10min read
PREVIOUS ARTICLE 18 Share Tips - 11 March 2013 NEXT ARTICLE 18 Share Tips - 25 March 2013

Warwick Grigor, Canaccord Genuity

BUY RECOMMENDATIONS

Anova Metals (AWV)

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

AWV (previously Kimberley Rare Earths) has reinvented itself as a gold stock after deciding the rare earths scene was too tough for a junior. It has gone for a low risk gold project in Nevada, the premier US gold producing state. The Big Springs project has a resource of 1.2 million ounces on licences that were previously open pit mined. There’s strong potential for between 50,000 and 100,000 ounces a year, firstly from open pits for two years then higher-grade underground extensions. While it will take up to two years to complete permits, there’s a very hungry mill about 40 miles from Big Springs that is desperate for ore. If a reasonable profit sharing arrangement is agreed, AWV could earn between $30 million and $40 million free cash flow on capital expenditure that might be as low as $10 million. Market capitalisation is less than $12 million now. With $3 million in the bank, the upside looks promising.

Goodrich Resources (GRX)

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

GRX has suddenly become a diamond producer, with the acquisition of the Ellendale Diamond Mine in the Kimberley region of WA. The upfront outlay was only $3.1 million. It will repay $11.2 million in environmental bonds over two years. With a market capitalisation of only $10 million, the shares are trading on a price/earnings ratio of only 0.5 times. While, at the moment, the mine plan is only for a two-year life, there’s a substantial resource base of 91 million tonnes from which to source long term mill throughput.

HOLD RECOMMENDATIONS

Finders Resources (FND)

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

The permit process for the Wetar copper project on an Indonesian island has been long. The company has successfully piloted its SX-EW operation and it’s been waiting for the final forestry permit prior to financing and construction. An in-principle permit was granted in February. This is being followed by a few months of paperwork and then the project should get the green light. The wait will be worthwhile.

Metals X (MLX)

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

Production from the Renison tin mine continues to grow and the company is increasing operating cash flows. With more than $70 million in the bank, no debt and a substantially improving tin price in the past three months, MLX looks worthy of holding for growth in 2013.

SELL RECOMMENDATIONS

Atrum Coal (ATU)

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

The shares of shot up on the back of announcements regarding quality coking coal in British Columbia, Canada. The price has gone from a low of 15 cents to be trading at 79 cents on March 13. The stock looks pricey at this early stage of the project. Time to take profits.

Silver Lake Resources (SLR)

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

SLR has been a market darling in the Australian gold sector for the past few years on the back of the Mt Monger Gold Mine just outside Kalgoorlie in Western Australia. However, in the past six months it has taken over Integra Mining and has been commissioning the Murchison Gold Project. During this period, its cash balance has reduced dramatically and outstanding bills have more than doubled. It looks like it has bitten off a bit more than it can chew and may suffer indigestion for 2013.

 

James Samson, Lincoln Indicators

BUY RECOMMENDATIONS

Logicamms (LCM)

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

After a promising performance during the first half of the financial year, this engineering and project management business is well placed to report a strong growth result for the full year. The company’s increasing exposure to the hydrocarbons markets, LNG and CSG, continues to underpin our hopes for mid-term growth.

Spark Infrastructure Group (SKI)

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

SKI is an infrastructure fund offering investors low risk, stable exposure to utility asset earnings with a steady dividend stream. The company owns stakes in electricity distribution assets in Australia, which are likely to benefit from a stable regulatory environment until 2015. We believe there’s a high degree of earnings certainty for SKI in years ahead.

HOLD RECOMMENDATIONS

1300 Smiles (ONT)

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

ONT owns and operates dental practices across Australia, and has posted healthy growth via an acquisition strategy in recent years. While ONT is fully priced at current levels, government policies intended to subsidise dentistry from 2014 should assist the mid-term outlook for the company.

G8 Education (GEM)

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

This childcare and early learning centre operator is an acquisition-driven growth business that remains well placed in consolidating a highly fragmented and growing industry. However, at current prices the company appears to be fairly valued by the market.

SELL RECOMMENDATIONS

Tabcorp Holdings (TAH)

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

Having lost a significant slice of its earnings through regulation of Victorian poker machines, TAH hasn’t been able to replace these profits. With a highly geared balance sheet, we believe risks are mounting for TAH. The sports gaming space is increasingly competitive, and we believe the risks are too high at present to warrant an investment in the business.

Whitehaven Coal (WHC)

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

With coal prices languishing, WHC investors have suffered recently. However, with questions surrounding the interests of key shareholders and the continuing operational difficulties facing the business, we believe that WHC displays an unacceptable level of risk in the current market climate.

 

Carey Smith, Alto Capital

BUY RECOMMENDATIONS

Oakton (OKN)

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

This provider of IT solutions to governments and businesses has suffered recently as both sectors have reduced spending on IT in response to budget cuts. However, with more than $16 million in excess franking credits, no debt and strong operating cash flows, we believe the stock is undervalued and will rebound strongly once IT spending returns to normal. 

Programmed Maintenance Services (PRG)

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

We believe PRG is undervalued compared to other companies in the maintenance and operational services sector, which have experienced strong share price increases. Trading on a price/earnings ratio below 10 times and offering a fully franked dividend yield above 5 per cent, we believe the upside potential far outweighs the downside risk.

HOLD RECOMMENDATIONS

QBE Insurance (QBE)

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

The stock has recovered from its multi-year low share price in November last year, and has since climbed 30 per cent. But we believe it will take time to restore its long-held reputation as one of the best-managed and profitable insurance groups in the industry. Nevertheless, profits should rebound in 2013.

Newcrest Mining (NCM)

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

Recent completion of two major growth projects, Cadia East and the Lihir upgrade, should result in substantial increases in gold production. NCM constantly disappoints the market, with less than expected production. Hopefully, the completed growth projects will rectify this. If its share price continues to hold around current levels, a takeover by a global gold producer can’t be ruled out. The shares closed at $22.30 on March 13.

SELL RECOMMENDATIONS

Carsales.com (CRZ)

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

Carsales.com has enjoyed a stellar 12 months, which has seen its share price almost double as investors chase dominant online businesses. With CRZ accounting for more than 75 per cent of page impressions in the car classifieds market, we question where future growth will come from to justify a forward price/earnings ratio of more than 26 times that it’s currently trading on.

Seek (SEK)

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

While there’s no doubt the company is the premier online employment site in Australia and is growing its overseas operations, we question the lofty valuation the market currently places on the group. Trading on a forward price/earnings ratio of more than 22 times, we believe it’s just too high and investors should take profits.

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.