Jabin Hallihan, Morgans
Oil Search (OSH)
A major oil and gas developer and producer, the company’s key asset is a 29 per cent interest in the world class Papua New Guinea/LNG project operated by Exxon Mobil. We rate OSH as a quality and sizeable market capitalisation stock based on strong earnings and an appealing growth profile. OSH has moved back into buy territory after its share price retreated on weak crude oil prices.
Senex Energy (SXY)
Focuses on operating and developing energy sources in Australia’s Cooper and Surat basins. SXY has reserves, funding and a good management team. We believe SXY remains a takeover target given appealing assets and an attractive balance sheet. We expect the market will gain confidence in SXY, as it progresses its drilling programs in the Surat Basin this year.
A possible share buyback and/or special dividend going forward are reasons to hold. We believe it’s prudent to have some exposure to the defensive grocery sector in a volatile market. We like Woolworths for its diversified exposure that includes Big W department stores, petrol stations and the hotels portfolio.
Transurban Group (TCL)
We’re expecting first half EBITDA growth of about 13 per cent on the prior corresponding period. We expect this will be mostly driven by acquisitions. Since October last year, shares in this toll road operator have been rising to trade at $12.335 on February 7.
Fortescue Metals Group (FMG)
Iron ore prices have been rising on the back of Vale’s recent tailings dam disaster in Brazil. FMG’s share price has risen from $4.76 on January 24 to trade at $6.11 on February 7. In our view, this iron ore producer is trading near fair value, so investors can consider taking a profit.
This building products provider issued a profit downgrade on February 4 in response to a downturn in building and property related industries and heavy rain causing project delays. Given the weather impact on earnings amid second half uncertainty, we suggest waiting for more clarity in its interim results and outlook. It will report on February 25. We like the BLD business and exposures, but current headwinds are still impacting.
David Thang, PhillipCapital
Westpac Bank (WBC)
Despite the continuing fallout from the banking Royal Commission, we expect the beaten down banks to continue attracting bargain hunters. Growing economies of scale, coupled with strong balance sheets and high credit ratings provide a strong platform for future growth. From a forward valuation perspective, we believe Westpac is more attractive compared to its peers.
Woodside Petroleum (WPL)
Australia’s premier oil and gas player. We expect the company to enjoy a strong tailwind from upward momentum in the West Texas Intermediate crude oil price, which is likely to continue in the short to medium term. Moreover, the cash flow base is diversified, with LNG production making it less susceptible to the vagaries of pure crude oil producers.
The A2 Milk Company (A2M)
The share price has risen about 50 per cent from the October 2018 low of $8.14. There is room for further upside in the short term. But on valuation grounds, we believe prices are tracking towards the top end of the scale. As an exporter, the risk is slowing growth in China.
Afterpay Touch Group (APT)
This buy now, pay later company continues to trade firmly north. In the short term, further upside is likely to $18. The next earnings report is due on February 26. A deeper penetration into the US and the UK are key for share price support. The shares closed at $17.58 on February 7.
The share price of this international building products provider was punished on weaker fiscal 2019 guidance. The shares have been trending down since early October 2018. In the absence of meaningful growth in 2019, we prefer others.
The share price of this investment manager and life services provider plunged after an earnings downgrade in January. We believe stiffer competition in the annuities space is likely to be a key headwind for the company. The shares have fallen from $9.23 on January 22 to close at $7.96 on February 7.
Jonathon Howe, Red Leaf Securities
Transaction Solutions International (TSN)
A technology based company focusing on cyber security and the cloud. The recent acquisition of Cloudten enables TSN to migrate companies from traditional data centres to the cloud. TSN now has two cyber security businesses in its stable. The shares were trading at less than a cent on February 8. I own shares in TSN.
In my view, the company has one of the best global software development kits for 3D body scanning. It owns patents in major markets. We note the company recently executed a binding term sheet with a Hong Kong fund manager to raise $6 million in capital at 60 cents a share. The shares were trading at 36.5 cents on February 8. I own shares in MYQ.
HOLD RECOMMENDATIONS Telstra (TLS)
One of the better performing top 50 stocks since July 1. This major telco recently showed its strength when another competitor withdrew from its mobile rollout, revealing how expensive it is to create new mobile infrastructure. The company also offers a solid dividend yield.
In our view, it appears the worst is now priced into the AMP share price after the fallout from the banking Royal Commission and the recent downgrade. We believe this financial services company is a solid addition to any portfolio at current levels. The shares were trading at $2.43 on February 8.
BHP Group (BHP)
The global miner has enjoyed a great run, with its share price rising from $29.17 on November 26 to trade at $35.55 on February 8. We believe investors should consider taking a profit. A change in Federal Government may potentially bring a policy shift.
Fortescue Metals Group (FMG)
The recent tailings dam disaster in Brazil and forecasts of tighter global iron ore supply have driven up the iron ore price. This iron ore producer’s share price has enjoyed a solid run up to the point where investors may want to consider taking some money off the table. The shares were trading at $6.05 on February 8.
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