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Richard Batt, Shadforth Financial Group

BUY RECOMMENDATIONS

AMP (AMP)

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

AMP has the scale and low unit costs to pick up profitable market share if smaller dealer groups go out of business in response to adverse regulatory reform. AMP also has the critical mass to adapt to reforms. Acquiring the Australian and New Zealand assets of AXA Asia Pacific broadens distribution capacity, extracts cost synergies, drives economies of scale and increases competitive advantages.

ANZ Bank (ANZ)

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

ANZ offers a full suite of banking and financial services to consumers and businesses. More recently, the bank has expanded operations into Asia. Its strategy is to generate between 25 per cent and 30 per cent of earnings from the Asian Pacific region by 2017. If successful, this strategy can provide significant upside for investors and they should take advantage of the current dip in the share price.

HOLD RECOMMENDATIONS

Seven Group Holdings (SVW)

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

SVW is a diversified operating and investment group, providing exposure to the construction and mining sectors. It also has investments in free-to-air and pay television, newspapers, magazines and online media. The company recently announced a solid full year result, with operating revenue up 41 per cent and a solid fully franked dividend of 20 cents a share.

Dulux Group (DLX)

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

Dulux is a market leader in coating, home maintenance and garden care. The company, offering an experienced and well-regarded management team, has access to an extensive and expanding distribution network. With strong cash flows and a healthy dividend policy, DLX is attractive to yield oriented investors.

SELL RECOMMENDATIONS

Transfield Services (TSE)

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

TSE generates a significant proportion of revenues from the resources and industrial sectors. Any slowdown or deferral in spending by resource companies could lower the company’s earnings. There’s little room for error in assessing and successfully managing projects in this difficult economic environment. Any unforseen problems could lead to higher costs and impact earnings. We prefer alternative investments at this time.

Boart Longyear (BLY)

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

The company’s earnings and cash flow are vulnerable to commodity price movements, which are weakening. Volatility on global financial markets may result in less mining exploration, which will impact demand for drill rigs. Until the outlook for the resource sector improves, better opportunities exist elsewhere.

 

Scott Marshall, Shaw Stockbroking

BUY RECOMMENDATIONS

Origin Energy (ORG)

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

We prefer Origin to AGL Energy (AGK) due to the significance of its Australia Pacific LNG project. Origin management offers solid financial discipline. In 2012, electricity volumes are up 26 per cent to 42.7 terrawatt hours. The company will now focus on reducing costs and winning and retaining customers.

Suncorp (SUN)

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

The key value drivers for SUN are general insurance rate increases, fewer claims and lower costs. We like the general insurance sector, as it’s independent of economic growth cycles. The sector also offers pricing power.

HOLD RECOMMENDATIONS

Amcor (AMC)

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

AMC is generating sales growth in emerging countries. AMC has scale advantages in the packaging segments it dominates. The company generates strong cash flow and applies this to acquisitions, capital investment and share buybacks.

Transurban (TCL)

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

Toll road revenue increases with inflation-linked price rises from a growing population and an ability to channel vehicles onto toll roads. TCL is widening several toll roads, including the M2 and M5 in Sydney and the 95 Express Lanes in Washington. TCL potentially offers longer term growth and investment opportunities if new toll roads are approved.

SELL RECOMMENDATIONS

ANZ Bank (ANZ)

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

Following a strong performance in the past two months, we have reduced our recommendation to sell. We have been supportive of the banking sector on valuation grounds and a falling interest rate environment.  But we think now is the time to lock in share price gains.

Carsales.com (CRZ)

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

CRZ continues to withstand competitive pressures. The group is extending its brand strength into non-auto markets, which should provide longer-term growth. Investors have already priced in the likelihood that CRZ will gain a meaningful market share in caravans, farm machinery and general auction sales. But time will tell. The share price will suffer if the company fails to meet expectations. At this point, we believe the company is over-valued.

 

Paul Shepherd, RBS Morgans

BUY RECOMMENDATIONS

Lend Lease Corporation (LLC)

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

We believe LLC’s portfolio is currently undervalued, and we expect recent improving earnings to continue. We believe this will be a key driver for a re-rating of the stock. Management continues to improve operational capacity, but, more critically, it has a sound suite of projects and assets to support this strategy.

Amcor (AMC)

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

The packaging giant’s full year 2012 result was a commendable performance. The result highlights the defensiveness of AMC’s core businesses, with volumes remaining stable despite difficult economic conditions. Cash flow was a highlight and signals the next leg of upside for AMC. We expect cash flow to be redeployed to acquisitions and capital management. AMC offers a defensive earnings stream, double-digit earnings growth, a 5 per cent dividend yield and a price/earnings ratio of about 13 times.

HOLD RECOMMENDATIONS

GrainCorp (GNC)

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

The acquisitions of Gardner Smith Group and Integro Foods to create an integrated edible oils business makes strategic sense and adds further diversification and stability. However, GNC appears to have paid a full price for the acquisitions, which, based on our modelling, are earnings per share dilutive in financial year 2013 and modestly accretive in 2014. GNC looks fair value to us based on an average grain season.

Boart Longyear (BLY)

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

The share price has been punished amid concerns of a slowing resources sector. Investors may look elsewhere for the next six months in the absence of a bright mining outlook. But patience may be rewarded over the longer term.

SELL RECOMMENDATIONS

Telecom Corporation of New Zealand (TEL)

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

TEL faces a tough outlook for financial years 2013 and 2014. The company flagged it would invest to hold broadband market share, which, to us, suggests downside risks in the second half of 2013 and financial year 2014. This may be due to increasing operating costs and capital expenditure. A new strategy will be finalised later this year.

Ramsay Health Care (RHC)

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

Recently, the company has been trading on a price/earnings ratio of almost 19 times, which, in our view, fails to recognise the medium-term earnings risks associated with means testing the private health insurance rebate. This, in turn, may put added pressure on insurance profitability and private hospital margins.

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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.