Gary Glover, Novus Capital
CSL Limited (CSL)
This blood products group has underperformed the sector and, recently, the general market. This has been primarily due to a rising Australian dollar as the core of CSL’s earnings is in US dollars. Expect to see continuing strong organic growth in the plasma proteins business, which should be positive for CSL’s share price. Any correction in the Australian dollar could lead to a positive re-rating for the stock.
Tabcorp Holdings (TAH)
Offers a wide range of gambling and entertainment products. Regulatory issues and the Equine flu made 2009 a difficult year for Tabcorp and it underperformed the general market. Expect the share price to recover in line with improving business conditions. Its low price/earnings ratio and high yield make this stock attractive.
Nexus Energy (NXS)
Recently commissioned its Longtom gas field, which will provide a solid cash flow base of about $70 million a year for the next 10 years. Nexus investors may be a little nervous while the company looks for buying partners into its Crux project, but we see little downside risk at the current price.
The 8 per cent plus dividend yield should support this stock in coming weeks if investors see any weakness in the overall market. Also, its defensive qualities are likely to support the stock in the short term. Deregulation of the telecommunications industry continues to pressure the largest player, and there doesn’t appear to be a catalyst to drive the stock to higher levels. I remain neutral on the stock and expect it to remain range bound.
James Hardie Industries (JHX)
James Hardie is the dominant manufacturer of fibre cement in the US, Australia, New Zealand and the Philippines. The US housing market is likely to remain subdued for some time. The recent share price run appears to have priced in most of a recovery so we view this as a sell.
A global provider of support services, with operations in about 45 countries. An apparent reluctance to change its business model in an industry appearing to look for other alternatives has hurt the share price. We find it hard to buy this stock in the absence of adapting to alternative products.
Richard Batt, Shadforth Financial Group
Origin Energy (ORG)
Origin recently announced that Australia Pacific LNG, its 50/50 joint venture with ConocoPhillips, lodged its draft environmental impact statement with the Queensland Government. This is a positive step forward for Origin and its joint venture project. It also provides a signal to investors that they should be taking advantage of recent share price weakness by establishing a holding in what is a quality exposure to the energy sector.
ANZ Banking Group (ANZ)
Commonwealth Bank recently upgraded its cash earnings and provided profit guidance well above consensus forecasts. The expectation is the other three major banks will also benefit, as they’re exposed to the same conditions. Of the majors, ANZ has a clear differentiating factor - its long-term strategic expansion into Asia. The recent acquisition of Asian assets sets the company apart as a real growth stock within the financial sector. Long-term investors should establish a holding in ANZ or add to their existing holdings.
An industry leader in providing pre-university and university pathway programs to Australian and overseas students. The company has just reported a solid first half driven by growth in student numbers. It’s expected that growth can continue with the company’s recent expansion into the US.
Aristocrat Leisure (ALL)
Generates revenue from making and distributing electronic gaming machines. The company recently announced that it expects annual operating profit to beat analysts’ forecasts, which is a positive sign for the company’s management and long-term investors.
Fairfax Media (FXJ)
A print and digital media giant, it’s leveraged to the economic and business cycles of Australia and New Zealand, which can greatly affect earnings. There’s been signs of a recovery in the sector, however, these have been tempered by continuing uncertainty in the global economy. We prefer alternatives.
Roc Oil Company (ROC)
Has oil and gas assets in Australia, Africa, China and the UK. The company’s exploration program provides investors with potential upside, but sovereign risks should be considered. We prefer its larger peers, such as Santos (STO) and Woodside Petroleum (WPL).
Scott Marshall, Shaw Stockbroking
BHP Billiton (BHP)
BHP finished the first half of 2010 in marginally better production shape than expected. Strong performances from the petroleum and nickel divisions more than offset weaker than anticipated copper and alumina output. The iron ore, aluminium and coking coal divisions also performed marginally better than expected. Half-year production records were set for petroleum, iron ore, nickel and zinc. The company cited a strong prices recovery in the December quarter. BHP remains predictably cautious, flagging potential for volatility in short term commodity prices.
Pharmaxis is on track to receive approval to sell Bronchitol in Europe by the end of 2010. The drug treats patients with cystic fibrosis. This represents the start of a significant commercial opportunity for the company. Trials have been promising, so expect the company to submit an application with US authorities soon. The outlook for other company biotech products, including Aridol, is positive, as is the recent acquisition of Topigen Pharmaceuticals.
The company noted weak trading conditions for the first four months of its 2010 year, with revenue flat compared to the second half of 2009 in both CHEP USA and Recall. Volumes in the auto and secure destruction businesses were weak. The group noted leverage to the restocking cycle, which may indicate an improved performance in the more recent past. On the positive side, the company is leveraged to an upturn in economic activity.
Coca-Cola Amatil (CCL)
While the outlook for the group remains strong, CCL has reached our price target. Coca-Cola bottlers globally have been directed to co-ordinate fruit juice packaging and marketing strategies as the company grows this segment. We expect CCL to follow this strategy and grow its fruit juice businesses.
Mount Gibson Iron (MGX)
Fourth quarter shipments of iron ore were up 4 per cent on the September quarter. Offsetting the strong sales performance was a 26 per cent fall in quarterly ore production due to higher levels of waste movement (stripping). MGX remains more than fully priced based on our iron ore price forecasts.
AXA Asia Pacific Holdings (AXA)
National Australia Bank with AXA France has bid $6.43 cash a share for AXA, countering a similarly structured bid from AMP. NAB has also offered $1.59 cash plus 0.1754 NAB shares for each AXA share. The ACCC is reviewing both the NAB and AMP offers for AXA. We do not see a final bid price much above the current share price.
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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