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Peter Russell, Russell Research

BUY RECOMMENDATIONS

GBST Holdings (GBT)

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

GBST was started in 1983 and listed in 2005. Its securities trade processing and wealth management platforms are well established in Australia, New Zealand and the UK. Sales of its market leading software are also set to grow in Asia and the US. Expect 20 per cent earnings growth this year and next with franked yields rising more than 3 per cent.

My Net Fone (MNF)

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

Listed in 2006, MNF claims to be Australia’s leading provider of hosted voice and data telecommunications, with a range of VoIP retail and network brands. Recent acquisitions on attractive terms are on track, and organic growth is ahead of forecast. MNF has net cash and its earnings growth should remain above 20 per cent with rising franked dividends.

HOLD RECOMMENDATIONS

Mortgage Choice (MOC)

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

Australia’s leading mortgage broker is enjoying strong conditions. It has a record loan book and a 4 per cent share of national mortgage flow. Commissions have recently increased, as have its franchisees and financial planning business. It expects good growth in cash profits and dividends, which yield above 5 per cent franked. Add to positions.

RCR Tomlinson (RCR)

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

For engineer RCR Tomlinson, 2013 was a fourth year of growth with record earnings. A $140 million acquisition brought respected brands O’Donnell Griffin and Haden, making infrastructure RCR’s largest group with resources halved to a third of revenue. Expect more than 20 per cent earnings growth, with a recent price/earnings ratio at 8.7 times and yield above 3 per cent. Add.

SELL RECOMMENDATIONS

BlueScope Steel (BSL)

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

This steelmaker severely felt the GFC. Global overcapacity, far bigger competitors, high input costs and debt forced extensive restructuring. By focusing on its niche brands and sectors, industry rationalisation at home and joint venturing overseas, the share price (once $50) has recovered from $1.47 to trade at $5.49 on February 6. But we believe share price growth from here is limited and better growth opportunities exist elsewhere.

Treasury Wine Estates (TWE)

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

Foster’s 2011 demerger freed each of the beer and wine operations. TWE accentuated quality wines and cut costs. Positive news doubled the share price to May 2013, but disappointing news followed and the share price retreated. Despite some great brands, many are ordinary and face global competition.

 

Boe Campion, Ord Minnett

BUY RECOMMENDATIONS

Magellan Financial Group (MFG) 

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

Remains one of the best performing international equity managers in the Australian market. The business continues to leverage that record, with a strong distribution team generating inflows from both domestic retail and offshore institutional investors. These inflows are a primary driver of an expected 50 per cent plus in earnings per share growth in fiscal years 2014 and 2015.

Corporate Travel Management (CTD)

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

CTD has a proven track record of diligently acquiring businesses and successfully integrating them. The company’s strategy of spreading an international footprint is well progressed. Its global network aids cross-selling between all regions and allows the targeting of multinational corporations.

HOLD RECOMMENDATIONS

Seek (SEK)

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

We are content to hold the stock as we believe it’s currently trading around fair value. The company has shown significant resilience in a subdued labour market while other factors underpin it at this point. They include a modest improvement in employment conditions (previous corresponding period comparisons getting easier) and a changing business mix.

JB Hi-Fi (JBH) 

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

The consumer electronics giant pre-announced its first half result on January 28, with a 6.8 per cent increase in sales to $1.94 billion and a 10 per cent increase in net profit to $90.3 million. Detail on strength of gross margins was a key surprise and should drive a stronger full year result.

SELL RECOMMENDATIONS

Toll Holdings (TOL)

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

In the next 12-to-18 months, we believe this transport logistics giant will continue to face challenging economic conditions within Australia. There’s a risk some contracts relating to specific construction projects won’t be renewed. With TOL recently trading at a 4.8 per cent premium to our December 2014 price target and our estimate of a 12-month total return of 0.1 per cent, we downgrade to lighten.

Recall Holdings (REC) 

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

We do believe opportunities exist to grow market share of the physical document and data storage markets, but the physical storage industry is characterised as one of low growth. Furthermore, the industry is potentially facing long term structural changes as businesses embrace new technologies. The speed at which the industry is changing is the unknown quantity, so we are reluctant to value Recall aggressively.

 

James Samson, Lincoln Indicators

BUY RECOMMENDATIONS

Credit Corp Group (CCP)

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

This debt collection and personal lending business has upgraded full year profit guidance. It also expects an increase in full year debt purchasing. The profit upgrade continues a pattern of under-promising and over-delivering from a company that shows strong growth in its consumer lending business. Financial health is strong.

JB Hi-Fi (JBH)

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

Shares in JBH underperformed in January on the back of weak retail sentiment. However, JBH has responded with positive profit guidance, expecting full year net profit after tax growth of between 8 per cent and 11 per cent. Accordingly, JBH appears to offer value and may become more attractive as the company’s foray into whitegoods shows improving returns.

HOLD RECOMMENDATIONS

Ainsworth Game Technology (AGI) 

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

AGI has performed extraordinarily well in recent times. The gaming machine maker is well placed for the remainder of fiscal year 2014, and is expected to benefit from improving domestic market share and global opportunities.

TPG Telecom (TPM)

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

TPM possesses a strong balance sheet and is investing in fibre networks domestically. Despite a strong market position, we view the share price as fully factoring in short term growth potential.

SELL RECOMMENDATIONS

Monadelphous Group (MND)

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

The mining services and construction sector is enduring challenges. While we continue to believe that MND is a standout business in the sector, demand headwinds are expected to take a toll in the next 12 months. Margins are at risk and we believe MND’s premium to its peers will result in increasing downside risk.

Myer Holdings (MYR)

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

Retailing remains difficult. We believe the company hasn’t delivered a satisfactory online solution, so there’s a risk that the business will disappoint this earnings season.

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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.