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Peter Russell, Intersuisse

BUY RECOMMENDATIONS

IOOF Holdings (IFL)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

IOOF is the largest, independent full service wealth manager after AMP. Its record half-year result confirmed strong progress in efficiencies as it trims its eight platforms towards three by December and builds its funds, which are already above $100 billion. Regulatory changes ahead will present opportunities as the industry consolidates. IOOF also offers a high dividend yield.

Company investor centre: IOOF Holdings

 

UGL Limited (UGL)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

An S&P/ASX 100 index stock, UGL is a big player in resources, rail and infrastructure services. UGL is diverse across long-term growth areas with significant market opportunities. Its focus on risk management, customer service, world-class technology and financial strength has supported a decade of strong growth. Get high growth and yield from this reliable player.

Company investor centre: UGL Limited

 

HOLD RECOMMENDATIONS

Fleetwood Corporation (FWD)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

An S&P/ASX200 index stock based in WA, it builds accommodation in remote areas. Fleetwood is well placed in the resources boom. It built and operates the Searipple Village at Karratha, where Woodside Petroleum can extend its occupancy from June in 6-month intervals. It acquired Queensland-based BRB Modular, with mutual product expansion opportunities. Demand for its recreational vehicles is strong. Add for high dividends with growth.

Toll Holdings (TOL)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

The tragic Japanese disasters will defer earnings growth in Toll’s Footwork operations. In Australia, consumer spending remains weak, which will no doubt call on all Toll’s expertise in handling costs and building efficiencies. World trade is picking up only slowly, although this may give Toll more opportunity for global acquisitions. Its exposure to resource logistics is already a key upside, with decades of Asian trade growth ahead being the real driver.

SELL RECOMMENDATIONS

Bank of Queensland (BOQ)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

The big banks are ‘on the nose’. Westpac is re-branding its St George operations in Victoria to a resurrected Bank of Melbourne. Yet the regional banks arguably have more problems – notably more expensive deposit and wholesale funding costs, which cut their margins. Queensland floods add to asset quality concerns at this bank. Better growth prospects elsewhere.

Goodman Fielder (GFF)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

Volatile commodity costs and supermarket customers putting pressure on selling prices makes it immensely tough. Chief executive Peter Margin is leaving. Over five years, Margin valiantly defended brands, while raising underlying earnings and exiting unprofitable businesses – as the share price slipped. How much longer will you stay?

 

Mike Bigwood, Patersons Securities

BUY RECOMMENDATIONS

Matrix Composites & Engineering (MCE) 

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

MCE is an engineering company whose main business is providing buoyancy products to the offshore oil and gas industry. MCE is one of four global companies providing these products. With improving production capabilities from a new manufacturing facility in WA, and a forecast return on equity of between 40 and 45 per cent for 2011, MCE remains one of my key picks.

Company investor centre: Matrix Composities & Engineering

 

Thorn Group (TGA)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

TGA is the company behind Radio Rentals & Rentlo, which provide rental options over a range of household products. In addition, TGA also provides financial services and loans via its CashFirst and Thorn Business Services. NPAT (net profit after tax) has increased 79 per cent in the past two years. With a consistent return on equity in the mid 20s, I see this stock as currently trading about 25-to-30 per cent below its intrinsic value.

Company investor centre: Thorn Group

 

HOLD RECOMMENDATIONS

Credit Corp Group (CCP)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

CCP is a receivables management company, which specialises in debt purchasing and collection. On the back of a strong first half result, the share price has risen 15 per cent in the past month. While still trading below my 2011 intrinsic valuation, the discount has narrowed.  But on a prospective fully franked dividend yield of about 3.5 per cent plus potential capital gains, I am happy to hold the stock.

Noble Mineral Resources (NMG)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

NMG operates the Bibiani Gold Project in Ghana, which is set for commissioning in July. Recently announced drilling results from various satellite deposits have highlighted the excellent grades of the project and should lead to an upgrade in resources. With a targeted production rate of 150,000 ounces a year, NMG is well placed to benefit from a continuing strong gold price.

SELL RECOMMENDATIONS

David Jones (DJS)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

This recommendation is aimed at investors looking for capital growth as opposed to yield from their portfolios. With increasing competition from domestic peers and on-line offerings, margins have been declining. The company only just reached the bottom of guidance of between 5 and 10 per cent NPAT growth in its recently announced first half result. Currently trading about 20 per cent above my calculated intrinsic value, I would be comfortable in looking for other opportunities to grow the portfolio.

Asciano (AIO)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

The business is leveraged to increasing coal volumes via its coal haulage business. On forecast 2011 earnings, I calculate a return on equity of just 6-to-7 per cent, with the measure only increasing to about 9 per cent using 2012 forecasts. In order to undertake an investment in the equity market, I require a higher return on equity than these levels. Therefore, AIO is a sell in my opinion.

 

Chris Elliott, Shadforth Financial Group

BUY RECOMMENDATIONS

Newcrest Mining (NCM)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

Newcrest is a high quality, low cost gold producer with strong exploration potential. A recent merger with Lihir Gold has increased its exposure to the gold exploration hot bed of West Africa and Papua New Guinea. First half NPAT (net profit after tax) more than doubled to $437.8 million. Newcrest offers an opportunity to invest in a large cap quality gold miner, without heading offshore.

Company investor centre: Newcrest Mining

 

Westpac Bank (WBC)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

Westpac’s first half result to March 31, 2011 isn’t due to be released until early May. But last month’s first quarter trading update reflected a buoyant start to the 2011 financial year. The bank’s first quarter NPAT was up 5 per cent compared to the 2010 third and fourth quarters. With a forecast fully-franked dividend yield of about 6.5 per cent for 2011 and a price/earnings ratio of 11 times, Westpac ticks all the boxes for stable growth and yield.

Company investor centre: Westpac Banking Group

 

HOLD RECOMMENDATIONS

Santos (STO)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

A perennial takeover target, Santos has rallied strongly after the disaster in Japan, driven mostly by higher oil prices. Its other commodity gas is heavily controlled by the European market. As Europe heads towards summer, gas demand and prices won’t significantly move. With earnings up 46 per cent in 2010, helped mainly by lower exploration writedowns and a strong oil price in 2011, STO has rallied strongly and looks fully priced.

Foster’s Group (FGL)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

Finally, the details are out and Foster’s shareholders can decide whether they want wine or beer. The demerger will see one Treasury Wine Estates share for every three FGL shares held by investors. Each entity will have its own board and management team, and FGL should remain in the S&P/ASX 50. Shareholders will vote in late April, so FGL is a hold until the demerger is complete.

SELL RECOMMENDATIONS

Aristocrat Leisure (ALL)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

Offers little yield and even less growth due to the fickle nature of the gaming industry. A high Australian dollar and the Japanese disaster doesn’t help. Carrying a debt/equity ratio of about 160 per cent and slumping revenue – down 25 per cent in 2010 – we suggest investors sell or avoid.

DUET Group (DUE)

Chart: Share price over the year to 01/04/2011 versus ASX200 (XJO)

An energy utility owner in Australia and the US. A soft first half result for the 2011 financial year may put distributions for 2012 under pressure unless there’s a sudden turnaround in the second half. The company holds some good assets, but due to its high level of gearing, the risk/reward ratio isn’t sufficient to justify a holding.

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.