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Gavin Wendt, MineLife

BUY RECOMMENDATIONS

Potash West (PWN)

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

An emerging potash company until this point has been solely focused on its Dandaragan Trough fertiliser project in Western Australia, where it’s identified a large scale resource. More recently, it’s farmed into an even more advanced potash opportunity in Germany, which has the potential for near term production. Potash is an important commodity in a world with growing food demand.

Poseidon Nickel (POS)

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

Poseidon Nickel is trading close to a two-year high. This follows exciting corporate developments recently, which have dramatically accelerated the company’s path towards maiden nickel production in Western Australia at a time of strong nickel prices. Dual project acquisitions from Norilsk have provided the company with three likely sources of production, with first production possible during early 2015.

HOLD RECOMMENDATIONS

Minotaur Exploration (MEP)

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

After its share price doubled recently on the back of high grade copper/gold results from maiden drilling at its Eloise prospect in Queensland, Minotaur Exploration has entered into a capital raising to fund further drilling activity. We are extremely pleased with the results so far, and it’s likely ongoing work will identify further high grade mineralisation. We retain a hold while the capital raising is sorted.

Rox Resources (RXL)

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

It’s generating strong market recognition with respect to its Fisher East nickel sulphide project in WA, which boasts wide intercepts, robust nickel grades and a JORC-compliant resource that’s growing strongly. All at a time of strengthening nickel prices. Also, drilling programs are underway on the Bonya copper and Reward zinc projects in the Northern Territory.

SELL RECOMMENDATIONS

Paladin Energy (PDN)

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

The critical issue for Paladin Energy is to generate cash to meet a convertible bond repayment due in October 2015.  The Langer Heinrich flagship operation in Namibia has successfully reduced costs, with more to come. Ultimately, uranium prices have to rise to generate sufficient cash. Although uranium prices will eventually increase, Paladin is faced with a funding gap. In our view, uncertainty adds up to a sell.

Silver Lake Resources (SLR)

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

Silver Lake recently reported a $170.4 million loss for fiscal year 2014. For 2015, the company hasn’t provided guidance on costs. In a difficult (but not impossible) environment for gold producers, Silver Lake is disadvantaged due to its technically challenging and high cost asset base, meaning it’s highly leveraged to the gold price. At the moment, this puts it under a lot of pressure.

 

Michael Heffernan, Lonsec

BUY RECOMMENDATIONS

iiNet (IIN)

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

An internet service provider that’s also involved in many facets of the telecommunications industry. It’s made several value accretive acquisitions in the past few years. Recently, it delivered a most impressive report, offers strong future growth prospects and robust share market fundamentals.

Qantas (QAN)

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

Strictly for the punters. Chief executive Alan Joyce has comprehensively cleared the decks, costs have been cut and the value of aircraft written down to such an extent that Qantas says it will deliver a profit before tax in its next report. The Qantas share price in 2007 was $6.06.  So the share price has more altitude to climb to get back anywhere near 2007 levels.

HOLD RECOMMENDATIONS

Wesfarmers (WES)

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

With Coles supermarkets and Bunnings hardware stores as key components of its retail stable, the Wesfarmers growth profile remains strong.  The $1 capital return and associated franking credits later this year (subject to shareholder approval) is another attractive reason to hold this stock.

CSL (CSL) 

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

This internationally renowned blood plasma and vaccine developer has been a sharemarket star since listing in 1994. Its recent report was most impressive. It will also benefit from any strengthening in the US dollar as it generates a sizeable proportion of revenue overseas.

SELL RECOMMENDATIONS

Mineral Resources (MIN)

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

As both a small iron ore producer and mining services company, MIN has been adversely impacted by the recent sustained fall in iron ore prices. A cut in capital expenditure in the broader mining sector during the past last year hasn’t helped.

Orica (ORI) 

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

As the mining sector has been experiencing severe headwinds in recent years, the fortunes of Orica have been substantially downgraded.  Unfortunately for Orica, it’s now predominantly an explosives manufacturer delivering its products to the mining sector.

 

Simon Bond, Morgans CIMB

BUY RECOMMENDATIONS

Ramsay Health Care (RHC)

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

The private hospital operator is firing on all cylinders, with the domestic business supported by solid organic growth, added capacity and new developments amid modest private health insurance and regulatory risk. RHC has a strong exportable operating model, with the UK’s return to solid profit and ongoing strength in France.

Healthscope (HSO)

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

We view Healthscope as a core holding. As a leading hospital and healthcare provider, HSO offers a developing portfolio of high return, low-risk assets underpinned by attractive industry dynamics. A reputation for quality and service helps support margin expansion, strong cash flow generation and sustainable double-digit earnings growth.

HOLD RECOMMENDATIONS

Origin Energy (ORG)

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

It’s been a tough year for ORG, with declining demand and low wholesale prices negatively impacting earnings. In 2015, we expect some earnings recovery in the energy markets business (predominantly on the back of the gas book), but we still believe the industry remains pressured.

AGL Energy (AGK)

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

The major downside risks to our target price revolve around weak wholesale electricity prices, softer demand in the retail and merchant businesses and capital expenditure over-runs in the upstream business. Upside risks include wholesale electricity price increases, demand improvements and removal of the carbon tax.

SELL RECOMMENDATIONS

Tatts Group (TTS)

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

At the operating level, Tatts Group’s result was disappointing, failing to reach our lower-than-consensus estimates across sales, EBIT and dividend. Our estimates were driven primarily by our cautious stance regarding the wagering
division. However, the weak result was driven by lotteries, which raises further concerns as we considered it a much more resilient business and believe the difficulties in wagering are still to come.

ASX Limited (ASX)

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

Despite an improving equity market environment, we still see ASX struggling for near term earnings growth given its reduced leverage to a recovery in market activity. Our forecasts assume only 4 per cent earnings per share growth in fiscal year 2015 and 7 per cent in 2016. This already factors in an ongoing recovery in IPO and trading activity. We don’t believe a forecast earnings per share multiple of 18 times in fiscal year 2015 is justified by this growth profile.

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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