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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.

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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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WHAT’S ON THIS WEEK

week 24 October 2014
    • 20
    • Medibank Private prospectus Finance Minister Mathias Cormann and Medibank Private managing director George Savvides announce details of Medibank Private prospectus | 4:05 AM
    • RBA Speech by RBA assistant governor (Economic) Christopher Kent to the Leading Age Services Australia National Congress 2014 | 6:08 AM
    • SGH Slater & Gordon annual general meeting | 6:09 AM
    • Book launch Book launch of The Boy From Nowhere, the story of Kerry Stokes | 6:46 AM
    • 21
    • RBA Minutes of Reserve Bank of Australia October board meeting released | 2:18 AM
    • SXL Southern Cross Austereo annual general meeting | 2:18 AM
    • RBA Speech by RBA deputy governor Philip Lowe to the Commonwealth Bank's Australasian Fixed Income conference | 4:29 AM
    • NCM Newcrest Mining quarterly production report | 4:59 AM
    • International Investment Funds Association Annual Conference of the International Investment Funds Association | 5:13 AM
    • BKN Bradken annual general meeting | 5:16 AM
    • ABS Australian Bureau of Statistics (ABS) International merchandise imports for September | 5:41 AM
    • ANZ ANZ-Roy Morgan weekly consumer confidence survey | 5:42 AM
    • QAN Qantas chief executive Alan Joyce to unveil new A330 business suite | 5:42 AM
    • 22
    • Australia-Israel Chamber of Commerce lunch Former ACCC chairman Graeme Samuel speaking at Australia-Israel Chamber of Commerce lunch | 4:06 AM
    • SUL Super Retail Group annual general meeting | 5:13 AM
    • CBA Commonwealth Bank Business Sales Indicator for September | 5:35 AM
    • ORG Origin Energy annual general meeting | 5:40 AM
    • Westpac/Melbourne Institute Westpac-Melbourne Institute Leading Indexes of Economic Activity | 6:05 AM
    • ABS ABS Consumer Price Index for September quarter | 6:05 AM
    • BHP BHP Billiton quarterly production report | 6:06 AM
    • Northern Territory Major Projects Conference Northern Territory Major Projects Conference | 6:09 AM
    • AmCham lunch Twitter Australia managing director Karen Stocks speaking at AmCham lunch | 6:10 AM
    • 23
    • HIA Housing Industry Association-RP Data residential land report for the June quarter | 2:19 AM
    • AGL AGL annual general meeting | 4:23 AM
    • SKE Skilled Group annual general meeting | 4:24 AM
    • TOL Toll Holdings annual general meeting | 4:25 AM
    • AMC Amcor annual general meeting | 4:25 AM
    • BKL Blackmores annual general meeting | 4:26 AM
    • IOF Investa Office Fund annual general meeting | 4:26 AM
    • NAB National Australia Bank's business survey for the September quarter | 4:28 AM
    • BHP BHP Billiton annual general meeting | 4:29 AM
    • RBA RBA governor Glenn Stevens to address annual general meeting of the Australian Payments and Clearing Association | 6:07 AM
    • SUN Suncorp Group annual general meeting | 6:08 AM
    • 24
    • QAN Qantas annual general meeting | 4:26 AM
    • PPX PaperlinX annual general meeting | 4:27 AM
    • QFX Quickflix annual general meeting | 4:27 AM
    • CRZ Carsales.com annual general meeting | 4:27 AM
    • RMD Resmed first quarter results | 4:28 AM

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Featured Comment

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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