John Rawicki, PhillipCapital

BUY RECOMMENDATIONS

AMP (AMP)

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

A big wealth management company, AMP’s superannuation and life insurance divisions are growing at a solid pace, with expected fund inflows of about $800 million in the second half. AMP also has a rejuvenated corporate super offering and a new low cost operating model. A potentially higher dividend payout ratio may be on the way.

Carsales.com (CRZ)

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

While the latest data on the auto classified website shows listings are down from the previous period, this is probably due to seasonal effects. I expect a rebound in listings in February and March as consumers return from holidays. Competition from rivals such as Gumtree hasn’t had any serious impact on CRZ market share as CRZ is still considered “the place to be” when selling your vehicle. I expect to see the stock trade north of $12 in 2015. The stock was trading at $10.60 on January 29.

HOLD RECOMMENDATIONS

JB Hi-Fi  (JBH)

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

I expect first half 2015 results to show an improvement in like-for-like sales given strong growth in the gaming and telco categories. Stocks of PlayStation 4 and Xbox game consoles have been higher than in previous periods, and new phone releases from Apple and Samsung are likely to have helped achieve stronger sales over the Christmas season.

Silver Lake Resources (SLR)

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

Gold production in the company’s December quarter was 10 per cent ahead of expectations at 29,109 ounces. Production costs, however, increased by about 20 per cent. The company has extended its hedge position for gold sales to 32,944 ounces at $A1417 an ounce, representing about 40 per cent of expected production for 2015. This may act as a headwind if gold price strength continues this year. The stock appears fully priced when trading at 24.2 cents on January 29.

SELL RECOMMENDATIONS

Newcrest Mining  (NCM)

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

The gold miner has enjoyed a stellar rebound in the past few months, coinciding with a $US140 increase in the spot gold price. In my view, the stock price seems to have run up too far, and is implying much better production numbers than we are likely to see this year. While Newcrest may exceed its production guidance, it’s unlikely to be good enough to see any further significant share price upside and we would look to exit the stock for now.

Qube Holdings (QUB)

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

Arrium announced the closure of its Peculiar Knob iron ore mine in South Australia last week. Qube provides road haulage services from the mine and is the single largest contract for Qube, accounting for about 5 per cent of the firm’s revenue. Troubled iron ore miner Atlas Iron is Qube’s next largest client, with another 5 per cent of revenue. The firm’s revenue base is in the high risk mineral resources space, exposing the stock to significantly weaker commodity markets.

 

Peter Moran, Wilson HTM

BUY RECOMMENDATIONS

Origin Energy (ORG)

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

We have upgraded our recommendation to buy following a price pullback of about 35 per cent since September. While we recognise Origin’s earnings will fall due to lower gas prices, the impact won’t be as great compared to other gas producers, partly because of the buffer provided by Origin’s utility business. As such, we see recent weakness as an opportunity to buy.

Woolworths (WOW)

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

The retail giant’s recent underperformance, relative to the market, has provided a buying opportunity. The company’s price/earnings ratio now matches the market, and earnings risk around core food and liquor businesses remain low.  Management taking several meaningful steps to address the issues surrounding the rollout of the Masters Hardware business adds to its appeal.

HOLD RECOMMENDATIONS

Amcor (AMC)

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

We view the announcement that Amcor’s managing director Ken MacKenzie will retire in June as a minor negative for the company. However, we don’t expect any major changes to Amcor’s strategy under new MD Ron Delia, who has been CFO since 2011. With the share price trading close to our target of $12.80 on January 29, we retain our hold recommendation.

Woodside Petroleum (WPL)

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

We see a risk that Woodside will cut its dividend in future years. Woodside has a policy of paying 80 per cent of its earnings as dividends. We expect earnings to almost halve this year. This implies a similar sized fall in dividends. With the share price trading at a marginal discount to our valuation, we retain our hold recommendation.

SELL RECOMMENDATIONS

Atlas Iron (AGO)

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

There were some positives in AGO’s recent quarterly report, with costs at the lower end of guidance and a cash balance of $169 million. This was above our expectations. However, that doesn’t change the fact that the iron ore price is likely to remain under pressure. Given the iron ore price and the Australian dollar at current levels, we value AGO’s equity as inconsequential.

Downer EDI (DOW)

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

Our analysis suggests Downer will experience falling earnings growth in the next two years as contracts are completed but not replaced in response to the mining services business suffering from lower volumes and reduced margins. We see better value elsewhere.

 

Darren Jackson, Calibre Investments

BUY RECOMMENDATIONS

Orora (ORA)

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

A relatively recent spin-off from packaging giant Amcor. Generally, spin-offs provide excess returns over the long run and Orora, also a global packaging company, has been no exception since listing. We anticipate the company’s very stable revenues and market share, combined with ongoing cost saving initiatives, will continue to boost earnings.

Australian Agricultural Company (AAC)

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

We are bullish on meat and cattle prices as a growing middle class in China and Asia increases its protein intake. Consequently, AAC is a beneficiary. Additionally, Indonesia imported a record amount of live cattle in 2014 after moving to a quota system.

HOLD RECOMMENDATIONS

Westfield (WFD)

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

Westfield is a strong beneficiary of the current low growth macro environment. It benefits from falling bond yields and the declining Australian dollar. It has a diverse global portfolio of shopping centers, including in the United States, where the economy is improving.

Liquefied Natural Gas (LNG)

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

We viewed LNG as a strong “take profit” at $3.60 in our August 11, 2014 share tips. After a share price retreat and the Magnolia LNG project awaiting approval from the Federal Energy Regulatory Commission, we have a much more neutral stance. FERC approval will be a milestone announcement. However, accurate valuation still remains difficult.

SELL RECOMMENDATIONS

Oz Minerals (OZL)

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

Copper prices have been plunging in response to negative sentiment driving weaker demand for the industrial metal. Copper prices in 2015 may mirror falls in crude oil and iron ore. Company specific, OZL, as a copper miner, is suffering from decreasing grades and increasing cash costs as Prominent Hill approaches the back end of its mine life.

Tiger Resources (TGS)

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

A Democratic Republic of the Congo based copper producer. The company is exposed to single commodity, operational and sovereign risks. Aside from the falling copper price, tensions have escalated in the DRC, as President Joseph Kabila tries to extend his term in office.

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