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Peter Rae, Morningstar

BUY RECOMMENDATIONS

WorleyParsons (WOR)

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

As a provider of engineering and professional services to the global oil and gas sector, WOR is well positioned to benefit from strong growth in these markets. It has strong technical expertise and a global network of more than 40,000 personnel. It should be able to capitalise on significant opportunities in unconventional oil and gas, such as liquefied natural gas, shale gas and oil sands.

Mesoblast (MSB)

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

MSB is a medical research company developing therapies that utilise mesenchymal precursor stem cells extracted from bone marrow. Large under-served potential markets include treating heart failure patients, bone marrow regeneration in cancer patients and several orthopaedic indications. Product sales are unlikely before 2015. The stock is only suited to investors comfortable with high levels of share price volatility and the many risks associated with research and development companies.

HOLD RECOMMENDATIONS

Telstra (TLS)

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

Telstra has been one of the best performing stocks in 2012 as investors chase relatively defensive earnings and dividends in a low interest rate environment. We don’t expect the same gains in 2013, but with interest rates expected to remain low, TLS remains an attractive income stock and is likely to be well-supported by the market.

Monadelphous (MND)

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

The outlook for the mining services sector has deteriorated significantly in recent months. Limited demand visibility has hurt the confidence of the Australian mining sector. A number of companies have issued earnings downgrades, but MND has been able to buck the trend by announcing that full year 2013 sales revenue would increase by 25 per cent. But the shares are not cheap at current prices. The shares were trading at $22.33 on December 13.

SELL RECOMMENDATIONS

Cabcharge (CAB)

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

The risks for CAB have increased recently, with its business model under threat from proposed changes to credit card surcharging and the Victorian Taxi Inquiry. Its market share has deteriorated in recent years. On top of this, the bus joint venture with ComfortDelGro suffered a blow with the loss of two NSW government bus contracts.

Ten Network (TEN)

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

TEN is facing pressures on several fronts. Poor television ratings have reduced revenue significantly, weakening an already unsatisfactory financial position. While a highly dilutive equity raising will strengthen the balance sheet, the need to improve programing will see TEN invest an additional $100 million through 2013. We don’t expect revenues to materially recover in a hurry due to TEN’s weak position.

 

Peter Russell, Russell Research

BUY RECOMMENDATIONS

Imdex (IMD)

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

The share price of this global provider of drilling fluids and instrumentation for mining, oil and gas operators have halved from record highs due to speculation the mining boom had ended. As usual, it was overdone. Mining continues despite  commodity prices retreating from their peak. On a consensus view, Imdex is trading on a price/earnings ratio of about 7 times and a franked yield of 4 per cent. In our view, this stock offers short and long term upside.

RCR Tomlinson (RCR)

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

RCR has a strong track record building and maintaining power and steam generation plants. Its expanded into engineering, instrumentation and construction, undertaking projects for Fortescue Metals, BHP Billiton, Newcrest Mining, Woodside Petroleum and others. It ended financial year 2012 with record revenue, profits and a strong order book. It’s trading on an attractive price/earnings ratio of about 7 times and a franked yield of 4.5 per cent.

HOLD RECOMMENDATIONS

Data #3 (DTL)

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

Data #3 is a very consistent and established performer. It licenses software and hardware for the public and private sectors. It’s a lead supplier for Microsoft, Cisco, and Hewlett Packard. It’s well placed to continue growth. It’s trading on an undemanding price/earnings ratio of about 12 times and offers a franked yield of almost 6.5 per cent.

G8 Education (GEM)

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

G8 has established a portfolio of childcare centres totalling 166 in Australia and 18 in Singapore. A further 51 are franchised in Singapore. Acquisitions have come thick and fast, typically priced at 4 times earnings before interest and tax. A proven business model should generate more favourable acquisitions and enhance occupancy and margins.

SELL RECOMMENDATIONS

James Hardie Industries (JHX)

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

This global building products manufacturer is challenged by low housing demand in the US and Europe. Declining earnings before interest and tax in the US have been offset by an increase in Asia. A likely upswing of house building in the US beckons, but it’s already factored in after $2 share price rise in the past six months. Take profits on a high price/earnings ratio of about 25 times.

Navitas (NVT)

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

Increasing demand for education was offset by several policy changes adversely impacting the company’s operations in Australia and the UK. Growth in its Canadian and US college courses have partially brightened its prospects, but, in our view, the shares are fully priced. The company faces more competition in the online space.

 

James Samson, Lincoln Indicators

BUY RECOMMENDATIONS

BC Iron (BCI)

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

After agreeing to buy an additional 25 per cent share of the Nullagine joint venture from Fortescue Metals Group, expect BCI to continue growing earnings in a difficult mining environment. This latest move shows the company making good use of its growing cash reserves. The combination of an equity raising and debt draw down will fund an 80 per cent uplift in BCI’s share of production from the Nullagine project.

Mermaid Marine Australia (MRM)

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

MRM provides vessels and related services to the offshore oil and gas industries. Many busy LNG projects off the north-west coast of Australia leaves MRM in a solid position to generate growth.

HOLD RECOMMENDATIONS

Aristocrat Leisure (ALL)

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

This gaming machine maker is looking to Asian casino development to boost demand in coming years. But forecasts of a subdued outlook in response to increasing competition in the US may result in the loss of market share. In light of this, ALL appears to be fully valued.

Corporate Travel Management (CTD)

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

The company has consolidated a strong position in the Australian market. Guidance suggests it will generate earnings growth for the current financial year. But there are risks associated with expanding to the United States.

SELL RECOMMENDATIONS

Brambles (BXB)

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

This global pallet and transport packaging company has enjoyed a solid share price run. But more research and development spending required in its Recall business places another burden on cash flow. The company appears overvalued at current levels amid concerns of potentially weaker global trading activity in financial years 20013 and 2014.

CSR (CSR)

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

Potentially the Australian housing market will stabilise, but we believe construction activity will remain subdued.

This building products company has recently been a good sharemarket performer. But we don’t believe the rising share price has factored in an outlook of challenging market conditions.

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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.