Broker Stock Recommendations
Ben Polkinghorne, Patersons Securities
This commercial explosives and chemical company reported a healthy first half result. Net profit after tax was up 15 per cent to $264 million. The result demonstrated the group’s resilient business model, which in turn should bring a re-rating. Orica appears well placed to capitalise on new growth opportunities given its sound financial position.
Tap Oil (TAP)
The oil and gas producer offers a solid long-term investment. Its strong balance sheet and steady cash flow can fund its exploration program going forward. TAP has $54 million in cash and no debt. The company continues to focus on prudently managing its assets.
Marion Energy (MAE)
An oil and gas explorer and producer, with projects in the US states of Utah and Oklahoma. Management has previously informed that it’s seeking buyers for the company and/or its assets in full, or in part. MAE has declared the data room open and is confident of considerable interest in its assets. You either sell, or hold for a potentially higher price from the sales process.
Leighton Holdings (LEI)
The construction giant recently announced the Dubai Airport project had been cancelled. But continue holding this company as it has a strong pipeline of work going forward. It should be a major beneficiary of government stimulus packages across the world.
Terramin Australia (TZN)
March quarter production of zinc and lead was weak. This resulted in higher than average costs. Zinc remains one of our least preferred commodities in a sector experiencing difficult times. Terramin will benefit when the zinc price recovers.
Perpetual is one of Australia’s leading listed fund managers, but on a valuation basis the share price appears expensive. Like most fund managers, earnings are highly correlated to how the sharemarket performs. The company’s funds under management have fallen by up to 50 per cent in the past two years and earnings are down between 30 and 40 per cent.
Richard Batt, Shadforths
BHP Billiton (BHP)
The miner has a balanced portfolio of world class, long life assets. It produces all the major commodities, including petroleum, alumina, copper, gold, iron ore, coal and nickel. It’s well managed and offers a strong balance sheet. BHP is the premium resource exposure for investment portfolios.
Westpac Bank (WBC)
Operates a sound banking business in Australia and New Zealand, with exposure to retail, corporate and institutional sectors. Focused on capital management, it’s been a strong performer compared to its peers in recent times. Although all banks face challenges, their positions in the Australian market are getting stronger. Today’s share price offers long term investors a good opportunity to accumulate the stock.
BlueScope Steel (BSL)
Australia’s biggest steel maker produces a range of products for the building, manufacturing, automotive, and construction industries. Although the global outlook for steel is bleak, BlueScope recently completed an institutional equity raising. It’s in the process of completing the retail component. As a result, the company will have more financial flexibility and a stronger balance sheet. This will enable it to take advantage of opportunities as market conditions improve.
Crane Group (CRG)
The plumbing products supplier holds a leading market position, offering strong brands and cost advantages through scale. They are a barrier to entry for competitors. Recently, the company successfully completed a $40 million placement to institutional investors, and is in the process of raising funds through a share purchase plan. Federal Government infrastructure spending is turning the building sector around. Crane has cash on hand, and should be able to grow earnings.
APN News and Media (APN)
This diversified media company faces continuing uncertainty due to recent declines in advertising markets caused by reductions in corporate advertising budgets. Concerns exist that major shareholder, Independent News & Media, which holds a 39 per cent stake in the company, may default on a bond after failing to reach an agreement with bondholders.
Boom Logistics (BOL)
This mobile crane company announced that the March quarter saw key markets within capital equipment, industrial services and non-residential construction deteriorate in Australia. Don’t expect the company to meet market expectations in 2009. Better opportunities exist elsewhere in the market without the associated risk.
Robert Swarbrick, Novus Capital
Karoon Gas Australia (KAR)
The share price has soared recently and in early morning trade on May 8, the stock was trading at $6.66. There are some promising signs amid an improving oil price. Mining entrepreneur Ken Talbot, through his Investment vehicle, owns more than 15 per cent of the stock and another institution Wellington Management owns 10 per cent. Next stop $10
Woodside Petroleum (WPL)
Australia’s biggest oil and gas producer is highly leveraged to an oil recovery. Oil is moving higher and could easily trade between US$75 and US$100 a barrel by December. The company has prized assets in the North West Shelf. Woodside’s share price could potentially reach $50 in the short term.
BHP Billiton (BHP)
The world’s biggest miner has performed remarkably well during the downturn of the past 12 months. It offers excellent management and is currently in talks with Rio Tinto. My view is BHP will buy some of Rio’s assets, but it won’t take over the company. It deserves a premium valuation and look to sell around $40 a share.
Paladin Energy (PDN)
The share price of this uranium producer has had a great run from the low $2 mark in November to $4.40 in early morning trade on May 8. Paladin has major mines in Namibia, Africa. While the commodity has not been as popular as oil and iron-ore, there is still a lot of Chinese demand. Major uranium companies in Canada may look at Paladin as a takeover target.
Macquarie Group (MQG)
Recently went to the market and raised $540 million from institutions and fund managers. The company model has its sceptics and Macquarie may need to raise more funds to grow. It initially wanted to raise almost $1 billion. Expect more write-downs and job cuts. Divisions which pushed growth in the past are clearly under pressure. I would be selling at mid $30 levels and look to buy again between $22 and $25.
ANZ Bank (ANZ)
The bank’s share price has bounced off its March lows with the rest of market. There is still major risk with financials, and ANZ may face further write downs in response to institutional problem loans. ANZ is among the most leveraged to financial institutions.
Other articles in this week’s newsletter
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.