Paul Clarke, State One Stockbroking

BUY RECOMMENDATIONS

Dart Energy (DTE)

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

DTE is an emerging player in the coal seam gas industry as an explorer and producer in eastern Australia and Asia. DTE plans to drill 10 wells or more in Australia and 40 plus overseas in 2012, with a goal to build proved and probable reserves. DTE has substantial exploration acreage that may be the catalyst for major discoveries and elevating it rapidly. It also has an experienced management team. 

New Hope Corporation (NHC)

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

Produces thermal coal for domestic and international markets via its Queensland mines. NHC is in a strong position as it has its own port and can control infrastructure requirements. The company has a strong balance sheet, is a low cost producer and is well placed to leverage off thermal coal being a cheap source of energy in a captive market.

HOLD RECOMMENDATIONS

Kingsgate Consolidated (KCN)

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

Its major asset is the Chatree Gold Project in Thailand. The mine has an anticipated life cycle of 14 years, with 1.9 million ounces of reserves and 3.8 million ounces of resources. KCN plans to double the capacity of Chatree and expects higher grades to result in bigger profits. It offers a proven management team.

Ten Network Holdings (TEN)

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

The business generates significant cash flow via a 30 per cent margin on $900 million revenue. Despite a multitude of channels available to viewers, free to air television is still a major vehicle for advertisers.

SELL RECOMMENDATIONS

Kathmandu Holdings (KMD)

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

Stores in Australia and New Zealand sell clothing and equipment to people interested in travel and adventure. KMD retains attractive product margins, and peak sales periods are winter, Easter and Christmas. But the discretionary retail sector remains under pressure given weak consumer spending.

Retail Food Group (RFG)

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

Its major franchised brands are Donut King, Michel’s Patisserie and Brumby’s Bakery. It relies heavily on shopping centre foot traffic to drive revenue. Shopping centre construction is declining, slowing outlet growth in a weak retail sector. We question the company’s strategic direction after it failed to takeover Oaks Hotels and Resorts.

 

Charles Veall, Alpha Broking

BUY RECOMMENDATIONS

Senex Energy (SXY)

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

Produces oil in the Cooper Basin and is exploring coal seam gas in the Surat Basin. A strong rally saw the share price rise from 45 cents in October 2011 to a recent high of $1.22. But the price has retreated, providing an opportunity to buy a company we believe offers a bright outlook. The shares were trading at $1.05 on March 29.

AusTex Oil (AOK)

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

A junior oil and gas producer in Oklahoma and Kansas. It’s currently producing about 200 barrels of oil equivalent a day, but we believe an active drilling program is likely to result in more production. It has interests in about 70,000 acres of oil and gas leases. The shares were priced at 16 cents on March 29. We like its prospects and any good news should flow to a higher share price.

HOLD RECOMMENDATIONS

BHP Billiton (BHP)

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

Our leading resource company should be a cornerstone of any portfolio. There’s strong support for the stock at $34. We believe any break on the downside will be short lived and provides a buying opportunity. Keep a close eye on the copper price, as it seems to have an effect on BHP’s price.

Iluka Resources (ILU)

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

A mineral sands explorer and producer, the share price has risen from a low of about $11 to a high of about $19.50 in the past 12 months. The shares were trading at $17.66 on March 29. Hold for a higher share price. If it retreats further, you may want to consider adding stock.

SELL RECOMMENDATIONS

QR National (QRN)

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

The new Queensland Government has indicated it will sell its remaining stake in this coal haulage operator. It may be a good time to sell following a recent profit warning. The price action indicates a retreat.

Perseus Mining (PRU)

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

A West African gold play, the share price action looks intriguing with solid support at $2.40. But a weekly close below this level would indicate a sell to us. In any case, there are safer gold plays in the market with less sovereign risk factors.

 

James Cooper, Morningstar

BUY RECOMMENDATIONS

Australian Agricultural Company (AAC)

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

The full year 2011 result was good in light of disruptions caused by the live export ban. Seasonal conditions are favourable and should remain so in full year 2012. Demand for beef should remain strong, particularly as Asian middle class numbers continue to grow.

BHP Billiton (BHP)

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

BHP is forecasting annual average growth of 4.4 per cent in seaborne trade between 2010 and 2020. This means as much new seaborne iron ore capacity will be required this decade as the previous one.

HOLD RECOMMENDATIONS

Boart Longyear (BLY)

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

The full year 2011 result was impressive, with operating revenue increasing 36.9 per cent to US$2 billion and net profit after tax by 89.2 per cent to US$159.9 million. CEO Craig Kipp noted operating trends and global demand remains strong, which should result in full year 2012 revenue growth of 14 per cent to US$2.3 billion and EBITDA growth of 29 per cent to US$460 million.

Billabong International (BBG)

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

BBG’s sale of almost 50 per cent of watch and accessories brand Nixon releases US$285 million to repay debt. The deal enables BBG to effectively share in the growth of the Nixon business, while offering scope for the brand to diversify away from the surf channel and into the broader market.

SELL RECOMMENDATIONS

Caltex Australia (CTX)

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

Shareholders should consider reducing positions above $13.70 given the strength in the share price. External factors, including Australian dollar strength and a wider price spread between heavy and light crude oil, affected the Caltex refiner margin division, resulting in a loss of $208 million.

Auckland International Airport (AIA)

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

AIA reported strong first half 2012 underlying earnings growth of 15 per cent to NZ$70.8 million, the highest rate of growth achieved by the company in more than seven years. The performance reflects the positive impact of the Rugby World Cup, new air services to and from Auckland and solid performances by associated companies. However, the price has run ahead of fair value and shareholders should consider reducing exposure above $1.71.

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