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Janine Cox, Wealth Within

BUY RECOMMENDATIONS

Seek (SEK)

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

During this recent market decline, quality stocks with solid technical buying signals are few and far between. But opportunities to profit are always just around the corner. Look for growth stocks with good earnings forecasts in a long- term uptrend and then wait for the buying signals to present. Seek, as the largest aggregator of job seekers and advertisers is certainly in this category, and has been sold down recently below support at around $9.50 to $10. A strong rise above this range will indicate the long-term trend is likely to continue.

Suncorp (SUN)

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

Suncorp has risen through the storm with its share price intact after selling a $1.6 billion loan portfolio for $1 billion amid further sales to occur next month. Relative to many stocks on the market recently experiencing heavy selling, it’s worth noting how SUN has held up quite well, an indication of buyer support. A further short term decline isn’t out of the question. But while SUN retains price support above $11, it holds the potential to trade to new five-year highs.

HOLD RECOMMENDATIONS

QBE Insurance (QBE)

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

QBE has moved through the worst of it, having weathered many natural disasters in the past few years, which have impacted bottom line results. Across the board, insurance companies are raising premiums and QBE is buying back hybrid securities, which means its gearing level comes down. The recent credit rating upgrade is very good news for QBE. An expected US economic recovery amid talk of winding back QE should further support the share price. QBE broke above major resistance at around $14 in May this year. That’s a good long term indication of strength and the end of a long term cycle low in 2012.

Brambles (BXB)

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

Brambles has been underestimated and has done better in terms of an improving share price than many fundamentalists predicted. With the US economy picking up, we are likely to see further support to the share price. An interesting point to make about Brambles, historically, is that when it runs the share price moves higher for periods of three-to-five years. Right now it looks as though it’s in the early stages of one of those runs after breaking through resistance at around $7.50 earlier this year. BXB has been trading sideways and in coming weeks we are likely to see this move continue or for the share price to soften slightly before a rebound occurs.

SELL RECOMMENDATIONS

JB Hi-Fi (JBH)

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

JB Hi-Fi is often a highly shorted stock on our market and explains why it can trend so well and then fall very rapidly. Since 2007, JBH has been better suited to shorter term opportunities. Following the recent rise, it would be wise to consider taking some money off the table as the stock has a number of significant price hurdles overhead, being $17 and $20. It’s been recently experiencing resistance from the lower part of this band. If JBH falls below $14.54, then a move to cash would be good risk management, as the probability would have increased for a further decline to fill a gap in price at around $12.

Insurance Australia Group (IAG)

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

IAG, as an insurance stock, returned to favour in 2012/2013. However, prior to the recent rise, it was trading down from its all-time high of $6.97 in 2005 – that’s a long time in decline. Although conditions have improved for the stock, it’s still trading at around 2007 prices, below the high. IAG has also recently broken its uptrend and therefore the risk exists for a further short decline to around $4.80 to $5. Although long term I believe IAG will challenge its all-time high, my current view on IAG is similar to JBH in that it makes sense to take some profits.

 

Charles Thomas, Bell Potter Securities

BUY RECOMMENDATIONS

Super Retail Group (SUL)

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

SUL’s portfolio of leading brands are well managed and there’s room to further grow these resilient brands. The company’s sound operating metrics are attractive. We view a trading forward price/earnings ratio of about 15 times as reasonable given the positive attributes noted amid the company’s robust growth outlook. Accordingly, on the back of SUL’s share price retreat and the corresponding dip in its full year 2014 P/E to 15.1 times, we upgrade our rating from hold to a buy with an unchanged 12-month price target of $13. The shares were trading at $11.74 on June 26.

Monadelphous Group (MND)

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

We have re-examined the outlook for MND and conclude the recent share price decline appears likely overdone. Our price target is 12 per cent lower than our previous estimate due to our earnings revisions. We have upgraded our recommendation from a hold to a buy as we now consider the stock has more than priced in the likely earnings decline in full year 2014. New contracts are the potential catalyst for a price recovery. The full year 2014 P/E of 10.5 times is attractive by historical standards and the prospective dividend yield of 7.9 per cent is both appealing and sustainable.

HOLD RECOMMENDATIONS

Ruralco Holdings (RHL)

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

Elders has rejected RHL’s offer for its rural services division. We suspect RHL has been prudent. The share price has significantly risen from its recent lows since reporting first half 2013 results. We have downgraded from a buy to a hold and view the stock as reasonably valued at current prices.

