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Warwick Grigor, Canaccord BGF

BUY RECOMMENDATIONS

Centaurus Metals (CTM)

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

The company revealed a positive bankable feasibility study for its Jambreiro iron ore project in Brazil, with very low cash operating costs of $16.20 a tonne to the mine gate (C1 Costs). CTM intends to establish itself as a reliable supplier of high quality sinter concentrates to the Brazilian steel industry. It offers good exposure to one of the strongest growing economies, with expansion opportunities beyond stage 1.

Tiger Resources (TGS)

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

Tiger has proved itself to be a competent and profitable copper producer from high grade ore in the Democratic Republic of the Congo. The shares were sold down heavily in October on suggestions the DRC was going to look at local equity stakes of up to 35 per cent in mining projects, but investors have obviously overlooked that Tiger already has a 40 per cent local partner. The shares should recover and resume their up trend when this is properly understood.

HOLD RECOMMENDATIONS

Havilah Resources (HAV)

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

In my view, Havilah continues to be undervalued amid a rich block of ground in South Australia, covering copper, gold and iron ore. The management team is looking to increase its skills base as it gears up for several developments in the next few years that may make it a very profitable producer. Havilah is a work in progress, so shareholders need a little more patience.

Resolute Mining (RSG)

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

RSG is a much stronger gold company than a few years ago after eliminating debt and successfully bringing the Syama gold project in Mali into line. Share buy-backs have helped to stabilise the share price. It continues to be one of the better, sizeable gold producers on the ASX. Shareholders should stick with this one.

SELL RECOMMENDATIONS

IndoChine Mining (IDC)

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

We believe it’s carrying a high market capitalisation given its current state of development. The Mt Kare gold project in Papua New Guinea prompted a mighty gold rush in the 1980s, but since then no company has been able to turn a profit. Some of the best operators have failed. The highlands of PNG are very difficult in many ways – geographically, culturally, politically and logistically. There is gold there, but we believe the challenges are greater than anticipated.

Mutiny Gold (MYG)

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

The Gullewa gold project in Western Australia has sent several companies broke over the years. It can always manage to come up with good intercepts and it invariably looks good on paper, but actually getting it to turn a profit has been a serious challenge in the past. We think it smarter to sit on the sidelines here and wait until the project is operational and delivering according to promises. There are better stories in the gold sector with more certain upside.

 

Marcus Obermeder, Ord Minnett

BUY RECOMMENDATIONS

Chandler Macleod Group (CMG)

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

Human resources business CMG recently bought Perth based IT consulting business Trilogy Resources. The acquisition is both earnings per share accretive and complementary to CMG’s existing relationship with the WA Government, which is one of two major clients of Trilogy Resources. The other is West Australian Newspapers. CMG should also benefit in the medium term from earnings upside to a cyclical recovery in recruitment.

Domino’s Pizza Enterprises (DMP)

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

Although management’s recent AGM trading update points to a slower than expected start to the year, I feel comfortable full year 2013 guidance of a 15 per cent plus increase in net profit after tax will be achieved. New products and promotions are being planned for the 2013 second half, with a focus on value. Enhancements to its digital platforms are also likely to achieve cost savings through in-store efficiencies. Buy while the price is still low. The shares were priced at $9.21 on November 15.

HOLD RECOMMENDATIONS

Legend Corporation (LGD)

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

This global leader in semiconductors informed the market that conditions were tougher than expected, with revenues down and costs rising. Management doesn’t expect this to be indicative for the full year, but I believe it will be difficult to regain lost earnings. Despite this downbeat guidance, LGD remains a hold as acquisitions remain an important driver and may be planned for the year ahead.

GWA Group (GWA)

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

Australia’s leading supplier of fixtures and fittings to residential and commercial premises has done it tough lately, delivering a disappointing performance update. Management blames weakness in renovations and new building activity. Despite this, I believe financial year 2013 represents trough earnings and they will recover in line with improving housing activity.

SELL RECOMMENDATIONS

DWS Limited (DWS)

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

Company guidance for financial year 2013 indicates challenging conditions in the IT services space. Ongoing issues include subdued business confidence, more offshore competition and increasing costs of doing business in Australia. Given this attack on multiple fronts, I recommend a sell.

Origin Energy (ORG)

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

ORG recently released a sharp profit downgrade. I believe this revised outlook statement for a fall of between 5 and 10 per cent will severely undermine what little confidence remains in the company’s short-term prospects. The lack of near term certainty virtually overwhelms the longer term value proposition. Look to sell for now.

 

James Samson, Lincoln Indicators

BUY RECOMMENDATIONS

RCR Tomlinson (RCR)

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

This multi-disciplined engineering company isn’t immune to increasing pressure in the mining services sector in line with a cooling resources investment landscape. But we believe the company is set to perform well in coming years. A likely catalyst is Fortescue Metals Group (FMG) announcing it will proceed with its Kings processing plant at Solomon Hub.

AP Eagers (APE)

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

It recently produced strong profit guidance for full year 2012. APE is the owner and operator of 97 new motor vehicle dealerships. The company has grown in response to strong demand for passenger vehicles. It’s expected to grow earnings and pay an attractive dividend yield.

HOLD RECOMMENDATIONS

Amcom Telecommunications (AMM)

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

Having recently enjoyed a strong share price run, AMM appears fully priced. The company owns and operates telecommunications infrastructure in Australia and provides associated telco services. Investors should be wary of the premium built into AMM’s share price at current levels. The shares were trading at $1.29 on November 15.

Flight Centre (FLT)

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

An iconic travel agency chain that’s flourished domestically in response to a strong Australian dollar. But ACCC allegations of price fixing against the company are now before the Brisbane Federal Court. In any case, we believe FLT is fully priced. The shares were trading at $28.12 on November 15.

SELL RECOMMENDATIONS

Sydney Airport (SYD)

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

We believe the owner and operator of Sydney Airport is in a distressed financial position. Despite strong traffic volumes reported in October, SYD is trading on a forward price to earnings ratio of about 40 times and appears over-priced at current levels. The shares were priced at $3.37 on November 15.

Kingsgate Consolidated (KCN)

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

Operationally inefficient gold miners may struggle despite a strong bullion price. KCN has been plagued with operational issues since acquiring Dominion Mining last year. We believe strong gold prices have led to some buoyancy in KCN’s share price that may prove unjustified.

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