James Samson, Lincoln Indicators

BUY RECOMMENDATIONS

CSL (CSL)

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

One of the world’s largest blood plasma providers to the health care industry and almost regarded as an Australian household brand. Having recently settled several anti-trust litigation cases in the US for US$64 million, CSL is well placed to continue its rich earnings growth in fiscal year 2014. While recent company announcements and sentiment have been somewhat static, this provides an opportunity to invest in CSL’s continuing long-term growth business.   

Credit Corp Group (CCP)

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

CCP is a debt collector and credit provider in the Australian market and, more recently, the US market. The company’s financial position is strong after performing particularly well in recent years. An increasingly attractive personal lending market and the company’s significant investment in the US places CCP in a strong position going forward.

HOLD RECOMMENDATIONS

Slater & Gordon (SGH) 

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

Having recently acquired several legal practices in the UK, expect Slater to continue growing its brand and position in the global personal injury litigation market. The company has achieved significant success domestically through an accretive market consolidation strategy, and we expect SGH will maintain its future earnings growth prospects from its UK investments. However, we believe SGH appears fully valued at current prices.

TPG Telecom (TPM)

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

Telecommunications has been a robust sector in recent times, and TPM has enjoyed a stellar share price run. However, after TPM announced, but did not quantify, its significant capital expenditure in fibre-based infrastructure in Australia, we believe caution is warranted when it comes to the company’s elevated share price.

SELL RECOMMENDATIONS

Cochlear (COH)

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

COH is yet to fully recover from the reputational damage caused by the Nucleus 5 product recall. While the share price sell-off was overdone at the time, COH now faces new challenges and signalled at its AGM that fiscal year 2014 earnings growth would be flat. In our view, COH is likely to face margin pressure as it looks to expand in the Asian region. Further, we are wary of the increasing impact of competition in the region.

Ozforex Group (OFX)

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

OFX is a financial intermediary providing foreign exchange services and solutions. Having listed at $2 on October 11, 2013, OFX was considered by some as an expensive initial public offering on a forward price/earnings ratio of around 21 times. Since listing on the ASX, the share price has rallied to close at $2.83 on October 16, and, in our view, appears to be significantly overvalued. While the company’s operations and market position are attractive, we believe there’s downside to the current market fervour.

 

Peter Russell, Russell Research

BUY RECOMMENDATIONS

IMF (Australia) (IMF)      

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

Litigation financier IMF had a record value of unfinished cases at its June 2013 year-end. After 12 years, it continues to build its case load, and is now expanding in the US. Expect another top result and at least another 15 cent franked dividend in 2014.                        

Webjet (WEB)                  

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

Last financial year, Webjet successfully acquired Asian competitor Zuji and upgraded IT systems. Costs of activities slowed profit growth. But revenues, margins and net cash increased. This half year will show expanded profit streams. Meanwhile, the share price has slid from $5.30 to way below consensus targets. The shares closed at $3.34 on October 15.    

HOLD RECOMMENDATIONS

AP Eagers (APE)            

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

This auto retailer has paid a dividend each year since listing 55 years ago. Focused on Queensland, New South Wales and South Australia, it owns and operates motor vehicle dealerships. With a focus on growing earnings and dividends, we expect a franked yield above 5 per cent going forward.    

Logicamms (LCM)                      

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

Company engineering consultants work with major oil, gas and mining groups to lift performance and cut asset operating costs. Logicamms has grown revenues, profits, margins and dividends over five years to give a 29 per cent total shareholder return. Add for a 5 per cent franked dividend and near double-digit earnings growth.          

SELL RECOMMENDATIONS

James Hardie Industries (JHX)            

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

In the past two years, the share price of this building products company has risen from below $6 to a decade high of $11. But the price is now well ahead of consensus targets, particularly given today’s more sober view of global growth and the US housing recovery.                   

Virgin Australia (VAH)         

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

Virgin works hard to be a good airline. But shareholders have little to like. There’s no dividend and the share price closed at just 42 cents on October 15 after all this time as a listed company. The price is above consensus targets. Debt, capital commitments and competition add uncertainty. What investment objectives keep you there?  

 

Peter Moran, Wilson HTM

BUY RECOMMENDATIONS

Myer Holdings (MYR)

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

Trading conditions appear to have improved post the Federal election. We anticipate sentiment will also improve as we head into the key Christmas trading period. Myer stands out as one of the better value plays in retailing with strong cash flow generation.

Cochlear (COH)

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

It’s been a difficult couple of years following the company’s recall of the Nucleus 5 implant. The stock has recently been trading below its historical earnings multiples of 23 times. If the N5 is re-released, as we believe likely, the stock would likely see a sharp re-rating.

HOLD RECOMMENDATIONS

Computershare (CPU)

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

While we continue to like CPU for market leverage on a longer-term view. Continuing weakness in global merger and acquisition activity combined with aggressive competitor behaviour are near term negatives. Trading on a forecast multiple of 17 times in fiscal year 2014, amid management guidance growth of only 5 per cent, means it’s a hold in our view.

Premier Investments (PMV)

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

The recent strong share price performance is behind our neutral recommendation. PMV’s fiscal year 2013 results have several positives (retailers Smiggle and Peter Alexander), but the core Just Jeans and Jay Jays (43 per cent of revenue) brands remain under pressure. Improvement is needed, but it’s uncertain in the short term.

SELL RECOMMENDATIONS

Treasury Wine Estates (TWE)

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

We continue to believe the stock is far too expensive at current levels, recently trading on a forecast price/earnings ratio of 23 times 2014 earnings. Potential further risks to earnings remain and present challenges in a difficult environment. Better value elsewhere in our view. Sell.

Metcash (MTS)

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

Metcash owns the IGA grocery and liquor brand and Mitre 10 hardware chain among other assets. Supermarket competition is only going to get tougher as Coles and Woolworths fight for more market share. We believe the difficult trading environment will compound Metcash’s tight cash position and pressure the dividend to fall. We have downgraded to a sell.

Please note that Cochlear is a buy and a sell this week as brokers take different views on the company’s 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.