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PREVIOUS ARTICLE 18 Share Tips - 5 March 2012 NEXT ARTICLE Oil Stocks Have Room to Run

Peter Rae, Morningstar

BUY RECOMMENDATIONS

Mermaid Marine Australia (MRM)

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

MRM is a big provider of marine services to Western Australia’s offshore oil and gas industry. It recently reported a strong first half 2012 result with high fleet utilisation rates. The outlook remains positive due to strong demand for its vessel fleet as a result of significant oil and gas project activity in the North West Shelf, Browse Basin and Timor Sea.

Qube Logistics Holdings (QUB)

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

QUB is set to become one of Australia’s largest port logistics operators. It owns majority stakes in stevedoring and land logistics businesses, and has strategic stakes in two sites proposed for restgeloping intermodal rail terminals. Chairman Chris Corrigan, formerly of Patrick Corporation, leads a highly competent and experienced management team.

HOLD RECOMMENDATIONS

Trade Me Group (TME)

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

Recently floated out of Fairfax Media, TME is the pre-eminent auction website in New Zealand with virtually no competition. It commands very strong brand equity as one of the most popular online brands in New Zealand. Profitability is high given the continuing shift from traditional media to online, and we forecast double-digit earnings growth for the next five years.

Cabcharge Australia (CAB) 

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

It continues to thrive due to its strong market position, continuing rollout of new technology and growth in sales of related services. Its share in a bus joint venture is also a key growth driver. But greater regulatory scrutiny and a review by the Reserve Bank of Australia into card surcharging create several uncertainties.

SELL RECOMMENDATIONS

Transpacific Industries Group (TPI)

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

TPI provides waste management, recycling and industrial cleaning services in Australia and New Zealand. The businesses provide essential, but not completely recession-proof services to consumers, industry and government. Debt, management and operational issues have plagued the company since the global financial crisis. Since the GFC, the company has undertaken a recapitalisation and restructuring. But debt remains too high, business rationalisation continues and the growth outlook is uncertain.

Transurban Group (TCL)

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

TCL is a leading toll road operator with proven management skills and a good quality portfolio, including Melbourne’s CityLink and Sydney’s Hills M2. It offers a secure and defensive income stream, but long term returns could disappoint. In our view, negatives include losing roads for no consideration when concessions end, a relatively low yield, questionable US investments and complex and opaque financial reporting. At current prices, we consider TCL overvalued.

James Georges, Patersons Securities

BUY RECOMMENDATIONS

Kingsgate Consolidated (KCN)

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

Its Chatree gold mine in Thailand offers much potential, with continuing stgelopments aimed at lifting total company production to 250,000 ounces a year. As an unhedged producer, KCN suits risk tolerant investors seeking gold exposure and exploration blue sky. Takeovers of Dominion Mining and Laguna Resources lower single mine risk. Proceeds from an underwritten placement at $7.10 a share enable further exploration and stgelopment on projects in Chile and New South Wales. The shares were trading at $6.11 on March 8.

Qantas Airways (QAN)

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

The airline is aggressively reducing costs. Expect capable management to meet challenges and retain a profitable business. Investors shouldn’t expect dividends in the medium term due to massive capital expenditure. As an airline, Qantas has an enviable reputation, but the stock is only suitable for investors who understand the business and have an appetite for risk.

HOLD RECOMMENDATIONS

APA Group (APA)

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

APA is a suitable core holding for income investors. It’s an industry leader in gas infrastructure, with interests in transmission and distributions assets across Australia. It’s responsible for delivering more than half the nation’s domestic gas usage. Gas, whether natural or coal seam, continues to be the fastest growing energy source in Australia.

Cochlear (COH)

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

Significant items, including product recall costs and future estimates, resulted in a first half loss of $20.4 million. But a dividend increase on the previous corresponding period to $1.20 a share suggests confidence in the Nucleus 5 CI500 stgice. It appears an implant recall was a temporary glitch.

SELL RECOMMENDATIONS

Cromwell Property Group (CMW)

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

CMW is a property owner, stgeloper and manager for third party investors. The office portfolio generates most earnings, while the management and stgelopment divisions could add upside as property markets improve over the longer term. But high gearing and slim debt covenant headroom could be an issue if property markets double dip. In our view, this higher risk stock is only suitable for risk tolerant investors – not typical income investors despite the attractive yield.

Harvey Norman Holdings (HVN)

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

Global sales for the six months ending December 31, 2011 were down 6.1 per cent on the previous corresponding period.  Like for like sales were down 6.3 per cent. The sales decline accelerated during the half. The continuing migration to online shopping is an emerging threat, which adds an element of risk.

 

Peter Russell, Russell Research

BUY RECOMMENDATIONS

FlexiGroup (FXL)    

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

A leading provider of vendor and retail point-of-sale finance and telecommunication services. After making it easy for customers to buy, FlexiGroup has built strong relationships with vendors, expanding from retail into services and now business-to-business. It has a strong focus on systems, efficient financing and innovation. The Paymate acquisition moves it into online payments.

NRW Holdings (NWH) 

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

In the thick of the resource construction boom, this civil mining services company is leveraged to massive projects, including oil, gas and iron ore. While the share price has risen, so too has its order book, staffing, cash balances and profit margins. The half-year results show it’s well on track.            

HOLD RECOMMENDATIONS

Decmil Group (DCG)  

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

As another fast growing player in resource project construction, Decmil enjoyed a strong first half with a capital raising, a record order book and a maiden dividend. It acquired an accommodation village in Queensland, and will build recurring earnings streams and project related income. Accumulate.        

Qube Logistics Holdings (QUB) 

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

Qube provides a wide range of stevedoring and national logistics, with port and bulk handling facilities. The last half showed revenue and profit growth. Acquiring WA-based Giacci Holdings adds to its resource focus. Keep adding. 

SELL RECOMMENDATIONS

Harvey Norman Holdings (HVN) 

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

Its iconic electrical and household stores have shown flat profits for years. The last half revealed weaker retail sales pressuring earnings. Substantial property holdings and the five cent dividend are a plus. But its online offering is late and we see scant early upside.         

Ten Network Holdings (TEN)  

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

Ten has been a leader in its target demographic. It’s built multi channels and invested in airport advertising. Yet its advertising revenues have been flat in the past five years and are now sliding. After warning of a bad interim result, with no dividend and a weak outlook, why wait?

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