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Ken Bloomfield, Financial Clarity

BUY RECOMMENDATIONS

Lend Lease  (LLC)

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

The share price has retreated recently and is now in our buying range. As well as benefiting from a strong building sector, LLC is the Australian leader in urban regeneration. Projects, such as Barangaroo and Victoria Harbour, are tapping into changing living preferences. Also, with Leighton’s facing possible credit rating challenges, LLC is currently winning more infrastructure building business – a good place to be with the Prime Minister committed to infrastructure.

Macquarie Group  (MQG)

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

Macquarie’s annuity style businesses of funds management and lending have been performing well, while its capital markets business has been struggling since the GFC. However, as merger, acquisition and IPO activity increases, MQG’s capital markets division is well placed to benefit.  Although we were buying Macquarie for our clients in the $30 levels in early 2013, we’re happy to buy them around $60 as both divisions begin to fire and drive profits upwards.

HOLD RECOMMENDATIONS

National Australia Bank (NAB)

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

Australian banks have enjoyed a great run and are looking slightly expensive, except NAB. We’re comfortable holding the banks for now while the housing market stays strong. National’s UK division has been dragging down its price relative to the other banks. However, with the UK economy recovering, we think the market has over priced the drag on earnings. NAB’s forecast 2015 fully franked dividend yield above 6 per cent is attractive and so is its valuation.

QBE Insurance  (QBE)

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

After waiting patiently on the sidelines in the past few years, we believe QBE is close to becoming a buy. If you already hold the stock, it’s worth hanging on. QBE has been reforming and restructuring its global businesses for three years, becoming more efficient and focused on what types of risk it wishes to be exposed.  Premiums are increasing across the board and, as interest rates start gradually rising in the US, its large pile of lazy money will start earning something again.

SELL RECOMMENDATIONS

Atlas Iron (AGO)

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

Iron ore prices have rebounded in the past two weeks after falling 35 per cent in the previous three months. But the majors are now flooding the market with ore, with plans to increase production well beyond demand increases. Combined with a slowing Chinese residential property sector, the iron ore price rebound may soon falter. Use this short term rally in iron ore prices to exit all the smaller producers (anything except BHP and RIO).

Harvey Norman (HVN)

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

The consumer is looking very weak, with few signs of a recovery in confidence following the Budget. Additionally, the weather has been very dry, reducing some winter related product sales. Recently trading on a price/earnings multiple of about 16 times, we see no need to be in a stock like HVN after its strong rally last year.

 

Jonathon Feil, Morgans CIMB

BUY RECOMMENDATIONS

Titan Energy Services (TTN)

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

Titan is an energy and infrastructure services group focused on the growing coal seam gas industry in Queensland. The business continues to examine ways to grow and diversify organically and through acquisition. Overall, it’s being valued like a mining services player, but offers a highly scalable and transferrable business model. Continuing contract wins are an added kicker. With market capitalisation of $100 million, EBIT of $18.5 million and a yield of 4.7 per cent, Titan is attractive.

Buru Energy (BRU)

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

After a substantial sell-off owing to operational delays and a mini warrant stop out event, BRU is offering deep value based on its gas and oil asset base. A cheap opportunistic takeover bid, or a value accretive farm out deal could be on the cards. Recently installed executive chairman Eric Streitberg (a significant shareholder) looks set to get operations back on track.

HOLD RECOMMENDATIONS

Rio Tinto (RIO)

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

Numbers released in April suggest group production across the board is broadly up on the 2013 first quarter, with a few exceptions.  But overall production was down more than expected on the 2013 fourth quarter. Full year 2014 copper production is at slight risk to the downside.

AGL Energy (AGK)

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

Australia’s second largest power retailer says axing the carbon tax will hurt this year’s profit by almost $200 million. It suffered a 5.5 per cent fall on the news, demonstrating the Australian Government’s influence over the energy market. Despite factoring in the weakness, the stock doesn’t excite.

SELL RECOMMENDATIONS

Sirius Resources NL (SIR)

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

Experienced a substantial lift on another nickel sulphide find. However, expect the reality of project economics to set in (the deposits are substantial distances from each other). Further, production won’t start for several years at its flagship Nova-Bollinger project in Western Australia, meaning it will miss the current boom in prices. Overall, the space is displaying bubble characteristics and, in our view, is overpriced.

Syrah Resources (SYR)

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

This graphite and vanadium junior recently reached euphoric highs on speculation of a Glencore takeover. But the speculation appears to be nothing more than noise. We expect market excitement to subside and the share price to retreat.

 

Les Szancer, Paradigm Securities

BUY RECOMMENDATIONS

Elementos (ELT)

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

The recently acquired Cleveland tin mine project brings a three-stage development opportunity to ELT. The 3.8 million tonnes of tailings grading 0.3 per cent tin should provide a low capital and operating cost cash flow operation that should assist in financing the re-opening. An important tungsten resource is also accessible from the decline. Tin and tungsten have good price outlooks.

Coretrack (CKK)

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

Has acquired ceramic proppants technology that can produce superior sand particles for use in the fracking process involving shale gas and tight oil production. The ceramic particles use fly ash from coal fired power stations to produce a fracking sand that’s near spherical, more uniform in particle size, strong and light. This gives a superior product in each characteristic and is price competitive to natural sands.

HOLD RECOMMENDATIONS

Blackham Resources (BLK) 

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

A gold play, with great resources and prospects, but it’s been having a boardroom brawl involving axed chairman Joseph Gutnick. Whenever this type of issue occurs, investors tend to run for the hills. The resources and bright prospects remain the same.

Central Petroleum (CTP)

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

I am ignoring the price fall, CTP is the operator in French energy company, Total’s funded drilling program in the Georgina Basin. It’s also growing income from oil projects at Palm and Surprise West. I expect Surprise East will be drilled later this quarter. There’s also an important helium deposit at Mt Kitty involving Santos. CTP’s involved in good projects.

SELL RECOMMENDATIONS

Mesoblast (MSB) 

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

Whether you conclude this biotech company’s medical applications have merit, one can’t ignore a terrible looking chart. Since February, when it traded above $6, the chart has gone in a steady downward spiral. Yes, it appears to be holding above the $4.20 mark, but I believe investors are losing confidence in the stock. The shares were trading at $4.45 on July 24.

NextDC (NXT)

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

A data carrier and vendor. Acquisitions have been purchased and the business model seems sound. All sounds great, but it doesn’t seem to be appealing to investors. The chart tells everything. In February, it was trading around $2.50 and it’s continued falling to trade at $1.55 on July 24. Maybe a contrarian might buy here, but I couldn’t on this chart.

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