John Rawicki, State One Stockbroking

BUY RECOMMENDATIONS

South Boulder Mines (STB)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

Owns the Colluli Potash Project in Eritrea, Africa. Colluli is the world’s shallowest potash deposit, enabling low-cost mining via an open pit design. It offers an impressive potash resource of 548 million tonnes at 19 per cent potassium.  And as the project is conveniently located near the coast, I see plenty of upside here.

Westfield Group (WDC)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

As a leading global retail property group, Westfield holds an interest in 119 shopping centres around the world. Westfield is taking a lucrative opportunity to participate in New York’s World Trade Centre retail development. Strong management and conservative debt make Westfield an attractive proposition.

HOLD RECOMMENDATIONS

Myer Holdings (MYR)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

A victim of feeble consumer sentiment, falling equity and housing markets, higher interest rates and increasing cost-of–living charges, Myer has been heavily oversold. The company is well placed to recover when consumer confidence improves in line with the economy.

Wesfarmers (WES)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

Diverse operations make Australia’s biggest listed conglomerate a relatively safe haven. Coles and Bunnings provide defensive attributes. Expect this stock to recover from recent selling. The Coles turnaround is gaining traction and provides earnings stability, while the Bunnings hardware division is growing strongly. WES is showing all the right signs of an improving business model.

SELL RECOMMENDATIONS

Aquarius Platinum (AQP)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

Rising production costs and sovereign risk attached to doing business in South Africa and Zimbabwe adds to uncertainty. Heightening risk is single commodity production. AQP’s lack of hedging expose revenues to platinum price volatility. Companies mining several commodities are safer plays. 

PanAust (PNA)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

A copper and gold miner operating in South East Asia. Although copper production from its Phu Kham mine in Laos is a reasonable 65,000 tonnes a year, we expect rising cash costs of about a US$1 a pound to squeeze profit margins. Furthermore, this mine is the company’s core asset, exposing it to a volatile copper price.

James Georges, Patersons Securities

BUY RECOMMENDATIONS

Commonwealth Bank (CBA)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

The bank continues to deliver. On August 10, it posted yet another record full-year cash profit of $6.84 billion. It was better than expected, as was the final, fully franked dividend of $1.88 a share. The banking sector outlook is uncertain given volatility in global financial markets and cautious consumers potentially affecting lending growth. But CBA has an outstanding track record. Recent turmoil offers a good opportunity to buy this blue chip for long-term growth and income.

Troy Resources (TRY)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

Troy Resources is an unhedged, low cost gold and silver producer focusing on South America. The next key value driver is a likely upgrading of its Casposo mine reserves to facilitate a 10-year life. Additionally, we continue to watch the Sandstone Nickel joint venture with Western Areas, as Troy may sell its stake in a project that has recently shown positive results. TRY also stands to benefit from recent currency fluctuations, with costs incurred in Brazilian real and Argentine pesos.

HOLD RECOMMENDATIONS

Qantas Airways (QAN)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

The national carrier is aggressively reducing costs despite complex fleet and labor relations. Management is capable of handling difficult times. Qantas will remain profitable, but it’s subject to volatile cyclical demand.

Orica (ORI)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

Orica is a leading explosives provider to the global mining industry. More recently, it diversified into underground mining and tunnelling products via its Minova acquisition. ORI is also the largest chemicals supplier in Australia and New Zealand. Competitive advantages include its Australian explosives duopoly, its global explosives distribution network and capital investment discipline. Transparency is good. It’s more suitable for growth portfolios. We have recently upgraded our view on the stock from reduce.

SELL RECOMMENDATIONS

WDS Limited (WDS)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

WDS, an integrated provider of design, engineering and construction services among others, has a solid client base, mostly comprising blue chip resource companies. The mining division is performing well, driven by underground coal operations. But due to a series of earnings downgrades in full-year 2010, apparent operational issues and the departure of its managing director, we consider the stock speculative and only suitable for high-risk investors.

Aquarius Platinum (AQP)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

AQP’s four mines are located in South Africa and Zimbabwe.  We deem these countries to have high sovereign risk. A lack of hedging exposes earnings to commodity price fluctuations. Long mine lives are attractive. But single commodity exposure makes the shares only suitable for risk tolerant investors.

Michael Heffernan, Austock

BUY RECOMMENDATIONS

Service Stream (SSM)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

A contractor to the telecommunications and utility sectors. It stands to benefit from a continuing rollout of the National Broadband Network. NBN Co Limited is expected to announce the outcomes for its tender rollout process next month. Service Stream, together with its joint venture partner Lend Lease, are one of three tenderers. 

Monadelphous Group (MND)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

A mining services company with a stellar sharemarket history, but its share price, like other quality companies, has been punished to the point of a good buying opportunity. Its attractive fundamentals and the continuing strong resources outlook are positive for its future growth. The company’s 12-month high was $22.40, while it is currently trading at below $18.00.

HOLD RECOMMENDATIONS

Wesfarmers (WES)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

This is a definite hold at this point. I consider it a safe harbour in these turbulent times.  Its diverse businesses – retailing, coal, chemicals and insurance - offer defensive and growth characteristics. Coles’ recent trading report was better than expected. That will assist the company’s profitability and share price.

Telstra (TLS)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

Amid steep sharemarket volatility, Telstra has held up reasonably well.  On August 11, it delivered a net profit of $3.23 billion for the full year to June 30, which marginally beat expectations. It retained its final dividend of 14 cents a share, taking the full year to 28 cents fully franked. Revenue was up 0.7 per cent to $25.09 billion, which is encouraging. The company is winning market share and the future now appears much brighter.

SELL RECOMMENDATIONS

Billabong International (BBG)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

As expected, this leisure and surf wear stock has encountered difficulties due to a strong Australian dollar and subdued consumer spending in the United States, where Billabong generates much of its revenue. Accordingly, an improvement in its profitability depends very much on how quickly the US economy recovers.

Suncorp Group (SUN)

Chart: Share price over the year to 12/08/2011 versus ASX200 (XJO) 

A Queensland based bank and insurer, which was buffeted by the state’s floods and cyclone earlier this year. Until the Queensland economy regains its previous strong growth trajectory, other banks are preferred.

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