Scott Marshall, Shaw Stockbroking
CFS Retail (CFX)
Gearing remains low, and CFX expects its 2010 distribution to be 12.5 cents a share, an increase of 5.4 per cent. CFX offers a conservative financial structure, a quality property portfolio and retail exposure. Growth in distributions (compared with other trusts that are forecasting a decline) highlights a strong retail portfolio. Retail spending in general is exposed to higher unemployment and unwinding of government stimulus. However, Australians continue to spend. Expect CFX to announce acquisitions.
Brambles is leveraged to a recovery in the transportation of more manufactured goods across Europe, the US and Australia. Recall suffered from a fall in demand, but we expect it to recover. BXB’s financial position is strong, and cash flow of US$1 billion from operations in recessionary times highlights a solid business. BXB should continue to perform well as the recovery firms up.
The company has appointed Mark Selway as its new chief executive. Boral must extract value from recent investments in growth initiatives. Several non core assets could be considered for sale amid Selway establishing new directions for the group using its cash flow.
David Jones (DJS)
The department store giant offers an ambitious long-term growth profile supported by new store rollouts (four-to-eight by 2012) and refurbishments. In holding the stock, investors should note that the share price has doubled in the past six months, and is now trading above its historic price/earnings range. The fully franked dividend yield of 5 per cent is supportive.
Hastie Group (HST)
This air conditioning group is exposed to the non-residential construction cycle, which in previous downturns has proven to be deep and long. There’s concerns that government funded and private work will be at reduced margins. HST has acquisition strategies. The P/E looks cheap, but we prefer to wait for evidence of increasing contracted work.
A capital expenditure decline in the international resources sector raises uncertainties. Expect several projects to be reduced in size, cancelled, or put on hold as funding across the globe is tightened. Existing projects provide solid support. This engineering services giant generates a lot of cash with healthy, albeit declining, profit margins. At this stage of the cycle, only those with an appetite for risk should invest.
Richard Batt, Shadforth Financial Group
Westfield Group (WDC)
A global retail property group with a high quality portfolio of shopping centres across Australia, the US, UK and New Zealand. The portfolio is well positioned in the current economic environment with high occupancy levels and long term leases generating stable cash flows. Expect investors to benefit from quality management with an impressive track record.
Coca-Cola Amatil (CCL)
The soft drink bottler is a well-managed company with a strong brand name. Regardless of the economic cycle, consumers will always buy the brands they know. And that’s a competitive advantage. CCL continues to deliver recurring revenues, providing investors with consistent fully franked dividends. CCL should be a part of any long-term portfolio.
Perpetual Limited (PPT)
Perpetual is a wealth manager offering a diversified range of services. Retail investors and financial planners respect the Perpetual brand, and goodwill continues to underpin retail fund inflow. This provides Perpetual with an opportunity to build its private wealth management business, which should generate future growth.
Premier Investments (PMV)
Premier Investments focus on investing in businesses exposed to the retail sector. The company aims to maximise capital growth via acquisitions. A strong balance sheet, with more than $230 million in cash, will enable it to make further acquisitions as opportunities arise. The stock suits investors seeking retail exposure and a good fully franked dividend.
FKP Property Group (FKP)
FKP owns retirement villages, with additional businesses in residential stgelopment and funds management. Although the retirement businesses will benefit from demographic change, risks associated with the property investment portfolio, by the very nature of stgelopment, still exist. For conservative investors, we believe there are better opportunities elsewhere.
Virgin Blue Holdings (VBA)
Many investors inadvertently became shareholders in VBA via an in specie distribution from Toll Holdings. And many investors ended up with relatively small holdings. A recent share price rise provides an opportunity to sell.
Andrew Doherty, Morningstar
Australia’s second largest private hospital operator has grown rapidly by acquisition. Scale, buying power and strength to negotiate with health funds provides the capacity to deliver earnings growth. The immediate focus is on increasing the capacity of its facilities to meet the growing demands of an ageing population.
Regional Express (REX)
Australia’s largest independent regional airline resulted from a merger of Hazelton and Kendell in 2002. It effectively holds monopoly positions in 60 per cent of its routes, many too small to be profitably serviced by Qantas, Virgin Blue or Jetstar. Earnings growth from next year isn’t factored into the share price. REX is suitable for risk tolerant investors.
ResMed Inc. (RMD)
ResMed is leading the charge on treating sleep apnea. Expect solid growth from serving a huge potential market. If RMD continues to up the innovation ante with new products, including airflow generators, masks and nasal pillows, it should remain an influential leader in future.
The Reject Shop (TRS)
The discount variety retailer has grown its network to more than 164 stores. It identifies and stocks high turnover, everyday items. The strategy is to expand its retail presence across Australia, enhancing operating efficiencies with scale. The stock currently trades near our fair value estimate.
Harvey Norman (HVN)
This is a very well managed growth stock. Its Australian stores operate under a franchisee business model. International operations are company owned and offer significant potential for earnings growth. We believe the shares are fully priced. There will be pressure on sales in the next 12 months as interest rates rise and government stimulus wanes.
Nufarm is a major producer of crop protection products, such as herbicides, fungicides and pesticides. Nufarm sells into all major world markets. Recently, Nufarm reduced debt to limit refinancing risk during the credit crisis. The shares have been a disappointing performer. The Sinochem takeover offers provides an opportunity to sell at a decent price.
Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.
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