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18 Share Tips - 12 July 2010

18 Share Tips - 12 July 2010

Broker Stock Recommendations - 6 to BUY, 6 to SELL and 6 to HOLD

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By Anthony Black 12.07.2010

 

Peter Day, Wilson HTM

BUY RECOMMENDATIONS

Slater & Gordon (SGH)

Specialising in personal injury, commercial, family and asbestos-related law, Slater & Gordon provides a unique exposure to the legal market. Its core markets aren’t correlated with the broader economy and earnings should grow organically by about 10 per cent a year. We regard the recent Queensland based Trilby Misso acquisition as strategically sound and appropriately priced.

APA Group (APA)   

Comprises Australian Pipeline Trust and APT Investment Trust, and owns Australia’s largest gas distribution and storage infrastructure network. Our sum-of-the-parts valuation has increased from $3.57 to $4.03 a share. This is a result of revised cash flow projections. Its recent play for Hastings Diversified Utilities Fund is positive. APA has an unrivalled ability to deliver on growth opportunities.

HOLD RECOMMENDATIONS

Perpetual Limited (PPT)  

Perpetual is a diversified wealth management investment fund. Investment performance regarding the company’s core funds has been relatively good in past years.  There’s still uncertainty on its strategic direction and we expect this continue until the company replaces its CEO.

Boom Logistics (BOL)   

An Australian lifting solutions company, with a pivotal position in the industrial maintenance, commercial construction and resources sectors. There’s recently been a corporate approach from Archer Capital. But in our view, Boom share holders need an offer with “reasonable” conditions to enable them to decide ownership.

SELL RECOMMENDATIONS

Paladin Energy (PDN)

This uranium company has projects in Australia and two operating mines in Africa. We remain bearish about the spot uranium price due to oversupply.  We believe a takeover of Paladin is unlikely in the short term and the stock appears expensive.

Nufarm (NUF)

We believe the Elders profit warning is a negative for Nufarm as it highlights weaker than expected glyphosate prices in Australia amid market acceptance of generic products. We expect glyphosate prices to remain low for some time and this may mean further downside risk to earnings in Australia. While seasonal conditions have been positive, we don’t believe volumes will meet market expectations.

Richard Batt, Shadforth Financial Group

Richard Batt, Shadforth Financial Group

BUY RECOMMENDATIONS

Commonwealth Bank (CBA)

The CBA has a universally recognised brand. It offers a powerful retail and business banking franchise, with an extensive distribution network via its branches. This provides significant competitive advantages that should grow wealth for investors over the longer term.

Western Areas NL (WSA)

Western Areas is a nickel miner and its principal asset is the Forrestania project. The two main deposits at the project are Flying Fox and Spotted Quoll. Exploration suggests these deposits should last at least 10 years, producing more than 20,000 tonnes of nickel a year from 2011. With good grades and low cash costs, WSA has the potential to be a good quality small miner.

HOLD RECOMMENDATIONS

Oz Minerals (OZL)

Offers investors exposure to copper, with the potential for growth via exploration, acquisitions, or both. The recent acquisition of a 19 per cent stake in Sandfire Resources shows a company committed to following its strategy of investing in promising copper assets. With a significant cash balance, the company can take advantage of opportunities as they arise to the benefit of investors.

Coca-Cola Amatil (CCL)

The soft drink giant offers a strong brand irrespective of the economic cycle. Consumers will always buy the brands they know.  CCL continues to deliver recurring revenues, which will provide investors with consistent fully-franked dividends.

SELL RECOMMENDATIONS

Brambles (BXB)

In early May, Brambles reported that revenue for the nine months to March 2010 was 1 per cent lower than the previous corresponding period. The company indicated that a slow rate of recovery in its major operating regions was a contributing factor. Since then, the economic outlook across most of BXB’s core geographies hasn’t improved, and the company faces greater competition. We’re concerned about a difficult operating environment and increasing competition and believe better investment opportunities exist elsewhere.

Downer EDI (DOW)

Provides a range of engineering and infrastructure management services to a variety of sectors. The contracting nature of the business is inherently higher risk, with many elements outside the company’s control. Project delays or cancellations are the most obvious short-term risks to earnings and the current market environment hasn’t helped. Based on this, we prefer other investment alternatives.

Les Szancer, Kinetic Securities

Les Szancer, Kinetic Securities

BUY RECOMMENDATIONS

Eagle Eye Metals (EYE)  

A minerals exploration and development company, with a portfolio of varying stage projects throughout the Leonora-Laverton region, north of Kalgoorlie. Eagle Eye has a 20 per cent strategic interest in Aphrodite Gold, which has some exciting gold prospects. Eagle Eye is a low cost entry into the gold and nickel markets. A speculative buy.

Aphrodite Gold (AQQ)

The Aphrodite project is about 65 kilometres north of Kalgoorlie, covering 51 square kilometres of the Bardoc Tectonic Zone. It contains a gold deposit of 287,000 ounces, and a significant inventory of unclassified gold mineralisation. But the gold deposit figure has been readjusted to potentially four times more. This may well be the most successful junior mining IPO (initial public offering) of the year. A speculative buy.

HOLD RECOMMENDATIONS.

BHP Billiton (BHP)

A diversified resource company if ever there was one. Aluminium, iron ore, diamonds, coal, manganese, petroleum – the list goes on. With so many different commodities, it’s well placed to weather any sharemarket gyrations.

Commonwealth Bank (CBA)

It’s one of our leading banks that rewards investors with good dividends. Hold for more attractive income as the Commonwealth Bank makes excellent profits year in, year out.

SELL RECOMMENDATIONS.

Telstra (TLS)

The telecommunications giant was recently trading above $3.30 after news of an agreement on the National Broadband Network. After the news was analysed, Telstra’s share price fell back – as expected. If you’re looking for a dividend stock, then Telstra may do the job. If you’re looking for a growth stock, then look elsewhere.

Santos (STO)

As someone who likes mining companies, I’m loathe to sell one, but this oil and gas company never seems to make me happy, as the share price reflects. Santos is about the same price it was a year ago. The one positive about a disappointing share price is a potential takeover offer. There’s been speculation about a takeover, but that’s all it’s been.

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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