Joshua Stega, JAS Wealth
BUY RECOMMENDATIONS
Westfield Corporation (WFD)
Chart: Share price over the year versus ASX200 (XJO)
A property trust that invests in, leases and manages retail shopping centres in the United States and the United Kingdom. All earnings and assets are offshore – about 75 per cent in the US and 25 per cent in the UK. WFD has been a major beneficiary of Australian dollar depreciation. WFD has a pipeline of potentially super profitable development projects being delivered at a time when investment demand for premium malls has never been stronger. We think WFD will prove to be a defensive stock in volatile times, so we’re happy to buy at current levels. The shares closed at $8.75 on December 18.
Newcrest Mining (NCM)
Chart: Share price over the year versus ASX200 (XJO)
Australia’s largest gold producer and one of the world’s top 10 gold mining companies by production, reserves and market capitalisation. NCM has underperformed lately due to a lower gold price, resulting in weaker cash flow and high debt levels. We believe that NCM’s cost profiles and significant number of projects in development phase provides investors with an attractive long term investment. With increasing volatility in global investment markets, we think the NCM share price is starting to look interesting and recommend building a stake at these levels. The shares closed at $10.75 on December 18.
HOLD RECOMMENDATIONS
Tabcorp Holdings (TAH)
Chart: Share price over the year versus ASX200 (XJO)
Offers a wide range of gambling and entertainment products. TAH has remained one of our top picks within the consumer discretionary space due to its transparent earnings profile and resilient revenue stream in uncertain times. TAH was recently offering a dividend yield of almost 4 per cent.
Wesfarmers (WES)
Chart: Share price over the year versus ASX200 (XJO)
A diversified group that makes up Australia’s largest retailer by sales revenue. Most business operations performed well in recent times despite the challenging economic climate. The defensive nature of the consumer staples sector appeals to investors with a relatively low risk appetite. For this reason we like WES and it was recently offering a solid dividend yield of 4.8 per cent, which should hold up in the face of a slowing Australian economy.
SELL RECOMMENDATIONS
Downer EDI (DOW)
Chart: Share price over the year versus ASX200 (XJO)
Provides engineering and infrastructure management services. While DOW’s continued cost out program and strong balance sheet leave it well placed to respond to market pressures, we feel the industry specific risks are too great. Key risks to our rating and valuation include further construction losses, a slowdown in Australian engineering and contract mining activity and lower investment in passenger and freight rail rolling stock. Despite a recent price/earnings multiple of 9.32 times, we question whether investors need to be in this sector at all.
Henderson Group PLC (HGG)
Chart: Share price over the year versus ASX200 (XJO)
A financial services group that sells a range of products focused on asset management. After a strong share price performance in the past 12 months, we’re concerned that HGG is overvalued. As with any asset manager, the business model is dependent on the performance of global markets, which are cyclical in nature. Any market pullback will invariably affect assets under management, future flows and group revenues. We believe now is a good time to take some easy profits in HGG.
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Peter Russell, Russell Research
BUY RECOMMENDATIONS
Corporate Travel Management (CTD)
Chart: Share price over the year versus ASX200 (XJO)
This strongly performing and well managed corporate travel group has made two more acquisitions, again partly and suitably funded by shareholders, which affords a good buying opportunity. The US acquisition adds a Washington base in the eastern states, while the key UK acquisition, well known to CTD for years, is established across seven European countries. This gives CTD global (and Atlantic) coverage, is highly compatible and scalable and earnings per share accretive at once.
IMF Bentham (IMF)
Chart: Share price over the year versus ASX200 (XJO)
After careful preparation, IMF has leveraged its seasoned litigation funding expertise into the US and the UK, making it arguably a world leader in this growing field. The moves are already adding strong work flows which, to accommodate the major growth prospects, are jointly funded with substantial financial partners. The case portfolio and likely completions indicate accelerating growth and dividends rising above 5 per cent from this year.
HOLD RECOMMENDATIONS
Capitol Health (CAJ)
Chart: Share price over the year versus ASX200 (XJO)
Now the largest community based diagnostic imaging network in Victoria with 52 clinics, fuelled by six acquisitions over five years. Capitol Health has agreed to acquire Sydney based Southern Radiology Group for $65 million. This adds 14 clinics, eight radiologists, five MRI licences, imaging expertise in four specialist clinical areas and an entry into NSW. Capitol has raised debt and equity funding and is negotiating another acquisition. Accumulate.
