Mark Goulopoulos, Patersons Securities
A well-managed company, providing mining products to the resources sector. Sales are directly correlated to mining volumes, which, contrary to recent negative sentiment, will continue to grow at strong rates for the foreseeable future.
Boart Longyear (BLY)
A drilling services company that’s endured a considerable share price fall due to excessive negative sentiment. The long-term outlook, while moderating in recent weeks, remains very solid. The shares were trading at $3.01 on June 21.
Commonwealth Bank (CBA)
A weaker housing market is offset by low corporate debt levels and falling interest rates. The net result is likely to be slow but steady profit and dividend growth. Although this is partially reflected in the share price, the total return (dividend and capital gains) should be attractive over the long term.
Woodside Petroleum (WPL)
New chief executive Peter Coleman has made an impressive start by finding a partner to invest in its Browse LNG project at an attractive valuation for Woodside. Although challenges remain, the balance sheet is now robust, which should drive solid growth over the long term.
Sonic Healthcare (SHL)
Revenue and profit growth for the past few years hasn’t matched the premium rating enjoyed by this medical diagnostics company. In anticipation of subdued profit growth in the medium term, the company is fully valued and better opportunities exist elsewhere.
Transurban Group (TCL)
A huge increase in risk aversion in past weeks has seen low risk and steady cash flow companies, such as Transurban, become most appealing. The share price rise more than accounts for this low risk. We believe the share price is trading at a premium for relatively low profit growth and an average dividend. A switch from this low growth utility to an undervalued higher growth investment would be well justified.
John Rawicki, Ord Minnett
While expecting only a modest improvement in housing starts this year, we believe the current share price is trading at an attractive level to begin accumulating stock. In our view, the recent sell-off has been overdone and we have a 12-month price target of $4.30. The shares were trading at $3.365 on June 21.
St Barbara (SBM)
One of our favourite mid-cap gold producers. The Gwalia mine is starting to achieve record rates of gold production at impressively low cash operating costs. Drivers for the stock in the near term include continuing improvements in Gwalia gold grades and higher total production. We have a price target of $2.70. The stock was trading at $2.175 on June 21.
Aristocrat Leisure (ALL)
The latest US reporting season showed mixed results for the gaming industry, but there are positive drivers for Aristocrat. In particular, demand for replacing gaming machines was high, profit margins have stabilised and sale prices have risen. Further, Aristocrat is a defensive stock, making it more resistant to market fluctuations than most other growth stocks.
Orica has agreed to form a joint venture with Yara and Apache to build an ammonium nitrate plant in the Pilbara region of Western Australia. We are forecasting growing demand for ammonium nitrate, although supply will catch up in the next five years. The joint venture will provide a secure base for Orica to grow market share. It’s worthwhile holding the stock.
We’re uncertain as to what short-term cash flow will be in the absence of forecasts. In our view, rising debt and a potential dividend cut is overhanging the share price. We don’t expect the company to undertake an equity raising this year, but we believe the stock will underperform.
Bendigo and Adelaide Bank (BEN)
Regional banks will find it difficult to outperform this year given the structural headwinds facing the industry. Challenges include tight funding, difficult lending markets and low growth expectations within the financial industry. Our current forecasts are for dividends to remain stalled at 30 cents a share for the foreseeable future.
Alan Marrs, Alpha Broking
Molopo Energy (MPO)
The share price has been trading near 12-month lows. Despite softer oil prices and weaker oil production at the Wolfcamp resource in Texas, potential production from this prospect is big. A fully funded $75 million drilling program during the next 12 months should enhance value. The shares were trading at 49.5 cents on June 21.
Ainsworth Game Technology (AGI)
This gaming machine and services company is performing well. Sales have consistently grown in recent years, and a recent company report forecasts more of the same. Its $44 million capital raising will reduce debt. Ainsworth’s inclusion in the All Ordinaries Index will generate more attention.
Flight Centre (FLT)
The company has grown via rolling out more shop fronts across the world. Flight Centre intends to vigourously defend price fixing allegations initiated by the ACCC (Australian Competition & Consumer Commission). But the issue will take time and money to resolve. Monitor news stgelopments.
Paladin Energy (PDN)
Selling a $US274 million convertible bond bolstered its share price. The low uranium price is a problem for the sector. Future demand for uranium is unclear. There’s no immediate catalyst to drive up the uranium price, even though it’s a carbon-free energy source.
CSL Limited (CSL)
It’s time to take profits on this one. The share price of this blood products company has risen substantially in the past nine months on the back of increasing profits, a share buyback and a weaker Australian dollar. But we believe this innovative company is facing weaker than expected demand in Europe and the US in the near term.
Bathurst Resources (BTU)
Operates the Buller hard coking coal project in New Zealand. The mine is facing weaker demand from China due to a global slowdown. The shares have fallen from more than $1 to trade at 42 cents on June 21. There’s no sign of an immediate recovery.
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