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Peter Moran, Wilson HTM

BUY RECOMMENDATIONS

Maverick Drilling & Exploration (MAD)

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

The most recent quarterly report shows production is once again on the increase – up to 735 barrels of oil a day for the month of December. While MAD’s drilling success rate was below expectations, this appears more than factored in. A retreating share price provides a reason to consider buying for the longer term.

Bandanna Energy (BND)

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

BND continues toward first coal production in late 2014. We believe this timetable is achievable and realistic. We anticipate approval of the Springsure Creek project and expect a funding package to be announced. Our price target is 69 cents a share. The shares closed at 25.5 cents on February 6.

HOLD RECOMMENDATIONS

Pharmaxis (PXS)

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

Dealt a blow after receiving a negative recommendation for its cystic fibrosis drug, Bronchitol, from a US Food and Drug Administration advisory body. We now expect PXS will look for restricted approval in the US, perhaps for adult patients. This will take time. The European business has now become the main driver.

Independence Group NL (IGO)

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

Offers a diversified asset portfolio, but the key value driver is its 30 per cent interest in the developing Tropicana gold project in Western Australia. A new mine plan based on a larger resource is due mid-2013. To reflect this, our price target lies between upside of $5.90 a share and our base case valuation of $3.85 a share. The shares closed at $4.85 on February 6.

SELL RECOMMENDATIONS

JB Hi-Fi (JBH)

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

The retail environment remains challenging among frugal consumers. Retail spending fell in December – that says something. Demand for big-ticket items, such as home entertainment systems, is weakening across the consumer landscape. Margins are being squeezed as prices fall.

Red 5 (RED)

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

Growth and low operating cost potential exist at its Siana gold mine. But the ramp-up of operations to date has been underwhelming. Until we see evidence of improving operating performance, we will retain a sell recommendation.

Peter Arden, Russell Research

BUY RECOMMENDATIONS

Beadell Resources (BDR)

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

Gold production recently began at BDR’s Tucano project in Brazil and is forecast to be at least 200,000 ounces in 2013.  The magnetic separation plant is due for completion in April 2013. Further high-grade intersections at the Duckhead zone indicate it has potential to contain much more gold than its current resource of 93,000 ounces, with an average grade of 30.9 grams a tonne.

Navarre Minerals (NML)

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

Discovering shallow high-grade gold mineralisation under soft Murray Basin sedimentary cover at Tandara near Bendigo is exciting news. Exploration is via drilling as NML moves to a maiden resource estimate in 2013. Associated work, including bulk sampling and conceptual mining studies, aim to show the zones of quartz reef are amenable to simple open pit mining and processing.

HOLD RECOMMENDATIONS

Alkane Resources (ALK)

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

Optimisation studies at its flagship Zirconia project at Dubbo, particularly for heavy rare earth elements, continue.   Current weak zirconia markets should have improved by the time ALK produces in the next few years.

Mount Gibson Iron (MGX)

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

Strong high-grade iron ore production at Koolan Island has lifted total iron ore sales to about 10 million tonnes a year. Expect stronger demand for iron ore. Accordingly, MGX is well positioned to take advantage as Chinese growth stabilises above 8 per cent in 2013. MGX’s cost reduction program is on track, helping to underpin its profitability and prospective fully franked yield of about 5 per cent.

SELL RECOMMENDATIONS

Iluka Resources (ILU)

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

Continuing weakness in the zircon market in response to global financial uncertainty is leading to lower demand. ILU has been cutting production to reduce the adverse impact of stockpile build-ups. But market stabilisation is needed before demand improves and there’s a return to previous production levels.

OZ Minerals (OZL)

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

Lower copper production and significantly higher costs are forecast for 2013 as the Prominent Hill operation deals with changing ore body geometry and lower ore grades. The Carrapateena resource discovered another potential deposit at great depth and identified several regional targets. But these are still many years away from production.

 

Simon Bond, RBS Morgans

BUY RECOMMENDATIONS

Monadelphous (MND)

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

A leading engineering group, providing services to the resources, energy and infrastructure sectors. While we’re acutely aware MND isn’t immune from any downturn in the mining cycle, we believe it’s benefiting from structural factors that will improve market share. We believe this will drive above-market growth for the next four years.

Perseus Mining (PRU)

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

Recent crusher issues at its Edikan gold project have affected project ramp-up, but we believe a resolution will be found. We expect another weak production quarter in March, but Perseus looks cheap when we consider the longer-term view. We re-initiate coverage with an outperform rating.

HOLD RECOMMENDATIONS

BHP Billiton (BHP)

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

The global mining giant is in a consolidation phase, and its operational performance supports this view. The 2012 fourth quarter production report contained very few surprises, with the key divisions of iron ore, petroleum and copper reporting numbers broadly in line with our expectations. We view the petroleum division as one area that could perform above expectations over the medium term.

Coca-Cola Amatil (CCL)

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

Growing product competition in the supermarket segment should be a warning sign for any supplier that’s over-earning. While Coca-Cola may be an unmatchable brand, that won’t stop the retailers from trying to provide competition with cheaper substitutes.

SELL RECOMMENDATIONS

TOLL Holdings (TOL)

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

This transport logistics giant has enjoyed a good run since the start of the year, but in our view, it’s too much too soon. TOL should benefit from a broad-based cyclical recovery, but we have seen little evidence of this to date. Accordingly, we remain cautious about how much it can improve during 2013.

Leighton Holdings (LEI)

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

We are lowering our financial year 2013 forecasts by 8 per cent, from an already below consensus position among some data, given project headwinds. These negative revisions are unrelated to the Middle East, which we believe remains a further downside risk in 2013.

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