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Peter Russell, Russell Research
BUY RECOMMENDATIONS
Emerchants (EML)
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Chart: Share price over the year
Provides prepaid financial card products and services across Australia and Europe. Its systems for processing reloadable and non-reloadable payment cards are used by consumer lenders, gaming and other commercial operators and public service clients. Revenue and earnings are growing strongly. We expect a price/earnings multiple of more than 30 times this year to fall below 20 times in fiscal year 2017.
NetComm Wireless (NTC)
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Chart: Share price over the year
Makes a world leading range of broadband and machine-to-machine products. The accelerating NBN/Ericsson rural broadband rollout using NetComm’s devices has also led to a master purchase agreement with a top US telco. Soundly financed with low debt, NetComm is on the cusp of rapid growth.
HOLD RECOMMENDATIONS
Burson Group (BAP)
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Chart: Share price over the year
Australasia’s leading provider of automotive after market parts, accessories and service. Burson acquired Metcash Automotive Holdings for $275 million in mid 2015, a strategic expansion boosting revenues, profits and market share. Integration is well underway, with two recent acquisitions also in hand. We expect solid growth ahead.
McMillan Shakespeare (MMS)
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Chart: Share price over the year
Long established as a leader in salary packaging and vehicle leasing. New ASX listed competitors may seem a negative, but they also strengthen the market and sharpen management. MMS has also built a significant business in the UK that adds diversification. We expect double digit growth with a fiscal year 2016 price/earnings ratio around 12.3 times and a franked dividend yield of 4.8 per cent.
SELL RECOMMENDATIONS
CIMIC Group (CIM)
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Chart: Share price over the year
Formerly Leighton Holdings, the construction giant – via exceptional growth – topped $60 in late 2007. Down to $16 by 2009, but up to $40 later that year, it took time to wash out the excesses, with lower highs and revisiting $16 in 2012, 2013 and early 2014. The re-born CIMIC, with Spanish control and discipline, has shown strong form. We’re looking for more to come, but at today’s price prefer other prospects. The shares closed at $34.58 on March 23.
Sims Metal Management (SGM)
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Chart: Share price over the year
The global metal recycler’s shares have slid from $42 in 2008. Diversified across electronics, plastics and other waste streams, ferrous metals remain its key business. China uses mainly iron ore. Ferrous volumes and prices are down heavily, forcing Sims to focus on cost reduction and adjustment. We see better prospects elsewhere. The shares closed at $8.96 on March 23.
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Janine Cox, Wealth Within
BUY RECOMMENDATIONS
Cromwell Property Group (CMW)
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Chart: Share price over the year
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CMW has battled resistance around $1.04. However, on March 18, it finally closed above this level, presenting an entry and indicating the potential to move higher. That said, resistance at $1.12 may stop the run, therefore a stop loss should to be set at $1. The shares were trading at $1.047 on March 23.
Bradken (BKN)
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Chart: Share price over the year
Not for the faint hearted or inexperienced. A stock that has been falling can always go lower and won’t turn until the time is right. Such is the case for BKN. However, if the share price trades through 83 cents next month, this presents a possible short term trade, with a view to keeping the stop loss tight. Shares in this heavy engineering company were trading at 68 cents on March 23.
HOLD RECOMMENDATIONS
Independence Group NL (IGO)
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Chart: Share price over the year
Unless shorting, there’s been little reason to be interested in this diversified mining company until recently. Commodity prices increases saw IGO move back up swiftly in February, with the potential to continue to about $3.60 in the short term. The next pull back is likely to create a trough on the weekly chart for a trailing stop loss. The shares were trading at $2.945 on March 23.
National Australia Bank (NAB)
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Chart: Share price over the year
NAB recently completed a trend line entry on the weekly chart. The ride from here could be wild, so don’t be surprised if the shares fall to around $25.50 in response to short term profit taking. The shares were trading at $27.19 on March 23.
SELL RECOMMENDATIONS
CSL (CSL)
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Chart: Share price over the year
Your time frame and investment objectives should determine whether you remain in the trade. The weekly chart has provided several reasons to exit, therefore short and medium term traders are likely to be out of long trades. Long term traders will be waiting for a signal to exit.
Treasury Wine Estates (TWE)
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Chart: Share price over the year
TWE has been very bullish and it’s possibile the price may rise to around $10.50 before the run fizzles. However, if TWE falls below $8.30, the risk of a further fall increases dramatically, so consider taking some profits. The shares were priced at $9.30 on March 23.
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Matthew Chen, Lincoln Indicators
BUY RECOMMENDATIONS
Event Hospitality and Entertainment (EVT)
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Chart: Share price over the year
A hotel and cinema operator in Australia, Fiji, New Zealand and Germany. EVT recently reported a strong first half 2016 result, with net profit after tax up by almost 50 per cent to $76.75 million. Premium cinema expansion and a good winter film line up will support growth on the entertainment side of the business. Strong tourism on the back of an attractive domestic currency should support the hotel and resorts businesses. The stock trades around a 10 per cent discount to our valuation and provides a reasonable dividend yield, so it looks attractive at current levels. The stock closed at $15.18 on March 23.
Mantra Group (MTR)
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Chart: Share price over the year
Provides accommodation services and is a pure play to continuing strong tourism in Australia and New Zealand. The company reported a strong half year result on the back of growing tourism and a weaker Australian dollar. Management guidance is for earnings growth of almost 20 per cent for fiscal year 2016.
HOLD RECOMMENDATIONS
REA Group (REA)
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Chart: Share price over the year
An online digital advertising portal for real estate, operating primarily in Australia, with additional sites in Europe, China and the US. The company’s recent interim result demonstrated continuing earnings growth and improving operating margins. Management indicated that trading conditions had started well for the 2016 second half. Pricing power and the company’s network reinforces the advantage REA has over its competitors, particularly in domestic markets.
Domino’s Pizza Enterprises (DMP)
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Chart: Share price over the year
Operates retail food outlets and franchise services in Australia, New Zealand, Europe and Japan. The strong and growing business continues to expand into overseas markets, most recently applying its model in Germany. Following a strong first half result, management has upgraded full year guidance and expects earnings to grow by 35 per cent. Remains a hold for its attractive growth prospects despite its full valuation.
SELL RECOMMENDATIONS
Origin Energy (ORG)
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Chart: Share price over the year
An integrated energy business with retail, power generation, production and exploration operations. Lower energy prices contributed to a first half loss of $254 million. It continues to carry substantial long term debt. Additional contributions from the Australia Pacific LNG project in fiscal year 2016 will help. But we expect earnings will be impacted by low energy prices. Given this outlook and ongoing balance sheet risks, we see better alternatives in other sectors.
James Hardie Industries PLC (JHX)
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Chart: Share price over the year
The building products company has benefited from more construction in recent years. In the past year, it generated strong earnings growth in the US. But management expects growth to be flat in the coming half. We believe the stock is best avoided until we see further signs of underlying demand.
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