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Nathan Zaia, Morningstar

BUY RECOMMENDATIONS

Metcash (MTS)

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

Fears that Australia’s third force in the domestic grocery market would suffer from a price war appears to be easing after a sound full year 2012 result. The Australian Competition & Consumer Commission appears more vocal in preventing a growing Woolworths and Coles dominance. For a low risk business, an undemanding price/earnings ratio and a fully franked dividend yield of about 8 per cent, this stock is attractive.

Southern Cross Media (SXL)

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

Subdued spending is creating intense headwinds for most media companies. SXL is a big regional media provider via radio and TV. Because of its massive audience, we expect SXL to win more than its fair share of advertising in line with an improving economy.

HOLD RECOMMENDATIONS

Amalgamated Holdings (AHD)

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

Conservative management helped AHD ride out the downturn. Its attractive portfolio includes Greater Union and Events cinema brands, the Rydges Hotel chain, the Thredbo ski resort and a growing property arm. Single digit growth is supported by a dividend yield above 6 per cent.

Dulux (DLX)

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

Full year 2012 revenue increased 7.2 per cent although earnings before interest and tax on a like-for-like basis slipped 4.7 per cent. Given the weak construction market, we think the business performed admirably, benefiting from more exposure to the resilient maintenance and home improvement sectors. A strong portfolio of brands and an extensive distribution network support long-term competitiveness.

SELL RECOMMENDATIONS

Flight Centre (FLT)

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

Flight Centre continues to deliver record earnings, but we think booking without a traditional travel agent will grow. We believe sustaining Flight Centre’s costly bricks and mortar business will get tougher as it faces stronger online competition. The price has risen about 50 per cent in the past six months, so we think the shares are overvalued. The long term risks are being underestimated.

Insurance Australia Group (IAG)

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

Despite an adverse claims environment, IAG reported a sound 18 per cent increase in full year 2012 net profit after tax. Growth is forecast on premiums and margins. But the recent QBE profit update is a welcome reminder of the risks – the fortunes of insurers are often out of their own hands.

>Anthony Black comment: Flight Centre has been recommended as a buy and sell this week as brokers take different views on its outlook. As always, investors should seek independent sharemarket and financial advice before making a decision to buy or sell.

 

Peter Moran, Wilson HTM

BUY RECOMMENDATIONS

Nufarm (NUF)

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

We expect positive conditions to support sales growth amid high soft commodity prices. As farmers seek to maximise yield, it should lead to stronger demand for Nufarm’s crop protection products. We expect further margin expansion as a result of an improving product mix and better cost controls.

Myer Holdings (MYR)

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

MYR’s most recent sales data showed growth of 1 per cent compared with a year earlier. As we head into the important Christmas trading period on the back of lower interest rates and a more positive macro outlook, Myer could surprise on the upside.

HOLD RECOMMENDATIONS

Wesfarmers (WES)

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

WES provided a brief trading update at its recent AGM. Generally, retail, insurance and the chemicals businesses were relatively upbeat. As expected, resources were negative due to lower coal prices, higher royalties and the carbon tax. At current levels, the stock is yielding more than 5 per cent. We believe the share price is appropriately valued. Hold.

Nanosonics (NAN)

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

NAN is notching up reasonably good sales of its Trophon sterilisation product in North America and Australia. However, sales are proving difficult in Europe, where ultrasound disinfection practices and attitudes lag those in the US and Australia. Investors should hold as we expect improving customer demand.

SELL RECOMMENDATIONS

WorleyParsons (WOR)

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

We believe Worley’s hydrocarbons division will struggle to retain the growth levels of recent years as the order book flattens and EBIT margins remain below peak levels. As such, we believe the share price is relatively expensive and recommend investors sell for better opportunities.

Treasury Wine Estates (TWE)

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

The exceptional 2012 vintage and substantial inventory of premium red wine is likely to result in strong earnings in financial year 2014. But longer term earnings are contingent on favourable growing conditions. According to our calculations, it’s trading on a price/earnings multiple of more than 18 times for 2014, so we believe the stock looks expensive and recommend investors sell.

 

Michael Heffernan, Lonsec

BUY RECOMMENDATIONS

Super Retail Group (SUL)

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

A well-managed retailer of automotive parts and camping and fishing accessories. It’s been a strong sharemarket performer in recent years, despite the hostile retail environment. Its takeover of Rebel is working well, and strong demand for sports utility vehicles paint a bright outlook.

Flight Centre (FLT)

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

Another standout performer in the past 12 months, FLT recently produced a very impressive result. The increasingly positive Australian and international travel outlook (due largely to a strong Australian dollar) works very much in its favour. Despite its share price rising sharply in the past few months, it still looks good value and offers attractive fundamentals, including a fully franked dividend yield.

HOLD RECOMMENDATIONS

CSL (CSL)

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

Its blood plasma and pharmaceutical businesses benefit from increasing demand for health related products around the world. Although much of its revenue is generated in the United States, it’s weathered US dollar weakness particularly well. Its recent report was excellent, delivering a US$1 billion profit for the first time, and its royalty revenue streams add a degree of comfort for investors seeking reliable cash flow.

Coca-Cola Amatil (CCL)

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

The recent trading update was impressive in a challenging economic environment, and it’s now one of the few remaining beverage stocks on the ASX. The company should also benefit from its entry into the beer business in Papua New Guinea, Fiji and the Pacific region.

SELL RECOMMENDATIONS

Fleetwood Corporation (FWD)

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

This manufacturer and retailer of caravans and mobile homes has recovered well from past economic difficulties. However, it’s now suffering from much slower growth in the resources sector and we expect this to crimp future profit growth.

Monadelphous Group (MND)

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

A premier mining services company with an impressive sharemarket history since listing in 1991. While it has attractive fundamentals, like Fleetwood, it’s suffering from a slowdown in capital expenditure by major mining companies. Accordingly, the strong profit increases in recent years will be much more difficult to achieve over the medium term.

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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.