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Jonathon Howe, Red Leaf Equities

BUY RECOMMENDATIONS

Ainsworth Game Technology  (AGI)

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

The share price has been trending down since late 2013, dropping about 40 per cent from highs, even though the company is growing in US. Its AGM on November 19 will provide clarity on the fiscal year 2015 outlook -we’re expecting a profit before tax of between $80 million and $90 million. Recently trading on forward price/earnings multiple of about 14 times compared to closest peer Aristocrat of about 22 times makes AGI a stand-out buy. A kicker for AGI is a falling Australian dollar as about 50 per cent of earnings are generated in the US.

CSR (CSR)

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

Its upcoming report has the potential to surprise the market and pay a reasonable dividend. A strong property market underpins demand for building supplies in commercial developments, new housing and renovations. The stock has been a little weak since August, which has created a buying opportunity.

HOLD RECOMMENDATIONS

Donaco International (DNA)

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

Sitting on $100 million cash, this leisure and entertainment company may buy another casino, ideally in South East Asia. The stock has been weaker due to Vietnamese and Chinese tensions, but it was recently added to the S&P/ASX 300 Index. We believe it will buy something in Vietnam, Cambodia or Laos, which will add to consensus net profit after tax for fiscal year 2015 of between $25 million and $30 million.

REA Group (REA)

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

REA is on a very high earnings multiple, but for good reason, with consistent annual growth of more than 30 per cent. We would like to know more about its strategy after recently increasing its stake in iProperty Group (IPP) to just below 20 per cent. iProperty Group is an online property business operating in South East Asia. Based on REA’s move on IPP, it seems that Australian real estate listings may have plateaued. It will be interesting to see what other markets REA is watching.

SELL RECOMMENDATIONS

Mint Wireless (MNW)

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

This mobile payments company enjoyed a glory run late last year when it landed various contracts with Bendigo Bank, MYOB and Bank of New Zealand. However, since another company Square announced it would come to Australia with competing technology, MNW seems to have been superseded and the share price has suffered as a result. In our view, the market was also looking for profitability by now, but the company is still burning a lot of cash.

Lynas Corporation (LYC)

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

This rare earths company continues to raise capital. It’s hardly surprising given last quarter’s negative cash flow of $11.6 million. This can be very dilutive for shareholders over the medium to long term. Until positive cash flows emerge from its primary mine (Mt Weld), we view this stock as very high risk.

 

Joshua Stega, JAS Wealth

BUY RECOMMENDATIONS

Lend Lease Group (LLC)

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

A vertically integrated property group, LLC recently hit a year high and we believe the share price is poised to go even higher. The latest results highlight the importance of the group’s diversified operations by service offering and geography. International profits rise on the back of a falling Australian dollar. Recently trading on a price/earnings multiple below 15 times and a dividend yield of 4.7 per cent generates appeal.

WorleyParsons (WOR)

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

A diverse global business providing professional services to the energy, resource and infrastructure sectors. WOR has suffered in recent times as macro economic uncertainty and other issues have led clients to delay decisions. A positive for WOR is a strong balance sheet, leaving the group well placed to target acquisitions and generate organic growth opportunities. A recent price/earnings multiple below 12 times is attractive.

HOLD RECOMMENDATIONS

Domino’s Pizza Enterprises (DMP)

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

DMP operates more than 750 stores in five countries, employing about 16,000 people. DMP continues to expand internationally, having issued profit growth guidance of about 20 per cent for 2015. As a listed company, DMP has beaten guidance every year except fiscal 2013. We continue to like the company and management. We retain our fully valued rating.

Computershare (CPU)

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

Computershare is involved in share registration, governance and stakeholder communication services. With its global scale, expertise, strong balance sheet and relatively low capital requirements, we believe CPU is well placed to generate solid long term growth. We see CPU benefiting from rising global interest rates due to its client trust account business.

SELL RECOMMENDATIONS

Virgin Australia Holdings (VAH)

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

The airline suffered a recent deterioration in operating profits. Business risks include volatile jet fuel prices, less leisure travel due to a weaker Australian dollar and uncertain costs of positioning Tiger Airways against Jetstar.

Sydney Airport (SYD)

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

Positioned to benefit in the medium term from expected strong passenger growth, particularly from the Asia/Pacific region. But recently trading on a price/earnings multiple of 29 times, the stock is expensive and we see limited share price upside in the short term.

 

Matthew Litchfield, PhillipCapital

BUY RECOMMENDATIONS

IOOF Holdings (IFL)

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

IFL has grown through acquisitions, such as SFG Australia in May, and organically through fund flow increases into their products. We see the stock as a major beneficiary of low interest rates and demographic trends. The phased-in increase in compulsory superannuation contributions should also support longer term growth prospects.

Sonic Healthcare (SHL)

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

SHL has been chosen as the preferred proponent in relation to a 15-year contract for the provision of laboratory services to Alberta Health Services. This stock offers investors a high degree of earnings certainty combined with favorable industry growth drivers. It also offers a well-capitalised balance sheet and a stable, highly regarded management team.

HOLD RECOMMENDATIONS

Boral (BLD)

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

Australia’s largest building and construction supplier delivered a strong full year 2014 result, with profit after tax of $171 million. The company is well placed to benefit from its strong market positions.  With the US economy improving, we’re expecting a turnaround in American operations to be a major contributor to the group’s growth. The joint venture announced between Boral and USG Corporation will provide increased exposure to Asia’s growth.

Woodside Petroleum (WPL)

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

Considered a cash cow with strong revenues from its Pluto operations and diversified cash flow base. This stock provides exposure to future growth prospects from exploration and pays handsome dividends to shareholders along the way.

SELL RECOMMENDATIONS

Cabcharge Australia (CAB)

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

The easy ride for CAB is over. Increasing competition from upcoming rivals, such as goCatch and Uber, challenges CAB’s dominance in the taxi payments sector. Also, regulatory changes, such as the Victorian Government introducing a 5 per cent cap on service fees has halved CAB fees for processing credit payments for taxi fares. NSW has indicated it will make a similar move to cap fees in December.

Ausdrill (ASL)

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

Another stock falling victim to the mining downturn, ASL has warned the market its earnings will slump by up to 13 per cent. This is the company’s second profit warning since August, blaming falling commodity prices and lower earnings from its energy drilling division. Given these challenges, I see better opportunities elsewhere.

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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.