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Simon Bond, RBS Morgans

BUY RECOMMENDATIONS

Tox Free Solutions (TOX)

Tox has acquired Waste Solutions, expanding its Australian geographical presence to provide customer services across the north-west. Following a 13 per cent increase to our earnings per share forecasts for 2012 amid recent share price weakness, we upgrade to a buy, with contract wins the key catalyst.

BT Investment Management (BTT)

Strong cost control was a standout in BTT’s solid first half 2011 result, contributing to a 63 per cent cost-to-income ratio. Performance fees are a key second half driver, but long term operational leverage and strategic focus remain sound regardless. Trading on an attractive 2012 price/earnings ratio and a franked dividend yield of about 7 per cent, we believe BTT offers value.

HOLD RECOMMENDATIONS

ResMed (RMD)

ResMed makes innovative medical products and focuses on sleep disordered breathing. Expected weakness in flow generator sales and ongoing foreign exchange headwinds offset continuing strength in mask sales. While product launches, an improving mix and the continuing evolution of home sleep testing should lend support over the medium to longer term, we believe near-term challenges remain, with timing for a turnaround unknown.

Orica (ORI)

Orica’s first half 2011 NPAT (net profit after tax) of A$264 million was 5 per cent ahead of our expectations. It was a strong performance in a difficult period. Maintaining guidance for profit growth in full-year 2011 was positive and alleviates one of the risks surrounding the stock. Despite this strong result, we view this explosives and chemical company as fairly priced and retain our hold rating.

SELL RECOMMENDATIONS

Energy Resources of Australia. (ERA)

This uranium company has announced it’s likely to install a A$220 million brine concentrator amid increasing mine rehabilitation costs above the A$315 million balance sheet provision. We retain our negative view on the stock due to operational and project risks.

Aquila Resources (AQA)

The Isaac Plains coal mine was one of the hardest hit by the Queensland floods, which was reflected in the quarterly results. We believe AQA’s share price rally has been overdone. We see risk in stgelopment timing, financing and capital expenditure relative to the company’s targets. We move to a sell recommendation.

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Adam Blumenthal, Investorfirst Securities

BUY RECOMMENDATIONS

Marion Energy (MAE)

This gas company has recently completed several capital raisings at current levels to fund operations going forward. Gas production has started at several United States wells, including Clear Creek and Ridge Runner. Reserves are estimated at 241 billion cubic feet of recoverable gas. This company offers much potential, but it remains a highly speculative buy.

Global Nickel Investments (GNI)

Global Nickel has recently secured a $22 million financing agreement with Zulu Capital to fund working capital and operations. Recent electromagnetic surveys have identified legitimate bedrock conductors at Mount Cornell. Ground surveys completed at Mount Venn produced very positive results. A high risk/reward play.

HOLD RECOMMENDATIONS

Australian Securities Exchange  (ASX)

As the proposed merger between the ASX and the Singapore Stock Exchange has been rejected, that leaves Chi-X, which is due to compete later this year. Wait and see what impact, if any, Chi-X has on ASX performance.

QR National (QRN)

The Goonyella expansion is promising, but the recent share price increase leaves QRN at fair value. Accordingly, we retain our hold recommendation.

SELL RECOMMENDATIONS

Valad Property Group (VPG)

United States private equity firm Blackstone has made a takeover bid for this real estate investment trust.  The cash price is $1.80 a security. Why wait for shareholder approval when you can get almost that now? The shares were $1.765 in early morning trade on May 12, 2011.

New Hope Corporation (NHC)

A thermal coal producer for domestic and international markets, with flagship mines in Queensland.
Given the share price increase, it won’t hurt to pocket some profits.

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John Rawicki, State One Stockbroking

BUY RECOMMENDATIONS

Azumah Resources (AZM)

This exciting West African gold explorer owns 100 per cent of the Wa Gold Project in Ghana. With a big inventory of 1.2 million ounces at 2 grams a tonne of gold amid production plans for late 2012, Azumah is a step ahead of its peers. Ghana is more politically stable than surrounding countries and has a rich mining history with excellent infrastructure in place.

Arafura Resources (ARU)

Arafura is becoming one of the few near-term rare earth producers outside China. The company’s 100 per cent owned Nolans Rare Earths Project in the Northern Territory is on track to start producing 20,000 tonnes of rare earth oxides from 2013. Arafura has enough capital to complete a bankable feasibility study in 2011, and is ideally positioned to take advantage of record high prices for rare earth minerals.

HOLD RECOMMENDATIONS

Iluka Resources (ILU)

Iluka is a leading mineral sands miner focusing on zircon, rutile and ilmenite. Firming demand for mineral sands, especially zircon amid constrained supply from 2010, places Iluka in a strong position to supply global demand. 

Brambles (BXB)

Brambles owns CHEP, the world’s largest pallet pooling provider. The company’s well-stgeloped global infrastructure and low costs will keep competitors at bay. Earnings are being hit by the downturn in US and European economies and heavy US restructuring expenses. Brambles generates plenty of cash and should achieve a cyclical upturn as the global economy recovers.

SELL RECOMMENDATIONS

Monadelphous Group (MND)

This company provides engineering, construction and maintenance services. Growth will largely depend on continuing strength in the West Australian resources and energy sectors. Most of the company’s work is contract-based, leaving it open to the risk of cancellations and delays if the resource boom falters.

BlueScope Steel (BSL)

BlueScope expects to post a net loss for the second half of 2011.  The company operates a capital intensive business with volatile margins. The strong Australian dollar makes steel imports an attractive alternative, placing further pressure on domestic steel producers, such as BlueScope.

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