Andrew Doherty, Morningstar BUY RECOMMENDATIONS CSL (CSL) CSL develops, makes and markets biopharmaceutical products. It has a large share of the international blood plasma industry, enabling scale efficiencies and pricing power. The odds favour a big share buy-back now that the acquisition of protein therapies firm Talecris is unlikely to happen. Brambles (BXB) CHEP pallets is the company’s main earnings driver. Performance is suffering in response to worsening retail conditions and margin pressure from some large customers. Scale efficiency and longer term international growth support company prospects. Brambles is a strong cash generator, with generous operating margins sustaining investments in new pallets and service centre upgrades. HOLD RECOMMENDATIONS Computershare (CPU) Computershare is the only global share registrar administering more than 80 million shareholder accounts for over 13,000 corporations across 12 countries on five continents. With its scale, expertise, strong balance sheet and low capital requirements, CPU should grow earnings at a high rate in future, although cyclical fluctuations in sharemarket activity could generate substantial shorter-term volatility. CSR (CSR) CSR operates four unrelated and cyclical businesses: sugar, aluminum, building products and property sales. A break-up of the business is likely at some stage, but only once the market recovers. Sugar is benefiting from an upturn in prices. Efficiency gains should help its building products division benefit from improving housing conditions in the next few years. SELL RECOMMENDATIONS Emeco Holdings (EHL) Emeco holds leading positions in letting earthmoving equipment in Australia and Indonesia. The focus is on mining and, to a lesser extent, civil construction. A high proportion of costs are fixed, which means earnings will fall much faster than sales during the downturn. The stock should be treated as a deep cyclical suitable only for higher risk investors. Fairfax Media (FXJ) The merger with Rural Press has created Australia's largest integrated metropolitan, regional and rural print (and digital) media business. Earnings and the balance sheet are under pressure due to the cyclical downturn in advertising spending, the longer-term decline in print media and high debt levels. Peter Rudd, Balnave Capital Group BUY RECOMMENDATIONS AMP (AMP) A stronger Australian stock market performance has resulted in AMP’s assets under management increasing by 3 per cent to $923 million for the March quarter. Life insurance cash flows also rose by 18 per cent, while financial service products increased contributions in an improving wealth management sector. DUET Group (DUE) This Victorian and WA energy transmission group reduced gearing to 63 per cent after a $265 million capital raising. Its five-year Victorian smart meter roll-out will provide usage efficiency benefits over the medium term. Distribution guidance of 20 cents a unit provides an attractive yield of about 12 per cent. HOLD RECOMMENDATIONS CGA Mining (CGX) Listed on the Australian and Toronto stock exchanges, the company recently poured its first gold at its US$250 million Masbate mine in the Philippines. Proposing to produce 200,000 ounces a year puts the stock in the top 10 of ASX-listed gold miners by output. Stockland (SGP) A $1.9 billion capital raising and on-going non-core asset sales will put the balance sheet of this major property group in order. It will allow the management team to re-establish the group as a pre-eminent global real estate entity. SELL RECOMMENDATIONS Energy Resources of Australia (ERA) This company’s recent share price high reflects a stronger uranium market. Approval to build a tunnel to access high-grade ore beneath its open cut mine will significantly extend mine life. But take some profits and look to buy back at a cheaper price. ING Industrial Fund (IIF) Local and overseas industrial real estate property and development sectors remain under pressure. This is a result of the global financial crisis reducing demand. Further asset write-downs could reduce distributions to investors. Peter Day, Wilson HTM BUY RECOMMENDATIONS CSL (CSL) The company’s proposed $3.1 billion acquisition of rival Talecris appears unlikely, although CSL has strongly indicated it will challenge the US Federal Trade Commission’s ruling. Our forecasts and valuation have never included Talecris. If the CSL deal fails, a share buy-back is a possibility, reducing share capital by about 10 per cent. Newcrest Mining (NCM) This quality Australian gold stock deserves a premium. Newcrest has low operating costs, and substantial reserves ensure long-life mines of 20 years or more. It offers proven exploration and operational capability. Sensitivity to the gold price is somewhat reduced by copper production. HOLD RECOMMENDATIONS Coca-Cola Amatil (CCL) Despite guidance in line with market expectations, there’s more here for the bulls than the bears. Australian volumes remain strong despite 5 per cent price rises in January. It looks fair value, and remains our preferred beverage exposure. Stockland (SGP) Stockland is a global property development and investment management group. A lack of guidance for 2010 is a cause for concern, and believe that caution needs to be exercised until greater earnings clarity emerges. SELL RECOMMENDATIONS Suncorp-Metway (SUN) The banking business faces funding and asset quality pressures. The general insurance business also has its owns challenges - margins may be squeezed from higher re-insurance premiums. Simply, better investments elsewhere. Fleetwood Corporation (FWD) Makes caravans, vehicle parts and accessories. Caravan production is half pre-September 2008 levels. Fleetwood’s share price has recently rallied in anticipation of an accommodation contract. Sell into this excitement.
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