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Michael Heffernan, PhillipCapital

BUY RECOMMENDATIONS

Macquarie Group (MQG)

Chart: Share price over the year

MQG recently announced it agreed to buy Esanda’s dealer finance portfolio from ANZ for $8.23 billion. Esanda is expected to be earnings per share accretive in the first year after acquisition. MQG’s recent trading update was positive and it flagged a higher dividend than for the same period last year when it posts its first half result on October 30.

Bank of Queensland (BOQ)

Chart: Share price over the year

It recently delivered a most impressive report. It has sound fundamentals, an attractive fully franked dividend yield of about 6 per cent and it should benefit from an improving Queensland economy. Requiring the major banks to hold more capital should make second tier players more competitive.

HOLD RECOMMENDATIONS

Domino’s Pizza Enterprises (DMP)

Chart: Share price over the year

A fabulous sharemarket performer in the past two years, its outlook still remains positive as it operates in an almost recession proof area of the economy. Its recent takeover of French business Pizza Sprint is a smart earnings accretive move.

Blackmores (BKL)

Chart: Share price over the year

Its 330 per cent share price increase in the past year has been stunning. It’s come back to earth a little in the past few weeks after breaching $151 on October 7. However, if the price falls further, investors may want to consider buying the stock. Also, its Asian expansion seems to be working well.

SELL RECOMMENDATIONS

GBST Holdings (GBT)

Chart: Share price over the year

This financial software provider had been a great sharemarket performer until its recent profit downgrade surprised the market. Consequently, its share price suffered a substantial fall. Other stocks in the financial area offer more appeal.

CSR (CSR)

Chart: Share price over the year

The share price of this building products company has fallen from $3.64 on June 30 to finish at $2.80 on October 21. This is particularly disappointing given a strong and improving residential construction sector. Best to look elsewhere until its future profitability looks more assuring.

 

Matthew Felsman, APP Securities

BUY RECOMMENDATIONS

Bank of Queensland (BOQ)

Chart: Share price over the year

Growth is hard to find at the moment. The market is conscious the big four banks may need another capital injection in 2016. In my view, the standout financial from a growth perspective is BOQ, as it’s offering 9.1 per cent earnings per share growth in 2016. The yield was recently 6.3 per cent – more with franking. It goes ex-dividend on October 29, so consider buying for yield and an overall XJO seasonal rally. 

Oil Search (OSH)

Chart: Share price over the year

For a more aggressive trade, a positive resolution to corporate activity should see Oil Search hit fresh 2015 highs before Christmas. It’s been a corporate game of chess from interested suitor Woodside Petroleum (WPL) who clearly want the company. The Woodside proposal of one WPL share for every four Oil Search shares was rejected by OSH, saying it grossly undervalues the company. A cash sweetener is really the only way WPL could get this away. I expect WPL will lodge a higher takeover bid.  Also, technical signals are pointing to an advance.

HOLD RECOMMENDATIONS

Macquarie Group (MQG)

Chart: Share price over the year

Raising capital for earnings per share accretive acquisitions has been a good play for MQG. Recently, it completed a $400 million institutional placement by issuing 5 million shares at $80 each. The placement will be partly used to fund the purchase of the Esanda dealer finance unit from ANZ. It also gave a trading update, saying first half 2016 net profit will be up 55 per cent on the same period last year due to higher performance fees and trading activity levels.  

Crown Resorts (CWN)

Chart: Share price over the year

Crown’s robust domestic operations make it an excellent growth play for the expected tourism boom. With the company undertaking new investments in the US and increasing its stronghold in the Australian market, expect the casino operator’s share price to rebound strongly.

SELL RECOMMENDATIONS

Harvey Norman (HVN)

Chart: Share price over the year

Harvey Norman is the most property exposed listed Australian retailer. It’s worth noting that two real estate agencies have been planning to list on the ASX in coming months, a sign that housing markets are perhaps at the top. Technically, the stock looks neutral at best and on enterprise valuation metrics, it’s more expensive then its peers.

iShares Global Healthcare ETF (IXJ)

Chart: Share price over the year

Relative to the S&P/ASX200, the healthcare sector was recently trading at a 25 per cent premium. The unit price has come off a high of $155.31 on August 6 to finish at $140.50 on October 21. In our view, it’s well above well net asset value of $99.90 a unit.

 

Peter Moran, Wilson HTM

BUY RECOMMENDATIONS

Bank of Queensland (BOQ)

Chart: Share price over the year

Delivered a strong fiscal year 2015 result that was above our expectations. Lending and non-interest income both continue to grow while costs remain contained. We see continuing organic growth in lending and improved pricing as the major banks adjust to recent changes in mortgage risk weights.

Ansell (ANN)

Chart: Share price over the year

The share price of this rubber gloves and condom making company has fallen about 30 per cent since the start of the year, with investors concerned about a lack of earnings growth. However, we believe the share price fall has been overdone – the shares are trading around a 20 per cent discount to our valuation. Recent weakness in currencies where production occurs will help improve earnings performance as will the recently announced on-market buy back.

HOLD RECOMMENDATIONS

Insurance Australia Group (IAG)

Chart: Share price over the year

Recently appointed CEO Peter Harmer has decided to shelve the previous strategy of looking to grow in China. We see this as a positive development given the difficulty of achieving targeted returns in what is a highly competitive market. We believe a capital return is now likely at some point in fiscal year 2016. As a one off, it could add between 3 per cent to 5 per cent to yields and limited earnings growth potential.

Perpetual (PPT)

Chart: Share price over the year

Perpetual suffered another quarter of net outflows – $700 million in the 2016 first quarter following net outflows of $1.6 billion in the 2015 fourth quarter. These two quarters have offset all positive net flows since December 2013, and, combined with weak markets, have cut funds under management to a two year low of $28.4 billion. While PPT has flagged it’s won a new Australian equity mandate of $1 billion that will fund in the 2016 second quarter, we believe a more consistent record on flows is required to drive value upside.

SELL RECOMMENDATIONS

Atlas Iron (AGO)

Chart: Share price over the year

We still believe the iron ore price will remain under pressure as the big producers continue to increase output. In our view, Atlas has too much debt and is a relatively high cost producer. We retain our sell recommendation.

Elders (ELD)

Chart: Share price over the year

This leading agribusiness has made significant progress in lifting earnings and reducing debt. We believe Elders should remain focused on these issues in the near term. However, gearing levels are still too high for our liking.

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