Monash IVF Group (MVF)
Chart: Share price over the year versus ASX200 (XJO)
This pioneer of assisted reproductive services with 40 years experience listed at $1.85 in June. Since then, it’s expanded in Malaysia, Brisbane, Sydney and Melbourne, with profit up 18 per cent and an industry leading pregnancy success rate of 32 per cent. MVF has now acquired the Fertility East business in Bondi, complementing its two existing Sydney operations. Accumulate.
SELL RECOMMENDATIONS
Qantas Airways (QAN)
Chart: Share price over the year versus ASX200 (XJO)
Investors should never set and forget. We kick ourselves when we notice a stock is way below what we expected. You also have to be vigilant when the stock booms. The stock has doubled since mid October. Following its strategy of cutting costs and aircraft sales, it expects a profit and said so on December 8. But we believe there’s too many challenges in this tough industry. No dividends. Take the cash and run.
Tatts Group (TTS)
Chart: Share price over the year versus ASX200 (XJO)
Tatts lost a Victorian duopoly gaming licence in 2012 and could win $540 million if the State Government doesn’t lodge a final appeal by January – and succeed. This could be up to 38 cents a share, which looks fully discounted in the share price, now close to its recent highs since the GFC. TTS attracts for a yield around 4.5 per cent franked, but that could be achieved elsewhere with more certain and faster growth prospects.
James Samson, Lincoln Indicators
BUY RECOMMENDATIONS
Arena REIT (ARF)
Chart: Share price over the year versus ASX200 (XJO)
A real estate investment trust with a focus on properties leased to childcare centres and medical diagnostic facilities. The stable and favourable long term outlook for the childcare and healthcare industries will underpin ARF’s future cash flows and sustain its distributions to security holders. Broadening the tenant base will help manage risks, such as changes to government regulations and potentially weaker profitability of key tenants. We believe the business is well placed to benefit from stability in these underlying tenant industries.
Thorn Group (TGA)
Chart: Share price over the year versus ASX200 (XJO)
Reported a strong interim result for fiscal year 2015 led by a solid performance in the Radio Rentals business and financial services division. Management has reiterated earnings guidance above $30 million for the full year. Key drivers going forward include a shift in the core business (Radio Rentals) towards longer term contracts, growth in receivables and acquisition growth. Future earnings growth will support cash flow and dividend growth, providing an attractive income stream for investors.
HOLD RECOMMENDATIONS
TPG Telecom (TPM)
Chart: Share price over the year versus ASX200 (XJO)
Had another strong year, but this is somewhat offset by some recent regulatory uncertainty regarding its fibre to the basement strategy. Despite this, the company remains in a strong position to continue on its trajectory. We expect growth to come from net subscriber gains and a higher margin product mix. Furthermore, the company stands to benefit from continuing synergy gains and scale uplift from its AAPT acquisition, which added a significant new corporate segment to the business.
Brambles (BXB)
Chart: Share price over the year versus ASX200 (XJO)
This global logistics business has performed well in recent periods. The company is a beneficiary of a lower Australian dollar and continues to be a preferred exposure to growth in the US economy. While the business is well placed and performing to expectations, with the benefits of additional acquisitions expected to flow through during fiscal year 2015, we believe the current share price is appropriate to accommodate these high expectations at present.
SELL RECOMMENDATIONS
Reckon Limited (RKN)
Chart: Share price over the year versus ASX200 (XJO)
Provides accounting software to the Australian market and competes with the likes of MYOB, Intuit and Xero. We believe RKN may continue to find the market difficult in terms of preserving margins and investing in R&D and product capability at an increased rate. While the company boasts a decent track record for generating cash flow and dividends, we believe that caution is appropriate given market conditions.
Seven Group Holdings (SVW)
Chart: Share price over the year versus ASX200 (XJO)
We argue that Seven Group Holdings is in the unfortunate position of operating two businesses in industries that are facing significant challenges. The company’s interest in WesTrac Group is subject to mining and construction expenditure cuts and the pain is being felt. Seven West Media continues to face structural challenges, as traditional broadcast media advertising markets remain uncertain. We believe investors should consider businesses that aren’t facing such strong challenges.
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.
