Carey Smith, Alto Capital
BUY RECOMMENDATIONS
QBE Insurance (QBE)
Chart: Share price over the year to versus ASX200 (XJO)
QBE has recovered from its multi-year low share price in November last year, and has now been in a solid uptrend for more than six months. Increasing long-term interest rates in the US and a weakening Australian dollar are positive for QBE, as it invests its float (money received from premiums, but not yet paid out in claims) in high quality fixed interest rate instruments. QBE is potentially at the start of a multi-year uptrend.
Metcash (MTS)
Chart: Share price over the year to versus ASX200 (XJO)
The third force in Australian food retailing provides marketing and distribution services to 2500 independent grocery stores across Australia. The stocks suits conservative investors attracted to the defensive nature of the sector, with the company recently trading around a 40 per cent price/earnings ratio discount to Woolworths and Wesfarmers, while also providing a superior dividend yield.
HOLD RECOMMENDATIONS
Pacific Brands (PBG)
Chart: Share price over the year to versus ASX200 (XJO)
This iconic clothing company is half way through its restructuring process, with benefits starting to be realised. Strong reliable cash flows have enabled it to pay dividends, while also paying down debt. Trading on a P/E ratio around 10 times and offering a fully franked dividend yield above 6 per cent, the stock is worth holding.
Australian Pharmaceutical Industries (API)
Chart: Share price over the year to versus ASX200 (XJO)
A leading health and beauty company. Brands include Soul Pattinson, Pharmacist Advice and Priceline. A dividend yield above 6 per cent provides some safety.
SELL RECOMMENDATIONS
Breville Group (BRG)
Chart: Share price over the year to versus ASX200 (XJO)
The share price has soared in the past five years and the company is now valued at more than $1.1 billion. Earnings per share growth in 2014 is forecast to be relatively flat. Recently trading on a P/E ratio of more than 20 times, we believe the stock is significantly overvalued.
Super Retail Group (SUL)
Chart: Share price over the year to versus ASX200 (XJO)
The diverse retailer has posted strong earnings growth in the past five years, resulting in a price premium. But we believe this premium has become excessive and suggest investors take profits.
Michael Heffernan, Lonsec
BUY RECOMMENDATIONS
Adelaide Brighton (ABC)
Chart: Share price over the year to versus ASX200 (XJO)
Its recent report was impressive. The improvement in construction activity and proposed infrastructure developments are strong positives for its future profitability. Low interest rates and a significant increase in confidence and sentiment following the recent federal election are very favourable for building activity generally.
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Woolworths (WOW)
Chart: Share price over the year to versus ASX200 (XJO)
A retailer that just keeps on keeping on. In its recent report, profit was up a solid 6 per cent and it expects growth of between 4 per cent and 7 per cent this financial year. An expected improving economy in the next 12 months will prove positive for the retail sector generally and, in particular, the Masters hardware business.
HOLD RECOMMENDATIONS
Tatts Group (TTS)
Chart: Share price over the year to versus ASX200 (XJO)
Its business has transitioned smoothly from largely gaming to lotteries and wagering. A most satisfactory recent result also incorporated a fully franked dividend. Its increasing national footprint, particularly in the lotteries business, places it in a very strong position.
Woodside Petroleum (WPL)
Chart: Share price over the year to versus ASX200 (XJO)
Not only is it Australia’s premier liquefied natural gas company, with new growth opportunities, but it pays a compelling 4 per cent fully franked dividend – unusual for a resources company. Expected strong demand, particularly from its Asian customers, paints a bright outlook.
SELL RECOMMENDATIONS
Boart Longyear (BLY)
Chart: Share price over the year to versus ASX200 (XJO)
The resources sector slowdown is making it tough for this international drilling company. The significant reduction in capital expenditure by major resource companies is yet to fully play out in the mining services sector. In a nutshell, there’s better options available elsewhere in the market.
Ausenco (AAX)
Chart: Share price over the year to versus ASX200 (XJO)
Its recent report disappointed. And like other mining services companies, its share price has been hit hard and a turnaround in underlying profitability is unlikely to be imminent. Accordingly, investors should bide their time in the interim.
Peter Day, Macquarie Private Wealth
BUY RECOMMENDATIONS
Amcor (AMC)
Chart: Share price over the year to versus ASX200 (XJO)
AMC plans to demerge its Australasia and packaging distribution (AAPD) business later this year. Expect the demerger to enhance shareholder value. AMC offers relatively low risk earnings growth supported by solid cash flow generation. Our share price target is $11.24. On September 18, the stock was trading at $10.77.
Northern Star Resources (NST)
Chart: Share price over the year to versus ASX200 (XJO)
A gold producer operating in Western Australia. NST has paid a fully franked dividend in the past three half years and has recently been trading on a fully franked yield of 2.7 per cent for 2014. NST has a track record of operational predictability and increasing profitability at its Paulsens mine. NST is a standout producer in the ASX-listed gold space.
HOLD RECOMMENDATIONS
Premier Investments (PMV)
Chart: Share price over the year to versus ASX200 (XJO)
PMV reported 2013 net profit of $174.5 million. It was up 1.5 per cent on previous corresponding period. The final dividend was 19 cents a share, a little better than expected. Our target price is $8.50. The shares were trading at $8.32 on September 19.
Aurizon Holdings (AZJ)
Chart: Share price over the year to versus ASX200 (XJO)
Despite a subdued coal pricing environment, this bulk freight specialist continues to generate efficiencies. Volume growth is incrementally positive, but much of it may be factored into the share price. We retain a hold on this stock.
SELL RECOMMENDATIONS
Acrux (ACR)
Chart: Share price over the year to versus ASX200 (XJO)
We have surveyed 381 endocrinologists globally regarding their views about testosterone therapy, brand preferences and the potential impact of new entrants. Our findings suggested there was little affinity for the medication Axiron. Investor expectations regarding share price gains may not be met in future.
Shopping Centres Australasia Property Group (SCP)
Chart: Share price over the year to versus ASX200 (XJO)
Leasing risk remains in the portfolio. While the dividend yield is relatively attractive, it’s underpinned by rental guarantees. Once leases expire, the outlook, in our view, is uncertain.
Click on the links below to read other articles from this week’s newsletter
18 Share Tips – 23 September 2013: 18 Share Tips to BUY, SELL & HOLD from…
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