Ben Potter, RBS Morgans
Monadelphous Group (MND)
This engineering service group reported a strong profit in bottom-of-cycle conditions, reinforcing the quality of its business. Improving macro conditions, an ability to grow organically with low capital intensity and a very solid balance sheet should make this company an outperformer during the next three years.
National Australia Bank (NAB)
The NAB is attractively priced as its price/earnings ratio has been trading around 9.5 times, which is a steep discount to the average of the other major banks. With a grossed up dividend yield of about 11 per cent, we believe NAB is the pick of the banking sector.
Commonwealth Bank (CBA)
Its half-yearly profit report beat its previously upgraded guidance, although it appears most of the reduction in bad debt charges is now factored into a fully valued share price. Buy on any share price weakness.
GWA International (GWT)
This company makes and markets a range of consumer products, including brands such as Caroma and Dux. It’s weathered the downturn and is well positioned to benefit from improving economic conditions. GWT has a history of strong dividends, and is currently providing a grossed up dividend yield of about 11 per cent.
BT Investment Management (BTT)
This Australian-based funds management business has benefited from a recovery in global sharemarkets in 2009, but we believe it’s now trading on an expensive price/earnings multiple. In our view, Perpetual (PPT) represents better value for investors in this sector.
Tap Oil (TAP)
TAP’s cash flow is in decline, and the company is planning an extensive exploration program during the next 15 months. We believe positive news flow in the short term will be limited. For oil and gas exposure, bigger companies such as Woodside Petroleum (WPL) and Oil Search (OSH) are preferred.
Andrew Doherty, Morningstar
Crane Group (CRG)
This building and pipeline products supplier is well placed to benefit from continuing government infrastructure spending and an upturn in housing and commercial construction activity in the next two years. Most of CRG’s businesses are mature and have leading market positions. Strong branding and cost advantages provide moderate barriers to entry. The stock offers an attractive, fully-franked dividend yield, but poor earnings visibility adds investment risk.
Domino’s Pizza Enterprises (DMP)
DMP is the Australian master licence holder of the Domino’s Pizza brand. It’s the largest pizza chain in Australia, with operations in New Zealand and Europe. It offers a strong, highly visible brand. Its value-for-money based marketing campaign has worked particularly well in the current climate.
This diversified engineer and maintenance services provider has a solid track record of earnings growth. The half-year result was impressive yet again. The company provides good cash flow through healthy margins, and the 4.5 per cent dividend yield is attractive to income investors. UGL is well placed to benefit from ongoing water, power and rail infrastructure investment and improving activity in Australian resources and US property.
Wotif.com Holdings (WTF)
A leading online accommodation bookings provider. Its approximate 35 per cent market share in Australia currently accounts for 10 per cent of all accommodation bookings. WTF´s product enables customers to book rooms at a heavy discount and, at the same time, gives hotels better management of their short-term inventory. This is a very strong cash generator through low and relatively fixed operating costs and limited capital expenditure requirements.
CAB holds a quasi-monopoly position in the taxi fare processing industry. The position is courtesy of first mover advantage, 30 years of experience and scale efficiencies. Moves into bus operations provide a new revenue stream. Earnings have held up well during the downturn, but we’re concerned about the potential for increasing competitive activity through technological advances and rising regulatory pressures.
REA Group (REA)
Australia’s leading online real estate classifieds site, REA is diversifying brand strength into related markets, including commercial property and businesses for sale. We’re concerned about the emerging threat from internet goliath Google, which is launching Australian real estate listings on to its Google Maps platform.
Steve Collette, Calibre Investments
Newcrest Mining (NCM)
Australia’s premium listed gold producer has been recently consolidating at sub $32 levels after hitting highs above $39 late last year. Post a reasonable report, and with gold again reclaiming levels above $US1100 an ounce, NCM appeals at today’s price and should climb back to at least $35.31 in the short term.
Relative to the typical multiple it attracts, the supermarket giant is cheap. Investors are possibly ignoring the stock given the move on rival Wesfarmers prior to and post its report. This is an excellent opportunity to accumulate a quality blue chip at compelling levels, which also offers defensive attributes in a falling market.
Oil Search (OSH)
There’s value here below $5.30. It may be a brave decision in light of recent results, but there’s long-term considerations. For those who bought the shares at higher levels, this company remains a hold in today’s climate.
Commonwealth Bank (CBA)
The stock has gone ex-dividend and will pay an interim $1.20 a share on April 1, 2010. The easiest gains in the sector may have passed amid challenging times ahead, but this stock remains a hold at current levels.
James Hardie Industries (JHX)
This stock has been tracking sideways for the best part of six months. Given its exposure to the US housing market, these funds may be better utilised elsewhere after the strong run up from February 2009. The driver for the next leg-up in the stock is difficult to discern, but the share price does look vulnerable at current levels should housing data disappoint, or the broader market retreats.
Telstra Corporation (TLS)
The recent report was a setback, and the stock has gone ex-dividend by 14 cents. Obviously, the yield is there and the stock is back towards some meaningful supports. However, a more potent consideration is whether you feel there’s better value and prospects elsewhere. If the answer is yes, then it’s time to pull up stumps on the Telstra experiment and sell.
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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