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Matthew Litchfield, PhillipCapital

BUY RECOMMENDATIONS

Santos (STO)

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

Offers exposure to quality producing assets, including the PNG LNG project. The project is at capacity and production will be boosted in fiscal year 2014/15. Expect further upside potential through active exploration activities. Also, the Gladstone LNG project is on track for first LNG in 2015. Management has also flagged an expected dividend increase when GLNG starts up.

G8 Education (GEM)

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

The operator of more than 400 childcare centres is on an acquisition drive to consolidate the highly fragmented industry. So far management has been disciplined when doing acquisitions, which are utilising efficiencies and creating economies of scale. Additionally, this growth company is positioned in a relatively defensive industry with growing demand. Any government push to encourage more women into the workforce should provide a benefit to GEM.

HOLD RECOMMENDATIONS

BHP Billiton (BHP)

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

The global miner recently announced a profit of $13.8 billion. The result confirmed a good operational performance. BHP announced the spin off of a new company containing non-core assets. It’s also offering investors a decent dividend.

Telstra (TLS)

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

This stock has risen 17 per cent on a year rolling basis and pays a handsome dividend of 29.5 cents a share. There’s no signs its competitive advantages are abating. Considered a cash cow, the company expects free cash flow of between $4.6 billion and $5.1 billion for 2015. Having returned $4.7 billion to shareholders last financial year and poised for expansion into Asia, I am more than happy to hold.

SELL RECOMMENDATIONS

QBE Insurance Group (QBE)

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

Disappointed the market again with another earnings downgrade. This is the fourth consecutive downgrade in what is becoming a concerning trend. The profitability of insurance companies is difficult to predict given exposure to unforeseen events. The share price has been punished and better opportunities exist elsewhere.

SMS Management & Technology (SMX)

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

Market conditions are weaker and highlight a tough operating environment. SMX reported a 40 per cent decline in net profit after tax to $12.7 million. The stock appears to be more negatively impacted by the current downturn than other IT service companies. It seems only further acquisitions will stop the negative earnings momentum.

 

Peter Russell, Russell Research

BUY RECOMMENDATIONS

Amcom Telecommunications (AMM)      

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

As a telco, Amcom envisaged future growth in data so it built networks and capabilities as it grew revenue by 28 per cent in fiscal year 2014 and earnings per share by 18 per cent. Working with US company Cisco and in the cloud, its University of Melbourne contract points the way for clients to use, not do, IT. Now with national infrastructure and recurring revenue, it expects to post double-digit net profit growth going forward.

BigAir Group (BGL)

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

Owns and operates Australia’s largest metropolitan fixed wireless network for fast broadband, quick installation and cloud managed services. Clients include businesses, students, retirement villages, shopping centres and mining camps. Organic and acquisition growth has built growing profits and dividends, with integration and network opportunities yet to be leveraged.

HOLD RECOMMENDATIONS

Infomedia (IFM)

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

This leading supplier of vehicle part catalogues and service instructions supports auto dealers in 185 countries via its cloud based software. Its growing subscription base has enabled 2015 net profit guidance above $14.5 million, up 18 per cent on the previous year. The shares were trading at $1.02 on August 27. It was recently trading on a price/earnings multiple of 21 times and a dividend yield above 4 per cent. It has no debt. Accumulate.

Servcorp (SRV)

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

Since raising $80 million in 2009, this serviced and virtual office group has opened 78 new office floors to manage 136 floors in 52 cities in 21 countries. Last financial year, revenue rose 17 per cent and net profit was up 35 per cent on 79 per cent occupancy. In 2015, Servcorp plans to add 10 per cent to capacity and forecasts no less than 15 per cent net profit growth. More upside to come.

SELL RECOMMENDATIONS

Caltex Australia (CTX)

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

Recently trading close to $28, the share price factors in a strong interim result and guidance. We have a high regard for chief executive Julian Segal and Caltex’s restructuring plans. The company is focusing on cost savings. While the long term looks promising, take some profits now and keep a close eye on the stock for a cheaper entry point.

Harvey Norman Holdings (HVN)

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

Strong online shopping growth and competition from other major bricks and mortar retailers leaves a challenging outlook. Most outlets are owned by franchisees and margins for HVN are thin. Return on assets is low and the shares are fully priced.

 

Les Szancer, Paradigm Securities

BUY RECOMMENDATIONS

Core Exploration (CXO)

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

It has more than 2000 square kilometres of promising mineralisation. There appears to be excellent potential for quantities of copper, gold, uranium and rare earths. A recently tight capital raising was well received by the market. A speculative stock for those with an appetite for risk.

Galilee Energy (GLL)

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

Offers good oil and gas prospects in North America, South America and Australia. It has $26 million in the bank and its drilling costs are relatively low. New management has arrived like a breath of fresh air. At Paradigm Securities, we listen to about a dozen presentations a week. This would be the most impressive presentation we’ve heard this year.

HOLD RECOMMENDATIONS

Liquefied Natural Gas (LNG)

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

The stock recently hit $4, but closed at $3.68 on August 27 on profit taking. Its cost structure is cheaper and more efficient than its peers. And, it has a massive LNG project in Louisiana in the US.

Gold Road Resources (GOR)

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

The Yamarna Belt in Western Australia is situated below several very rich belts, including Laverton, Duketon, Lenora, Norseman and Southern Cross. Collectively they have given off more than 175 million ounces in Western Australia. Even though the GOR price has charged ahead, there’s still more upside potential. If you own it keep it. If you don’t, buy some.

SELL RECOMMENDATIONS

News Corporation (NWS)

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

Print media is under pressure across the globe. This company’s Australian newspapers aren’t immune. Selling fewer papers adversely impacts advertising revenues.

Cabcharge (CAB)

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

The company has enjoyed a good run. Victoria slashed card servicing fees and other states may follow. This would potentially hurt revenue.

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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