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18 Share Tips - 19 March 2012

18 Share Tips - 19 March 2012

18 Share Tips to BUY, SELL & HOLD from Australia's leading brokers

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By Anthony Black 19.03.2012

Andrew Inglis, Shadforth Financial Group

BUY RECOMMENDATIONS

Karoon Gas Australia (KAR)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

KAR has oil and gas exploration permits on the north-west shelf and in offshore Brazil and Peru, which are high risk/high reward propositions in proven oil and gas fields. KAR has an extremely active drilling program underway in 2012. The share price chart indicates the market has some confidence in its prospects. This is a speculative stock for higher risk tolerant investors.

Macquarie Group (MQG)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

MQG has recently announced a cost cutting program and a significant share buyback, which have been well received by the market. Higher quality earnings from its annuity style businesses (banking, leasing, funds management) provide a stronger earnings base, while market related businesses (stock broking, deal making) remain depressed. MQG is trading at a large price/earnings discount to historical levels. With earnings at depressed levels, there’s potential for a strong share price rebound once sharemarkets recover.

HOLD RECOMMENDATIONS

QBE Insurance (QBE)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

QBE recently completed a capital raising after suffering one of the worst years for catastrophe claims. Premiums are rising strongly to help insurance companies recoup these losses, and if catastrophe claims revert to more normal levels this year, then earnings will rebound. Profit margins will remain below QBE’s historical levels due to very low interest rates on its extensive short term deposits. The current share purchase plan offers existing shareholders the opportunity to top up at a discount to the market price.

News Corporation (NWS)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

News is generating very strong profit/margin growth, particularly from its cable TV business. It has an under geared balance sheet and extremely strong cash flows. A $US5 billion share buyback is currently underway, and there’s potential for up to $US19 billion in share buybacks in the next three years. Investigations into the UK phone hacking scandal are still a risk, but may prove a blessing in disguise if profits are used for buybacks. Buy on the dips.

SELL RECOMMENDATIONS

BHP Billiton (BHP)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

BHP is spending a lot of money on expensive acquisitions (in US shale gas) and projects (such as Olympic Dam), which, in our view, are likely to reduce its return on capital in the medium term. While an excellent company with record earnings and many world-class projects, several recent strategic decisions appear questionable. Existing shareholders could consider reducing their BHP holdings and reinvesting the proceeds into Rio Tinto after taking into account the capital gains tax consequences.

Newcrest Mining (NCM)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

Newcrest is an excellent gold company with good growth prospects.  However, the gold price appears to have peaked, so it appears to be a good time to reduce this holding (and other gold company shareholdings) on share price rallies.

 

Mark Lennox, Halifax Investment Services

BUY RECOMMENDATIONS

Buru Energy (BRU)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

Focuses on exploring and developing petroleum resources at the Canning Superbasin in Western Australia. Buru is currently drilling the Valhalla project, and is undertaking an extended production test at the Ungani field, which is expected to be marginally cash flow positive during the initial test phase. With further appraisal and development drilling expected, we anticipate the share price will be supported.

Starpharma Holdings (SPL)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

Its antimicrobial agent VivaGel is moving closer to approval as the US Food and Drug Administration agreed to Phase 3 clinical studies. Peter Turvey joining the board indicates an intention to aggressively market and licence its products. Turvey is well known in the industry for his work at CSL as executive vice president licensing for the research and development division. He worked on the Gardasil licence to Merck & Co.

HOLD RECOMMENDATIONS

CSL (CSL)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

This blood products group continues to outperform the index.  Should demand from emerging markets improve and the US dollar strengthens, we see upside from here

Paladin Energy (PDN)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

December quarter uranium production met expectations. Stronger quarter-on-quarter production resulted in a modest   increase in margins. PDN is still highly exposed to rises and falls in the uranium price, which has marginally increased in in 2012.

SELL RECOMMENDATIONS

QBE Insurance (QBE)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

QBE recently completed a $450 million placement, and is seeking a further $150 million from a retail share purchase plan. Flood and hail damage to US crops amounted to $US319 million in claims in 2011. Floods in Thailand accounted for another $US261million. Combine this with a falling US dollar and lower US interest rates and storm clouds continue to darken.

Mount Gibson Iron (MGX)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

The share price has fallen by about $1 in the past 12 months in response to increasing operating costs, falling iron ore prices and the absence of a likely takeover at this point in the commodity cycle. Talk of slowing growth in China and a falling property market doesn’t help. The shares were trading at $1.16 on March 15.

 

Peter Day, Wilson HTM

BUY RECOMMENDATIONS

National Australia Bank (NAB) 

CHART

Chart: Share price over the year to versus ASX200 (XJO)

NAB’s current share price is implying a negative value for its United Kingdom assets. The potential outcome of a strategic review could be a full or partial sale of UK assets, the creation of a good bank/bad bank structure, or selling a troubled loan portfolio. A positive outcome would lead to a significant revaluation of UK assets and the company’s share price. NAB shares were trading at $23.90 on March 15.

Cockatoo Coal (COK) 

CHART

Chart: Share price over the year to versus ASX200 (XJO)

This coal explorer and producer has agreed on a $313 million placement to South Korean company SK Networks at 53.5 cents a share, a 40 per cent premium to the closing price in early March. A placement of this size will provide COK with sufficient funds for future projects, so it shouldn’t need to raise any further funds in the medium term.

HOLD RECOMMENDATIONS

Insurance Australia Group (IAG) 

CHART

Chart: Share price over the year to versus ASX200 (XJO)

One of the largest general insurers in Australia, with brands including NRMA, CGU and SGIO. The company is embarking on a restructure of CGU that will result in the loss of 600 jobs over three years. The restructure is expected to generate annual cost savings of about $65 million by the end of the 2015 financial year. CGU will move to a single customer relationship and will revise its underwriting team and claims systems.

Wesfarmers (WES) 

CHART

Chart: Share price over the year to versus ASX200 (XJO)

Our analysis suggests only modest upside to today’s share price even if the Coles business is able to match the space productivity and profitability of Woolworths. Such an outcome would require more market share and less competition. This is most unlikely considering the economy.

SELL RECOMMENDATIONS

Ten Network Holdings (TEN) 

CHART

Chart: Share price over the year to versus ASX200 (XJO)

TEN’s recent earnings downgrade highlights the serious challenges it faces as it implements a new programming strategy in a tough advertising market. TEN remains a higher risk proposition after a disappointing ratings performance at the start of 2012. Market conditions remain difficult.

Aristocrat Leisure (ALL)

CHART

Chart: Share price over the year to versus ASX200 (XJO)

We believe this gaming machine maker and distributor remains expensive compared to its North American competitors.  While its result exceeded market expectations, a share price rally of 14 per cent is too much and is difficult to justify.

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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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