18 Share Tips – 9 September 2013

Peter Russell, Russell Research

BUY RECOMMENDATIONS

BigAir Group (BGL)

Chart: Share price over the year to versus ASX200 (XJO)

Small cap company BigAir owns and operates one of the largest fixed wireless broadband networks across our big cities and in some regional areas. Five years of record profits via acquisitions and organic growth have built scale and systems supporting general and specialist businesses, student and remote accommodation needs. It has cash, no debt and pays dividends. We expect rapid future growth.      

Magellan Flagship Fund (MFF)

Chart: Share price over the year to versus ASX200 (XJO)

Provides retail investors with an opportunity to directly participate in the strong growth of offshore investment portfolios managed by Magellan Financial Group (MFG) – which we have previously recommended here. MFG management is experienced, dynamic, connected and focused. Funds under management have grown to $16 billion in a few years. Through MFF, you get a specialist and successful manager choosing the best international reward/risk investment plays.          

HOLD RECOMMENDATIONS

Collection House (CLH)

Chart: Share price over the year to versus ASX200 (XJO)

Arguably Australia’s leading receivables manager, CLH has earned profits and paid dividends since 1999. It has grown in each of the past five years. Its main focus is buying and working off debt ledgers, with disciplined control of risk and costs. It’s forecast a 9 per cent-to-15 per cent rise in earnings to June 2014. We expect this to continue beyond 2014, with a franked yield above 4.5 per cent.      

Super Retail Group (SUL)

Chart: Share price over the year to versus ASX200 (XJO)

Management’s strategy, ability and focus have built a seven-year record of growth for this high performer in the resilient auto, leisure and sports retail sectors. Yet there is more to come. Initiatives include more new stores (17 have opened since June), building the online channel, starting its own brands and increasing supply chain efficiencies. Expect 15 per cent annual growth with a 3.5 per cent yield.      

SELL RECOMMENDATIONS

Harvey Norman (HVN)

Chart: Share price over the year to versus ASX200 (XJO)

Profitable, pays dividends and the founder is a household name. What’s not to like about HVN? Well, trends have slipped in recent years. With little unique intellectual property, the franchise model doesn’t provide enough margin or control. Too much property is locked in and the offshore businesses are weak. It’s not broken, but you can do better elsewhere. 

Qantas Airways (QAN)

Chart: Share price over the year to versus ASX200 (XJO)

We have said it for years – an airline isn’t the place for a retail investor. From 2000 to 2009, you received a 5.6 per cent franked yield, but nothing in the past four years. In the past decade, the share price has mostly gone down. Qantas International earns too little margin despite potential upside from new partner Emirates. Up against strong global competition and Virgin Australia here.   

Janine Cox, Wealth Within

BUY RECOMMENDATIONS

Pacific Brands (PBG)

Chart: Share price over the year to versus ASX200 (XJO)

Most of my recommendations come with conditions. The reason is any stock must prove it can jump over certain price hurdles. Clothing company Pacific Brands has good support at around 75 cents and may continue to trade much higher over the medium term. However, it needs to strongly rise above 85.5 cents to increase the probability of this happening. Continue to watch PBG. On September 4, the stock closed at 74.5 cents.

Asciano (AIO)

Chart: Share price over the year to versus ASX200 (XJO)

Long term, this stock appears to offer great potential. It’s traded sideways since March 2010, but is now setting up for a breakout. When it rises, the run is likely to continue to about the next strong level of resistance of between $7.60 and $8.80. This transport infrastructure and operations company closed at $5.69 on September 4.

HOLD RECOMMENDATIONS

Alumina (AWC)

Chart: Share price over the year to versus ASX200 (XJO)

AWC is testing support around $1, an important psychological level for the stock. Whole dollar multiples will often represent important milestones for the price of a share. Given that AWC has been trading sideways and the weekly range is narrowing, a strong rise above $1.10 would be a positive sign. A fall below 95 cents would signal further weakness. The shares closed at $1.035 on September 4.

National Australia Bank (NAB)

Chart: Share price over the year to versus ASX200 (XJO)

Recently NAB fell around 20 per cent from its high. However, a rebound rapidly followed reversing 80 per cent of the share price fall. The recovery may either represent real confidence in the banks or a flight to defensives, as investors avoid energy and material sectors. I would suggest the latter and recommend a hold.

SELL RECOMMENDATIONS

Singapore Telecommunications (SGT)

Chart: Share price over the year to versus ASX200 (XJO)

Many people think traders have to be in and out of the market in a day. But this couldn’t be further from reality. You select the time frame to suit your style. For medium term traders, SGT is showing significant weakness and a strong close below $2.98 at the end of any week would indicate it’s time to exit. The shares closed at $2.99 on September 4.

Treasury Wine Estates (TWE)

Chart: Share price over the year to versus ASX200 (XJO)

TWE has lost about 25 per cent since a high in May and the fall broke below an important technical level. Although, in the short term, TWE may rebound temporarily to just above $5, the recent sell off means the probability of a further decline has increased, with the next level of support around $4.20. Therefore, in the short term, I see better opportunities elsewhere. The shares closed at $4.66 on September 4.

John Rawicki, PhillipCapital

BUY RECOMMENDATIONS

Rio Tinto (RIO)

Chart: Share price over the year to versus ASX200 (XJO)

Rio expects to expand iron ore production to 290 million tonnes a year – two-to-four months ahead of schedule. The company believes it reach this target in May 2014. The mining giant also believes it can reduce production costs by $11 a tonne by 2020. With iron ore prices recovering and Chinese restocking taking place, I expect Rio to offer significant upside.

Oil Search (OSH)

Chart: Share price over the year to versus ASX200 (XJO)

The company’s Papua New Guinea LNG project is 90 per cent complete and will deliver strong cash flows. Boasting sufficient gas to underpin a further one-to-two trains of LNG at highly attractive rates of return, I believe investors will see further share price growth.

HOLD RECOMMENDATIONS

Duet Group (DUE)

Chart: Share price over the year to versus ASX200 (XJO)

Duet owns gas pipelines and electricity distribution networks in Australia. The company recently raised $100 million via a placement to fund another pipeline project. While the project is cash flow accretive, I believe the share price is in line with fair value.

AGL Energy (AGK)

Chart: Share price over the year to versus ASX200 (XJO)

AGL operates retail and merchant energy businesses and power stations. The company reported an underlying net profit of $598 million for fiscal year 2013, in line with the consensus estimate. AGL stands to benefit from increasing gas prices.

SELL RECOMMENDATIONS

Woolworths (WOW)

Chart: Share price over the year to versus ASX200 (XJO)

The company’s core business is strong. But sustaining growth, particularly in the supermarkets division, presents challenges. Capital expenditures are also reaching uncomfortable levels. Hardware chain Masters is placing a drain on the company’s capital through significant lease costs. I see a more sensible risk/reward proposition in Wesfarmers.

Boart Longyear (BLY)

Chart: Share price over the year to versus ASX200 (XJO)

An integrated drilling services provider for the mining and energy sectors. The company is highly geared to the resource exploration cycle, which is expected to weaken in the near term. The rapid fall in commodity prices has made this stock particularly vulnerable. Also, in our view, the balance sheet looks weak.

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.