Peter Russell, Russell Research
My Net Fone (MNF)
Provides VoIP and hosted telecommunications across Australia with links to Singapore, New Zealand and beyond. It’s growing strongly, is an experienced acquirer with high return on equity and has agreed to buy the global wholesale voice business of Telecom New Zealand. This should double revenues and add a third to its profits next financial year. The transforming deal adds a carrier grade global network and relationships, a dominant NZ brand, team, customers, network and capabilities.
Building revenues fast from subscriptions to its top quality patented aerial mapping systems. NEA provides high detail, frequent and cost-effective scaled pictures shot from aircraft. Proven and profitable in Australia, with 85 per cent of the population covered regularly, NEA has launched in the US with seven top city regions to be covered during financial year 2016. Revenues are set to double from fiscal year 2014 to fiscal year 2016. Expect earnings per share to double in each of fiscal years 2015 and 2016. A good time and price to buy.
Amalgamated Holdings (AHD)
Its Rydges Hotels, cinema chains, resorts, hospitality and leisure businesses are generating expanding revenues and earnings, underpinned by a conservative and proven management, property assets and cash matching low debt. Franked yield is around 4 per cent and rising. The share price has doubled in the past three years. AHD is a hold, but watch and add to positions.
AP Eagers (APE)
A major distributor of new and used motor vehicles, parts and accessories. Offers servicing, financing and leasing and covers all top 12 selling car brands. APE owns substantial property and almost 20 per cent of AHE (Automotive Holdings Group). APE has strong financials and a solid growth history. Its franked and rising yield was recently 3.4 per cent.
Competition among supermarkets remains fierce. Even Woolworths and Coles are contemplating margin erosion. Powerful overseas competitors are building their businesses. While the Metcash share price has already fallen far, to what may seem an attractive price/earnings multiple and yield, we expect earnings to slide before a possible small recovery in 2017.
Transpacific Industries Group (TPI)
The share price of this waste management company has fallen back again in the past year. This is despite sales of non-core businesses reducing debt, the resumption of dividends and key management changes. Its weak landfill asset performance has been recognised, but despite buying Boral’s Melbourne site, productivity is low. With weak growth in Australia and notably in this industry, we see better opportunities elsewhere.
Simon Herrmann, wise-owl.com
QBE Insurance Group (QBE)
Last year, QBE announced strategic reviews of its US-based middle market operations, with the aim of returning to profitability by selling parts of its underperforming operations. The group returned to profit during fiscal year 2014, and with much of the changes completed, management can focus on delivering profitable growth. The NSW storms will most likely have a short term impact on its Australian operations, but our long term view remains favourable.
Rumble Resources (RTR)
Provides speculative exposure to the potential for Western Australia’s Fraser Range to emerge as a new nickel mining district. Even though the company relies on external capital, we’re attracted to the overall package and our valuation represents a significant premium. We issue a speculative buy recommendation. The shares closed at 6.7 cents on April 22.
Leighton Holdings (LEI)
Leighton confirmed that it’s on track to deliver guidance after increasing net profit after tax margins during the first quarter of 2015. The company aims to simplify its business by lowering overheads, reducing bureaucracy and outsourcing IT and travel. Last year, Hochtief increased its interest in Leighton, providing additional stability to the group.
Nemex Resources (NXR)
The market for biometric recognition technologies is estimated to be worth $US7billion and Nemex has secured earn in rights for up to 51 per cent of Wavefront Biometric Technologies (WBT). Our valuation stands at 9 cents a share, which translates to a hold recommendation. The shares closed at 7.7 cents a share on April 22.
Altona Mining (AOH)
Following the sale of all its Finnish operations and most of its exploration assets in Finland, we recommend reducing exposure. The Outokumpu Project in south-east Finland was its most advanced asset to date. After releasing the special dividend, the market values Altona at cash backing only and doesn’t attribute any value to its Queensland assets. The medium term outlook remains challenging in a low copper price environment.
Tassal Group (TGR)
We downgraded to a sell when TGR hit our protective stop loss of $3.40, as technical support was broken. The long term outlook appears bright, but a Senate inquiry to investigate the environmental effects of fish farming in Tasmania is creating short term uncertainty among investors. The shares closed at $3.16 on April 23.
Les Szancer, Paradigm Securities
Otto Energy (OEL)
A well managed Australian oil and gas company. It’s cashed up and has proposed to share some of that cash with investors via a share capital return of 6.4 cents. It has oil projects in Tanzania and oil and gas projects in the Philippines. We like the company outlook and this stock suits investors with an appetite for risk. Its website is well worth a look.
Pura Vida Energy NL (PVD)
An Australian oil explorer, with projects in Gabon, Madagascar and Morocco. It’s done some clever deals, like getting into bed with multi-billion dollar company Freeport-McMoRan Oil and Gas. It has cash and prospects, so it could be considered as an addition to a balanced portfolio.
Blackham Resources (BLK)
We’ve had this as a buy and my advice is to hold the stock. It has more than 4 million ounces of gold, a mill that would cost between $150 million to $200 million to replace, so what’s stopping this stock from exploding? Money, of course. Sooner or later, it will get funding and then look out.
Mount Ridley Mines (MRD)
Went from about 1 cent to 4.8 cents and closed at 2.5 cents on April 22. Nothing has changed – it’s still the same company with the same assets. This precious and base metals explorer is primarily focusing on projects in the Fraser Range region in WA, near Sirius Resources’ first class nickel deposit. I would hold and buy on pullbacks. I believe it will continue to make positive announcements. May even be a takeover target.
QBE Insurance Group (QBE)
Insurance companies are exposed to mother nature and one can only speculate what the New South Wales storms will end up costing. Despite this company’s clever investing techniques, disasters are just that.
Qantas Airways (QAN)
Following on, airlines wouldn’t have escaped losses from the NSW storms. Delays, cancelled flights and passenger hotel bills will all have an impact on the bottom line. Airlines are often exposed to costs outside their control. Better investment options elsewhere.
Please note. QBE Insurance Group is recommended as a buy and a sell this week as brokers offer different perspectives about the company.
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.