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Michael Heffernan, PhillipCapital

BUY RECOMMENDATIONS

Pact Group Holdings (PGH)

Chart: Share price over the year

A major Australian packaging group that’s been a strong sharemarket performer despite a struggling ASX in recent times. It has sound fundamentals, an attractive dividend yield of almost 4 per cent and a robust profit growth profile.

TPG Telecom (TPM)

Chart: Share price over the year

A major Australian telecommunications company and the second largest internet service provider. It delivered an excellent half year report and its future prospects are bright.

HOLD RECOMMENDATIONS

Flight Centre (FLT)

Chart: Share price over the year

Since listing on the ASX in 1995, FLT has proved to be an impressive performer in difficult circumstances. It’s been able to successfully compete with other bricks and mortar outlets and online businesses. It also pays an attractive fully franked dividend yield of almost 4 per cent.

Domino’s Pizza Enterprises (DMP)

Chart: Share price over the year

Its share price has treaded water in the past year, but that’s better than the overall market. Its outlook remains positive, as it operates in an almost recession proof part of the economy. Recently acquiring French and German pizza businesses helps consolidate its position in Europe.

SELL RECOMMENDATIONS

Computershare (CPU) 

Chart: Share price over the year

This share registry company has been disappointing in the past year and its profit prospects are under pressure due to the higher US dollar and lower yields on foreign investments. Unless there’s a significant upturn in sharemarket activity and new floats in the near future, I prefer other stocks.

Bank of Queensland (BOQ)

Chart: Share price over the year

A second tier bank that was one of my favourites. Its latest result was ordinary and didn’t meet my expectations. While its financial underpinnings are reasonable, I prefer major bank stocks in the current volatile market environment.


James Samson, Eureka Report

BUY RECOMMENDATIONS 

Credit Corp Group (CCP)

Chart: Share price over the year

A collections business buying aged receivables largely from banks and utilities. The company has a strong history of beating earnings guidance, and is poised for another record year of debt ledger purchases. Recent growth in the company’s consumer lending book is likely to deliver net profit growth and earnings per share growth in fiscal year 2016. Expectations that US operations will approach break even could add further upside. At current prices, CCP appears attractive. The shares closed at $9.98 on April 27.

FlexiGroup (FXL) 

Chart: Share price over the year

Despite a poor share price performance in recent times, FXL has potential catalysts. FXL is mostly a consumer lending business with multiple products across interest free loans, credit cards and other structured finance products. The acquisition of New Zealand based Fisher and Paykel finance has the potential to lift group earnings in fiscal year 2016 and beyond. Recent securitisation of receivables with a green bond tranche shows the company’s innovative approach to originating low cost funding for growth initiatives. 

HOLD RECOMMENDATIONS

Automotive Holdings Group (AHG) 

Chart: Share price over the year

AHG owns car dealerships and boasts an enviable market position across Australia. The company has a strong track record in its auto division, delivering earnings and dividend growth. However, the logistics division is yet to deliver and is very much a work in progress. While long term we remain comfortable that AHG is a solid business expected to deliver a strong income stream through fully franked dividends, there’s some short term risks.

Toxfree Solutions (TOX)

Chart: Share price over the year

A waste services business that has a healthy track record during volatile markets. The company acquired Worth Recycling, a New South Wales based liquid and industrial waste treatment services business. In our view, this is a strong acquisition, but the share price has moved up to factor it in. At current levels, TOX is fully priced.

SELL RECOMMENDATIONS 

Cadence Capital (CDM)

Chart: Share price over the year

CDM is a listed investment company with long and short strategies on the ASX and in international shares. It recently announced lower net tangible assets (NTA) as performance has come under short term pressure. The share price has held up, creating a 15 per cent premium to NTA at April 26. Our view is there’s some risk left in the share price.

Collection House (CLH)

Chart: Share price over the year

The company is buying fewer aged receivables, which has led to a significant share price decline. CLH is searching for a new CEO to replace the outgoing Matthew Thomas. Risks remain given uncertainty and stiff competition. We can’t justify an investment in CLH. It may be worth watching when a new CEO is expected to be appointed before the end of the financial year.


Peter Moran, Wilson HTM

BUY RECOMMENDATIONS

Suncorp (SUN)

Chart: Share price over the year

We expect SUN’s insurance business to lift margins from 10.3 per cent to 12.8 per cent. As a result, we see solid earnings prospects going forward. Also, a forecast dividend yield of 7 per cent and potential capital management initiatives underpin our buy recommendation.

Santos (STO)

Chart: Share price over the year

March quarter production of 15.6 million barrels of oil equivalent was 10 per cent above our forecasts, driven largely by a stronger performance from Gladstone LNG (GLNG). Oil production fell by 5 per cent in the March quarter, which was better than we expected. Importantly, Santos also reaffirmed that train 2 is on track to deliver first LNG from Gladstone in the June quarter.

HOLD RECOMMENDATIONS

Wesfarmers (WES)

Chart: Share price over the year

Excluding petrol, its retail portfolio delivered underlying total sales growth of 6.8 per cent for the March quarter. Importantly, this level of growth should continue to facilitate operating leverage, enabling the group to further improve its value proposition and drive volume upside without compromising margins. However, at current prices, we believe Wesfarmers is fairly valued. 

Perpetual (PPT)

Chart: Share price over the year

Net fund flows fell $400 million in the 2016 third quarter – the third negative quarter in the past year. Funds under management fell 4 per cent to $29.8 billion, a level not seen since March 2014. Perpetual’s near term earnings backdrop appears challenging given volatile equity markets and weak fund flows. Cost savings and deal synergies are coming to an end. Despite improved value appeal, we retain our hold recommendation.

SELL RECOMMENDATIONS

Iluka Resources (ILU)

Chart: Share price over the year

Recent sales revenue was below our expectations. We’re particularly concerned about pricing in the zircon market. The two other big players, Tronox and Rio Tinto, recently cut their prices, forcing Iluka to follow suit. There’s a risk more price falls may follow. Better value elsewhere.

Northern Star Resources (NST)

Chart: Share price over the year

From an operational perspective, we have no issues with this gold producer. Our problem is valuation. The share price has risen about 30 per cent since January. We believe the share price is highly susceptible to any weakness in the gold price. Sell on valuation.

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