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PREVIOUS ARTICLE Brokers Think This Stock Looks... NEXT ARTICLE 18 Share Tips - 24 October 201...

 

Clive Briggs, RBS Morgans

BUY RECOMMENDATIONS

Iluka Resources (ILU)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

Following an update on zircon market dynamics in China, we’re confident that zircon prices will increase between $US200 and $US250 a tonne in the December quarter. The company will receive higher royalty payments from iron ore produced at specific parts of BHP Billiton’s mining area C in Western Australia. Iluka remains one of our top picks in the resources sector. Trading at $16.09 on October 14, the price is considerably below its 12-month high of $19.46.

Washington H Soul Pattinson & Company (SOL)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

Holds sizeable stakes in coal company New Hope Corporation and materials firm Brickworks. It reported a solid full-year 2011 result despite bad weather having an adverse impact on New Hope’s operations. We believe SOL remains good value and offers diversified leverage to ongoing resources demand and a domestic building recovery.

HOLD RECOMMENDATIONS

Monadelphous Group (MND)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

Robust commodity prices and strong customer balance sheets underpin a positive medium-term outlook for this engineering and construction company. Capital expenditure plans continue to expand despite delays. Longer term prospects for this company are excellent.

UGL Group (UGL)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

A diversified services company involved in maintenance, facilities management, engineering and construction. In our view, UGL is attractively priced for the quality of its franchise and cash generation.  We expect limited upside to full-year 2012 forecasts. We currently view UGL as a tail portfolio holding rather than a top tier risk position.

SELL RECOMMENDATIONS

Nexus Energy (NXS)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

Nexus managing director Richard Cottee has resigned, effective immediately. While asset values remain, this event increases uncertainty about the company’s ability to deliver value for shareholders. In particular, we’re concerned as to whether the company can realise value from the proposed Crux oil project in off shore Western Australia. We believe Cottee’s resignation is a loss for Nexus due to his experience and reputation in the industry. 

Leighton Holdings (LEI)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

We retain a positive view regarding future domestic engineering and construction activity. But in our view, Leighton will struggle to attract enough quality staff given the skills shortage and competition in the labour market. Other companies in the sector are trading at a more attractive discount than Leighton.

 

Andrew Inglis, Shadforth Financial Group

BUY RECOMMENDATIONS

ANZ Bank (ANZ)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

The major banks have recently traded at two-year lows and are attractively priced with strong dividends, albeit with slower growth prospects. ANZ has better growth prospects as a result of its Asian growth strategy, which is steadily gaining traction. With the prospect of major re-capitalisations and asset sales by some European banks, ANZ may find opportunities to further expand its Asian business. 

Woodside Petroleum (WPL)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

This oil and gas giant has recently traded at its lowest levels since the global financial crisis despite being within six months of reaping the benefits from its Pluto LNG project. There are several challenges ahead in stgeloping the Browse and Sunrise LNG projects plus additional LNG trains at Pluto, but the current share price puts little value on these projects. Oil equivalent production is forecast to increase from 65 million barrels a year to 200 million barrels by 2017 as the company takes advantage of growing LNG demand from Asia.

HOLD RECOMMENDATIONS

News Corporation (NWS)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

Recent international investigations into News Corp have reflected poorly on the company’s image, but there may be a silver lining. NWS is under intense political scrutiny and, in our view, it’s unlikely that regulators will allow NWS to make any significant (often overpriced) acquisitions in the near future. NWS has an excellent mix of media businesses producing very strong cash flows and debt is negligible. Shareholders should start to reap the benefits from increasing dividends, share buybacks (currently buying back $US5 billion) and a rising share price.

Sims Metal Management (SGM)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

Sims is the largest metals recycler in the world and is building a strong position in the much smaller but fast growing electronics recycling business. Sims is a cyclical business, but it has a strong track record of managing its way through the cycles. It’s a strong cash generator with little debt. It recently announced it would buy back up to 10 per cent of its shares on market in the next year at currently depressed prices. This is a positive sign the shares represent good long-term value.

SELL RECOMMENDATIONS

Foster’s Group (FGL)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

Sell on market rather than wait for the SABMiller takeover to go to a vote at the end of 2011. Investors may get marginally less for each share now, but they can immediately use the proceeds to buy many cheap blue chip stocks currently “on sale”.

Ramsay Health Care (RHC)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

Ramsay is a well managed international private hospital operator with good long term growth prospects. Since April 15, 2010, its share price has increased about 40 per cent versus a fall of about 17 per cent in the S&P/ASX 200 index – a fantastic result for shareholders. But the shares are now looking relatively expensive. Sell or halve this holding and put the proceeds to work in other value blue chips trading at a discount. The shares were trading at $18.76 on October 14.

Darren Jackson, Calibre Investments

BUY RECOMMENDATIONS

Viking Ashanti (VKA)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO)

A promising junior gold explorer looking to expand on its 500,000 ounce JORC (Joint Ore Reserves Committee) resource in West Africa. Recent drilling results support this objective. On a peer comparison, VKA appears significantly undervalued and is a strong buy at current levels. On October 14, the stock was trading at 15 cents.

Voyager Resources (VOR)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

Voyager is a copper and gold explorer in Mongolia. In August, VOR released some stellar assay results. Very solid grades were coupled with superb width to suggest this is an emerging discovery of importance. Positioned strategically next to China and backed by a capable board and management team adds to this stock’s appeal.

HOLD RECOMMENDATIONS

Spark Infrastructure (SKI)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

Stocks with good sustainable yields and manageable debt remain a market focus. Spark Infrastructure meets these criteria and offers an annuity style income stream generated from its electricity, gas and water distribution networks. An attractive dividend yield has been above 9 per cent.

Rio Tinto (RIO)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

At current price levels and with a trailing price/earnings ratio below 10 times on October 12, Rio Tinto appears like a compelling buy. However, with earnings tied to global economic growth via iron ore and copper assets, a strong degree of uncertainty remains. If positive macro economic data begins to emerge and Europe reaches a meaningful debt solution, this stock will kick hard.

SELL RECOMMENDATIONS

Mesoblast (MSB)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

This stem cell research company had its best ever financial year, and this has seen the share price more than double in 2011 – an amazing performance in a bear market. But what’s relevant is that much of last year’s revenue was due to receiving big royalty payments. In our view, today’s valuation will only be sustained by positive news and cash flows. The pressure is on to retain sales momentum. Sell part of your portfolio.

Foster’s Group (FGL)

 

Chart: Share price over the year to 14/10/2011 versus ASX200 (XJO) 

The Foster’s board has recommended shareholders accept SABMiller’s takeover offer at $5.5325 a share. We believe the offer is fairly valued and a superior bid is unlikely to emerge. We would take our profit now. It removes a remote chance that the acquisition doesn’t proceed. 

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