James Samson, Lincoln Indicators
Mermaid Marine Australia (MRM)
Operates vessels for Australia’s offshore oil and gas industry. This sector is experiencing exceptional levels of growth, and MRM is well placed to take advantage. The company reported outstanding interim financial results, which beat market expectations, and exhibited particularly strong growth rates in vessel operations.
This drilling fluid and products supplier recently reported strong interim financial results, which beat expectations. Strong earnings were driven by growth in the company’s minerals division. In addition to the positive outlook for core minerals, we’re expecting its oil and gas division to contribute positively to profits in the years ahead after recent acquisitions.
Rio Tinto (RIO)
This resources giant is our preferred exposure among the big diversified mining companies in Australia. However, investors should be aware that commodity price volatility is generating uncertainty. Rio reported reasonably strong underlying results, where other major listed miners have underperformed.
Cardno Limited (CDD)
CDD is an infrastructure and environmental services company, with specialist engineering expertise. The share price has risen by more than 18 per cent in the past month. The company has strong growth potential, but we do have some concerns about its acquisition-dominated strategy. Given the recent price performance, the shares appear fully valued.
We still believe OST is in for tougher times. With continuing difficulties plaguing the sector, OST faces the financial ramifications of a carbon tax, and ever-increasing labour costs. Manufacturing in Australia faces big challenges.
Qantas Airways (QAN)
It’s clear that running profitable airlines in Australia is difficult. With Air Australia recently going into administration, the airline industry is suffering margin contraction in revenue and cost lines. The Qantas push into Asia imposes a new set of risks and opens the company to increasing competition. We see limited upside to growth and retain a sell on the stock.
Paul Clarke, State One Stockbroking
Trade Me Group (TME)
TME is the leading auction website in New Zealand and has a virtual monopoly in this space. TME has strong brand equity and the online site is immensely popular in NZ. The TME model is similar to eBay. Earnings are expected to grow in the next five years. TME delivers excellent profitability, with margins above 70 per cent. A dividend payout ratio of 80 per cent also makes the stock attractive.
This major wealth manager and life insurer operates the biggest financial planning network in Australia. AMP is well positioned to benefit from compulsory superannuation. The acquisition and integration of AXA Asia Pacific should broaden distribution, create synergies and generate economies of scale. AMP is well capitalised with a robust balance sheet.
OST is a leading manufacturer and distributor of steel and metal products in Australasia. We believe OST is likely to benefit from an anticipated increase in infrastructure activity enhanced by government stimulus in residential and civil construction.
Treasury Wine Estates (TWE)
This international wine business generates about 80 per cent of sales in Australia, the UK and the US. TWE is in the process of aggressively targeting emerging markets to expand its distribution network. Wine consumption in Asia is expected to grow rapidly in the next 10 years. TWE is also backed by a sound balance sheet.
This mid-tier IT consulting business reported falls in 2012 half year revenue of 7.2 per cent and earnings per share of 6.4 per cent on the prior corresponding period. Revenue can be volatile, particularly in difficult economic times, if firms cut IT spending to reduce costs. Project delays also contributed to the disappointing results, and work volumes are yet to recover.
Sandfire Resources (SFR)
Its major asset is the DeGrussa copper project about 900 kilometres north of Perth. A single commodity focus and limited mine life spark concerns. It will take several years before positive operating cash flow is realised. Investors who bought at lower prices should consider locking in a profit.
Les Szancer, Alpha Broking
Condor Blanco Mines (CDB)
This copper and gold play in Chile, where there’s been stable Government for some time, has sailed under the radar. This stock was priced at 8 cents on February 23, 2012, after listing at 20 cents last year. In my view, it offers good exploration prospects in the world-class Maricunga Belt (that hosts multi-million ounce gold deposits), at Carachapampa, La Isla and Yaretas. I also expect positive news from diamond drilling at some point.
This company is committed to delivering innovative medical technologies to the global market by way of licensing. Products that increase airflow and treat tumors are part of the company’s portfolio, as are painless needles. This company offers much potential, but it’s a speculative buy. It’s also very focused on shareholder interests.
Newcrest Mining (NCM)
Gold company share prices have lagged the bullion price, but I believe this imbalance is due to correct. China is a big gold buyer and is encouraging its people to invest in the precious metal. China will set up a new gold exchange by mid 2012. I expect gold producing companies to benefit from additional activities.
The share price of this oil and gas company has been disappointing in the past few years. Plenty of available gas across the world has kept the price in check. But oil is another story. Oil could easily get back to US$120 a barrel amid global uncertainty.
Qantas Airways (QAN)
I was going to suggest this as a sell even before Qantas revealed a shocking profit fall of more than 80 per cent. Qantas has been besieged by problems, from industrial disputes to problem flights and cracks on wings – but to name a few. The outlay for planes is enormous considering the return. Sell and move on.
QBE Insurance (QBE)
Just like airlines, I have never liked insurance companies. QBE, like any big insurance company, is only a disaster or two away from a massive payout. And the world hasn’t been short of disasters in the past two years. It’s true QBE generates lot of income from investments, but it, like other insurance companies, spend big amounts on advertising to attract customers dollars. Too competitive.
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