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Hamza Habib, Patersons Securities

BUY RECOMMENDATIONS

Cape Lambert Resources (CFE)

Chart: Share price over the year to versus ASX200 (XJO)

An exploration and stgelopment company, with exposure to iron ore, copper, gold and base metals. The company has agreed to sell its 19.99 per cent holding in African Iron for about $72.2 million. Consequently, CFE will most likely pay a dividend. Additionally, the company is looking at executing more deals in 2012, which should be positive for the share price.

Fleetwood Corporation (FWD)

Chart: Share price over the year to versus ASX200 (XJO)

Fleetwood provides mobile accommodation for the recreation, resource stgelopment and retirement sectors. With a healthy contract pipeline and potential for further contract wins this year, FWD looks attractive at current levels. Also appealing is a fully franked dividend yield above 6 per cent.

HOLD RECOMMENDATIONS

Oz Minerals (OZL)

Chart: Share price over the year to versus ASX200 (XJO)

Expect a progressive rise in costs this year as it increases underground mining. The company met its own guidance for metals output in 2011. In the final three months of 2011, copper production slipped but gold increased. The company plans to spend a further $70 million to continue exploration at Prominent Hill this year, which is its only producing asset.

QBE Insurance (QBE)

Chart: Share price over the year to versus ASX200 (XJO)

Recently surprised the market by foreshadowing a substantial fall in annual profit. Expect a cut in dividends. Although the share price has recovered from its lows after the downgrade, investors may see QBE trading sideways for some time.

SELL RECOMMENDATIONS

GrainCorp (GNC)

Chart: Share price over the year to versus ASX200 (XJO)

Its good performance has been reflected in its share price momentum. But with risks associated with foreign exchange rates, grain prices and commodity prices in 2012, investors should lock in profits and take another look at GNC later at what we believe will be lower levels.  

CSL Limited (CSL)

Chart: Share price over the year to versus ASX200 (XJO)

The share price has risen more than 15 per cent since its lows at the end of September 2011. This blood products group appeals to investors for its defensive nature. With the S&P/ASX 200 back above 4200 points on January 19, investors should take profits and consider non-defensive companies for better returns.   

 

James Samson, Lincoln Indicators

BUY RECOMMENDATIONS

Decmil Group (DCG)

Chart: Share price over the year to versus ASX200 (XJO)

Provides civil construction services to the mining sector. Despite contracting margins in recent years, it’s well placed to benefit from continuing high levels of capital expenditure in Western Australia and Queensland. Additionally, we view the company’s recent entry into the managed accommodation space in Gladstone as a positive step as it’s likely to produce stable, recurring and growing revenue for the company.

Texon Petroleum (TXN)

Chart: Share price over the year to versus ASX200 (XJO)

Produces oil and gas from assets in Texas. A financially healthy small firm, the company is getting good flow rates from its Eagle Ford well. Producing more oil than gas is generating greater revenue for the company. Further, management anticipates completing the sale of its Olmos oil asset soon.

HOLD RECOMMENDATIONS

Miclyn Express Offshore (MIO)

Chart: Share price over the year to versus ASX200 (XJO)

A vessel operator servicing the offshore oil and gas sectors. With capital expenditure in offshore oil and gas expected to rise, MIO’s share price has been outperforming. However at current levels, the company appears fairly priced. The shares were priced at $1.97 on January 19.

National Australia Bank (NAB)

Chart: Share price over the year to versus ASX200 (XJO)

Generating earnings growth appears a difficult task in the traditional banking sector. NAB looks fairly priced at or around $23. Further, investors should be cautious as the company is exposed to Europe via its interests in the UK.

SELL RECOMMENDATIONS

AMP Limited (AMP)

Chart: Share price over the year to versus ASX200 (XJO)

With wealth management performance somewhat tied to sharemarket performance, we’re expecting a difficult period for the AMP share price. We argue that weakness is further compounded by the company’s insurance exposure, which, due to last year’s natural disasters, is likely to adversely impact its financial position.

Suncorp Group (SUN)

Chart: Share price over the year to versus ASX200 (XJO)

After Australia’s biggest listed insurer QBE recently announced disappointing earnings guidance, the implications for SUN are on the downside. With claims from 2011 still weighing on the company’s earnings, we’re also expecting the impact of rising reinsurance costs to hold back the share price.

 

Richard Batt, Shadforth Financial Group

BUY RECOMMENDATIONS

DuluxGroup (DLX)

Chart: Share price over the year to versus ASX200 (XJO)

The company continues to benefit from the growing DIY (do It yourself) home renovation trend. Amid a subdued property market, homeowners will continue to focus on cheaper improvements, such as a fresh coat of paint. DLX provides a fully franked dividend yield marginally above 5 per cent and is ideal for long-term portfolios.

BC Iron (BCI)

Chart: Share price over the year to versus ASX200 (XJO)

An iron ore miner in the Pilbara region of Western Australia. Its core asset is the Nullagine Iron Ore Project, which is a joint venture operation with Fortescue Metals Group. Nullagine is currently producing 3 million tonnes a year, utilising Fortescue’s rail and port facilities. If plans are met to increase production to 5 million tonnes during the next 12 months, earnings should improve and could lead to the start of dividends – a positive catalyst for the share price.

HOLD RECOMMENDATIONS

NRW Holdings (NWH)

Chart: Share price over the year to versus ASX200 (XJO)

Provides contract civil and mining services primarily to the Western Australian iron ore market. Last calendar year, the share price rose more than 19 per cent as the company benefited from significant capital spending in the mining sector. With capital spending to continue, long-term investors should retain their exposure.

New Hope Corporation (NHC)

Chart: Share price over the year to versus ASX200 (XJO)

In October 2011, the coal miner announced a formal process had been established for potential buyers to place bids for NHC. The share price has fallen more than 13 per cent from its highs following the announcement. Investors shouldn’t be discouraged, as the company has a strong balance sheet, plenty of cash and no debt. It also has its own port and is in a better position than most coal miners to control its infrastructure requirements.

SELL RECOMMENDATIONS

Insurance Australia Group (IAG)

Chart: Share price over the year to versus ASX200 (XJO)

IAG is Australia’s biggest domestic general insurer, providing services via a range of brands. Although IAG has a large market share, it has no distinctive competitive advantage and its margins continue to suffer. Better opportunities exist elsewhere in the sector.

Hills Holdings (HIL)

Chart: Share price over the year to versus ASX200 (XJO)

Makes and distributes building and industrial products, among others, in Australia and overseas. The company has a strong track record of delivering consistent earnings and dividend growth. But earnings growth requires a favourable economy. In our view, trading conditions are difficult in today’s economic climate. We expect dividends may be pressured.

 

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18 Share Tips – 23 January 2012

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