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James Georges, PhillipCapital

BUY RECOMMENDATIONS

BHP Billiton (BHP)

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

Despite the recent turbulence experienced in the mining sector, this global resources giant is still the mainstay of any portfolio. Expect competition in the resources sector to ease as smaller companies struggle in a market of declining commodity prices. BHP is trading at a discount. It has the firepower to weather storms and is the first to recover when there’s a cyclical recovery. The shares were trading at $31.77 on April 24.

Nearmap (NEA)

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

Provides geospatial map technology to governments and corporations. Last quarter results showed a substantial increase in cash receipts. The company is actively working to increase its subscriber base. It holds more than $10 million in cash reserves. A speculative buy for those with an appetite for risk.

HOLD RECOMMENDATIONS

APA Group (APA)

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

APA is the industry leader in gas infrastructure projects spread across Australia. It’s been a solid performer and offers an attractive yield for investors seeking income. Business risk may flow in response to negative sentiment surrounding the coal seam gas industry, but other than that it has outperformed the market in the past four years.

Aurizon Holdings (AZJ)

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

Formally QR National, AZJ is a vertically integrated, heavy haul rail freight operator. It operates the largest coal rail network in Australia. Limited competition is a positive, but a risk is high dependency on coal demand from Asia. Any downturn in Asian demand would most likely present challenges. 

SELL RECOMMENDATIONS

Wesfarmers (WES)

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

This industrial conglomerate has been a star performer in the past 12 months, with its share price rising from $28.43 to close at $43.37 on April 24. However, Target’s sales haven’t improved. We are forecasting earnings per share growth to decline going forward. We believe the stock is fully valued, so it may be a good time to lock in some profits.

Harvey Norman (HVN)

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

While March quarter comparable sales showed a modest increase of 1.5 per cent, other big retailers did better. Management needs to address sales performance given fierce competition from bricks and mortar outlets and online retailers. The share price has steadily climbed in the past 12 months. The shares were trading at $2.96 on Aril 24. Until we see evidence of major structural improvements to lift sales, better opportunities exist elsewhere. 

 

Peter Moran, Wilson HTM

BUY RECOMMENDATIONS

Nextdc (NXT)

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

The recent decision by Australia Post to utilise 70 racks at NXT’s Melbourne data centre – while not large as a percentage of the facility – adds credibility as an independent operator. With demand growing at existing centres and new facilities being built in Sydney and Perth, we recommend buying this company for growth.

AMP (AMP)

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

The outlook for this wealth manager and superannuation giant is brighter. In addition to an attractive 5 per cent yield, we believe AMP’s share price will rise as the company returns to double-digit earnings growth assisted by a more favourable market.

HOLD RECOMMENDATIONS

ASX (ASX)

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

While trading activity has increased recently, the ASX has introduced rebates this year as it competes with Chi-X. The result is lower leverage to improving trading volumes compared to what would have been received historically. In addition, IPO activity is still very low at this point so hold for an improvement.

Telstra Corporation (TLS)

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

The coalition has confirmed that investors will be “kept whole” as it looks to negotiate a new agreement with Telstra if elected to government. The announcement is welcome as it removes some of the uncertainty surrounding Telstra before the election. Given where the share price is trading, we recommend investors hold for yield. The shares closed at $4.88 on April 24.  

SELL RECOMMENDATIONS

Corporate Travel Management (CTD)

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

CTD has performed better than its peers, winning new clients while retaining a high proportion of existing clients. However, the share price has run well beyond our valuation of $3.60, so we recommend selling at current prices. The shares were trading at $4.80 on April 24.

DuluxGroup (DLX)

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

This paint company is another that has run well beyond our valuation. While DLX has strong market positions and is well managed, we believe investors may be overestimating the company’s leverage to improved new housing activity, which is just 20 per cent of group sales revenue post the acquisition of Alesco. On a 2013 price/earnings ratio of 18 times, we see better value elsewhere.

 

Peter Day, Macquarie Private Wealth

BUY RECOMMENDATIONS

Santos (STO)

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

The energy giant reported first quarter production of 12 million barrels and revenue of $713 million. Those numbers were below our forecasts due to Cooper Basin maintenance. The LNG project in Queensland is more than 50 per cent  complete with 45 wells drilled upstream -up 50 per cent on a rolling 12-month quarterly average. Overall, the operating result was disappointing, but this was offset by the seemingly solid progress on growth projects. The outlook is brighter.

Transurban Group (TCL)

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

The company recently held an investor briefing. Of importance was learning that the additional costs for M2 road works in Sydney and other projects were $90 million. Progression to stage 3 is imminent. The M2 traffic ramp up should be significant, and should start this quarter. We have an outperfom recommendation on the stock.

HOLD RECOMMENDATIONS

CFS Retail Property Trust (CFX)

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

Since January 1, 2013, CFX has outperformed the A-REIT index by 300 basis points. With the stock now trading at our price target, we have downgraded to a hold. The shares were trading at $2.22 on April 24. 

Telstra Corporation (TLS)

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

The coalition’s broadband policy was in line with expectations. Fibre to the node rather than the home will substantially reduce rollout costs. Telstra is well positioned to protect NBN deal value and cement a strong free cash flow profile going forward. We expect dividend growth under Labor, or a coalition government.

SELL RECOMMENDATIONS

Envestra (ENV)

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

The gas company has successfully completed a $130 million placement. The increased equity should result in a higher credit rating and lower debt costs, while funding future capital expenditure. But ENV remains overvalued in our view, and the capital raising does little to offset this. We retain our sell recommendation.

Ten Network Holdings (TEN)

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

The half year result showed revenue continuing to decline. There’s scope to cut costs, but a key question is how does this balance with the requirement to invest in new content? Earnings volatility is likely to persist in response to shorter ad cycles. A lack of clarity on programming complicates the outlook.

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.