8min read
PREVIOUS ARTICLE 18 Share Tips - 17 August 2015 NEXT ARTICLE 18 Share Tips - 31 August 2015

Warwick Grigor, Far East Capital

BUY RECOMMENDATIONS

Energia Minerals (EMX)

 

Chart: Share price over the year

EMX has an advanced brownfields zinc project in northern Italy that could be rapidly brought back into production by 2017, at a capacity of 150,000 tonnes per annum of zinc concentrates. Zinc has the most favourable economic outlook of all the metals right now and we believe EMX offers the best entry of the juniors. Investors comfortable with risk should examine this stock.

MRL Corporation (MRF)

Chart: Share price over the year

In Sri Lanka, MRF is fast approaching commercial mining of the highest grade graphite deposits in the world. With run of mine grades expected to be around 95 per cent, it will offer a premium product that can also be used for higher applications and for conversion to graphene in a low cost, one step process. In our view, there’s no risk of oversupply from this type of graphite, unlike graphite from the bulk, large flake African projects. The shares finished at 6.4 cents on August 20.

HOLD RECOMMENDATIONS

Orinoco Gold (OGX)

Chart: Share price over the year

Its small, high grade Cascavel gold mine in Brazil is in development stage. While estimates look very positive, you always have to wait until you’re stoping ore to be sure. The outlook for the gold price has improved; it was recently trading back above $US1100 an ounce. A drilling program on the old (extremely) high grade Sertao gold mine purchased from Troy Resources could provide added spice in the fourth quarter.

Pacific Niugini (PNR)

Chart: Share price over the year

PNR has hit several stumbling blocks with the development of the high grade, underground Nicolsons gold mine near Halls Creek in WA. Softer ground conditions are slowing development. That forced it to the market and to issue shares at a discount. With the proceeds now available, it should have the finance to achieve a strong positive cash flow before the end of 2015.

SELL RECOMMENDATIONS

Atrum Coal (ATU)

Chart: Share price over the year

ATU was a massive high flyer when everything was going down, but it flew too high. There were concerns about corporate governance and a lengthy suspension of the shares. The share price was $1.235 on May 28, 2015. The shares finished at 62 cents on August 20. Share price momentum has been trending the wrong way. A most challenging outlook.

Syrah Resources (SYR)

Chart: Share price over the year

Syrah led the pack into graphite and has been a great sharemarket performer, but it’s now entering a hiatus that comes with the development phase of a mine. News flow will be constrained and the hardest part is ahead – the construction and commissioning. In early August it announced a $211 million capital raising. This normally fills any short term appetite for shares, so new buyers may be absent from the market for a while. Putting that aside, we believe the large flake graphite market is in danger of a major oversupply in the next few years when new projects come on stream.

 

Jeremy Hook, TMS Capital

BUY RECOMMENDATIONS

CSL (CSL)

Chart: Share price over the year

Australia’s leading biopharmaceutical company with global operations. The major revenue stream comes from blood plasma products. The recent acquisition of the Novartis flu business offers continuing growth. We recommend buying CSL for its strong balance sheet and growth opportunities. It offers a solid research and development pipeline.

REA Group (REA)

Chart: Share price over the year

The recent result from this online property group was very strong despite lower levels of listings and a self imposed price freeze for the calendar year as the company moves agents onto its new pricing model. With continuing strong housing markets and a new pricing model to kick back in during the year paints a bright outlook. The move into Asia and the US offers great long term potential and we continue to recommend what we regard as Australia’s premier growth stock.

HOLD RECOMMENDATIONS

Auckland International Airport (AIA)

Chart: Share price over the year

A New Zealand based company that owns Auckland Airport. While AIA’s core operations are aeronautical activities, it generates rental revenue from retail and car parking. We believe traffic numbers should continue to grow strongly in coming years, with earnings growth to flow from scalable assets.

Commonwealth Bank of Australia (CBA) 

Chart: Share price over the year

Although we feel the banks have enjoyed good credit growth, low levels of bad and doubtful debts and strong margins over recent years, we expect these to slow in 2015/16. Nevertheless, the CBA yield is once again looking attractive. Expect capital appreciation in coming years.

SELL RECOMMENDATIONS

Peet (PPC)

Chart: Share price over the year

Although the assets of this residential developer are substantial, PPC should have caught a strong tailwind from the booming east coast housing markets. But the company’s share price has done very little. Our concern is 37 per cent exposure to WA, where we’re seeing clear signs of a slowdown. The residential boom in Sydney and Melbourne must be close to the top.

Retail Food Group (RFG)

Chart: Share price over the year

Optimism surrounds expansion into Asia, particularly China. It’s still very early days and we’re concerned about how much of this is already priced in with the company yet to post results. We have concerns about the local franchise model – how it’s performing relative to the company.

 

Jonathan Fernie, Lincoln Indicators

BUY RECOMMENDATIONS

Henderson Group PLC (HGG)

Chart: Share price over the year

A global asset manager that’s listed on the ASX and London Stock Exchange. Funds under management are more than  £80 billion across a mix of asset classes. HGG recently reported a strong half year result, driven by robust net inflows and a solid investment performance. Recently, Australian investors have also benefited from a stronger British pound. We believe HGG is well placed for the full year and continues to look attractive at current levels.

Corporate Travel Management (CTD)

Chart: Share price over the year

Provides travel management solutions for the corporate market, with operations across Australia, New Zealand, North America, Europe and Asia. Following upgraded guidance in May, we expect strong earnings growth for the full year when it reports at the end of August. CTD continues to build scale while expanding its global footprint. This should allow it to compete for more regional and global tenders. Management is open to bolt on acquisitions and the group should benefit from any recovery in domestic economic activity.

HOLD RECOMMENDATIONS

Suncorp Group (SUN) 

Chart: Share price over the year

A diversified financial services firm offering general insurance, banking and life insurance. While the group’s fiscal year 2015 result was impacted by major weather events, SUN rewarded shareholders with another special dividend. The bank and life insurance divisions are performing well after a tough few years. We also expect general insurance earnings to improve in financial year 2016. An attractive yield for income investors should continue.

GBST Holdings (GBT)

Chart: Share price over the year

A financial services software provider with operations across Australia, Europe, Asia and North America. The company reported a strong full year result with net profit after tax up 52 per cent to $15.3 million. Looking forward, we expect GBT to deliver solid earnings growth in fiscal year 2016. We expect the company to grow customers and lift margins from gaining scale. The company is trading close to our valuation.

SELL RECOMMENDATIONS

Mineral Resources (MIN)

Chart: Share price over the year

Mines iron ore and provides ore processing services to the sector. While the group has delivered record production this year, underlying earnings fell 55 per cent to $109 million on the back of plunging iron ore prices. The mining industry’s focus on cost cutting will impact MIN’s services business. Further, given weaker Chinese demand amid supply growth this year, we believe the outlook is clouded for fiscal year 2016.

Orica (ORI)

Chart: Share price over the year

The commercial explosives maker recently announced substantial impairments and signalled that full year earnings are expected to be well down on the prior year. ORI continues to face challenging conditions, particularly in the coal sector. We don’t see this turning around in the near term. While management has initiated a transformation program targeting cost efficiencies, we believe the stock should be avoided given the clouded earnings outlook.

>> BACK TO THE NEWSLETTER: Click here to read other articles from this week’s newsletter

 

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.