Michael Gable, Fairmont Equities
BUY RECOMMENDATIONS
ARB Corporation (ARB)
Chart: Share price over the year
We expect double digit sales growth in fiscal year 2016. ARB benefits from a weaker Australian dollar as its products become more price competitive in overseas markets. A structural shift towards sport utility vehicles is another benefit. The stock has been in an uptrend for several years. It’s close to breaking out of a symmetrical triangle, which implies further upside towards $16. The shares closed at $14.54 on October 28.
InvoCare (IVC)
Chart: Share price over the year
We looked at this funeral operator when the share price was above $13. We liked its defensive earnings and the potential from new expansion in the US. However, we thought it was expensive at the time. Now that it’s fallen to cheaper levels and is finding support at the longer term uptrend line, we believe IVC is now a buy for a move back up to $13 levels again. The shares closed at $11.40 on October 28.
HOLD RECOMMENDATIONS
Premier Investments (PMV)
Chart: Share price over the year
The company recently reported full year results and we were impressed with its sales and margin growth. The stock isn’t expensive and the charts are showing it bouncing off the long term uptrend. This tells us that PMV will continue to climb to higher levels and possibly reach a new high in the next few months. The stock closed at $13.80 on October 28.
Commonwealth Bank of Australia (CBA)
Chart: Share price over the year
During the recent sell-off, CBA found support at the longer term uptrend line and has since managed to show enough technical signals to move higher from here. Banks showed they can transfer costs to customers. The prospect of another interest rate cut adds support to CBA and the other banks at current levels. I expect upside resistance to come in at low $80 levels and then near $88. The shares finished at $77.64 on October 28.
SELL RECOMMENDATIONS
Aristocrat Leisure (ALL)
Chart: Share price over the year
I recommended ALL as a buy here in January when it was at $6 levels. The stock is now fully valued and the chart is showing some major resistance above $9. We would sell and look to re-enter on a dip below $8. Shares in this gaming machine company finished at $9.15 on October 28.
Insurance Australia Group (IAG)
Chart: Share price over the year
There’s potential for capital management, but we’re concerned about the margin outlook, the earnings growth potential and its Asian strategy. The stock broke the longer term uptrend in February, so we believe the current share price rise is likely to fall short of $6 and head back down again. I would aim to sell IAG at high $5 levels. The shares closed at $5.56 on October 28.
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Gavin Wendt, MineLife
BUY RECOMMENDATIONS
AusQuest (AQD)
Chart: Share price over the year
AQD is set to start a major drilling program on its copper and gold exploration joint ventures in southern Peru, which, in our view, should generate strong market interest. Five porphyry copper targets will be drill tested in the next few years by high quality farm-in partners. The scale of potential joint venture expenditure over the projects is vast at around $A39 million. A speculative buy.
West African Resources (WAF)
Chart: Share price over the year
The company has taken significant steps to accelerate its push towards near term gold production status, with the looming completion of a definitive feasibility study at its Mankarga gold project in Burkina Faso. It’s targeting first gold production during 2016. Pre-feasibility study numbers are positive. The numbers point to low life of mine all in operating costs of $US749 an ounce in an initial seven year project life.
HOLD RECOMMENDATIONS
Sheffield Resources (SFX)
Chart: Share price over the year
An advanced mineral sands play with a strong management pedigree. The major driver of interest is its Thunderbird mineral sands deposit in WA, which has now been proven to host a world class deposit in terms of size and grade. Recent pre-feasibility study upgrades have reduced pre-production capital expenditure costs by 26 per cent and boosted mine life by 25 per cent.
Strike Energy (STX)
Chart: Share price over the year
Has a sole focus on its hugely prospective gas acreage in the Cooper Basin. The company has outperformed virtually all of its ASX-listed peers in the unconventional energy space. This is a reflection of the methodical manner in which it firstly identified its acreage, undertook meaningful exploration activity, signed up cornerstone gas customers and is now appraising commercial potential.
SELL RECOMMENDATIONS
Pilbara Minerals (PLS)
Chart: Share price over the year
Had a fabulous share price run, firming from 4.8 cents on June 1, 2015 to 38 cents on October 13. The company is generating strong market interest as a result of aggressive exploration, appraisal and pre-production activity on its Western Australian lithium and tantalum assets. For investors sitting on large gains, locking in some profit wouldn’t be a bad idea. The shares finished at 28 centson October 28.
Lucapa Diamond Company (LOM)
Chart: Share price over the year
Features one of the veterans of the Australian resource scene Miles Kennedy. He’s done it again with what appears to be a most attractive alluvial diamond project in Angola. Large special diamonds are being found at a steady rate. The stock rose from 16.5 cents on September 21, 2015 to 58.5 cents on October 6. Perhaps time to take some profit. The shares closed at 37.5 cents on October 28.
Mathan Somasundaram, Baillieu Holst
BUY RECOMMENDATIONS
Vita Group (VTG)
Chart: Share price over the year
We expect this communications, computing and electronics provider to continue optimising its retail footprint in fiscal year 2016. Consequently, this should drive up store earnings. The company aims to offset any margin pressure with a heightened focus on multi product sales and an improving product mix. Our analyst Josh Kannourakis has a 12 month price target of $2.10. The shares closed at $1.75 on October 28.
Infomedia (IFM)
Chart: Share price over the year
A global technology company providing information solutions to the parts and services sector of the automotive industry. Our positive investment thesis has been predicated on potential market opportunity offered by the Superservice product suite, particularly in the US. This is a significant opportunity and we have upgraded growth prospects. Our analyst Nicolas Burgess retains a buy rating, with a 12 month price target of $1.10. The shares finished at 74.5 cents on October 28.
HOLD RECOMMENDATIONS
Amalgamated Holdings (AHD)
Chart: Share price over the year
An entertainment, hospitality and leisure company. It’s a quality defensive stock with an attractive yield and clean balance sheet while offering option value through underlying property developments. Investors should look for any possible weakness as a cheaper entry point. The shares closed at $13.96 on October 28. Our analyst Nick Caley has a price target of $14.60.
Domino’s Pizza Enterprises (DMP)
Chart: Share price over the year
The acquisition rationale is robust and solidifies DMP as a market leader in France. We expect full benefits from the acquisition and group earnings per share growth of 27 per cent in fiscal year 2017. The shares closed at $46.88 on October 28.
SELL RECOMMENDATIONS
Myer Holdings (MYR)
Chart: Share price over the year
The discretionary retail sector faces challenges on several fronts. Competition is fierce, the cost of living is rising and consumer sentiment is weak. On top of this, major banks increased interest rates. Myer may find it difficult to grow. Management and strategy change increases execution risk.
WorleyParsons (WOR)
Chart: Share price over the year
We retain a negative view on mining services related to the energy sector in an environment of stiff competition, falling resource capital expenditure and falling commodity prices. In our view, Worley’s growth outlook is uncertain as a result of falling oil prices.
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