Jon Fernie, Lincoln Indicators
BUY RECOMMENDATIONS
OzForex Group (OFX)
Chart: Share price over the year versus ASX200 (XJO)
Provides foreign exchange and online international payment services to consumer and business clients, with operations in Australia, New Zealand, Europe, North America and Asia. The company reported a solid full year result with growth across all divisions. We expect improving margins as the group gains scale. A strong balance sheet also means that bolt-on acquisitions are possible. Given the retreat in the share price since the result, we believe the stock looks attractive at current levels. The stock closed at $2.11 on July 22.
Infomedia (IFM)
Chart: Share price over the year versus ASX200 (XJO)
Provides information solutions to the automotive industry. The company has a strong market position globally, and management has guided for full year earnings growth of more than 12 per cent in fiscal year 2015. We see this as achievable, particularly given the benefits of a lower Australian dollar to this international operator. While IFM lost the Jaguar Land Rover contract at the start of the second half, it gained an agreement with Hyundai soon afterwards. Overall, we continue to believe the outlook remains robust.
HOLD RECOMMENDATIONS
Ansell (ANN)
Chart: Share price over the year versus ASX200 (XJO)
A global provider of health and safety protection solutions. The company is due to report full year results in August and we expect strong growth organically and from recent acquisitions. While conditions in Europe and South America remain challenging, ANN is performing well in the US. Given significant overseas earnings, the group will also benefit from recent currency movements. We continue to view ANN as a solid defensive exposure.
Bendigo and Adelaide Bank (BEN)
Chart: Share price over the year versus ASX200 (XJO)
While facing a competitive environment, we expect BEN to deliver a solid fiscal year 2015 result, with a full contribution from the Rural Finance Corporation acquisition. BEN continues to provide an attractive above market yield and regional banks will also benefit from APRA’s recent move to increase mortgage risk weightings for the major banks. However, at recent levels, the stock is trading close to our valuation.
SELL RECOMMENDATIONS
Coca-Cola Amatil (CCL)
Chart: Share price over the year versus ASX200 (XJO)
The beverage maker continues to face pressure from retailers and changing consumer preferences, which, in our view, are likely to impact sales growth. While a transformation program and ongoing investment in product development are positive moves, this will take time to deliver results. Given the clouded outlook, we believe there are better alternatives available.
Mincor Resources NL (MCR)
Chart: Share price over the year versus ASX200 (XJO)
A nickel miner with operations in Western Australia. The company recently provided a solid quarterly production update, although MCR continues to be impacted by weak global nickel prices that are down almost 40 per cent in the past 12 months. We expect revenue to be down for the full year and this will impact the group’s profitability. We believe MCR is best avoided until we see some recovery in nickel prices.
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Michael Gable, Fairmont Equities
BUY RECOMMENDATIONS
REA Group (REA)
Chart: Share price over the year versus ASX200 (XJO)
The REA share price has fallen back from its recent highs due to lower than expected results in the 2015 third quarter. However, we view this as cyclical, not structural. This online real estate operator is looking cheap and the charts suggest it will continue to head towards $50. This will no doubt be aided by some short covering, which we suspect is already underway. The shares closed at $43.25 on July 22.
Greencross (GXL)
Chart: Share price over the year versus ASX200 (XJO)
The current one year forward price/earnings multiple of 14.8 times is very attractive for a growth stock like GXL. The market seems more caught up with previous guidance for fiscal year 2015, which disappointed, and isn’t factoring the potential uplift in earnings for fiscal years 2016 and 2017. The chart suggests that it’s trying to reverse the recent downward trajectory, and we view this as an opportunity to start picking up some shares in this veterinary company.
HOLD RECOMMENDATIONS
McMillan Shakespeare (MMS)
Chart: Share price over the year versus ASX200 (XJO)
After rallying for three weeks in May to form a high of $13.22, MMS was then pushed lower for six weeks, but failed to take out the previous low. This is bullish, as the bears had twice as long, but couldn’t get the price back to where it commenced its rally in May. The work in trying to get it down was overcome in just one week of buying. This is telling us that MMS is now continuing its uptrend and is on target for levels just below $14, where we would expect some major resistance to kick in. Shares in this salary packaging company closed at $13.34 on July 22.
Commonwealth Bank (CBA)
Chart: Share price over the year versus ASX200 (XJO)
We recommended CBA as a hold a month ago and we still believe it has further upside and is worth holding. It has clearly bounced off strong support and has remained robust during market volatility. The bank is well capitalised and the upcoming dividend in August should continue to draw support for the stock.
SELL RECOMMENDATIONS
BHP Billiton (BHP)
Chart: Share price over the year versus ASX200 (XJO)
Looking at the BHP chart, it’s likely to head back and retest the January low near $24 (price adjusted for the S32 demerger). A series of lower highs make this a distinct possibility. We believe it needs to make one more low before seeing a meaningful bounce that’s worthy of a trade.
Pact Group Holdings (PGH)
Chart: Share price over the year versus ASX200 (XJO)
We recommended this packaging company as a buy here in May, then a hold in June. Now we can see it reaching its full valuation and some major resistance from a charting perspective. We suggest taking profits at these levels. We would be happy to look at it again if it fell below $4.40. The stock closed at $4.83 on July 22.
Michael Heffernan, PhillipCapital
BUY RECOMMENDATIONS
Brambles (BXB)
Chart: Share price over the year versus ASX200 (XJO)
This supply chain logistics company has overcome difficulties of the past decade. Demerging its Recall business has enabled it to focus on its core activities. Brambles is performing well. Its international exposure should provide a boost.
Harvey Norman (HVN)
Chart: Share price over the year versus ASX200 (XJO)
The retail giant stands to benefit from the strong residential building and renovation sectors and the federal Budget’s small business tax incentives. Also, its fundamentals are sound and it pays a reasonably attractive dividend.
HOLD RECOMMENDATIONS
Domino’s Pizza Enterprises (DMP)
Chart: Share price over the year versus ASX200 (XJO)
While a stunning sharemarket performer in the past two years, the share price has retreated from its 12-month high of $41.64 on May 5. However, its outlook remains intact and it operates in an almost recession proof area of the economy. Europe also seems to be doing well for it.
Qantas Airways (QAN)
Chart: Share price over the year versus ASX200 (XJO)
Not just for the punters now. Its last traffic report was positive, its credit rating was upgraded and the low oil price is a gift. Qantas is paying bonuses totalling about $90 million to staff who agreed to an 18-month wage freeze. The bonus decision may be a forerunner to a quietly impressive upcoming result.
SELL RECOMMENDATIONS
Monadelphous Group (MND)
Chart: Share price over the year versus ASX200 (XJO)
Major mining companies that cut back capital expenditure plans in response to sharp declines in mineral prices across the board hit MND hard. This leading engineering group and other mining service companies face challenges. Until the outlook for the resources sector improves, other sectors are preferred.
Perpetual (PPT)
Chart: Share price over the year versus ASX200 (XJO)
Delivered a disappointing funds report for the June quarter. While total funds under management fell in line with the broader sharemarket, more funds flowed out than came in, which is of greater concern. Other stocks in the funds management area are preferred.
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