Joshua Stega, JAS Wealth
BUY RECOMMENDATIONS
Brambles (BXB)
Chart: Share price over the year to versus ASX200 (XJO)
Provides support services and operates in more than 45 countries. It employs more than 12,000 people. BXB is highly leveraged to a continuing recovery in global economic conditions. Our investment thesis is based on the recently announced demerger of the Recall business. We believe the separate arms of the company will be more efficient as independent entities. We are buyers at current levels and would be happy holders of each business following the demerger.
Ardent Leisure Group (AAD)
Chart: Share price over the year to versus ASX200 (XJO)
Owns and operates leisure assets, such as Dreamworld, Whitewater World, d’Albora Marinas, AMF Bowling, Goodlife Health Clubs and Main Event in the US. With the likelihood of further interest rate cuts in Australia, we think investors will continue to chase yield and be attracted to AAD’s cash flows. Also, Ardent’s business is highly leveraged to consumer spending patterns and should benefit from lower interest rates and a corresponding lower Australian currency.
HOLD RECOMMENDATIONS
AMP (AMP)
Chart: Share price over the year to versus ASX200 (XJO)
Provides a broad spectrum of wealth management and financial service solutions, including financial planning, banking, retail and corporate superannuation and retirement income products. We like the long term outlook for the wealth management business in Australia. But in the shorter term, we believe investors should have legitimate concerns regarding the prospects for ongoing regulatory change in financial services; continuing integration risks from the AXA takeover and equity flows into AMP products. We feel AMP’s current share price adequately captures these risks, and therefore we rate this stock a hold.
ASX Limited (ASX)
Chart: Share price over the year to versus ASX200 (XJO)
We continue to view ASX favourably due to its good organic growth opportunities, a robust cost management program and the ability to leverage earnings with growth in the broader economy. A main risk is sustained weakness in investment markets. After a significant capital raising last month, we are happy to hold this stock at current levels.
SELL RECOMMENDATIONS
Cabcharge (CAB)
Chart: Share price over the year to versus ASX200 (XJO)
Operates a national charge facility for paying taxi fares and also owns taxi companies in NSW and Victoria. The immediate outlook for Cabcharge’s payments business is one of uncertainty given the changing regulatory environment and increasing competition. Amid technological advances, we believe it’s short sighted to assume that CAB’s position in this market and the 10 per cent surcharge it receives can remain a long-term business model. Despite the chance of a short-term bounce, we are sellers at any opportunity.
Myer Holdings (MYR)
Chart: Share price over the year to versus ASX200 (XJO)
The retail giant has more than 60 stores across Australia. After several years of restructuring, MYR emerged via an IPO in 2009, perfectly timed by private equity owners to exit the business. It’s an iconic brand and benefits from scale. But key medium term risks include a more frugal and cautious domestic consumer and competition threats posed by technology and the web. We prefer other investments.
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Andrew Arvanitopoulos, Alpha Securities
BUY RECOMMENDATIONS
Greencross (GXL)
Chart: Share price over the year to versus ASX200 (XJO)
Greencross is a big provider of veterinary services in Australia, with numerous animal hospitals, clinics and laboratories. GXL’s strategy is to aggregate vet practices and utilise its scale and streamlined business practices to improve profitability. Industry dynamics favour acquisitions and GXL has significant room for growth if it continues to execute its strategy effectively.
Transurban (TCL)
Chart: Share price over the year to versus ASX200 (XJO)
Fourth quarter traffic growth remains strong and revenue increases will flow to the bottom line. Completing the M2 upgrade in Sydney will also lift revenue on the back of rising tolls. TCL is now yielding around 5 per cent unfranked, making it among the lowest in the utility space.
HOLD RECOMMENDATIONS
ASX Limited (ASX)
Chart: Share price over the year to versus ASX200 (XJO)
Activity was solid in June. We expect an increase in turnover, supported by higher trading volumes and prices and improving retail investor sentiment.
Flight Centre (FLT)
Chart: Share price over the year to versus ASX200 (XJO)
FLT’s corporate business has been growing amid continuing improvement in profitability from the US and UK businesses. Potential exists for medium-term capital initiatives given FLT’s strong cash generation and high levels of cash on hand.
Expect international departures to grow modestly and domestic travel to improve.
SELL RECOMMENDATIONS
Boart Longyear (BLY)
Chart: Share price over the year to versus ASX200 (XJO)
The company recently cut earnings guidance for the second time in about six weeks. The mining sector is slowing so this drilling company’s outlook is challenging. We would rather be on the sidelines.
OZ Minerals (OZL)
Chart: Share price over the year to versus ASX200 (XJO)
The company reduced its 2013 copper production guidance from between 90,000-to-95,000 tonnes to 82,000-to-88,000 tonnes. We expect cash costs to rise due to expectations of weaker output. In our view, production concerns and lower commodity prices will drag on OZL’s share price in the near-to-medium term.
Peter Moran, Wilson HTM
BUY RECOMMENDATIONS
Myer Holdings (MYR)
Chart: Share price over the year to versus ASX200 (XJO)
MYR’s shares were recently sold down on fragile consumer confidence and weakness among retailers generally. However, we believe MYR is well managed and has avoided some of the excess inventory issues suffered by competitors. With strong cash flow generation and a forecast yield of 7 per cent, we recommend investors consider buying the stock.
Universal Biosensors (UBI)
Chart: Share price over the year to versus ASX200 (XJO)
This medical diagnostic company’s sales and service fees are denominated in US dollars. A portion of its costs (general and administrative) are transacted in Australian dollars. The positive impact of a weaker Australian dollar is substantial. A stock for investors with an appetite for risk to consider.
HOLD RECOMMENDATIONS
Retail Food Group (RFG)
Chart: Share price over the year to versus ASX200 (XJO)
RFG has attractive growth prospects in pizza and coffee, including the potential for further acquisitions. The company’s on track to grow its core brands. We believe RFG’s share price will remain well supported at current levels, but believe it’s broadly fair value.
Flight Centre (FLT)
Chart: Share price over the year to versus ASX200 (XJO)
Flight Centre continues to outperform Australian and global peers, reporting a second profit upgrade in as many months. The company is enjoying strong demand for flights and increases in market share in most core markets. The strategy is working. Due to recent strong share price performance, we retain our hold recommendation.
SELL RECOMMENDATIONS
Macquarie Atlas Roads Group (MQA)
Chart: Share price over the year to versus ASX200 (XJO)
MQA’s share price has been running strongly as investors look for companies that benefit from a lower Australian dollar. MQA’s assets are European toll roads so there is a benefit. However, a weak European economy will continue to provide headwinds for underlying earnings. With the shares up about 50 per cent since the beginning of the year, there’s better value elsewhere.
Elders (ELD)
Chart: Share price over the year to versus ASX200 (XJO)
We argue that the value of Elders’ ordinary equity was heavily dependent on a successful asset sale program. The prospects of an asset sale program have diminished. We revert to valuing Elders on a stand-alone basis, and the outlook, in our view, is disappointing for stock holders.
Please note that Myer is recommended as a buy and a sell this week as brokers take different views on the company’s outlook. Readers are advised to seek independent advice before investing.
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.
