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Boe Campion, Ord Minnett, 

BUY RECOMMENDATIONS

Perpetual (PPT)

Chart: Share price over the year

Provides funds management, financial planning and trustee services. It generates strong cash flow and offers an attractive dividend yield. Any further Reserve Bank interest rate cuts will continue to push investors towards higher yielding Australian stocks. It’s expanding into managing global equities and is focused on improving sales and distribution. It can take advantage of potential opportunities that a robust balance sheet affords.

Lendlease Group (LLC)

Chart: Share price over the year

We’ve undertaken a detailed review of the company’s $15 billion global apartment pipeline, with 10 year projections for its major announced projects. We expect revenue to peak in fiscal year 2021, driven by the first and largest apartment tower at Barangaroo South. The key risk to this profile is tighter financing conditions driving settlement defaults and a potential price correction. However, on a sub 10 times forecast price/earnings ratio for fiscal year 2017, we believe this risk remains more than fully priced, and see any sentiment driven weakness in the stock as a potential buying opportunity.  

 

HOLD RECOMMENDATIONS

CSL (CSL)

Chart: Share price over the year

CSL’s track record of unlocking value in its research and development portfolio is key to valuation upside along with a turnaround in the Novartis influenza vaccine acquisition. Further geographical and label expansions across its product portfolio and positive momentum in its Breakthrough Medicines program should generate strong earnings growth.

Westfield Corporation (WFD) 

Chart: Share price over the year

WFD has largely completed its portfolio repositioning and can debt fund its $US6 billion of highly accretive retail development projects (about a 50 per cent return on cost), increasing its weighting to premium malls. We believe this will drive strong earnings and net tangible assets growth between fiscal years 2017 and 2020. We like WFD’s US dollar exposure, its highly accretive development pipeline, strong transactional markets and exposure to an improving US economy.

 

SELL RECOMMENDATIONS

Mirvac Group (MGR)

Chart: Share price over the year

We believe any cooling measures that slow residential supply will result in higher equity being required to settle residential purchases. This, combined with uncertainty around Chinese capital controls, could lead to increased settlement risk for inner city apartments.

Bendigo and Adelaide Bank (BEN)

Chart: Share price over the year

We expect limited earnings per share growth in fiscal years 2016 and 2017 as the previously strong Homesafe gains cycle down. In our view, valuations aren’t compelling, so we retain our lighten recommendation.


Simon Herrmann, wise-owl.com

BUY RECOMMENDATIONS

Crusader Resources (CAS)

Chart: Share price over the year

Offers speculative exposure to gold and iron ore markets via a diversified portfolio of operating and development assets in Brazil. Its track record of mine development, the scale of gold resources at Borborema and the near term cash flow opportunity at Juruena are attractive qualities. Our valuation is 20 cents a share. A speculative buy. The shares were trading at 13 cents on June 1.

Berkeley Energia (BKY)

Chart: Share price over the year

It recently started developing the Salamanca uranium project in Spain. Now incorporating the high grade Zona 7 deposit, Salamanca has an estimated net present value of $US871.3 million and a mine life of 18 years. While volatile uranium prices and funding are principal risks, Berkeley is transitioning from explorer to producer, which should yield interest in the stock.

HOLD RECOMMENDATIONS

G8 Education (GEM)

Chart: Share price over the year

The childcare education provider experienced a technical correction in 2014/15, but the stock recently broke out of a downtrend and appears to be back on track. GEM pays an attractive quarterly dividend and its fundamentals are favourable provided management maintains a strong balance sheet. 

TechnologyOne (TNE)

Chart: Share price over the year

The software company has consistently increased its dividend by 10 per cent a year, while revenue growth remains strong. TNE’s sales pipeline is heavily weighted towards the second half, so management expects to achieve profit growth for the full year. The cloud business segment is enjoying strong momentum. The company has a strong balance sheet with $45 million in cash and no debt. 

SELL RECOMMENDATIONS

Salmat (SLM)

Chart: Share price over the year

This marketing services company is in a long term downtrend. Revenue in the 2016 first half fell by 7 per cent to $235.6 million in response to discontinuing a number of service lines after a strategic review. Current economic trading conditions heighten risk. The low valuation leaves room for the company to surprise on the upside. But in the short to medium term, we remain bearish. 

Benitec Biopharma (BLT)

Chart: Share price over the year 

The share price has fallen more than 60 per cent since the start of the year. The company recently announced it was winding down its hepatitis C program due to increasing therapy competition within the industry. Company fundamentals would need to change to generate our interest. 


Mathan Somasundaram, Baillieu Holst

 

BUY RECOMMENDATIONS

Mantra Group (MTR)

Chart: Share price over the year

Our buy call on this accommodation services provider is backed by stable revenue streams with an attractive yield. The portfolio is expanding in an industry where demand generally exceeds supply. We view the 2016 first half result as early favourable evidence of the domestic travel theme. Our analyst Nick Caley’s price target is $5.40. The shares were trading at $3.865 on June 2.

IMF Bentham (IMF)

Chart: Share price over the year

After a disappointing 2016 first half, this litigation funder appears to have returned to its traditional winning form. Positive outcomes from settlements involving ratings agency Standard & Poor’s and a further $A9.9 million windfall from a previously settled US case would appear to have de-risked the 2016 second half. This should facilitate a catch-up dividend in the second half given no dividend was paid in the first half. Caley’s price target is $1.85. The shares were trading at $1.42 on June 2.

 

HOLD RECOMMENDATIONS

Aristocrat Leisure (ALL)

Chart: Share price over the year

Management has sustained execution performance. The gaming machine maker produces quality product and is leveraged to an upturn in the North American replacement cycle. It offers a sustainable earnings mix and the balance sheet is rapidly improving. However, the strong share price run since the recent profit upgrade has limited upside to our valuation and price target. Caley’s price target is $13.20. The shares were trading at $13.08 on June 2.

Perpetual (PPT)

Chart: Share price over the year

Challenging revenue conditions are largely out of the company’s control. It was pleasing to see that cost performance was appropriate for the conditions and was certainly better than some others across the financial sector. That said, we expect market volatility to continue, so we retain a hold on the stock. Analyst Nicolas Burgess has a price target of $45. The shares were trading at $42.31 on June 2.

 

SELL RECOMMENDATIONS

Harvey Norman (HVN)

Chart: Share price over the year

We retain a negative view on discretionary retail in an environment of fierce competition, a lower Australian dollar and rising cost of living pressures. We believe a cooling property market will take the wind from the HVN sales outlook in the next few years while more competition in white goods will reduce future margins.

JB Hi-Fi (JBH)

Chart: Share price over the year

We believe stiffer online competition, a weaker currency and price deflation will weigh on the stock. In our view, the market is paying premium multiples for a stock that we expect to run into margin pressure and erosion of market share.

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