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Charles Thomas, Bell Potter Securities

BUY RECOMMENDATIONS

Vocus Communications (VOC)

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

We have updated each valuation methodology for this telecommunications supplier. The net result is a price target increase from $4.50 to $5. At this price target, the total expected return (including the dividend yield) is 16 per cent and this supports our buy recommendation. The shares closed at $4.33 on June 18.

ANZ Bank (ANZ)

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

We have further reviewed ANZ’s prospects at the end of the bank reporting season. The strength of its fundamentals relative to many of its peers, and exposure to US dollar earnings through its super regional strategy (20 per cent of group cash earnings) gives us confidence that it’s better placed than most at this point in the economic cycle.

HOLD RECOMMENDATIONS

Super Retail Group (SUL)

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

Well managed SUL offers attractive medium term growth prospects backed by sound operating metrics. But a more cautious stance is warranted until significant near term volatility in SUL’s target consumer market abates. Accordingly, we downgrade our rating from a buy to a hold.

Monadelphous (MND)

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

Our price target has declined 12 per cent to $18.40 due to our earnings revisions based on a discount cash flow valuation. We have downgraded our rating from a buy to a hold, noting deterioration in the new project pipeline in recent months. The company forced was forced to ride out the cycle and attempted to cushion earnings through material cost reductions.

SELL RECOMMENDATIONS

The Reject Shop (TRS)

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

The retail chain has revised down its fiscal year 2014 profit guidance to between $14.5 million and $15.5 million. The revised profit forecast includes a $500,000 (post tax) impact from store opening costs and asset writedowns on six stores. Notwithstanding store rollout costs, the ongoing inability to grow earnings despite an expanding store footprint is concerning. We believe TRS’s risk profile remains elevated due to major centre store challenges, store cannibalisation risks and gross margin risks in the face of highly competitive conditions and a lower Australian dollar. We retain our sell rating.

Australian Securities Exchange (ASX)

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

We have downgraded our earnings in financial years 2014 and 2015. The downgrade is driven by a weak third quarter trading update. Our analysis suggests derivatives revenue growth is becoming increasingly challenging. Following our changed estimates, we retain our sell recommendation.

 

Darren Jackson, Calibre Investments

BUY RECOMMENDATIONS

G8 Education (GEM)

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

The company recently completed a capital rising to make earnings accretive acquisitions. This childcare centre operator has been a strong performer. Domestically, there’s ample room for G8 to make further acquisitions and continue to deliver growth.

Swala Energy (SWE)

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

Key events are fast approaching which could potentially revalue this oil and gas junior. This includes the farm-out of SWE’s Pangani block and seismic data from Block 12B. Previously, Swala’s farm out of Block 12B was on very favourable terms and the company continues to build an impressive land bank around the East African Rift. A speculative buy.

HOLD RECOMMENDATIONS

Western Areas (WSA)

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

Nickel has been benefiting from supply constraints caused by the Indonesian export ban on unprocessed commodities. This is in strong contrast to most industrial metals (iron ore and copper), which have been performing poorly. Until supply constraints are addressed (through construction of Indonesian blast furnaces), nickel and Western Areas remain a hold.

SP AusNet (SPN)

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

Recent RBA commentary suggests interest rates will be lower for longer. Europe currently has negative interest rates. The yield theme still has a way to go provided economic growth remains stagnant. This power and gas distributor offers a reliable and sustainable income stream and was recently yielding 6.26 per cent.

SELL RECOMMENDATIONS

Invocare (IVC)

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

We have noticed companies sensitive to the weather have reported poorly and can cite The Reject Shop (TRS) and Pacific Brands (PBG) as recent examples. Oddly enough, warm winters tend to lower mortality rates. This isn’t ideal if you’re an operator of funeral homes and cemeteries. IVC reported a similar situation last year.

PanAust (PNA)

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

Guangdong Rising Assets Management has made a “non binding indicative proposal” to acquire all PNA shares for $2.30 each. Our recommendation is based on the poor performance of Chinese takeover bids, the time value of money and the recent fall in the copper price. Also, this isn’t a firm offer. PNA has been trading close to the proposal price and, in our view that appears excessive.  

 

Les Szancer, Paradigm Securities

BUY RECOMMENDATIONS

Sirtex Medical (SRX)

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

Its unique medical device delivery system targets liver cancer without damaging healthy cells. This treatment has been a major contributor to company growth. A recent share price fall provides a buying opportunity for a company that’s chalked up 38 consecutive quarters of growth. Strong sales add to its appeal. It also pays a dividend.

Rhinomed  (RNO) 

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

According to clinical trials, its nasal medical device can increase airflow to the lungs by 38 per cent. Its technology program is examining sleep apnea solutions. The sports and sleep apnea markets are huge. Potential exists. A speculative buy.

HOLD RECOMMENDATIONS

OncoSil Medical (OSL)

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

Its lead product is in late stage clinical research. Its implantable medical device emits radiation into a pancreatic tumour without damaging healthy surrounding tissues. Offers much potential, but investors should always weigh up risks and rewards.

Central Petroleum (CTP)

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

Excitement followed an initial find in the Amadeus Basin. Mixed results led to a retreating share price. We now await further updates.

SELL RECOMMENDATIONS

REA Group (REA)

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

REA Group offers a successful online business model. However, a group of real estate agents are in the process of setting up a rival operation. We would expect competition to impact income. The chart isn’t looking strong after hitting $52 earlier this year. The shares were trading at $45.10 on June 19.

Paladin Energy (PDN)

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

Until uranium becomes a serious energy player again, I think the Paladin share price will continue to suffer. The chart looks terrible if you’re an investor. The share price has halved since March. Inevitably, uranium will become a force again if you have the patience to wait. The shares were trading at 31 cents on June 19.

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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