Andrew Inglis, Shadforth Financial Group
Australia’s largest oil refiner has been trading below the value of its net assets. Caltex earns more than half of its income from a growing retail chain. It’s cutting costs and expanding in population growth areas. Fuel volumes will improve in line with the economic recovery, particularly in the airline sector. Excess capacity in South-East Asia’s refining industry and a high Australian dollar are negative for Caltex. But the stock offers a long term buying opportunity.
Sims Metal Management (SGM)
Sims is the largest metals and electronics recycler in the world. It’s well managed and has recently raised capital for further acquisitions. Profits vary depending on metal prices and the supply of scrap. Sims provides excellent leverage to an economic recovery.
Sonic Healthcare (SHL)
The share price of this pathology giant recently hit 20-month highs. Profit margins are increasing under strong management. It has the capacity to continue making value- adding acquisitions. Sonic will generate long-term growth from the increasing medical needs of an ageing population.
Origin Energy (ORG)
Origin’s share price recently hit 15-month highs amid growing market confidence the company’s LNG joint venture will secure a long-term sales agreement. Origin is starting to use its huge balance sheet capacity to make acquisitions, and is well placed amid the privatisation of NSW power. The long-term strategic direction looks very sound.
Commonwealth Bank (CBA)
The major banks are strongly positioned for an economic recovery. The CBA is trading around a 15 per cent price/earnings ratio premium to ANZ. Where it’s tax effective, CBA investors could consider switching (all or part of their holdings) into ANZ, which is well positioned for growth from its Asian strategy and the Australian economic recovery.
Wesfarmers has a collection of excellent businesses and is predominantly now a retailer. The share price has rallied strongly on a turnaround at Coles, higher coal prices and the economic recovery. Its share price looks expensive compared to Woolworths. Woolworths is trading around a 28 per cent price/earnings ratio discount to Wesfarmers. Where tax effective, Wesfarmers investors could consider a switch to Woolworths.
Ben Potter, RBS Morgans
This transport infrastructure company has no debt due until May 2012 after it announced the refinancing of debt maturing in May 2010. We believe this is another boost for investor sentiment. Expect further announcements, in relation to securing a credit rating and additional haulage contracts, to act as positive catalysts.
Following our recent site tours in Melbourne, we continue to see upside potential for the company’s hospital and pathology divisions. Extending existing hospital facilities and expanding into new pathology territories are expected to drive medium-term growth. Healthscope has consistently increased its annual dividend payout since 2001.
Transurban Group (TCL)
Sit on this in response to the TCL board rejecting a takeover bid from two Canadian pension funds pitched at $5.25 a share. There may just be a higher offer, possibly around the $6 level.
Operationally, the company remains on track in turning around Coles. Despite currently trading at the upper end of its range, we believe Wesfarmers should be a core portfolio holding for long term investors.
BT Investment Management (BTT)
The first half 2009 profit result demonstrated BTT’s strong cost-cutting ability. But it also highlighted the negative margin effect of investors shifting from equity investments to cash. This Australian-based funds management business is trading on an expensive price multiple and we believe better value can be found elsewhere in the sharemarket.
Our long-held belief that the share price looked expensive based on profit forecasts was confirmed when this engineering services company recently lowered full-year 2010 profit guidance. While the global energy and resources sectors offer long-term growth potential, investors should consider taking profits and look for a cheaper entry point.
Brett Schreuders, Alto Capital
Meridian Minerals (MII)
This Pilbara-based zinc and lead stgeloper is starting a feasibility study, with some further drilling results due in coming weeks. Inferred resource is currently estimated at 8.2 million tonnes at 7.4 per cent zinc and 4.6 per cent lead. With lead and zinc prices strongly trending upwards, this is a speculative buy for risk tolerant investors.
BC Iron (BCI)
This iron explorer has joined forces with Fortescue Metals to stgelop BC Iron’s Nullagine project. Focus has turned to securing final regulatory approvals, awarding key construction and mining contracts and starting village and mine centre construction. The iron ore sector is hot again and BCI looks set to reward medium and long term investors.
Coretrack Limited (CKK)
Its oil and gas coring services technology looks set to transform the company from a research and stgelopment play to a commercial entity. The technology, a stgice that measures the core sample during the drilling process, is ready for commercial application. We recommended the stock as a buy on August 17, 2009, at 14.5c. On January 15, 2010, the stock was trading at 27c.
Newcrest Mining (NCM)
The gold miner recently received planning approval for its Cadia East project in New South Wales. Still requiring NCM board approval, this would be Australia’s largest underground mine, and it would secure a 20-year future in the region. With central banks expected to be net buyers of gold in 2010, and stimulus packages still sizzling around the globe, the stars appear to be aligning for gold.
Biota Holdings (BTA)
Sales forecasts for the swine flu vaccine appear ambitious given the virus’s mild nature and the need for single shots rather than double. Coupled with public indifference, the take-up has been lower than expected in the UK and other countries. With uncertainty hanging over revenues, it’s time to take some profits and look elsewhere.
Amcor has been redefining its global packaging business, easing raw material cost pressures. Food, beverage and healthcare packaging remain the key revenue driver amid continuing pressure on consumer spending from the global financial crisis. The share price has bounced 80 per cent from its March 2009 lows, and we feel it’s prudent to lock in some of those gains.
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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