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Joshua Stega, JAS Wealth

BUY RECOMMENDATIONS

Blackmores (BKL)

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

BKL develops, makes and distributes health care products. BKL has a strong brand, profitable sales mix and a robust market position that enables it to operate a more profitable model than many peers. There’s significant opportunities in the Asian region, and we believe the company will continue to deliver double digit growth there in the medium to long term. BKL was recently trading at a discount to the ASX Small Industrials Index, with a price/earnings multiple of 17 times and a dividend yield above 5 per cent.

Coca-Cola Amatil (CCL)

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

Competitive advantages include the power of the Coke brand and its distribution network. It was recently trading on a price/earnings ratio of 15 times and a yield above 5 per cent. We believe the current share price represents a good opportunity for long term investors to build a solid position in a well managed business with significant long term growth potential.

HOLD RECOMMENDATIONS

Perpetual (PPT) 

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

If it successfully executes its cost strategy, we see meaningful upside to fiscal year 2014 and 2015 earnings. However, at this stage, we have risk weighted our earnings estimates to reflect uncertainty around execution. We are taking a wait and see approach with this stock.

Iress (IRE)

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

Supplies sharemarket and wealth management systems in Australia, New Zealand, Canada and South Africa. It has a solid business model that mostly relies on developing high margin premium products in Australia, which then can be replicated in other markets. In terms of expansion, IRE usually enters markets where it has a competitive advantage and builds scale through acquisitions until it is the dominant player.

SELL RECOMMENDATIONS

Ansell (ANN)

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

A well managed business with a solid brand and good market share. But we believe the company will struggle to out-perform in the short to medium term. The most recent financial report was below our forecasts and we believe better investment opportunities exist elsewhere.

Oil Search (OSH)

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

The oil producer has a long and profitable history in Papua New Guinea. But much of the perceived value is in substantial gas resources, so far quarantined by a lack of infrastructure and high capital costs. We argue that a lot hinges on LNG in PNG. For a company recently trading on a price/earnings multiple of 33 times and a negligible dividend yield, we are sellers of the stock.

 

James Samson, Lincoln Indicators

BUY RECOMMENDATIONS

Bigair Group (BGL)

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

BGL provides fixed wireless data solutions to the Australian market. The business offers an increasingly important niche service to the telecommunications market, and is expanding into additional product suites, such as unified communications. While not cheap, BGL is a growing business with a bright future.

Senex Energy (SXY)

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

SXY is our preferred stock with exposure to the Cooper/Eromanga basins, an area seen by many as possessing attractive future value. The company is producing oil at a high margin. It has recently agreed to farm-out arrangements with Origin Energy and the South Australia Cooper Basin Joint Venture in order to commercialise its regional gas resources. With short term growth in oil production and profits, and a strong longer term theme in the gas business, SXY appears attractive at current levels.

HOLD RECOMMENDATIONS

Adelaide Brighton (ABC) 

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

Recently announced it will lose a key contract. The share price reacted savagely, but we believe ABC’s strong market position and cash flow stability will continue to underpin an above market dividend stream. Also, the contract loss will only impact earnings from 2016. While there are risks, the business is a hold at these levels.

Titan Energy Services (TTN)

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

TTN is experiencing growth in the coal seam gas focused Surat Basin in Queensland. While TTN is still on track to post strong growth, we see some risk to guidance for the full year and, as such, believe the share price is currently reflective of its value.

SELL RECOMMENDATIONS

Affinity Education (AFJ)

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

AFJ recently listed and is looking to emulate fellow listed success story, G8 Education (GEM). However, with limited experience in integrating newly acquired childcare centres and a fine funding balance to achieve, we prefer GEM’s experience and track record, even with its higher share price.

Imdex (IMD)

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

Given the tough conditions in mining services and in particular drilling services, we view IMD as a risky investment at present. Australian Mud Company, a drilling fluid supplier and IMD subsidiary, notified that an additive may contain a small proportion of asbestos. Work at an Origin LNG project was suspended until all affected material had been quarantined and accounted for throughout the supply chain.

 

Peter Day, Macquarie Private Wealth

BUY RECOMMENDATIONS

Adelaide Brighton (ABC)

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

Revenue of $1.228 billion for the year to December 31, 2013 represented a by 3.8 per cent increase on the previous corresponding period. Total full year dividends of 19.5 cents were 3 cents higher than in 2012. We still retain an outperform recommendation despite a supply contract with Cement Australia unlikely to extend beyond this calendar year.  

National Australia Bank (NAB)

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

The first quarter 2014 result showed a near best in class capital performance aided by de-risking across the book. Going forward, other capital initiatives are available as well. Capital initiatives could add up to a capital return within one-to-two years or sooner. We expect the stock to outperform.

HOLD RECOMMENDATIONS

CFS Retail Property Trust (CFX)

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

While retail sales are improving, we anticipate continuing negative rent reversions and an earnings drag into full year 2015. We view the portfolio relatively favourably, but CFX is trading around our price target.

Beach Energy (BPT)

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

BPT gave an update regarding the Nappamerri Trough unconventional program, highlighting that Boston 2 and 3 flow rates will be delayed until later this year. We retain a neutral stance. While BPT recently indicated that five wells would flow by April, this has slipped as its joint venture grapples with mechanical issues.

SELL RECOMMENDATIONS

Flinders Mines (FMS)

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

Flinders is developing its Pilbara iron ore project. Securing a partner to fund the infrastructure requirements is a positive. But how these projects are funded remains uncertain. The decision to work with another junior rather than an incumbent operator was a surprise. We retain our underperform recommendation.

Leighton Holdings (LEI)

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

Hochtief has made a conditional, proportional off-market offer to acquire three out of every eight shares held by LEI shareholders. Multiples are at a premium to domestic peers, but in line with global peers. Given the extent of the price rally, we reduce our recommendation to a sell.

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.

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