John Rawicki, PhillipCapital
BUY RECOMMENDATIONS
Commissioners Gold (CGU)
Chart: Share price over the year to versus ASX200 (XJO)
Venturing outside my usual blue chip space, I am an accumulator of this little gold stock below 2.5 cents. With a market cap of only about $2 million, it’s the cheapest gold play listed on the ASX. The company announced it was about to start producing gold at its Peru mine. Upcoming changes to the board of directors may see new projects announced amid potential for renewed interest in the stock. A speculative buy. The shares closed at 1.9 cents on April 30.
Ardent Leisure Group (AAD)
Chart: Share price over the year to versus ASX200 (XJO)
Operates leisure and entertainment assets, such as Dreamworld and Kingpin Bowling lounges in Australia. It also operates in New Zealand and the United States. The timing of the Easter holidays, recent good weather and improving profit margins will underpin theme park earnings. Further expansion of its highly successful Main Event business in the US offers potential upside for growth.
HOLD RECOMMENDATIONS
Independence Group (IGO)
Chart: Share price over the year to versus ASX200 (XJO)
A mineral explorer and producer, mostly involved in nickel and gold in Western Australia. The company has reported another strong set of production results, with nickel production beating expectations. With strong earnings and cash generation, dividends are likely to increase this year, and the company should continue to benefit from the ongoing ore export ban in Indonesia.
BT Investment Management (BTT)
Chart: Share price over the year to versus ASX200 (XJO)
Provides investment management services to wholesale and retail funds. Minor outflows in Australian funds under management were offset by continuing inflows in the UK business. While overall growth in funds under management has been steady, the share price increase in the past 12 months leaves the stock fairly valued and upside may be limited.
SELL RECOMMENDATIONS
Gindalbie Metals (GBG)
Chart: Share price over the year to versus ASX200 (XJO)
While iron ore shipments were above expectations for the last quarter, iron ore production was about 50 per cent below expectations. Reduced shipping forecasts and increased unit costs have pushed earnings for fiscal year 2014 to a paltry 0.1 cents a share, down from 0.6 cents a share. Increasing iron ore supplies is also placing pressure on production margins, further increasing downside risk for shareholders.
Goodman Fielder (GFF)
Chart: Share price over the year to versus ASX200 (XJO)
The GFF board has received a non-binding takeover offer from Wilmar International and First Pacific at 65 cents a share. While the Goodman Fielder board has rejected the offer as opportunistic and undervalued, I believe 65 cents is fair. Shareholders may wish to lock in the increasing share price while they can, and reinvest the funds elsewhere in case the takeover doesn’t go ahead. There’s a risk the offer may be either withdrawn or lowered. The shares were trading at 66.2 cents on May 1.
Sean Conlan, Macquarie Private Wealth
BUY RECOMMENDATIONS
Dick Smith Holdings (DSH)
Chart: Share price over the year to versus ASX200 (XJO)
The retailer appears on track to achieve our 2014 financial year prospectus forecasts. We see an opportunity for a significant re-rating as DSH management delivers on future growth forecasts.
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NextDC (NXT)
Chart: Share price over the year to versus ASX200 (XJO)
The company appears well positioned to benefit from high demand for data centre capacity driven by exponential growth in internet traffic. The current price provides a discount to our valuation of current assets, which assumes about four years to reach full capacity. Given management experience, options exist for further network expansion.
HOLD RECOMMENDATIONS
Wesfarmers (WES)
Chart: Share price over the year to versus ASX200 (XJO)
The outlook for Coles, Bunnings and Kmart remains solid. There’s a prospect for a special dividend in the first half of 2015 reflecting recent divestments. With the stock trading on about 19 times 2015 estimated earnings, our neutral rating is retained.
Harvey Norman (HVN)
Chart: Share price over the year to versus ASX200 (XJO)
The stock is leveraged to the domestic housing recovery. We forecast about 177,000 housing starts in 2014, up about 9 per cent on 2013. Even so, this retail stock is trading above our price target.
SELL RECOMMENDATIONS
McAleese (MCS)
Chart: Share price over the year to versus ASX200 (XJO)
Confidence in earnings delivery will be needed for sentiment for to improve in this transport company. According to our research on April 16, the company was forecast to be close to its net debt to earnings covenant.
QBE Insurance (QBE)
Chart: Share price over the year to versus ASX200 (XJO)
QBE has received the benefit of the doubt from investors after two years of consistent downgrades, the most recent being 25 per cent. While we are forecasting an improvement in the US business, underlying trends in several business lines remain challenging.
Mark Lennox, HC Securities
BUY RECOMMENDATIONS
Macquarie Group (MQG)
Chart: Share price over the year to versus ASX200 (XJO)
Macquarie recently announced online broker Bell Direct will provide a back-end trading platform for its banking and financial services group. Macquarie’s share price has risen strongly in the past 12 months, reflecting improving market conditions and investment markets more broadly.
CSL (CSL)
Chart: Share price over the year to versus ASX200 (XJO)
A blood products group trading on a fiscal year price/earnings ratio of about 22 times, with a return on equity around 36 per cent. Profits have continued to grow, indicating the company is a dominant player in a sector that has seen competitors come and go with little earnings stability.
HOLD RECOMMENDATIONS
ANZ Bank (ANZ)
Chart: Share price over the year to versus ASX200 (XJO)
The bank delivered a strong performance for the 2014 half year. Cash profit was up 11 per cent to $3.5 billion. The fully franked interim dividend rose 14 per cent to 83 cents a share. The bank’s Asian arm is doing well. Keep holding.
National Australia Bank (NAB)
Chart: Share price over the year to versus ASX200 (XJO)
Expect strong dividends from the NAB going forward. It’s unlikely bank shares prices will fall in line with overvaluation while they are yielding 5 per cent or more.
SELL RECOMMENDATIONS
Fortescue Metals Group (FMG)
Chart: Share price over the year to versus ASX200 (XJO)
Record shipments of 31.5 million tonnes or iron ore were recorded in the March quarter. Still, some analysts were expecting more. Recently, the iron ore price has been falling and we see more risk to the downside in Fortescue.
Rio Tinto (RIO)
Chart: Share price over the year to versus ASX200 (XJO)
The mining giant will test driverless trains in the Pilbara as part of the company’s plan to export 360 million tonnes of iron ore a year by 2017. But, in the shorter term, we expect lower iron ore prices to filter through and impact the share price.
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.
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18 Share Tips – 5 May 2014: 18 Share Tips to BUY, SELL & HOLD from…
