company is reaching the final stages of a sale, with a short list of probable suitors undertaking due diligence. Its Bowen and Galilee Basin projects host total attributable resources of 1.48 billion tonnes of mainly thermal and some PCI coals. Bandanna will probably attract a sale premium and $2.50 a share is possible. On June 16, 2011, it was trading at a $1.86.

Perseus Mining (PRU)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

All gold stocks seem to have been overlooked in recent weeks even though the bullion price is strong. Perseus has been sold down, and was trading at $2.45 on June 16, 2011. However, we can see value all the way to $4.50. Commissioning of the 250,000-to-300,000 ounce a year Central Ashanti Gold Project in coming months will be the first step to possibly achieving gold production of about 500,000 ounces a year. Given its resource base is above 7 million ounces a year, this continues to be a high priority takeover possibility.

SELL RECOMMENDATIONS

Greenland Minerals and Energy (GGG)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

In our view, the share price has been pushed to unrealistic levels. It was trading at 50.5 cents on June 16, 2011. It says it has one of the biggest rare earth deposits in the world, but if it was to produce at the scale the scoping study describes, it would boost the world supply of rare earth carbonates by 40 per cent and kill the market. There is uranium with the rare earths too, but it can’t be mined due to government policy.

Stock code: GGG

Charts: Greenland Minerals & Energy Limited

More news: Greenland Minerals & Energy Limited

Aquila Resources (AQA)

Chart: Share price over the year to 17/06/2011 versus ASX200 (XJO) 

Conflicts between Aquila and joint venture partner Vale over project execution may impact the share price. The problems executing the Eagle Downs coal project, and the marketing arrangements for the Isaac Plains coal mine may have a material effect on Aquila’s sales and performance. All these disruptions are causing severe price volatility and we see little upside in the short term.

Stock code: AQA

Charts: Aquila Resources Limited

More news: Aquila Resources Limited

>>Back to the newsletter to view other articles – June 19th 2011

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