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Charlie Heerey, PhillipCapital

BUY RECOMMENDATIONS

Duet Group (DUE)

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

Energy utility companies APA, Envestra and Duet are great portfolio stocks paying attractive (albeit non-franked) income. They tend to move largely in line, but DUE has lagged slightly in recent months in a quiet news period. Buy for the catch up and hold for solid yield and growth.

Cash Converters (CCV)

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

This second hand goods retailer and personal loans provider has delivered impressive earnings growth in the past few years. The share price has responded strongly. We like the outlook as the company expands into the UK market, rolls out more stores in NSW, expands the personal loans business and looks to buy additional stores from franchisees.

HOLD RECOMMENDATIONS

BC Iron (BCI)

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

A well regarded mid cap iron ore producer with a strong balance sheet and a good track record on production levels and cost controls. We certainly like the story, but have gone to a hold given the recent run up in price.

Linc Energy (LNC)

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

We have liked Linc’s turnaround in the past few months as US cash flows, the Adani royalties and debt refinancing provide more certainty. It’s had a great run from about 60 cents through winter. However, we don’t think you need to chase it at these levels and have moved our valuation back to a hold. Linc isn’t for the faint hearted and has to suit your risk tolerance. 

SELL RECOMMENDATIONS

Macmahon Holdings (MAH)

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

In the mining services space, you need to review which companies you own.  Selling shovels to miners was a great investment in 2010/2011. Not so in 2012, as large resource houses reviewed future projects, such as BHP’s Olympic Dam. The market began to discount forecast earnings for companies working on huge resources and energy projects. Macmahon had several downgrades in 2012 and the outlook remains challenging. The outlook may improve, but it’s certainly a volatile stock. I’d rather be holding companies at the quality end, such as Monadelphous.

Newcrest Mining (NCM)

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

The market breathed a sigh of relief when no nasty surprises surfaced in last quarter’s production figures. In hindsight, NCM paid too much for Lihir. After taking a longer term look at the share price chart, what is the market telling us? It might be time to review how much gold you have in your portfolio.

 

Boe Campion, Ord Minnett

BUY RECOMMENDATIONS

Rio Tinto (RIO)

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

The global miner offers significant valuation support from exposure to high returning growth projects. We acknowledge there may be some caution towards the shares in the short term over concerns that higher iron ore prices might retreat. But we expect improving investor confidence in 2013 to result in a share price re-rating.

Erm Power (EPW)

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

Principal activities include electricity sales, electricity generation and stgelopment and a nascent gas exploration and procurement business. We continue to rate Erm as a buy. The valuation looks reasonable, it pays a decent dividend and it has growth options to expand its electricity business into new markets.

HOLD RECOMMENDATIONS

Brambles (BXB)

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

We like the medium-term growth outlook for BXB. We also like the fact that growth isn’t reliant on macro conditions given leverage to the more stable non-discretionary retail sector. Pallet usage has increased and it will achieve cost savings from recent acquisitions. In a world where profit growth will be hard to come by this year, Brambles’ stock price should head towards our price target of $8.73. 

Telstra (TLS)

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

A concern for investors is whether the NBN will radically rebase margins in the fixed line business. If so, will it render the stock expensive in spite of its high yield? We argue that investors should take a conservative view of fixed line margins, but that the stock’s valuation has not yet moved into risky territory even on these assumptions.

SELL RECOMMENDATIONS

Myer Holdings (MYR)

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

Given the pressures we believe exist from a sales and cost of doing business perspective – and the challenge from online retail – the earnings outlook remains subdued. Following the recent share price hike, we believe the risk/reward proposition doesn’t look attractive.

Southern Cross Media (SXL)

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

Southern Cross Media has faced a difficult trading environment in the 2013 first half amid challenging regional TV market conditions and weak TV ratings. We downgraded our first half TV revenue forecast from 16 per cent to 19 per cent and marginally reduced expenses. Metro radio was also weak and given Austereo’s ratings and content issues, so we downgraded first half revenue from 10 per cent to 12 per cent.

 

Les Szancer, Blueribbonoptionsonline.com

BUY RECOMMENDATIONS

Convergent Minerals (CVG)

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

Mostly a gold company, with projects in Western Australia and Queensland. It also has the Diamantina phosphate prospect in Queensland. This company offers a strong board and management team. CVG is trading at 2-cent levels pending the latest results. I prefer to get in before a share price rises. A stock for investors who can stomach risk. A high risk/high reward prospect.

Zeus Resources (ZEU)

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

The share price of this recently listed uranium explorer has been belted. So why do I still have faith? Because sooner rather than later, I believe nuclear power will return to favour as a serious energy alternative. Also, a big Chinese state- owned company ZIMC has invested $10 million in this small firm. The Chinese are astute and don’t invest their funds without fastidious due diligence. A speculative buy.

HOLD RECOMMENDATIONS

Condor Blanco Mines (CDB)

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

A 4000 metre diamond drilling program has begun on a top prospect in Chile. CDB is discussing potential joint ventures  for its copper/gold porphyry projects. And the iron tailings project was picked up on favourable terms. Retain.

Fortescue Metals Group (FMG)

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

Last year was a bumpy ride for this iron ore producer amid high gearing and a slump in iron ore prices. The company restructured debt and the iron ore price recovered. The future looks brighter, but, as a one commodity company, risks remain.

SELL RECOMMENDATIONS

AMP (AMP)

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

AMP has enjoyed a nice run in the past few months. But do you want to own an insurance company given bushfires and floods? Consider taking some profits.

Rio Tinto (RIO)

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

The company saw off CEO Tom Albanese after expensive writedowns. It expects to write off more than $10 billion from the Alcan fiasco and a further $3 billion on its Mozambique coal assets. RIO has been trading between $50 and $70 in the past year or so. On January 30, it was trading closer to $70. Is now the start of the flight back to $50?

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Please note: Rio Tinto is recommended as a buy and a sell this week. Analysts have taken different views about the company outlook. Investors should seek their own advice before investing. 

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.