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Carey Smith, Alto Capital

BUY RECOMMENDATIONS

Transfield Services (TSE)

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

One of Australia’s largest operations and maintenance service providers to the mining, energy and infrastructure sectors reports its full year results on August 29. While we believe the profit numbers won’t be pretty, we don’t expect them to be as bad as the market is expecting. This must be considered a speculative buy as the stock is down about 50 per cent in the past six months. 

Oakton (OKN)

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

This IT solutions provider to governments and businesses met profit estimates for the 2013 financial year and forecast increasing profits and dividends going forward. 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 from its multi-year low of around $1.20. The shares were trading at $1.32 on August 22.

HOLD RECOMMENDATIONS

National Australia Bank (NAB)

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

NAB is slowly shaking its title as the ugly duckling of the banking sector as the group’s UK division returns to profitability, although NAB still trades at a significant discount to its peers. The recent market update on third quarter results provides confidence the bank will reach its full year earnings target for the year ending September 30, 2013.

Sonic Healthcare (SHL)

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

This international medical diagnostics company reported 4 per cent earnings growth for 2013 and increased its full year dividend by 3 cents to 62 cents. Earnings and dividends are forecast to continue growing at a modest rate in the coming year as health expenditure continues to increase globally. SHL is generally considered a defensive play due to its constant and reliable strong cash flows.

SELL RECOMMENDATIONS

Ramsay Health Care (RHC)

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

The share price of Australia’s premier and largest private hospital operator has tripled since 2010, as investors switched into defensive and yield stocks. We believe the share price has significantly overshot fair value and expect it to come under pressure, as it’s been recently trading on price/earnings ratio above 25 times and a dividend yield below 2 per cent. It reports 2013 results on August 29.

Amcor (AMC)

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

AMC has been an investment community favorite ever since it acquired Alcan in 2010, making it the world’s largest packaging company. The recent uptick in the share price is due to investors chasing companies that will benefit from a lower Australian dollar. However, for a packaging company, we find it hard to justify a price/earnings ratio above 16 times considering the high capital expenditure required for the company.

 

Joshua Stega, JAS Wealth

BUY RECOMMENDATIONS

Buru Energy (BRU)

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

An oil and gas exploration and production company solely focused on the Canning Superbasin in Western Australia. We like BRU because it has a large acreage position, an equity interest of between 50 per cent and 100 per cent in most key tenements and a strong non-operating partner in Mitsubishi. With potential for early cash flows from the Ungani oil discovery, we think recent share price weakness represents a good buying opportunity.

ThinkSmart (TSM)

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

Operates in the UK, Spain, Italy, France, Australia and New Zealand. It focuses on business-to-business IT financing for transactions between $5000 and $10,000. Small businesses are becoming more reliant on the latest IT solutions and this is resulting in an increasing turnover of purchases, which is exactly the sector TSM is servicing. Offers strong growth potential.

HOLD RECOMMENDATIONS

Woolworths (WOW)

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

The outlook for WOW’s Australian food and liquor sales is becoming increasingly challenged due in large part to the re-emergence of Coles as an aggressive competitor. But WOW remains a top quality company, generating a high return on funds employed. We rate this stock a hold at current levels. The shares were trading at $33.52 on August 22.

Challenger Limited (CGF)

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

An investment management organisation, offering a wide range of financial products and services. We like the longer-term opportunities for the annuities business. However, in the shorter term we feel the low interest rate environment will reduce the attraction of this business. It’s been recently trading on a price/earnings ratio of 7.5 times and a dividend yield of 4 per cent. There’s room for the share price to improve.

SELL RECOMMENDATIONS

TPG Telecom (TPM)

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

A telecommunications company, with a strong record of operational performance. At the current share price, we believe a good opportunity exists to take profits in light of risks presented to the TPG business model from the NBN rollout. While we expect TPG to increase market share in an NBN world, we think this will be achieved at reduced margins, which we forecast halving from 39 per cent in fiscal year 2013 to 19 per cent post 2019. Recently trading on a price/earnings ratio above 22 times, we think the stock is expensive.

Retail Food Group (RFG)

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

Franchised outlets include Donut King, Michel’s Patisserie and Brumby’s Bakeries. In a challenging retail environment, RFG has performed relatively well due to its low priced food products. Going forward, we see risks to RFG’s business model, which relies on shopping centre foot traffic to generate sales and cash flow. Changing retail trends are resulting in subdued shopping centre development. The share price has been recently trading at the higher end of its 52-week range.

 

James Samson, Lincoln Indicators

BUY RECOMMENDATIONS

Credit Corp Group (CCP)

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

CCP is a debt collection business with a growing track record for under promising and over delivering. The company is hitting a ceiling in terms of domestic debt collection markets, but currently has multiple alternative expansion options to explore. It’s in strong financial health. Amid expansion in consumer lending and in US debt collections, CCP looks set to once again record strong growth in fiscal year 2014.

Regis Resources (RRL)

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

Gold producer RRL isn’t for the faint hearted. The company outperforms many peers in the gold industry as its Moolart Well and Garden Well projects produce reasonably consistent performances. With gold prices remaining at low levels, RRL is our preferred gold exposure that offers plenty of upside should the gold price recover further.

HOLD RECOMMENDATIONS

Ramsay Health Care (RHC)

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

RHC is the leading operator of private hospitals and a provider of medical and surgical services in Australia. Despite a recent announcement flagging a contract dispute with Medibank Private, we believe the future is bright for this business. However, at current levels RHC appears to be fully priced.

Tox Free Solutions (TOX)

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

TOX reported solid full year results in August and is continuing to consolidate a reasonably fragmented waste management industry in Australia. The future is bright for TOX, particularly in fiscal 2014 as the business reaps the rewards of recent acquisitions. But it’s trading at elevated levels, leaving little further upside in the short term.

SELL RECOMMENDATIONS

Caltex Australia (CTX)

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

With the Australian dollar declining, margins may begin to come under pressure. The refiner and service station operator recently provided weak profit guidance for full year 2013, but the share price has rebounded recently. In our view, CTX looks expensive at current levels.

Fairfax Media (FXJ)

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

Following a shake-up and industry restructuring, FXJ is monetising online services with the advent of pay walls for news content. While this may provide some short-term revenue benefits, we believe it may pressure advertising revenues in future years if subscriber traffic declines.

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.