Robert Swarbrick, Novus Capital
Redfork Energy (RFE)
A debt-free oil and gas explorer and producer operating in the United States. Drilling has started at 10 wells, and expect more to follow in the next 12 months. This stock should benefit as production begins and the share register is quite tight. The stock has been as high as $1.38. It was a $1.24 a share in early morning trading on July 17.
Deep Yellow (DYL)
The share price of this uranium explorer has fallen from 47.5c in June to 30c levels. It has no debt and $50 million in cash. Uranium producer Paladin Energy owns 19.9 per cent of Deep Yellow. Deep Yellow offers good assets in Namibia and may be a takeover target. I expect this to bounce back to 40c soon.
Consolidated Media Holdings (CMJ)
Seven Network’s Kerry Stokes has bought 19 per cent of the stock and James Packer has lifted his holding to almost 41 per cent. When looking at the value of Foxtel’s assets, there could be long term upside here, with Stokes launching a possible takeover.
Cortona Resources (CRC)
A gold explorer with assets in Western Australia and New South Wales. The stock has been as high as 22c amid a volatile gold price. When NSW goes into stgelopment, the stock has tremendous upside potential.
ANZ Bank (ANZ)
The ANZ recently raised more than $2 billion from small retail investors who paid $14.40 a share. The initial retail target was $350 million. But I expect more pain in the domestic residential mortgage market. Take profits on the share purchase plan.
Wesfarmers is a diverse industrial stock and borrowed a vast amount to buy Coles Group. Recently it sold 45 stores and is looking to further rationalise the business model. I expect further downside.
Andrew Doherty, Morningstar
AGL Energy (AGK)
One of Australia’s major integrated energy companies, AGL’s customer base exceeds 3.5 million people. Investments in upstream gas activities and electricity generation complement long-term gas supply contracts. Strong growth potential exists in the retail and power generation businesses and the upstream gas portfolio. Expect above average shareholder returns over the medium term.
BHP Billiton (BHP)
BHP is a well-managed global resources leader, with a balanced portfolio of world class, long life assets. It also offers a full suite of conventional energy products. The world’s largest diversified resources company will benefit from continuing Chinese growth, as many prime assets are well located to service Asia. Low cost operations and a strong balance sheet are the key.
Adelaide Brighton (ABC)
This cement and lime producer is exposed to the decline in building and resources activity. Performance is holding up relatively well due to strong positions in most areas, price rises and cost cuts. Healthy capacity is supporting margins. Earnings will rebound once underlying conditions improve.
New Hope Corporation (NHC)
New Hope mines thermal coal, primarily from its low cost, long life mine Acland, about 140 km west of Brisbane. Smaller contributions are from Jeebropilly and Oakleigh near Ipswich. Growth is from Acland expansion. Coal seam gas via a 15.5 per cent stake in Arrow Energy (AOE) may also drive long term growth. Selling the New Saraji coal mine for $2.45 billion in 2008 leaves the balance sheet in immaculate condition, with about $2.6 billion in net cash, much of which can be paid in special dividends.
Flight Centre (FLT)
Australia’s largest traditional high street travel agent differentiates its brand into market segments, including retail, wholesale, corporate and online. Discount airlines intensify price competition, driving down the cost of air travel and lowering commissions to travel agents. The decline in discretionary spending will continue to pressure earnings.
REA Group (REA)
REA is Australia’s leading real estate online classifieds site. So many people use realestate.com.au that it’s more popular than the next 15 competitors combined. We are concerned about the threat posed by internet giant Google’s plans to enter the market. Barriers to entry are low. A cautious approach to this stock is necessary.
Ben Potter, ABN AMRO Morgans
News Corporation (NWS)
News is our key pick in the media sector and we expect to see an advertising recovery in the US before Australia. The company’s earnings should be boosted by continuing growth in its cable division, now accounting for almost half of its operating income.
QBE Insurance (QBE)
QBE offers diverse product and geographical exposure by operating in 45 countries. Gearing is conservative at 30 per cent net debt to equity, and the current environment should provide plenty of growth opportunities. The stock looks undervalued, trading on a forward 12-month price/ earnings ratio of 10 times versus its historical average of 13 times.
ABB Grain (ABB)
Canadian company Viterra’s recent cash and scrip offer for ABB Grain has indirectly improved in line with the suitor’s share price. But given ABB’s profit downgrade, this should rule out any chance of a higher offer coming from either Viterra or a competitor.
Consolidated Media Holdings (CMJ)
Seven Network chairman Kerry Stokes has been a heavy buyer of CMJ stock, possibly building a stake in the company in readiness for a takeover. CMJ has good defensive assets, but they are fully valued at the current price.
Australian Securities Exchange (ASX)
Despite the recent sharemarket bounce, average daily volumes are still well below those of a year ago. We believe ASX offers little growth this financial year and next and, in our view, trends are not as positive as the share price suggests. Expect the share price to retreat in the short-to-medium term.
Qantas Airways (QAN)
While the decline in passenger demand is showing signs of moderating, the pricing environment is still weak, and seems likely to remain so for the immediate future. We believe rising unemployment and household deleveraging pose risks to travel demand over the next six-to-12 months.
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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