Simon Herrmann, Wise-owl.com
BUY RECOMMENDATIONS
Platinum Asset Management (PTM)
Chart: Share price over the year
PTM has a strong track record of achieving above average returns and the stock price is directly correlated to its portfolio performance. PTM offers diversified exposure to international stock markets, with a strong focus on US equities and technology shares. It’s set to benefit from reducing volatility and improving market sentiment.
TFS Corporation (TFC)
Chart: Share price over the year
Offers profitable exposure to the Indian sandalwood market. We’re attracted to the company’s growth trajectory, strong market position and high competitive barriers. Harvest volumes are scheduled to increase 10 times in fiscal year 2016. Enhanced earnings quality and consumer demand should increase interest in the stock.
HOLD RECOMMENDATIONS
Challenger (CGF)
Chart: Share price over the year
Generated a 12 per cent increase in annuity sales in the 2016 first quarter compared to the previous corresponding period. CGF’s recent performance underlines the company’s ability to capitalise on the demographic shift in the Australian population. CGF offers profitable exposure to the growing superannuation industry.
Echo Entertainment Group (EGP)
Chart: Share price over the year
Technically, Echo Entertainment is travelling in a defined long term ascending channel. Net profit after tax has substantially increased in the past four years. At recent prices, EGP was paying a 3 per cent fully franked dividend. Dividend growth has been consistent in the past four years. Offers profitable exposure to the gaming, hospitality and entertainment sector.
SELL RECOMMENDATIONS
Bradken (BKN)
Chart: Share price over the year
This mining consumables group slumped on news it’s broken off merger talks with a private equity consortium, adding to recent struggles related to the mining slowdown. The share price is down about 80 per cent this year and I see no reason to hold unless the stock can manage to break out of its downtrend.
Capitol Health (CAJ)
Chart: Share price over the year
This medical diagnostic imaging services provider posted a 46 per cent fall in reported net profit after tax to $3.9 million in fiscal year 2015 following substantial acquisitions. Revenue in 2016 may not meet expectations amid challenging trading conditions. While it’s likely to improve in the long term, I believe there’s better short term opportunities elsewhere.
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Matthew Litchfield, PhillipCapital
BUY RECOMMENDATIONS
CSL (CSL)
Chart: Share price over the year
CSL’s scale and innovation success within an oligopolistic industry underpins growth for this biopharmaceutical company. We expect product innovation to drive high single digit top line growth. Ageing populations in many countries and rising wealth levels will continue to drive demand for CSL’s blood plasma products.
Crown Resorts (CWN)
Chart: Share price over the year
Crown offers an attractive growth profile for investors looking for a proven company with resilient earnings underpinned by long term licences. Crown Melbourne is benefitting from an increase in gaming machines. Its exposure to Macau is showing signs of a rebound amid several supportive policy updates flagged by the Chinese Government.
HOLD RECOMMENDATIONS
Emerchants (EML)
Chart: Share price over the year
This smaller capitalised company reported an impressive quarter with good growth across all key metrics, including dollars loaded, stored value and active accounts. This payments solutions provider is benefitting from its acquisition of Store Financial in the UK.
Macquarie Group (MQG)
Chart: Share price over the year
Posted another strong earnings report in late October with first half 2016 earnings up 58 per cent to $1.07 billion. It was a great result. Macquarie has a capable management team and a strong balance sheet. The recent Esanda dealer finance acquisition is consistent with management’s aim to generate more lower risk lending and funds management revenue.
SELL RECOMMENDATIONS
The Reject Shop (TRS)
Chart: Share price over the year
The retail chain has enjoyed a good run recently. However, we view this as an opportunity to take money off the table in this discount retailer. The consensus among analysts is the stock is trading above its target price. It operates in a highly competitive environment so we would prefer to be invested elsewhere.
Fortescue Metals Group (FMG)
Chart: Share price over the year
Among analysts, FMG receives an above average number of sell recommendations and it’s not hard to see why. The iron ore price has more than halved in the past 12 months. In our view, debt levels are high. The cost of production is also higher compared to several other producers. Now is a good time to exit for better opportunities elsewhere.
James Samson, Eureka Report
BUY RECOMMENDATIONS
FlexiGroup (FXL)
Chart: Share price over the year
This lending and consumer finance business announced it will acquire Fisher and Paykel Finance, a New Zealand based lending and credit card business. The price of $275 million appears to be fair as I expect cost synergies and cross selling opportunities. The acquisition reminds the market that FXL still has growth avenues to pursue. With the share price way off its highs, FXL remains attractive at current prices. Our valuation is $3.22. The shares closed at $3.04 on November 4.
Arena REIT (ARF)
Chart: Share price over the year
ARF is a stapled security that offers a non traditional exposure to property markets. It focuses on owning and leasing childcare and medical centres. The group’s lease expiry profile, occupancy and growth pipeline look impressive. ARF provides investors with income and the potential for future capital growth. The outlook is bright.
HOLD RECOMMENDATIONS
UXC (UXC)
Chart: Share price over the year
This IT services business should benefit from more government and business spending and recently announced several material contract wins. UXC has received a takeover approach from US company CSC at $1.26 a share plus a dividend of 2 cents. While more upside may be generated from performance or a competing bid, most of the value appears priced in at the moment.
Telstra (TLS)
Chart: Share price over the year
Has recently been trading lower than the broader market. However, it still remains the biggest telecommunications business in Australia by a significant margin. But smaller more nimble players in the mobile and broadband space are challenging for market share. The dividend is attractive, so it’s worth holding.
SELL RECOMMENDATIONS
Adelaide Brighton (ABC)
Chart: Share price over the year
Makes cement and other construction materials. Growth may slow in the housing and construction markets. There’s margin pressure in mining and engineering projects. A recent track record of strong dividends is supporting the share price. However, the price is exposed to downside risk if the company cuts its dividend or fails to pay another special dividend.
Whitehaven Coal (WHC)
Chart: Share price over the year
Although WHC delivered a strong report for the September quarter, the company is still up against lower coal prices. My view is lower coal prices will persist so WHC’s share price will remain under pressure. I acknowledge an alternative view that higher coal prices would lift the share price. But I believe investors can find better opportunities elsewhere with less risk.
