Peter Russell, Russell Research
BUY RECOMMENDATIONS
Amcom Telecommunications (AMM)
Chart: Share price over the year to versus ASX200 (XJO)
A rapidly growing Perth-based IT and telecommunications group in the S&P/ASX 300 Index. A wide fibre optic network supports national telecommunications, data, IT and cloud managed services to business and government. Expect earnings to continue at about a 20 per cent growth rate with a franked yield of 4 per cent in full year 2014 and negligible debt. I’m comfortable with the reaction to Wyllie Group selling 8 million shares. Its remaining 7.8 million creates a good buying price.
Carsales.com (CRZ)
Chart: Share price over the year to versus ASX200 (XJO)
Enjoying the strong car market, it dominates Australian online browsing with sound growth in display advertising, dealer and data services. More than 20 per cent earnings growth and a net cash position supports expansion in related areas and general classifieds. It’s acquiring a 30 per cent stake in Brazil’s leading auto website and 19.9 per cent in an Asian site. Expect benefits from both. Look to a 3.7 per cent franked yield and continuing share price upside.
HOLD RECOMMENDATIONS
Credit Corp Group (CCP)
Chart: Share price over the year to versus ASX200 (XJO)
CCP acquires debt ledgers from credit providers. Learning from severe GFC burnout after over-played expansion, it has been rebuilt in a controlled manner. Yet profit growth has still been rapid, with a 20 per cent return on equity and no net debt. An organically grown consumer loan book and a timely staged build-up of debt ledger operations in the US add opportunities to retain double-digit growth.
Domino’s Pizza Enterprises (DMP)
Chart: Share price over the year to versus ASX200 (XJO)
Domino’s displays innovation and high product standards. A leader in mobile and online delivery, it’s built a large base of outlets. Experience in Australia and New Zealand is deployed across Europe. Earnings growth at 20 per cent and net cash underpins the price/earnings ratio and a 3 per cent franked full year 2014 yield.
SELL RECOMMENDATIONS
Macquarie Atlas Roads Group (MQA)
Chart: Share price over the year to versus ASX200 (XJO)
Created in 2010, it holds stakes in six toll roads. The key one is a 19.44 per cent stake in APRR, with more than 2200 kilometres of road network in France. Three others in the US, one in the UK and one in Germany added only 6 per cent of full year 2012 asset earnings. A relic of pre-GFC leverage, partly tidied up and now paying unfranked dividends, its traffic performance is flat. Further improvement, restructuring or asset sales are a long-term aim. Near its 2011 peak, so sell.
Sigma Pharmaceuticals (SIP)
Chart: Share price over the year to versus ASX200 (XJO)
One of three pharmaceutical distributors, wholesalers and brand owners, Sigma has been on the back foot since its price rose above $6 in late 2006. Each player has fought for market share as margins declined and the Government contained its spending on health care. The share price is up from 23 cents in 2010, but upside looks negligible. The shares were trading at 77 cents on June 19. Prefer others.
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Chris McGrath, Alto Capital
BUY RECOMMENDATIONS
Woodside Petroleum (WPL)
Chart: Share price over the year to versus ASX200 (XJO)
As Australia’s premier oil and gas play, WPL’s operations include LNG, natural gas, condensate, crude oil and LPG. Forays into the US and the Middle East add a minor international complexion. LNG interests in the North West Shelf Joint Venture (NWSJV) at offshore Western Australia are the mainstay. Production is forecast to grow strongly. With forecast earnings increasing 9 per cent this year, it’s still worth buying.
AWE (AWE)
Chart: Share price over the year to versus ASX200 (XJO)
AWE joined the ranks of serious mid-tier oil and gas companies in 2006, with production at Casino, Cliff Head and BassGas. Production from Tui in New Zealand began in July 2007. A key strategy is to develop discoveries near installed infrastructure. It offers strong management, low sovereign risk and exploration upside. A healthy balance sheet with $30 million net cash appeals.
HOLD RECOMMENDATIONS
Amcor (AMC)
Chart: Share price over the year to versus ASX200 (XJO)
AMC manages a global network of packaging plants across various product segments. Boosted by the acquisition of Alcan, operations are progressing well. With currency finally moving in the right direction for it, the outlook is improving.
Bendigo and Adelaide Bank (BEN)
Chart: Share price over the year to versus ASX200 (XJO)
BEN’s competitive advantage is public goodwill and trust after rolling out branches in locations deserted by larger banks. The Adelaide Bank merger diversified the balance sheet, while expanding the geographical footprint. BEN’s relatively conservative managed retail bank complements the mortgage broker and wholesale banking focus of Adelaide Bank.
SELL RECOMMENDATIONS
BlueScope Steel (BSL)
Chart: Share price over the year to versus ASX200 (XJO)
BlueScope Steel is an Australian steel maker producing hot rolled, coated steel and building products. The focus is on growing the midstream and downstream value added segments, particularly coated steel and building products. The business is capital intensive and margins are volatile.
JB Hi-Fi (JBH)
Chart: Share price over the year to versus ASX200 (XJO)
JB Hi-Fi operates more than 180 branded electrical stores across Australia and New Zealand and is rapidly growing via an aggressive store roll out program. Potentially threatened by the economic environment and online sales, we believe JBH will find it increasingly difficult to reach sales targets.
Mark Lennox, HC Securities
BUY RECOMMENDATIONS
National Australia Bank (NAB)
Chart: Share price over the year to versus ASX200 (XJO)
NAB is among the world’s top 20 biggest banks by market capitalisation. The recent retreat in the banking sector represents a fantastic entry point during the next three-to-six months. Downside pressure was exacerbated by offshore selling, as offshore fund managers liquidated positions in fear of losing between 10 and 20 per cent on their Australian assets with a falling currency.
QBE Insurance (QBE)
Chart: Share price over the year to versus ASX200 (XJO)
QBE provides insurance services to the Asia Pacific region, the US, Canada and Europe. QBE has experienced a triple whammy in the past few years with natural disasters, a rising Australian dollar and falling US bond yields impacting earnings. But the stock has rallied on a falling Australian dollar and expectations of an unwinding in quantitative easing strengthening US bonds and rates. We expect QBE to strengthen in this year’s second half.
HOLD RECOMMENDATIONS
Westpac Bank (WBC)
Chart: Share price over the year to versus ASX200 (XJO)
The share price has fallen significantly since the start of May and was recently trading on a 2013 price-to-earnings multiple of about 12 times. Provided unemployment doesn’t rise above 10 per cent, we consider WBC as a fantastic medium-to-long term hold.
ANZ Bank (ANZ)
Chart: Share price over the year to versus ASX200 (XJO)
ANZ is well positioned to grow into the Asian market while retaining its large deposit base across Australia and New Zealand. Like Westpac, it offers reliable dividends and the prospect for capital growth.
SELL RECOMMENDATIONS
Newcrest Mining (NCM)
Chart: Share price over the year to versus ASX200 (XJO)
Newcrest Mining is facing scrutiny from regulators about its disclosure of a possible $6 billion writedown after gold slid into a bear market. Newcrest, which flagged the charge on June 7, halted some of its higher cost gold mines. Newcrest’s market value has fallen more than $2 billion this month. With production expected to be relatively flat next year, we don’t see much upside in NCM.
Regis Resources (RRL)
Chart: Share price over the year to versus ASX200 (XJO)
A gold company focusing on its tenement package in Western Australia. Its main projects include Moolart Well, Garden Well and Rosemont. RRL also conducts exploration activities in several deposits in the eastern goldfields. The gold price has been trending down and we expect the share price to follow.
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.
