Andrew Doherty, Morningstar
The only global share registrar administering more than 100 million shareholder accounts across 20 countries. Acquisitions, including the recent purchase of Bank of New York Mellon’s shareowner services business, have strengthened the company’s market position. A combination of global scale and sophisticated technology underpin a strong competitive advantage. We expect a return to earnings growth next year following a period of weakness.
This leading provider of explosives to the global mining industry is well positioned to benefit from the massive uplift in resources exploration and production activity in the next few years. Recent expansion into underground mining and tunnelling products, via the Minova acquisition, extends growth possibilities. Orica is generally well managed with sound financial disciplines.
Brambles own CHEP, the world’s leading pallet pooling provider, which benefits from global scale and more than 50 years of learning experience. The service centre network and low cost position are hard for competitors to match. News that start-up pallet pooler iGPS may be struggling to meet customer demand reinforces CHEP’s position.
Coca-Cola Amatil (CCL)
This well-managed bottler of Coke and mostly other non-alcoholic beverages benefits from scale advantages flowing from its extensive distribution network. Revenues grow as new products, including ready to drinks (RTDs) and premium beer, are added to the chain relatively cheaply. Brand power supports price increases over time. Healthy margins allow cash flows to comfortably exceed substantial capital requirements.
Monadelphous Group (MND)
This mining engineering, construction management and maintenance provider has a terrific track record. We expect further profit increases in the next few years driven by large capital expenditure and investment projects. MND has a strong balance sheet and decent cash flows. The problem is the relatively high share price, which offers little room for anything to go wrong.
Aristocrat Leisure (ALL)
This electronic gaming machine manufacturer and software provider is struggling in Australia, the US and Japan. Products are out-dated, while changing regulations and volatile gaming demand add to business complexity. The company has been a serial down-grader. We see no reason for investors to be in this stock.
James Georges, Patersons Securities
Lynas Corporation (LYC)
Lynas will be the next rare earths oxide supplier outside China. Record rare earths prices add to this company’s appeal. The company has received its operating licence for the Mt Weld rare earths plant and will soon be feeding ore into the concentrator. The company is fully funded to achieve forthcoming milestones. It has $220 million in cash plus further funds raised through a combination of issuing equity and debt. Our valuation has risen and we have a price target of $2.95 a share. On May 26, the share price was trading at $2.26.
Macarthur Coal (MCC)
Macarthur appears to be the standout in terms of valuation relative to its peers. Production and sales fell in the 2011 third quarter due to the Queensland floods. The share price has reacted positively to recent profit guidance and an increase in coal resources at West Rolleston and the Vermont East/Willunga tenements. We retain our buy recommendation.
Oz Minerals (OZL)
We see the recent acquisition of the Carrapateena copper project as positive, with production expected to start in 2018. The company is looking for another project and is well placed for an acquisition given its strong cash position of $700 million post the Carrapateena deal.
New Hope Corporation (NHC)
We continue to view NHC as a good low cost operator in the coal sector. It’s been able to capitalise on escalating coal prices and rain had a minimal impact on production. We think it’s fairly valued.
Bannerman Resources (BMN)
In our view, Bannerman’s 80 per cent-owned Etango project in Namibia is a marginal asset at our long-term uranium price of US$70 a pound. In this post Fukushima environment, we believe Bannerman will find it increasingly difficult to access funding to continue project stgelopment.
Equinox Minerals (EQN)
Barrick has trumped Minmetals’ $CAN6.3 billion bid for Equinox, raising the offer price to $C7.3 billion ($C8.15 a share). The offer is good news for shareholders, representing a significant premium to the pre-offer share price. We don’t believe a superior offer will emerge. We believe the offer values Equinox’s assets generously and shareholders should accept the offer or sell. The shares were priced at $7.86 in morning trade on May 26.
Les Szancer, Alpha Broking
Prima Biomed (PRR)
I have been involved since it was about 5 cents. This Australian biotech has come up with a vaccine called Cvac for ovarian cancer sufferers. It actually hit 40 cents and has now given us another chance to buy on the dip. It will soon list on the NASDAQ, exposing it to numerous more potential investors. On May 26, the shares were priced at 30.5 cents.
Chameleon Mining NL (CHM)
They rarely come more speculative than this. A gold explorer that’s had its fair share of legal issues. But management remains confident. The shares have been as high as 20 cents and were trading at half a cent on May 26. It may be worth a $500 punt.
Rio Tinto (RIO)
I am calling Rio Tinto a hold, but it isn’t because I have gone bearish on commodities. In fact, I am still mid-to-longer term bullish. In the short term, however, the markets are having an issue with direction, so I wouldn’t be adding at the moment. Rio has been $160 a share and one day it will return to those lofty heights.
Yes, Telstra is range-bound and it seems like it’s been forever trading between $2.60 and $3. Will we ever get any growth from this stock? Who knows. But it still offers a dividend yield of about 9 per cent, which is better than bank interest. The franking credits are also a bonus.
QBE Insurance (QBE)
We tend to forget how many natural disasters there’s been in Australia and across the world. That’s bad news for insurance companies. For me, this is about the charts. Recently, QBE was below the 21-day, the 50-day and the 90-day moving averages. It did test the 200-day, but on the weekly chart it was making lower highs and lower troughs. That’s enough for me to bail out.
BlueScope Steel (BSL)
This has been a misery to be hold lately. The share price has been going lower and lower. The only way is up, they say. But this stock was recently below the 21-day, the 50-day, the 90-day and even the 200-day moving averages. So they produce steel, but no one seems to care much.
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