18 Share Tips – 15 July 2013

Gavin Wendt, MineLife

BUY RECOMMENDATIONS

Wolf Minerals (WLF)

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

WLF is an emerging tungsten producer at a time of tight supply. It’s focusing on developing its world class Hemerdon Ball tungsten project in Devon, England. Hemerdon currently boasts a JORC-compliant resource of 401 million tonnes at 0.13 per cent tungsten and 0.02 per cent tin – ranking it as the world’s third largest tungsten deposit. Wolf is also well placed as it has secure project funding, allowing it to commence production during 2014.

Middle Island Resources (MDI)

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

This gold explorer maintains a hugely prospective West African acreage position, comprising 5500 square kilometres throughout Burkina Faso, Niger and Liberia. The primary objective remains a minimum JORC-compliant resource of 1 million ounces in at least one of its project areas, allowing a transition to mining status. The company has a strong cash position of $6 million, encouraging news flow and a low cost profile.

HOLD RECOMMENDATIONS

Northern Minerals (NTU)

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

One of the best credentialed, emerging rare earths opportunities in the world. It has the potential to become a low risk and reliable supplier of high quality rare earths to a growing market in south east Asia. Its flagship project is Browns Range, which it aims to advance towards production during 2016, using a relatively simple and low cost processing flow-sheet in order to produce a high grade concentrate.

Ventnor Resources (VRX)

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

Maintains a first class exploration package in a prime location just 40 kilometres east of Sandfire Resources’ high grade DeGrussa copper discovery in Western Australia’s Doolgunna region. The company recently announced a 40 per cent resource upgrade, which was followed by positive scoping study results. Mining licences have just been granted over both projects and the aim is to transition to production during 2014.

SELL RECOMMENDATIONS

Newcrest Mining (NCM)

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

Poor gold production numbers from its Lihir Island operation are just the tip of the iceberg in my view. Investors are disappointed in company performance to say the least. Some are furious. The dramatic share price plunge that prefaced the release of poor production figures leave many questions unanswered. There’s little catalyst for a turnaround.

Paladin Energy (PDN)

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

Like Newcrest, production disappointments at a time of falling prices present a double whammy for investors. We believe short sellers will continue to have a field day with the stock, particularly as uranium prices are continuing their slide and worker unrest grows at its African operations. We can’t foresee a catalyst to change things any time soon, which means investors are better off on the sidelines.

Boe Campion, Ord Minnett

BUY RECOMMENDATIONS

Treasury Group (TRG)

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

Treasury Group holds minority stakes in several well known Australian based equity managers, such as Investors Mutual, Rare Infrastructure and Celeste. We see TRG trading on a full year 2014 price/earnings ratio of 11 times, with earnings per share growth of 27.9 per cent and a dividend yield of 8.1 per cent. We believe TRG is a quality business under-rated by the market. Expect second half 2013 results to highlight underlying profitability of TRG’s fund managers and the value within TRG itself.

Carindale Property Trust (CDP)

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

Net tangible asset value on the balance sheet came in at $6.36. But we believe NTA is beyond what’s on the balance sheet and argue that $6.60-to-$6.80 is justified. Completion of the Westfield Carindale expansion in Brisbane has been on budget and ahead of schedule. Carindale is also expected to rival Bondi Junction (Sydney) and Doncaster (Melbourne) within Westfield’s Australian portfolio.

HOLD RECOMMENDATIONS

Toll Holdings (TOL)

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

We retain our hold recommendation and increase our price target to $5.84. We believe this transport logistics giant is trading at a discount relative to peers for full year 2014 and full year 2015. Our $5.84 price target implies a 12-month total return of 14.1 per cent – a 9.2 per cent capital return and 4.9 per cent after tax dividend yield. The shares were trading at $5.36 on July 10.

QBE Insurance (QBE)

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

We note QBE is exposed to rising interest rates in the US and a depreciating Aussie dollar, which we believe will dominate in the near term. The stock is trading near fair value in our view.

SELL RECOMMENDATIONS

Seek (SEK)

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

The outlook for 2013 online employment volumes remains challenging. The decline in employment print classifieds has accelerated between 2005 and 2012 and we believe it will shrink the remaining market.

WorleyParsons (WOR)

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

We feel the current share price fully factors in the medium term growth outlook and WOR’s competitive advantages without taking into consideration near term risks. With WOR recently trading at a premium to our average valuation, we retain our sell recommendation.

Richard Batt, Shadforth Financial Group

BUY RECOMMENDATIONS

SMS Management and Technology (SMX)

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

SMX provides a range of IT consulting services to a diversified portfolio of government and private sector clients. With a strong balance sheet and no debt, the company is well placed to make acquisitions.

ANZ Bank (ANZ)

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

ANZ’s first half result was impressive and the company flagged its intention to progressively increase its dividend payout going forward. The share price had recently fallen just over 12 per cent since reaching a 12-month high in May and we suggest investors consider taking advantage of this retreat to buy the stock.

HOLD RECOMMENDATIONS

AGL Energy (AGK)

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

AGK is one of Australia’s largest integrated energy companies. The company has stable and highly defensive earnings with low gearing. Strong operating cash flows enables regular fully franked dividends, which is an attraction in the current low interest rate environment.

Brambles (BXB)

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

BXB has recently announced it will exit its Recall information management business via a demerger to existing shareholders. We recommend investors retain their exposure to BXB and await further information on the demerger.

SELL RECOMMENDATIONS

Treasury Wine Estates (TWE)

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

The Winemakers’ Federation of Australia recently released its 2013 Vintage Report, and the 1.83 million tonne crush is up 10 per cent on last year and well above the six-year average. The size of the crop surprised, as growing conditions had been difficult with one of the hottest summers on record. The large crop could lead to excess supply impacting profitability and we recommend investors lock in some profits.

Cabcharge Australia (CAB)

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

CAB has a strong position within its industry. But structural changes have increased competition and new entrants have taken market share. Given increasing competitive threats and greater regulatory scrutiny, we prefer other investments.

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.