John Rawicki, State One Stockbroking
BUY RECOMMENDATIONS
Atlas Iron (AGO)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Atlas is an iron ore iron ore
Stock code: AGO
Charts: Atlas Iron Limited
More news: Atlas Iron Limited
Diatreme Resources (DRX)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
A junior mineral sands developer, Diatreme has a highly lucrative project in South Australia’s Eucla Basin. The high proportion of zircon makes it a particularly attractive deposit. We have calculated a NPV (net present value) of 53 cents a share for the company, an enormous premium to its July 7 price of 11 cents.
Stock code: DRX
Charts: Diatreme Resources Limited
More news: Diatreme Resources Limited
HOLD RECOMMENDATIONS
JB Hi-Fi (JBH)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
It’s hard to bet against JBH given its recent track record. But a slow down in discretionary spending on large ticket items, such as flat screen TVs, would impact store revenues. JB Hi-Fi is undergoing rapid growth via an aggressive store roll-out program. The business has proven to be very resilient, trading strongly throughout the global financial crisis and it should ride out the current wave of volatility.
Sims Metal Management (SGM)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Sims recycles metals and other materials from scrap traders and processes it for melting into new products. Demand for scrap metal is increasing due to its lower cost as a steel-making ingredient. Exports to developing economies are also rising, and any recovery in US construction activity is expected to drive both demand and supply for scrap metals.
SELL RECOMMENDATIONS
Aquila Resources (AQA)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Aquila’s dispute with joint venture partner Vale over marketing of coal is expected to hurt profits. The Queensland floods will also impact the bottom line. We downgrade our full-year 2011 forecast to a $63 million loss. We expect a $6 million loss in operating cash flow in the 2011 second half, compared with a $31 million profit in the 2011 first half.
Stock code: AQA
Charts: Aquila Resources Limited
More news: Aquila Resources Limited
Duet Group (DUE)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Duet owns a portfolio of energy utility assets across Australia. The balance sheet looks a little stretched so the company is reducing gearing levels through debt repayments and asset sales. We believe Duet’s current distribution levels may be unsustainable and there’s a chance of a cut.
Stock code: DUE
Charts: Duet Group Limited
More news: Duet Group Limited
Michael Heffernan, Austock
BUY RECOMMENDATIONS
MAP Group (MAP)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Gradual improvements in world economies and the potential for more air travel on the back of discount fares make MAP an attractive proposition, particularly from a dividend perspective. The recent mooted swap of its European airport shares for Sydney airport shares, plus a sizeable cash component from the Ontario Teachers’ Pension
Stock code: MAP
Charts: MAP Group Limited
More news: MAP Group Limited
Ridley Corporation (RIC)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
A maker of animal feed stock and the producer of Cheetham Salt offers attractive fundamentals. With more favourable conditions operating in the agricultural sector amid a positive contribution from the Camilleri (stock feed) business, the future looks promising.
Stock code: RIC
Charts: Ridley Corporation Limited
More news: Ridley Corporation Limited
HOLD RECOMMENDATIONS
Thorn Group (TGA)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Formerly Radio Rentals of Australia operates in a largely recession proof area of the economy, concentrating on the rental and buy markets for those unable to afford the purchase price outright. It has low debt levels and pays an attractive fully franked dividend.
Lynas Corporation (LYC)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
This company has a strong growth profile for products in high demand given the use of rare earths in mobile phones and plasma televisions. Major producer China has, in the past, curbed exports of rare earths and a further announcement from China about export quotas is expected in the near future. Mitsubishi now has a 9.99 per cent stake, which underlines confidence in the Lynas business.
SELL RECOMMENDATIONS
Qantas Airways (QAN)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Australia’s premier airline, which suffered significantly during the global financial crisis, is now struggling in an increasingly competitive aviation environment amid high oil prices and the threat of future industrial disputation.
Stock code: QAN
Charts: Qantas Airways Limited
More news: Qantas Airways Limited
Bank of Queensland (BOQ)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Floods and cyclones in Queensland had an impact on many businesses, which flowed to the banking sector. While the outlook for the financial services sector is reasonable, the major banks are preferred.
Stock code: BOQ
Charts: Bank of Queensland Limited
More news: Bank of Queensland Limited
Chris Elliott, Shadforth Financial Group
BUY RECOMMENDATIONS
Foster’s Group (FGL)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Foster’s has recently demerged wine from beer after years of failing to consolidate both into a single and highly profitable operation. Foster’s, Australia’s leading brewing company with popular brands, also has RTD (ready-to-drink spirits) and non-alcoholic beverages. With such a strong global beer brand, it has huge takeover potential. We have already seen SABMiller launch a low-ball takeover offer of $4.90 a share. But it may have to up the ante and a rival bidder may emerge.
Stock code: FGL
Charts: Foster’s Group Limited
More news: Foster’s Group Limited
Commonwealth Bank of Australia (CBA)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Commonwealth Bank will release its full year results in August 2011. Some are expecting another record profit despite concerns regarding lending margins, slower business lending and possibly an increase in residential mortgage defaults. CBA has consistently grown shareholder value for many years. With a forecast fully franked dividend of $3.10 for 2010/11, investors can expect a final dividend of about $1.78 a share.
Stock code: CBA
Charts: Commonwealth Bank of Australia Limited
More news: Commonwealth Bank of Australia Limited
HOLD RECOMMENDATIONS
Woodside Petroleum (WPL)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Pluto project setbacks have hurt the share price. Several months ago, the rumour mill was humming about a possible takeover of WPL. The share price then was almost $10 higher than it is now. But Pluto LNG costs have increased again, taking the project to $14.6 billion and pushing production back six months. Despite this, WPL is well managed and offers a strong balance sheet. The company is suitable for conservative investors seeking oil and gas exposure.
Wesfarmers (WES)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Curragh coal operations took the brunt of flood and water-related impacts, so we expect operations will struggle to break even in the 2011 second half. We also expect cash costs per tonne to significantly reflect reduced production. But the company’s other businesses appear to be on track.
SELL RECOMMENDATIONS
Pacific Brands (PBG)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
PBG manages some of Australia’s most recognised brands, such as Bonds, Slazenger, Hard Yakka, KingGee and Dunlop. In the past 12 months, PBG has been restructuring – and culling non-performing brands – but it’s failed to meet expectations with the stock price continuing to fall. We expect revenue pressures for some time.
Stock code: PBG
Charts: Pacific Brands Limited
More news: Pacific Brands Limited
Treasury Wine Estates (TWE)
Chart: Share price over the year to 08/07/2011 versus ASX200 (XJO)
Treasury Wine Estates is the biggest listed pure wine company in the world. Its stable includes Beringer, Lindeman’s, Penfolds, Rosemount and Wolf Blass. Australia, the US and the UK account for about 80 per cent of sales. But a global over-supply of grapes and a strong Australian dollar exposes TWE to volatile earnings. I believe Foster’s is a better choice as it offers shareholders more stable earnings.
Stock code: TWE
Charts: Treasury Wine Estates Limited
More news: Treasury Wine Estates Limited
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