Corporate Travel Management (CTD)

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

Our 12-month price target has increased marginally as our short-term downgrades are offset by the medium to long-term impact of the TravelCorp acquisition. The CTD share price has continued to perform strongly inline with our expectations, but consider this is becoming increasingly difficult to replicate given multiples and valuation.

SELL RECOMMENDATIONS

ALS Limited (ALQ)

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

The deterioration in minerals was greater than we had anticipated, with second half revenues down 19 per cent year-on- year compared to 33 per cent growth in the first half of the year. We expect this deterioration to accelerate during full year 2014. We are attracted to ALQ’s industry positioning (a leading provider in minerals), scale, track record and balance sheet. However, our sell rating reflects our expectation of a significant down cycle in minerals and forecast decline in full year 2014. We expect ALQ to ramp up its diversification into food and pharmaceutical testing via acquisition during full year 14.

Carsales.com.au (CRZ)

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

We downgrade carsales.com.au to a sell despite operating fundamentals remaining intact. In our view, growth levers include increasing market share of all new and used cars sold in Australia, increasing yields, driving take-up on research and data products, leveraging display based advertising opportunities and pursuing international growth. We now believe the market is pricing in overly optimistic assumptions for most of these key drivers, which has led us to placing a sell rating on CRZ.

 

Scott Marshall, Shaw Stockbroking

BUY RECOMMENDATIONS

AGL Energy (AGK)

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

AGK gave full year profit guidance towards the lower end of between $590 million and $640 million. If the lower end is achieved, this would be a 20 per cent increase in earnings. Its retail energy division has seen an unprecedented degree of customer churn in the NSW and Victorian markets. AGK says this has diminished dramatically in the past few months. The Queensland Government has allowed AGK to claw back 30 per cent of previous new tariffs for the 2014 period. This would increase AGK’s profits by between $10 million and $15 million. The Independent Pricing & Regulatory Tribunal recently granted AGK a 9.2 per cent increase in gas prices for 2014.

Lend Lease (LLC)

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

Resource projects don’t appear on the list of LLC’s major projects. LLC management estimate resources represent 8 per cent of group projects. LLC is focused on large scale development and construction projects in Australia, the UK and US. Major projects that will start between 2013 and 2015 include Barangaroo Sydney; the Sydney International Convention, Exhibition and Entertainment Precinct; Victoria Harbour Melbourne; RNA Showgrounds Brisbane; Waterbank Perth; Jem Singapore; Elephant & Castle London; International Quarter Stratford UK and Sunshine Coast University. The total end value is $25 billion for these projects alone.

HOLD RECOMMENDATIONS

Boom Logistics (BOL)

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

BOL lost the BHP Billiton ports contract at Port Hedland. We were already well below consensus forecasts for 2013. This is not as bad as it looks given Shaw forecast the BHP contract was generating revenue of only $20 million to $25 million and only $1.7 million EBIT in the 11 months to May 2013. The cranes can be redeployed elsewhere. The company trades at a discounted 2013 price/earnings multiple of only 4.6 times compared to the average for mining services companies at 9.9 times. With few near term share price catalysts, we believe the stock is fairly valued with the turnaround starting to yield the promised earnings uplift in 2014.

Commonwealth Bank (CBA)

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

Momentum from the third quarter of 2013 has continued into the fourth quarter. We have forecast a second half dividend of $2. Profit margins should be sustainable and mortgage volumes have picked up. There’s no sign of an increase in bad debts and we don’t forecast any significant rise. Capital is strong and the board may consider capital management initiatives.

SELL RECOMMENDATIONS

Monadelphous Group (MND)

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

We believe that without significant contract wins soon, MND is likely to disappoint in 2014 given it also expects a challenging year for growth. We are pre-emptively slashing our 2014 and 2015 profit forecasts. In the absence of any contract wins, 2014 earnings growth is likely to be very challenging. Shaw estimates that work in hand is $1.2 billion, much less than 2013 forecast revenues.

Wotif.com (WTF)

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

WTF has provided 2013 profit guidance of between $50.5 million and $51.5 million compared to $58 million for the prior year. This is well below the market’s forecasts. Total transaction value is expected to be relatively flat, with increases in Australian and New Zealand accommodation offset by continuing shortfalls in Asia and the rest of the world. We believe that future commission increases may be hard to achieve. The structural shift to online accommodation bookings in Australia may have largely run its course.

Please note that Monadelphous Group is recommended as a buy and a sell this week as brokers take different views on the company’s position and outlook. Readers should seek independent financial advice before investing. 

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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.