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18 Share Tips - 2nd December 2011

18 Share Tips - 2nd December 2011

By Anthony Black 02.12.2011


Darren Jackson, Calibre Investments

BUY RECOMMENDATIONS

Thorn Group (TGA)

CHART 

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

This is one company that should prosper in the event of an economic downturn. It focuses on consumer product rentals, payday loans and debt collecting services. Recently released half year results revealed net profit after tax was up 30 per cent and revenue was up 20 per cent.

AWE Limited (AWE)

CHART 

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

This oil and gas producer appears to be a genuine turnaround story, with new senior appointments and a strategic review of operations. While oil and gas operations generate significant cash flow, it has previously been offset by even greater cash burn and asset write-downs. Moving forward, we expect this to reverse, with AWE’s overall profit shifting from negative to positive.

HOLD RECOMMENDATIONS

SP AusNet (SPN)

CHART 

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

With investors over weight in cash, and interest rates at historically low levels, the search for yield has rarely been more crucial. SP AusNet offers a reliable and sustainable income stream generated from its electricity and gas distribution networks. The stock carries a partially franked trailing dividend yield above 8 per cent.

Perseus Mining (PRU)

CHART 

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

The gold rich nation of Ghana recently announced an increase in corporate tax rates, from 25 per cent to 35 per cent, on mining companies.  In response to this news, Perseus Mining’s share price retreated to what appears to be entry levels. In light of this pullback, we await further news, or movement in the gold price for a more definitive buy or sell signal.

SELL RECOMMENDATIONS

Little World Beverages (LWB)

CHART 

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

Little World Beverages has a fine tasting product range and positive year-on-year earnings growth. But, in our view, the current valuation for this boutique brewer is exceedingly generous and a bit hard to digest. When trading around $3.30, the company has an enterprise value of $195 million and a trailing price/earnings ratio above 22 times. We believe this can only be substantiated with exceedingly strong future earnings growth. On December 1, the stock was priced at $3.30.

Virgin Blue Holdings (VBA)

CHART 

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

VBA, like most airlines, is operating in a very difficult environment of low margins and ever increasing labour and fuel costs. Recent share price rises due to the grounding of the Qantas fleet appears to be an over-reaction in our view. We don’t expect Virgin to benefit long term from the Qantas upheaval. Expect upcoming earnings guidance to be positive, so sell into this strength.

Michael Heffernan, Austock

BUY RECOMMENDATIONS

Incitec Pivot (IPL)

CHART 

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

This explosives and fertiliser company recently produced a most satisfactory result. The company stands to benefit significantly from ongoing growth in the resources sector, particularly as earnings from explosives will continue to increase as a proportion of its total. Also its balance sheet is strong, with a relatively low debt-to-equity ratio.

Domino’s Pizza (DMP)

CHART 

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

A franchise pizza operation, which has been a tremendous success story since listing on the ASX in 2005. As it operates in an almost recession proof area of the economy, its future looks bright even if European debt problems persist and the US recovery is slow.

HOLD RECOMMENDATIONS

Campbell Brothers (CPB)

CHART 

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

Involved in a range of business activities, from laboratory analytics to distribution of chemicals. Its sharemarket fundamentals are strong and its diversity in today’s volatile times leaves it in a strong position.

Bradken (BKN)

CHART 

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

This company, which produces consumables for the mining sector, has been impressively resilient in the past few years after an almost near death experience during the global financial crisis. With production levels in the resources sector expected to grow, the future looks promising. Also, and comforting for investors, is the company pays a fully franked dividend yield of around 5.5 per cent.

SELL RECOMMENDATIONS

Goodman Fielder (GFF)

CHART 

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

This iconic food maker is currently facing one of its toughest tests. Specifically, branded products are being squeezed for shelf space by the increasingly pervasive major supermarket home brands. Supermarkets are concentrating on their own labels in the face of higher costs and competitive pressures.

BlueScope Steel (BSL)

CHART 

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

Steel companies have experienced particularly difficult times in recent years due to the high cost of iron ore inputs, a strong Australian dollar, import competition and the recently legislated carbon tax.  Although the latter does provide limited compensation for steel companies, this is unlikely to be a permanent feature of the domestic steel landscape.

Paul Clarke, State One Stockbroking

BUY RECOMMENDATIONS

Regional Express Holdings (REX)

CHART 

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

Regional Express is Australia’s largest independent regional airline. It’s the sole provider of numerous services on routes deemed by the major airlines to be too small or profitable. REX is well positioned to grow profits driven by the large Air Ambulance Victoria contract (from July 2011), and charter and freight services operated through subsidiaries Pel-Air and Airlink.

Cabcharge Australia (CAB)

CHART 

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

CAB operates a highly profitable taxi payment processing network via its own charge card and by processing third party cards. CAB terminals are installed in more than 18,000 taxis, representing 95 per cent of an industry made up of six companies in New South Wales and two in Victoria. Expect a recovery in corporate taxi travel and higher contributions from CAB’s CDC bus and UK joint ventures to boost earnings.

HOLD RECOMMENDATIONS

Extract Resources (EXT)

CHART 

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

EXT holds uranium deposits mostly in Namibia. Extract’s Husab project is its main asset situated near Rio Tinto’s Rossing mine, which has been operating for more than 40 years and produces 8 per cent of the world’s uranium. Expect first production from the Husab project in 2014. Recently, as part of the feasibility study refinement process, an additional 37 per cent increase in resources to 320 million pounds was identified, extending the mine life beyond 20 years. 

