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Jonathan Fernie, Lincoln Indicators

BUY RECOMMENDATIONS

Ramsay Health Care (RHC)

 

Chart: Share price over the year

The private hospital provider has operations in Australia, the UK, France and South East Asia. The company recently reported a strong fiscal year 2015 result with underlying earnings up by more than 20 per cent to $373 million. Looking forward, management has provided guidance for underlying earnings growth of between 12 per cent and 14 per cent as the company gets a full year contribution from recently acquired Generale de Sante amid UK business volumes continuing to grow. Furthermore, the stock was recently trading around a 15 per cent discount to our valuation, so it looks attractive at current levels. The shares closed at $58.47 on September 30.

Credit Corp Group (CCP)

Chart: Share price over the year

Provides debt collection and consumer lending services in Australia, New Zealand and the US. The company reported a solid full year result on the back of the core collection business performing well and further consumer lending growth. While expansion into the US remains challenging, this could be a good longer term opportunity. Potential regulatory changes have contributed to recent share price weakness, although we don’t expect these to have a major impact. Management guidance is for earnings growth between 4 per cent to 9 per cent for fiscal year 2016. The stock also provides a relatively attractive dividend yield.

HOLD RECOMMENDATIONS

JB Hi-Fi (JBH) 

Chart: Share price over the year

Management indicated that trading conditions had started well for fiscal year 2016 with solid sales. New product launches, store roll outs, a relatively benign budget and a buoyant property market are likely to contribute to further growth in the next 12 months. The stock was recently offering an above market dividend yield. Given these factors, we believe investors should continue to hold JBH.

Carsales.com (CAR)

Chart: Share price over the year

Provides online automotive classifieds and display advertising. In the absence of guidance, we expect solid growth to be driven by a full contribution from Stratton Finance and in non automotive segments. We also view investments in leading online operators in Brazil, South East Asia and Korea as good opportunities.

SELL RECOMMENDATIONS

Myer Holdings (MYR)

Chart: Share price over the year

Underlying full year earnings were down more than 20 per cent to $78 million in fiscal year 2015. Management has outlined a new strategy to improve sales and margins, although we believe execution risk remains elevated. MYR continues to face a competitive environment and a tough consumer spending outlook. Given these factors, we believe the stock is best avoided until we see further signs of operational improvement.

Origin Energy (ORG)

Chart: Share price over the year

An integrated energy business with retail, power generation, production and exploration operations. Lower energy prices weighed on the group’s recent full year result and ORG continues to carry substantial long term debt. While the group will benefit from additional contributions from the Australia Pacific LNG project in financial year 2016, we expect earnings will be impacted by the lower energy price environment. The company recently announced a capital raising, but given the outlook and ongoing balance sheet risks, we see better alternatives in other sectors.

 

Michael Gable, Fairmont Equities

BUY RECOMMENDATIONS

Greencross (GXL)

Chart: Share price over the year

We recommended this veterinary clinic giant below $6 prior to it reporting full year results, as we felt it had been over sold. After a top result, it rallied strongly above $7. With chief executive Jeffrey David stepping down, the stock has dipped, providing another buying opportunity. The chart is very bullish and we still expect levels as high as $8 in the next few months. The shares finished at $6.51 on September 30.

ARB Corporation (ARB)

Chart: Share price over the year

This automobile accessories provider continues to see double digit earnings growth, and the weaker Australian dollar is making its products more competitive in overseas markets. The chart shows a stock still in a solid uptrend and any short term weakness shouldn’t extend below $12. As long as that level holds, we expect ARB to rally towards $15 by the end of the year.

HOLD RECOMMENDATIONS

Vocus Communications (VOC)

Chart: Share price over the year

After breaking the short term downtrend in June, the stock then pulled back with the rest of the market during August. Price action in the past few weeks has seen it climb near July’s peak, which is a great performance against the overall market. Given the proposed merger with M2 Group (MTU), we believe the company’s prospects look even more bullish and we are expecting it to hit a new high over the next few months.

ANZ Bank (ANZ)

Chart: Share price over the year

From the highs earlier this year, ANZ has pulled back in three waves, which suggests only a counter trend move compared to the overall uptrend. We have received a buy signal on the weekly relative strength index for the first time in many years and there’s naturally some support just above $26. It may take a few more weeks, but ANZ is likely to trade higher from current levels.

SELL RECOMMENDATIONS

Veda Group (VED)

Chart: Share price over the year

We recommended this data analytics business as a buy in thebull.com.au a year ago when it was at $2.20 levels. It’s now received a conditional proposal from Equifax to acquire the shares at $2.70 each. It’s not a formal offer. Considering other opportunities at depressed levels, we’re happy to start selling near $2.70. The shares closed at $2.67 on September 30.

Woodside Petroleum (WPL)

Chart: Share price over the year

From a technical perspective, we forecast the stock would retreat from mid $30 levels earlier this year. The stock has broken through the $30 support level. The chart is forecasting WPL to now head towards the GFC low just above $26. From there, we can reassess whether there’s a short term trade on the long side. The oil and gas giant finished at $28.93 on September 30.

 

Jonathon Howe, Red Leaf Securities

BUY RECOMMENDATIONS

Disruptive Investment Group (DVI)

Chart: Share price over the year

The stock has performed quite well recently, courtesy of investments in online travel agency BYOjet and online property site iBuyNew. We look forward to seeing the next quarter, which should tell us more about the performance of both businesses. The shares finished at 3.8 cents on October 1.

Transaction Solutions International (TSN)

Chart: Share price over the year

Not many ASX listed stocks can give you access to the Indian macro theme. It owns 25 per cent of TSi, which has $US10 million in net cash and an Indian business with 1800 ATMs that are cash flow positive. It appears an investor, who was creating overhang in the stock, has sold given the positive market reaction. We expect the share price to rise on any ATM or mobile kiosk contract win. But certainly not for the risk averse.

HOLD RECOMMENDATIONS

Donaco International (DNA)

Chart: Share price over the year

The casino operator recently provided its full year statutory accounts, which exceeded our expectations. We’re happy to hold DNA at current levels given the sound gaming theme. Macau appears to be bottoming.

Medibank (MPL)

Chart: Share price over the year

Performed well in the recent reporting season. The market had under estimated the company’s successful cost cutting measures. Given the defensive nature of the stock, it makes a good addition to a portfolio.

SELL RECOMMENDATIONS

Qantas Airways (QAN)

Chart: Share price over the year

Qantas is negatively correlated to the oil price. The share price has performed exceptionally well and management has done a great job cutting costs. But it can’t control the oil price. Investors should consider locking in some profits.

Liquefied Natural Gas (LNG)

Chart: Share price over the year

As we forecast here, the stock has fallen substantially since April and we retain a negative view. We’re still concerned about the company’s outlook in the absence of deals and the major players deferring LNG projects.

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