Peter Russell, Intersuisse
Servcorp offers internationally serviced and virtual office solutions. A recent capital raising is funding a global network expansion of prime CBD locations. It wins from a high Australian dollar and low global property prices. Unique ICT (information and communication technology) systems built over 20 years make it a global leader courtesy of the internet.
Icon Energy (ICN)
Actively exploring tenements in the Surat Basin for coal seam gas, Icon Energy offers significant resource potential. Additional potential from shale gas adds interest. It’s one of 292 actively traded mid-cap, or smaller commodity explorers and producers currently in the Intersuisse Resources Index. The index rose 179 per cent in 2009, illustrating the sector’s opportunities, and we see upside for Icon Energy in 2010 as it proves up its resource prospects. It should be noted that Intersuisse has done capital markets work for Icon Energy recently.
Hastings Diversified Utilities Fund (HDF)
Owns Australian gas utility Epic Energy and 39 per cent of UK-regulated South East Water. Revenues are highly stable and growing. Epic has the funds to expand a key piece of its gas transmission network joining Adelaide to Southern Queensland via Moomba. Cash inflow is rising, very strongly from 2012, covering a 10 per cent yield. Hastings is a potential takeover target with APA Group sitting on a small stake.
Macquarie Infrastructure Group (MIG)
The proposed restructuring will transform a snaky mess of toll roads into two assets. The key portfolio will house toll roads in Toronto and Sydney – performing well, and also attractive to potential buyers. The unattractive roads will continue to be managed by Macquarie and may one day be resurrected. A 10c distribution adds value.
This building materials company has long-term prospects in a US housing recovery. But the emphasis is long-term. Its Asian businesses lack scale. Boral forecast a decline in its Australian markets in full-year 2010 despite a lift in housing. It’s constrained by competitive pricing across its activities and high levels of investment and maintenance. Fully-priced.
Transpacific Industries Group (TPI)
TPI shares have run up since its November 2009 lows, affording an opportunity to move on. TPI over-reached itself in attempting to corner the total waste management market. While the market is growing steadily, debt became a major burden. Equity raising and refinancing leaves TPI with no dividend until 2011, little room to move and a slow recovery.
Michael Heffernan, Austock
Flight Centre (FLT)
While it’s been an impressive performer in difficult circumstances, the increasingly positive aviation outlook amid stronger world economies is favourable for its profitability. Recent positive passenger figures from Qantas and Virgin underline this outlook.
REA Group (REA)
Rising, yet historically low interest rates and government grants, have underpinned a buoyant property market, and it’s flowed through to REA Group’s profit line. Expectations of a pause in interest rate rises and an increasing tempo in economic activity paint a bright outlook for this online publisher.
A solid performer during adversity, and a takeover of Mitre10 is positive. Metcash provides an attractive dividend and offers a moderate growth profile in the less volatile supermarket sector. Christmas trading appears to have exceeded expectations.
Wealth management activity should increase with an improving sharemarket. It could become a takeover target if National Australia Bank successfully acquires Axa Asia Pacific.
Roc Oil Company (ROC)
A serial underperformer even when oil prices have substantially increased. Its geographically dispersed production areas contain elements of sovereign risk, which have combined to constrain its sharemarket performance. There are better options available.
Caltex Australia (CTX)
The oil refiner seems unable to take a trick following a recent ACCC decision to reject its plan to buy 300 Mobil sites. As it now considers its next expansion venture, investors should be proactive and consider other stocks and sectors.
Sean Conlan, Macquarie Private Wealth
AWE Limited (AWE)
We believe the market is continuing to ascribe little value to AWE’s high quality exploration portfolio, most of which will be tested this year. We reiterate our outperform rating and price target of $3.90 a share. Following BassGas exploration, AWE will begin the New Zealand drilling program.
Boart Longyear (BLY)
This drilling services company offers significant operating leverage to the global exploration cycle that’s emerging from a downturn. Juniors are raising equity capital to fund exploration, commodity prices are well above traditional threshold levels and the majors are looking to increase their capital expenditure budgets in 2010. All point to a strong recovery in Boart Longyear’s earnings in full-year 2010 and 2011.
While the outlook for refiners, particularly Caltex, remains challenging, it’s been well flagged and appears to be increasingly factored into the share price. Our share price target of $10 reflects the weaker medium-term margin environment.
Corporate Express (CXP)
Management expects most of their markets to remain subdued in the short term. Guidance suggests the company remains on track to deliver consensus forecasts for net profit after tax of between $52.1 million and 56.1 million for full-year 2010. Macquarie’s NPAT forecast is $52.1 million.
Karoon Gas Australia (KAR)
While we recognise all indications from Poseidon-2 are encouraging at this stage, significant uncertainty remains. The share price already reflects the market’s optimism surrounding a possible LNG stgelopment.
Mirvac Group (MGR)
While we expect full-year 2010 to be the low point for the group’s stgelopment earnings, we believe an improvement is reflected in the company’s share price. Rising interest rates pose a risk to the duration of a recovery in the residential stgelopment business.
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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