Technology One (TNE)

CHART 

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

Provides end-to-end software solutions to private businesses and government departments. Products offered include HR and payroll solutions and supply chain and business intelligence applications. TNE recently reported a strong full-year 2011 result, with net profit after tax increasing by 14 per cent to $20.3 million. TNE operates on healthy margins, is supported by a robust balance sheet and generates a high degree of repeat sales.

SELL RECOMMENDATIONS

Goodman Fielder (GFF)

CHART 

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

The food maker is currently undertaking a strategic review of operations, with a view to cut $100 million in costs by full-year 2015. Although a positive move, it’s unclear as to where it will achieve these savings. In any case, we believe cost savings are likely to be offset by continuing weak revenue.

BlueScope Steel (BSL)

CHART 

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

The steelmaker recently announced a capital raising. Its objective is to raise $600 million via issuing 1.5 billion new shares at 40 cents each. BSL carries more than $1.2 billion of debt on its balance sheet and the funds raised will reduce part of this debt. But will the capital raising be enough, and will it satisfy its lenders given the outlook for steel manufacturing in Australia is negative? Steel industry trading conditions remain challenging with domestic sales volumes declining.

>> Click here to go back to the newsletter to read other articles 

 

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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WHAT’S ON THIS WEEK

week 31 October 2014
    • 27
    • ARG Argo Investments annual general meeting | 4:26 AM
    • BEN Bendigo and Adelaide Bank annual general meeting | 4:27 AM
    • SPO Spotless annual general meeting | 4:28 AM
    • RBA Panel participation by Reserve Bank of Australia (RBA) head of financial stability, Luci Ellis at the Australian Housing and Urban Research Institute panel roundtable | 6:07 AM
    • 28
    • AOFM AOFM to issue $200 million of February 21, 2022 indexed Treasury bonds | 4:05 AM
    • SGP Stockland annual general meeting | 4:26 AM
    • Financial Review's Future Forum Financial Review's Future Forum: The Asian Century, featuring Telstra chief financial officer Andrew Penn, Fortescue Metals chief executive Nev Power and former Australian Ambassador to China Geoff Raby | 4:27 AM
    • WPL WorleyParsons annual general meeting | 4:27 AM
    • WHC Whitehaven Coal annual general meeting | 4:28 AM
    • SGF Challenger annual general meeting | 4:29 AM
    • TAH Tabcorp annual general meeting | 4:29 AM
    • BGA Bega Cheese annual general meeting | 5:13 AM
    • ANZ ANZ-Roy Morgan weekly consumer confidence survey | 5:16 AM
    • DMP Domino's Pizza annual general meeting | 6:08 AM
    • 29
    • MMS McMillan Shakespeare Group annual general meeting | 2:18 AM
    • QRX QRxPharma annual general meeting | 2:18 AM
    • TTS Tatts annual general meeting | 4:06 AM
    • AOFM AOFM to issue $600 million of April 21, 2029 Treasury bonds | 4:59 AM
    • DXS Dexus Property Group annual general meeting | 5:40 AM
    • AGO Atlas Iron annual general meeting | 5:41 AM
    • JBH JB Hi-Fi annual general meeting | 5:42 AM
    • MOC Mortgage Choice annual general meeting | 6:05 AM
    • NIB nib Holdings annual general meeting | 6:08 AM
    • TPI Transpacific Industries annual general meeting | 6:09 AM
    • SUN Suncorp chief executive Patrick Snowball speaking at American Chamber of Commerce in Australia lunch | 6:09 AM
    • GXL Greencross annual general meeting | 6:46 AM
    • 30
    • IAG IAG annual general meeting | 2:19 AM
    • NAB NAB full year results | 4:23 AM
    • AAD Ardent Leisure annual general meeting | 4:24 AM
    • PAS PAS Group annual general meeting | 4:25 AM
    • FDC Federation Centres annual general meeting | 4:25 AM
    • FLT Flight Centre annual general meeting | 4:26 AM
    • PPT Perpetual annual general meeting | 5:13 AM
    • NCK Nick Scali annual general meeting | 5:18 AM
    • HIA HIA New home sales for September | 5:19 AM
    • AOFM AOFM to issue $500 million of Treasury notes, maturing on February 27, 2015 | 5:19 AM
    • FNP Freedom Foods annual general meeting | 5:19 AM
    • TOL Toll Group investor day | 5:35 AM
    • UGL UGL annual general meeting | 5:42 AM
    • ABS Australian Bureau of Statistics (ABS) international trade price indexes for September quarter | 6:05 AM
    • BTT BT Investment Management full year results | 6:06 AM
    • WES Wesfarmers first quarter sales results | 6:10 AM
    • 31
    • ANZ ANZ full year results | 5:20 AM
    • EGP Echo Entertainment annual general meeting | 5:21 AM
    • ABS ABS producer price indexes for September quarter | 5:22 AM
    • RBA RBA to release financial aggregates for September | 5:22 AM
    • NCM Newcrest Mining annual general meeting | 5:22 AM
    • HIL Hills annual general meeting | 5:23 AM
    • AOFM AOFM to issue $600 million of October 21, 2019 Treasury bonds | 5:23 AM
    • MQG Macquarie Group half year results | 6:09 AM
    • ORG Origin Energy quarterly production report | 6:09 AM

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Craig James, of CommSec points out that retail sales grew by 7.4 per cent during the past year, marking the best rolling 12-month period since January 2002

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