Darren Jackson, Calibre Investments

BUY RECOMMENDATIONS

Rialto Energy (RIA)

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

This junior oil and gas company has come to the forefront of our attention. It’s currently commenced well appraisal and an exploration program in West Africa’s Cote D’Ivoire. Appraisal results appear promising, with one well spudded. The recent share price retreat provides a good entry point. On April 19, the shares were trading at 38 cents.

Draig Resources (DRG)

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

Draig is a Mongolian coal play that’s trading at historically low levels. It closed at 43 cents on April 18. Expect upside potential via its flagship coal asset Teeg to culminate in a JORC (Joint Ore Reserves Committee) announcement. Separately, within the global sector, Chinese company Chalco has expressed interest in acquiring a stake in Toronto listed SouthGobi Resources. Could this mean more corporate activity? Draig’s share price hasn’t responded to Chalco’s announcement. 

HOLD RECOMMENDATIONS

RHG Limited (RHG)

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

RHG represents a good alternative to some hybrid securities with a similar risk/return profile. The company manages an existing loan book. The runoff from this loan book, less management costs, is distributed to shareholders through fully franked dividends.  

Duet Group (DUE)

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

An energy infrastructure group, offering relatively steady and predictable cash flows via its portfolio of assets in Australia and the United States. The trailing (non-franked) dividend yield is 10 per cent, while a weaker Australian dollar is helpful to US earnings repatriated back to Australia.

SELL RECOMMENDATIONS

Mirabela Nickel (MBN)

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

Brazilian operations continue to make losses. The company posted a loss of more than $US50 million for the year ending December 31, 2011. The recent share price action has been quite disturbing, with total liabilities exceeding market capitalisation. Meanwhile, the spot nickel price remains weak.

Echo Entertainment (EGP)

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

The share price has enjoyed a strong run this year, increasing more than 20 per cent. Crown Casino has lifted its stake in Echo, which operates The Star Casino in Sydney, to 10 per cent. But it remains uncertain whether Crown can or will launch a takeover. It may be an opportune time to take some profits.

Hamza Habib, Patersons Securities

BUY RECOMMENDATIONS

Sino Gas & Energy (SEH)

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

Has been operating in China since 2005, and holds a portfolio of unconventional gas assets in two production sharing contracts. These Ordos Basin contracts in China cover 3000 square kilometres. The Ordos Basin is the second largest onshore oil and gas basin in China, with established pipeline infrastructure to major markets. There’s big demand for gas in China. Our price target is 25 cents. The stock was trading at 7.9 cents on April 19.

Jacka Resources (JKA)

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

A small cap oil and gas explorer based in Africa. Its onshore and offshore assets in Tunisia and Nigeria are stgelopment/appraisal projects offering proven hydrocarbon basins. Additionally, the company has taken a 50 per cent stake in a 22,000 square kilometer block in Somaliland, increasing Jacka’s footprint in what is currently a highly prospective hydrocarbon region.

HOLD RECOMMENDATIONS

Leighton Holdings (LEI)

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

The share price was punished on another earnings downgrade. Higher than expected costs and delays at troubled projects, including Brisbane’s Airport Link and Victoria’s desalination plant, contributed to the downgrade. The bad news is factored in, but a share price recovery may take time.

Transfield Services (TSE)

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

The company downgraded full year 2012 earnings guidance from $130 million to $105 million. The company blamed poor weather conditions and a provision for a legacy contract. Although 2013 and 2014 forecasts remain intact, management will need to win new contracts and improve existing operations.

SELL RECOMMENDATIONS

Paladin Energy (PDN)

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

A concern is debt of more than $800 million. This uranium miner will need to refinance a $325 million convertible note by March 2013.  With uranium prices at $US51.44 a pound in mid April, most uranium producers would struggle to be profitable. Given Paladin’s precarious financials, it will more than likely find it challenging.

Reckon Limited (RKN)

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

An Australian based IT firm providing financial and business management solutions. The company is going into transition, as two major software licences will be terminated in 2014. Given the sector’s competitive landscape, Reckon may find it challenging to implement new revenue streams without spending substantially on future research and stgelopment.

Shawn Uldridge, William Shaw Securities

BUY RECOMMENDATIONS

Rio Tinto (RIO)

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

Rio shares have been range bound for nine months, trading between $60 and $72. The lower range has been rising, suggesting an imminent break of this range to the upside. Results released in February were excellent, and we expect a long-term price target above $90.

Westpac Bank (WBC)

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

Recent share price strength shouldn’t deter long-term buyers from adding to their Westpac holdings. With results to be released next month, today’s buyers today can expect fully franked dividend yields collectively totalling more than 21 per cent in the next 15 months.

HOLD RECOMMENDATIONS

AMP (AMP)

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

Its half year results met analyst expectations, and showed good progress in integrating the AXA business. With a partially-franked dividend yield of about 6.75 per cent amid good prospects for dividend growth, AMP is a hold at current levels and a buy on significant weakness.

News Corporation (NWS)

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

The share price has risen steadily since August 2011. Stronger advertising and media markets, a string of box office hits and a business-as-usual attitude in the wake of the News of the World debacle justifies the price rise. While NWS shares are by no means cheap, they will continue to rise strongly as the global economy recovers.

SELL RECOMMENDATIONS

Newcrest Mining (NCM)

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

The gold price hasn’t made any new highs this year, and we don’t expect it to. This will continue to weigh on the share price, as the company struggles with rising costs and the integration of Lihir Gold. We believe upside in gold stocks has gone. Not hedging production at these high prices could hurt NCM in the long term.

Qantas Airways (QAN)

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

Fuel and labour costs are rising and union action persists. Virgin Australia is providing more competition by introducing business class, Tiger Airways is hanging on and Air Pacific is about to begin domestic operations. Airfares, I believe, will get cheaper. Underlying profit was down 50 per cent in February’s results and is unlikely to recover quickly.

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