18 Share Tips – 4 February 2012

Peter Russell, Russell Research

BUY RECOMMENDATIONS

Austin Engineering (ANG)       

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

This supplier of  “shovels to miners” is in a sweet spot for strong long-term demand. It supplies dump truck bodies, excavator and loader buckets and other mining equipment. Fast growing operations span Australia, North America and Chile, with joint ventures in Brazil and the Middle East.   

Industrea (IDL)   

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

Major Chinese coal miners are a major contributor to this company’s strong sales of underground mining equipment. The equipment has top safety features and enhances productivity. Industrea is also doing well in Australia and increasingly overseas. Its cutting edge equipment, backed by contract mining services, provides strong upside.    

HOLD RECOMMENDATIONS

GUD Holdings (GUD)

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

This Sunbeam household appliances distributor reported lower interim sales and profits in tough conditions. But we expect a stronger second half. The company recently added Dexion products to its diversified range. GUD has a sound record – designing and marketing onshore and sourcing offshore. It offers a 9 per cent franked yield.          

Navitas (NVT)   

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

One of few education stocks on the ASX, Navitas is leveraged to long-term demand growth. Interim results were flat, impacted by government policy changes in Australia and the UK. But these issues have been addressed here and will be in the UK. Operations in Canada and Singapore are growing well amid expansion in the US.          

SELL RECOMMENDATIONS

BlueScope Steel (BSL)           

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

After a long decline, the price has stabilised, but prospects in the short-to-mid term remain weak. Transformation is well under way, with shareholder and government assistance, pain for the workforce and a Port Kembla furnace closure. At least shareholders can move on.        

ResMed (RMD)     

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

Sleep disorder breathing products should remain a long-term growth market, but global conditions aren’t as favourable now. ResMed has just reported another record result, but we expect a flat period ahead. The share price recovery from the three-month gloom provides an opportunity to quit a low, unfranked dividend yield.

James Georges, Patersons Securities

BUY RECOMMENDATIONS

Qantas Airways (QAN)

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

The airline is aggressively reducing costs despite complex fleet and labor relations. Mild competitive advantages include an enviable reputation and two-brand strategy. Given leverage, both ways to the oil price and global growth, Qantas is only suitable for investors understanding the high risks of this business, helped by occasional buy-backs.

Mesoblast (MSB)

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

MSB is a medical research company. It develops therapies utilising mesenchymal precursor stem cells extracted from bone marrow. The therapy isn’t controversial, unlike several other stem-cell therapies, while clinical trial results are promising. A strategic alliance with US biotech Cephalon provides strong endorsement of its technology. 

HOLD RECOMMENDATIONS

Sundance Resources (SDL)

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

This stock is based around iron ore deposits in west Africa. It has the potential to become a world-class producer, and was recently the subject of a takeover bid by Chinese miner Sichuan Hanlong before complications emerged. With the price trading below the bid price of 57 cents, SDL’s a hold. The stock was priced at 42.5 cents on February 2.

Bank of Queensland (BOQ)

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

The latest Queensland floods are having an adverse effect on business confidence. The recent Standard and Poor’s downgrade didn’t surprise the market. Any signs of an improving Europe will lift confidence, which should be good for the banks. This stock is mostly suitable for longer term investors.

SELL RECOMMENDATIONS

Telecom New Zealand (TEL)

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

Regulatory changes and increasing competition have made it tougher for this once state-run monopoly. TEL has key assets across mobile, broadband and fixed line networks. It retains strong market positions in most areas, but these are increasingly under threat. Product and service price deflation is a constant. Sell on rallies.

Elders (ELD)

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

Elders operates in the difficult, highly cyclical agricultural and automotive markets. Mild competitive advantages include a well-established rural distribution network. After a major re-capitalisation, Elders is in much better financial shape, but earnings are yet to show any real signs of improving. Better opportunities exist elsewhere, such as Incitec Pivot.

Paul Clarke, State One Stockbroking

BUY RECOMMENDATIONS

Crown Limited (CWN)

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

Crown is a major player in the Australian entertainment industry, with gaming its key activity. CWN has strong cash flows and a clean balance sheet post the write-off of several failed overseas investments. News that the Federal Government isn’t going to introduce mandatory pre-commitment on electronic gaming machines is positive for Crown, as is the potential to utilise its under-geared balance sheet. 

Atlas Iron (AGO)

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

An iron ore company based in the Pilbara, with two operational mines producing 6 million tonnes in direct shipping ore. AGO has limited infrastructure concerns, with facilities at Port Headland providing capacity for up to 15 million tonnes a year. AGO has a solid track record in project development. Combine this with zero debt and about $400 million in cash and AGO is an attractive investment.

HOLD RECOMMENDATIONS

Transurban Group (TCL)

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

A toll road operator, it owns Melbourne’s CityLink and Sydney’s Hills M2. It also has a 75 per cent stake in the M1 Eastern Distributor, 50 per cent in the M5 and 50 per cent in the M7. TCL also offers a strong defensive income stream funded by cash flow without debt.

Woolworths (WOW)

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

The supermarket giant intends to close about 100 Dick Smith stores and look to sell the remaining 200 outlets. Its big hardware investment is yet to be fully realised.   

SELL RECOMMENDATIONS

CSG Limited (CSV)

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

An IT company offering end-to-end technology solutions via two business divisions – Print Services and Technology Solutions. CSV expects net profit after tax of between $9 million and $11 million in the 2012 first half, well below the $18.4 million earned in last year’s first half. CSV is undertaking numerous management changes. Given the cyclical nature of the IT business, we believe it will take time to turn this business around. 

Aquarius Platinum (AQP)

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

A platinum producer, with operations and projects in South Africa and Zimbabwe. Given the high level of sovereign risk from operating in these countries, coupled with a lack of hedging that may expose AQP to adverse movements in commodity prices, we believe the stock is a risky play. Also, AQP’s dominant focus on platinum gives it little room to diversify in terms of mining other minerals.

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.