Jonathon Howe, Red Leaf Securities
BUY RECOMMENDATIONS
Reliance Worldwide Corporation (RWC)
This large plumbing equipment wholesaler has a global presence. The recent report beat prospectus forecasts, although the market suspects the stock ran too hard too fast. This has created a good opportunity to add this stock to a well rounded portfolio.
Beta Shares Australian Dividend Harvester Fund (HVST)
Another top yield exchange traded fund, providing shareholders with 20 cents a month over the year. The fund invests primarily in the top 50 ASX stocks, including banks, miners and telcos. HVST generates its margin via put options, enabling it to pay attractive dividends.
HOLD RECOMMENDATIONS
Telstra Corporation (TLS)
The telecommunications giant is assessing various opportunities to expand given, in our view, the telco side of the business has now plateaued. The stock is on a reasonable yield, although we don’t expect to see much capital growth until potential business expansion happens.
OneVue Holdings (OVH)
Although recently merging with Diversa, OneVue is producing slow and steady organic growth via its platform and funds services business. It services more than 50 fund managers worldwide, and has more than $3.3 billion in funds under management. When the OneVue fund exchange is launched in September, we expect a re-rating of the stock.
SELL RECOMMENDATIONS
Blackmores (BKL)
We believe the wonder years in China may be a thing of the past for this behemoth vitamins producer. The risk is much more stringent Chinese regulations and its potential negative operating impact on BKL. We prefer to sit this one out for now.
Bellamy’s Australia (BAL)
Potentially tighter cross border e-commerce regulations to be introduced in China may have a negative impact on this infant formula company. We also noticed that directors have recently sold stock. For us, there’s too much uncertainty in relation to China.
Gavin Wendt, MineLife
BUY RECOMMENDATIONS
Talisman Mining (TLM)
TLM has ramped up exploration activity on its 100 per cent owned and advanced Sinclair nickel project in Western Australia. It put work on hold in late 2015 to focus attention and funding on its higher profile and rapidly evolving Monty copper prospect at Doolgunna in WA. Refocusing on Sinclair is timely, as the nickel price has firmed on the back of improving market fundamentals. Talisman is set to drill test two nickel prospects in early September.
Altech Chemicals (ATC)
The stock is a rather unique investment proposition as it’s progressing appraisal activity on its high purity alumina specialty chemicals operation. The objective is to produce high purity alumina at a fraction of the cost of traditional production methods. The company is well advanced and recently completed a positive bankable feasibility study on its proposed WA mining operation and planned Malaysian processing operation while it looks to secure project funding.
HOLD RECOMMENDATIONS
Sheffield Resources (SFX)
The company boasts a wealth of bulk commodity project management experience within its ranks, including most of the former Warwick Resources team that successfully sold its iron ore project and company to Atlas Iron at the start of the boom. Since then, the team has been working at Sheffield Resources. The team has been appraising its vast, high grade Thunderbird mineral sands project in WA. The project is advanced, with a positive bankable feasibility study completed. The company is looking for project funding.
Legend Mining (LEG)
The company has undergone a significant transformation in recent years after selling its Cameroon metal assets for $17.5 million in 2015. The company, in conjunction with successful prospector Mark Creasy, has now refocused on its priority Fraser Range nickel acreage in Western Australia. Legend is one of the biggest land holders within the Fraser Range. It has almost 3000 square kilometres under tenure and retains $12 million in funding to pursue targeted and active exploration.
SELL RECOMMENDATIONS
West African Resources (WAF)
The company has done everything right in the past 12 months in terms of exploration and appraisal work on its Tanlouka gold project in Burkina Faso. This is clearly reflected in its robust share price performance, which tells the tale of a company rapidly moving towards production status. The key is the high grade nature of mineralisation within the M deposits at Tanlouka, which suggest high margin gold production. Given the strong share price performance, some holders might look to lock in some profits.
Gascoyne Resources (GCY)
Chart: Share price over the year
The company has been one of the star performers in the emerging gold space, as reflected in its strong share price performance. The major attraction has been its advanced gold resource base of more than 2 million ounces spread across two deposits in WA, which has set it up as an attractive takeover target, or a potentially profitable gold producer in its own right. Given its strong share price performance, holders might look to realise some profits around current levels.
Peter Moran, Wilsons
BUY RECOMMENDATIONS
Silver Chef (SIV)
Posted net profit after tax of $22.4 million for the 2016 financial year, up 45 per cent on the prior corresponding period. We expect additional revenue growth from acquisitions in coming years and from its Canadian operations, which are now profitable. SIV, an equipment funding company, was recently yielding above 4 per cent. Retail Food Group (RFG)
Posted a strong fiscal year 2016 result, with normalised net profit after tax increasing 24 per cent to $66.4 million. The result was driven by 3 per cent EBITDA growth in the traditional bakery business and a full 12 month contribution from Gloria Jean’s and Di Bella, which were acquired in 2014. We see the Hudson Pacific Food Service acquisition contributing an additional 8 per cent to earnings growth for fiscal year 2017. The dividend yield was recently about 5 per cent. HOLD RECOMMENDATIONS
Flight Centre (FLT)
A good business that continues to gain market share. We believe the sector will continue to grow as more people travel. Flight Centre’s investment and innovation positions it well to capitalise on this trend. The challenge is to keep costs under control. Wesfarmers (WES)
The industrial conglomerate has continued to perform well with the exception of the previously flagged Target chain and its resources division. Coles’ earnings growth slowed to 3 per cent in the second half, but that’s still impressive given the strong competitive environment and particularly when compared to main rival Woolworths. The recent dividend yield was 4.8 per cent, which is favourable compared to bank interest rates. SELL RECOMMENDATIONS
Sims Metal Management (SGM)
Underlying earnings before interest and tax of $58 million was in line with expectations for fiscal year 2016, but almost 60 per cent below the previous corresponding period. We expect scrap prices will remain under pressure. Consequently, this may put pressure on profits. With the share price recently trading around its highs for the year, we have downgraded to a sell. WorleyParsons (WOR)
In our view, this engineering services company reported a disappointing fiscal year 2016 result, missing management’s recent guidance. Management has been successfully reducing costs. But this has been somewhat offset by a contraction in work. Management didn’t provide guidance for fiscal year 2017, but it expects trading conditions to remain challenging.
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