James Georges, Octa Phillip Securities
BUY RECOMMENDATIONS
Newcrest Mining (NCM)
Chart: Share price over the year to versus ASX200 (XJO)
We like this low cost gold and copper producer at $27 levels at the end of September. If you’re looking for a proxy on the gold price in equity markets, Newcrest is our preferred exposure in a balanced portfolio. As an aside, we believe investors should weight more of their portfolio to cash, as we don’t believe QE3 will have the same stimulatory effect on the global economy as previous programs. Europe remains fragile.
Toll Holdings (TOL)
Chart: Share price over the year to versus ASX200 (XJO)
As a dominant transport, logistics and freight forwarding company, Toll has the ability to use its scale and size to grow, especially across Asia. But Toll is at the mercy of global economic conditions. That said, its recent share price decline merits an upgrade to accumulate.
HOLD RECOMMENDATIONS
Nufarm (NUF)
Chart: Share price over the year to versus ASX200 (XJO)
We believe its recent financial year result showed a solid base, differing from the wild swings during the global financial crisis. Its herbicide business, which makes up 70 per cent of sales, showed a back-to-back improvement. At current levels, we believe this stock is a hold based on its forecast price/earnings ratio of 14.7 times in financial year 2013 and 12.4 times in 2014.
Computershare (CPU)
Chart: Share price over the year to versus ASX200 (XJO)
We believe Computershare should generate solid long-term growth. While cyclical fluctuations in the sharemarket affect its business, its diversification across regions and non-equity market activities help dampen the volatility.
SELL RECOMMENDATIONS
David Jones (DJS)
Chart: Share price over the year to versus ASX200 (XJO)
The department store giant faces challenges, as consumers remain frugal. The last round of cost cutting has occurred, but, in our view, its current senior executive team is unproven. Since its latest results, amid a better start in the 2013 financial year, the company hasn’t provided guidance going forward. Reduce.
Aquila Resources (AQA)
Chart: Share price over the year to versus ASX200 (XJO)
Focuses on steel related raw materials, such as iron ore and coking coal. It sold its stake in the Isaac Plains coal mine to Sumitomo for $430 million. Despite the sale, a significant $136 million drop in cash to $50 million is a concern as it’s left with a portfolio of undeveloped assets.
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Peter Russell, Russell Research
BUY RECOMMENDATIONS
Bradken (BKN)
Chart: Share price over the year to versus ASX200 (XJO)
This major international supplier of engineering consumables, rail wagons and other products recently reported EBITDA of $220 million – at the top of guidance reduced in April. With business related to volume mined, not new mining projects, it was recently trading at about 70 per cent of prior levels. Foundry and machining operations in China, the US, UK and Australia should grow via record order books. Expect a franked yield above 8 per cent on a single-digit price/earnings multiple.
Breville Group (BRG)
Chart: Share price over the year to versus ASX200 (XJO)
Breville brands have leading market positions in kitchen appliances in Australia, New Zealand, North America and increasingly in Asia. Financial year 2012 saw earnings up 45 per cent, with a 25 per cent return on equity, driven by international business based on innovative Australian design and global marketing. With a strong cash position and a focus on new product launches, we expect more growth on a price/earnings multiple of 12 times and a franked yield of 5 per cent.
HOLD RECOMMENDATIONS
Magellan Financial Group (MFG)
Chart: Share price over the year to versus ASX200 (XJO)
This innovative funds manager has the attention of investors in Australia and abroad. Profit tripled in financial year 2012 as funds under management rose from $2.75 billion in June 2011 to $4.15 billion in August 2012. With the Magellan Global Fund and Magellan Infrastructure Fund substantially outperforming, MFG is well set for growth despite its recent price upswing.
Mortgage Choice (MOC)
Chart: Share price over the year to versus ASX200 (XJO)
Australia’s largest independently operated mortgage broker enjoyed a steady profit on its core business while developing complementary operations across its expanding network of franchisees. In financial year 2012, its book of loans managed for banks and other lenders continued to grow, reaching $45 billion due to a high performance of approvals and settlements and a 4.5 per cent market share. This gave an 8.5 per cent franked yield that we expect will continue to improve.
SELL RECOMMENDATIONS
Duet Group (DUE)
Chart: Share price over the year to versus ASX200 (XJO)
Duet holds majority stakes in gas pipeline and distribution systems in Western Australia and Victoria. Income is largely regulated and debt is high. A distribution of 16.5 cents is set for financial year 2013, an 8.1 per cent unfranked yield. The price is high relative to assets and history and it potentially faces regulatory pressure.
Envestra (ENV)
Chart: Share price over the year to versus ASX200 (XJO)
Envestra owns gas pipelines in Victoria, South Australia, Queensland, NSW and Northern Territory, mostly for distribution. Income is regulated, cash flow is predictable and debt is high. Previously attractive for a high, but unfranked yield, the stock has moved from 50 cents two years ago to be trading at 87.5 cents cents on September 27. It’s now at a substantial premium to assets.
Cleo Nanni, Alpha Broking
BUY RECOMMENDATIONS
CSL (CSL)
Chart: Share price over the year to versus ASX200 (XJO)
A biopharmaceutical company that researches, develops, makes and markets products to treat and prevent serious human medical conditions. Recently, CSL’s share price has marginally retreated, enabling an opportunity to accumulate this well managed company. Buy on any price weakness.
Newcrest Mining (NCM)
Chart: Share price over the year to versus ASX200 (XJO)
A gold producer, with major operations in Australia, Indonesia, Papua New Guinea and Fiji. The recent price action has been positive after a disappointing 12 months. The gold price is resilient, so we expect Newcrest to continue recovering.
HOLD RECOMMENDATIONS
Westpac Bank (WBC)
Chart: Share price over the year to versus ASX200 (XJO)
The share price has been going up and we expect it to improve going into results season. We also anticipate a final dividend of at least 80 cents, possibly higher, to be announced in November. Simply retain.
National Australia Bank (NAB)
Chart: Share price over the year to versus ASX200 (XJO)
Provides financial services in Australia, New Zealand, Asia, the UK and the US. The share price rallied from $22 in early June to a recent high of $25.60 in mid-August. Since then, it’s been trading sideways. Hold for another attractive dividend to be announced in November.
SELL RECOMMENDATIONS
Fortescue Metals Group (FMG)
Chart: Share price over the year to versus ASX200 (XJO)
An iron ore producer in the Pilbara region of Western Australia. The share price recovered after a debt restructure avoided a possible breach of its loan covenants. In our view, the debt remains a large burden on the balance sheet. Less risky investment opportunities exist elsewhere.
BlueScope Steel (BSL)
Chart: Share price over the year to versus ASX200 (XJO)
The outlook appears too challenging for this steel products maker. It’s up against a strong Australian dollar and cheap imports. In the past three years, the share price has been punished and I don’t see much upside. I would sell on any rally.
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.
