James Cooper, Morningstar
BUY RECOMMENDATIONS
Alumina Limited (AWC)
Chart: Share price over the year to versus ASX200 (XJO)
A weak 2012 first half has resulted in a much weaker profit outlook for financial years 2012 and 2013. But, importantly, operating cash flows remain positive at a time when it’s hard to see things getting worse. The longer-term outlook for alumina and Alumina Limited remains positive, but sometimes there’s near- term risks to negotiate. A risk is conditions remain at current atrocious levels and force an equity issue.
Sims Metal Management (SGM)
Chart: Share price over the year to versus ASX200 (XJO)
Fiscal 2012 was an ugly for Sims with hefty goodwill impairments. Weak margins stemmed from too much shredding capacity amid weak scrap flows and tepid ferrous trading activity. Significant cost reductions and recovering scrap prices should lift full year 2013 earnings.
HOLD RECOMMENDATIONS
Ansell (ANN)
Chart: Share price over the year to versus ASX200 (XJO)
Guidance for financial year 2013 suggests earnings per share will grow in mid-single to low double- digits, before crediting a positive contribution from the Comasec acquisition amid potentially lower raw material prices. This positive outlook reflects demand resilience, effective innovation and growth in emerging markets.
Coca-Cola Amatil (CCL)
Chart: Share price over the year to versus ASX200 (XJO)
The fully franked interim dividend increased 9.1 per cent to 24 cents a share. Investors, who can take full advantage of 100 per cent franking, will still earn, at a share price of $13.50, a reasonably attractive grossed up dividend yield of 6.3 per cent, likely to grow by at least 5 per cent a year. The shares were trading at $13.36 on September 20.
SELL RECOMMENDATIONS
Primary Health Care (PRY)
Chart: Share price over the year to versus ASX200 (XJO)
The Government will review pathology spending during financial year 2013 and there could be a case to cut funding. If the Government cuts funding, the company has indicated it will shed staff. The company has set an ambitious earnings per share growth target of between 20 per cent to 25 per cent for financial year 2013.
Domino’s Pizza Enterprises (DMP)
Chart: Share price over the year to versus ASX200 (XJO)
Coping with softening economic trends was a central theme for most companies in 2012. Not so Domino’s, which powered ahead with growth initiatives. Underlying net profit after tax increased by 26 per cent. Earnings momentum is expected to continue into financial year 2013. But a 2013 price/earnings multiple of 22 times looks too high despite the growth and business quality.
James Samson, Lincoln Indicators
BUY RECOMMENDATIONS
Mermaid Marine Australia (MRM)
Chart: Share price over the year to versus ASX200 (XJO)
With capital spending in the north-west offshore energy space continuing unabated – perhaps in response to recent concerns in the minerals market – MRM offer investors good exposure to potentially strong LNG production and stgelopment over the next three-to-five years.
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Breville Group (BRG)
Chart: Share price over the year to versus ASX200 (XJO)
BRG is a business that’s bucked the trend of retail gloom, posting strong and consistent earnings growth in the past 18 months. We believe the outlook for global sales and earnings growth remains bright despite volatile retail sentiment.
HOLD RECOMMENDATIONS
Ainsworth Game Technology (AGI)
Chart: Share price over the year to versus ASX200 (XJO)
Having enjoyed a very strong share price run recently, this poker machine manufacturer appears to be fully priced at current levels. While the business boasts a strong outlook and growth profile, we believe the coming year will present some challenges as the business begins to pay tax. As such, there’s limited upside at current levels.
Corporate Travel Management (CTD)
Chart: Share price over the year to versus ASX200 (XJO)
This corporate travel services provider has performed strongly in the past 12 months. With a potential softening in employment markets for fly in, fly out workers, we believe CTD is fully priced.
SELL RECOMMENDATIONS
Hastings Diversified Utilities Fund (HDF)
Chart: Share price over the year to versus ASX200 (XJO)
With a takeover offer well and truly reflected in the current share price, we believe there’s little to be gained from holding HDF in a volatile market. There’s also a chance the deal may not proceed. The shares were trading at $2.63 on September 20.
GWA Group (GWA)
Chart: Share price over the year to versus ASX200 (XJO)
After posting an uninspiring full year result, GWA has dropped its policy of maintaining a floor on its dividend payout. With continuing adversity expected in the residential construction sector, we believe the risk for GWA remains on the downside.
Michael Heffernan, Lonsec
BUY RECOMMENDATIONS
Ramsay Health Care (RHC)
Chart: Share price over the year to versus ASX200 (XJO)
This pre-eminent listed private hospital operator offers attractive sharemarket fundamentals and continues to do well despite a difficult economic climate. The pressure on the public hospital system leaves private hospital operators well placed, particularly as hospitalisation increases in line with an ageing population.
CSL (CSL)
Chart: Share price over the year to versus ASX200 (XJO)
This world-class blood plasma and pharmaceutical research business recently produced an impressive result in a challenging international environment, and, accordingly its share price rose. Its prospects remain sound and CSL should benefit if the US dollar climbs against the Aussie.
HOLD RECOMMENDATIONS
Computershare (CPU)
Chart: Share price over the year to versus ASX200 (XJO)
Also delivered a reasonably sound result – albeit its outlook statement was somewhat downbeat. However, with sharemarket activity now improving following the German Constitutional Court decision and QE3 by the US Federal Reserve Board, Computershare should reap the benefits, as it’s a key player in the delivery of post-trade equity transactions in major markets.
Virgin Australia (VAH)
Chart: Share price over the year to versus ASX200 (XJO)
The prevalence of cheap fares and an increase in passengers are major benefits for Virgin. Its links with Etihad and Delta Airlines, combined with its increasing emphasis on premium and business class travellers, positions it well in the competitive airline environment.
SELL RECOMMENDATIONS
BlueScope Steel (BSL)
Chart: Share price over the year to versus ASX200 (XJO)
While its share price has recovered from a near death experience in recent times, its medium term outlook is clouded due to potentially softer steel demand, particularly from China. The high Australian dollar, import competition and the carbon tax hardly paint a bright outlook going forward.
Emeco Holdings (EHL)
Chart: Share price over the year to versus ASX200 (XJO)
Rents heavy earth moving equipment to the resources sector. But revenue is likely to be pressured as blue chip and emerging resource companies wind back exploration and mining activity. Risk averse investors should look to other sectors.
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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.
