Joshua Stega, JAS Wealth
IOOF Holdings (IFL)
This Australian financial services company recently agreed to sell boutique fund managers Perennial Fixed Interest and Perennial Growth Management to Henderson Group (HGG). We think this exit makes sense as it further focuses IFL on platforms and distribution, a business that is less cyclical than funds management. IFL was recently trading on a price/earnings multiple of 18 times and a yield of 4.9 per cent, which we think is good value for a business with plenty of room for growth.
Aurizon Holdings (AZJ)
Previously known as QR National, it was privatised from Queensland government ownership in 2010. We believe Aurizon offers high earnings growth due to business improvement initiatives and growth in its track network asset base. We believe these two factors alone could increase earnings by 7 per cent next year. AZJ was recently trading on a price/earnings multiple of 17.5 times and a yield of 4 per cent, which we think is cheap considering the strength of its market position.
Burson Group (BAP)
Auto parts is a $3.8 billion industry in Australia and we believe Burson is in the box seat to dominate the space, similar to what Bunnings does with hardware. Listed just over a year ago, we’re keeping an eye on how management plans to expand BAP as a public company. Full year results will be delivered in August and we will be examining the report with much interest.
ALS Limited (ALQ)
Provides analytical testing and inspection services to the mining, environmental, food and industrial sectors. ALQ’s profits have suffered due to the slowdown in the commodities space. We believe investors holding this stock have already experienced the bulk of the share price correction. ALQ is trading inline with average Australian industrial multiples, but at a discount to international peers.
BT Investment Management (BTT)
Equity markets, currency and flow momentum have driven the fund manager’s share price up about 40 per cent this year, outperforming Australian and UK peers by at least 20 per cent. Today’s share price doesn’t factor in enough downside risk and that’s a concern to us in what is a very cyclical industry. Given it was recently trading on a price/earnings multiple above 20 times, we think you’re better off switching into IFL. The shares closed at $9.30 on June 3.
UGL Limited (UGL)
A broad based infrastructure services company. While we’re attracted to UGL’s recurring maintenance work, we believe the outlook remains challenging. We see cuts in government infrastructure spending and a difficult outlook for resources spending. Our price target is in the low $2 levels. With no dividend expected this year or next, we think you should get out now and revisit this stock at a later stage. The shares closed at $2.54 on June 3.
Janine Cox, Wealth Within
Aurizon Holdings (AZJ)
AZJ is trading in a strong uptrend. The rail freight operator recently broke above the all time high of $5.26 in April 2014, meaning it’s trading in blue sky and represents a buying opportunity. Whenever a stock breaks such a level, it may retreat temporarily to build support for the next rise, which is likely in the second half of 2015.
Long term, CGF is bullish and was recently trading above 50 per cent of the all time high price of $12.75 in March 2000. This month, CGF has retreated into a short term low, with the monthly high at $6.97. Given this, an entry may be considered above $7.
Flight Centre Travel Group (FLT)
FLT has been trading in a long term uptrend, and has been particularly bullish in recent months. Before it can break through resistance at around $48, FLT is likely to consolidate for a few weeks to test support around $42.50 to $43. The shares closed at $43.11 on June 4.
Commonwealth Bank (CBA)
CBA has retreated during April and May. Generally, May can be a down month and is likely to be followed by a strong rise in July. I believe the market has oversold banks, forgetting how historically the big four typically generate mid to high single digit earnings growth.
SEK has been trading sideways for more than a year, and so far buyer support at around $15.80 is holding up the price. Should SEK close strongly below this level on any day, the probability of a further fall would significantly increase, and may be a signal to take profits. The shares closed at $16.40 on June 4.
M2 Group (MTU)
The telecommunications service provider had a stellar run in the past year. Even with really bullish stocks like this one, what goes up must eventually come down. A technical exit would be triggered if the share price closed below $10.47, being the previous trough, on any day. The shares closed at $10.48 on June 4.
Jonathon Feil, Morgans
Ashley Services Group (ASH)
An integrated provider of training, recruitment and labour hire, with around 350 internal staff operating from 33 offices across Australia. The company has suffered downgrades since prospectus, but it looks over done as investors take tax losses. With a 6.4 cents fully franked dividend, the grossed up yield is about 16 per cent. By the end of June, it will have $10 million cash and no debt. Therefore, at a current market capitalisation of about $85 million, enterprise value is $75 million on EBITDA of $22 million. Looks cheap.
The PAS Group (PGR)
An Australian apparel business with a diversified portfolio of brands distributed through retail and wholesale channels. The company recently released a trading update, expecting fiscal year 2015 EBITDA to range between $20 million and $21.5 million. Second half EBITDA is expected to be in the range of $11.3 million to $12.8 million compared with $8.7 million in the first half. Market capitalisation is about $77 million. It has $7.3 million in cash and no debt. It continues to evaluate acquisitions using its strong balance sheet.
A dark fibre infrastructure provider. Morgans recently listed the IPO and the shares doubled on the first day. It’s focused on taking advantage of incumbent Singaporean telcos selling dark fibre. Meaningful sales will take around two years, which, in our view, will give it a value closer to about $3. Hold, or either take a profit at these levels. The shares were trading at $2.04 on June 4.
Sirtex Medical (SRX)
SRX presented data from a SIRFLOX study into its liver directed SIR-Spheres microsphere device targeting the treatment of first line metastatic colorectal cancer (mCRC). However, nothing in the report changes our view that while the device clearly works in the liver, the results will have limited impact in driving adoption of the device into first line mCRC.
Lovisa Holdings (LOV)
A fast fashion jewellery retailer, with stores in Australia, New Zealand, Singapore, Malaysia, South Africa and the Middle East. The shares have risen about 50 per cent since listing in December 2014. It was recently trading on a fiscal year 2015 price/earnings multiple of more than 20 times. We think international expansion is priced for perfection and I’m happy to stay on the sidelines. The shares were trading at $3.25 on June 4.
Caltex Australia (CTX)
An integrated oil refiner and marketing company, a transport fuel supplier and convenience retailer. Refiner margins are narrowing and reducing oil volatility adds more margin pressure going forward.
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