The Bull

Wednesday 22

October, 201410:56 AM

Industry Chart

TheBull PREMIUM

  • Blue
  • Chips
  • &
  • Stocks
  • To
  • Watch

Stock upgrades & buys - featuring BLY, RKN, ILU

Stock upgrades & buys - featuring BLY, RKN, ILU

By Staff Journalist 09.12.2011


Price target increased

Boart Longyear (BLY)

CHART 

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

 

Share Price: $3.36

Price target: $4.26 (RBS)

Broker Calls: RBS - Buy

P/E: 1

Market Cap: $1,550 million

Boart Longyear (BLY) falls firmly in the "value investing" box, with a P/E of less than 10, a PEG of less than .5. And brokers seem to be very keen on the stock - we tracked down six brokers with buys on the stock with price targets ranging from $3.97 to $4.26. While that alone doesn't necessarily make it a good buy, it is a share worth watching.

BLY provides equipment, drilling services, and other consumable products to the mining industry.  As such, they are at risk of a continued drop in commodity prices and a significant slowdown in China which will affect their customers – the miners.  Although their dividend payout ratio is low at 2.8%, dividend payout has been spotty, with no dividend paid for FY2009.  And although they modestly increased debt and gross gearing, they are still low enough to consider their balance sheet as reasonably strong.  Share price is currently trading at about 1.25 times book value. 

James Samson from Lincoln has a Buy on BLY and thinks the outlook is clear. "Interim results in August showed revenue and margin growth in its drilling services and product operating segments...it also upgraded guidance for financial year 2011," he said. "Recent sample volumes, analysed by laboratory services company Campbell Brothers, suggest drilling levels remain high despite the weaker macroeconomic environment."

 

Upgrades

Reckon (RKN)

CHART 

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

 

Share Price: $2.28

Price target: $2.78 (Merrill Lynch)

Broker Calls: Merrill Lynch - Low Risk Buy

P/E: 16.54

Market Cap: $304 million

A drop in Reckon's share price over the past few weeks presents an opportunity, according to some brokers. In times such as these, most investors are looking for low-risk stocks and Merrill Lynch believes that Reckon (RKN) fits the bill, placing a "low-risk buy" on the financial software firm. It has a $2.78 price target on the company, a 22% premium to Thursday's closing price. However it must be noted that this was place before the joint-development software deal with Intuit fell through - the catalyst for the recent share price decline. 

With several companies conducting a fierce bidding war earlier this year for Australia's other software titan MYOB, Reckon could well be next on the list. Private equity firms Bain, Kohlberg Kravis Roberts (KKR) and Sage battled it out in a bid to gobble up MYOB for $1.3 billion. Bain won the battle, leaving Sage's new CEO Guy Berruyer with empty hands. And a fat acquisition wallet. With RKN's market cap at just $304 million, Sage - or KKR - could easily pick up the company.

Takeover speculation aside, RKN's numbers and outlook look good, according to analysts. A few months back it announced earnings growth of 8% for the 6 months to June 30, 2011, despite being adversely impacted by weak economic conditions in the UK and NZ, adverse exchange rates and a sluggish retail sector in Australia. “It is pleasing to see solid organic revenue growth in our core businesses, and that the continual push for further efficiency gains is bearing fruit,” said Clive Rabie, Reckon’s Group CEO. “Within the constraints of difficult market conditions, and the consequential delays in decision making, we continue our historical strong new product sales growth which in turn adds to our maintenance revenue base by adding new clients to the business each year.”

Some analysts believe that RKN is already sitting at fair value and as a result have a hold on the stock. James Samson, Lincoln Indicators says that despite the somewhat defensive nature of its business and a reasonably solid 2011 financial report, he believes the shares are fully priced at current levels. Morningstar did have a hold on it, but given the recent share price weakness the broker has upgraded it to Accumulate as it believes the stock is worth $2.60.

 

Buys

Iluka Resources (ILU)

CHART 

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

 

Share Price: $16.68

Price target: $25.00 (Citi)

Broker Calls: Merrill Lynch - Buy, ThinkTechnically - Hold

P/E: 14.63

Market Cap: $6,984 million

The analyst community sees a bright future for Iluka Resources.  One reason for their optimism is the company’s recent performance:

NPAT (Net Profit after Tax) in 2011 was $145.9 million, compared to a loss of $6.6 million in 2010.

Net Operating Cash Flow for HY 2011 was $240 million, compared to only $49.9 million in 2010.

FCF (Free Cash Flow) went from a negative ($47.3) million to a positive $167.7 million.

CAPEX (Capital Expenditures) went down from $94.9 million in 2010 to $48.7 million in 2011.

Total Debt went down from $439 million in 2010 to $171 million in 2011.

Debt to Equity (Gearing) was reduced fro 28.8% in 2010 to 12.2% in 2011.

ROC (Return on Capital) rose from 6.1% in 2010 to 32.4% in 2011.

ROE (Return on Equity) in 2011 was 25.3% compared with .6% in 2010.

While these numbers represent a snapshot of a relatively brief moment in time, taken together they are what investor dreams are made of.  Expenses, debt, and gearing all went down.  Profit, cash flow, and shareholder return all went up.

One of the bullish brokers is RBS's Clive Briggs, who is confident that zircon prices will increase between $US200 and $US250 a tonne in the December quarter. "The company will receive higher royalty payments from iron ore produced at specific parts of BHP Billiton’s mining area C in Western Australia," he notes, adding that Iluka remains one of his top picks in the resources sector. There are a host of other brokers who are also positive about ILU's outlook - Credit Suisse has a $20.00 price target, while Citi is even more bullish with a $25.00 target.

Meanwhile Mark Lennox from Think Technically placed a hold on ILU. "The company expects its strong position in zircon and mineral sands to remain unaffected by any downturn in China’s growth," he says. "Iluka reported a 10 per cent increase in mineral sands production for the September quarter and holds a third of the world’s market share for zircon, which is used in ceramic tiles."

With brokers bullish on the stock, a positive outlook and and the numbers looking good, then ILU is worth a look - if you believe growth in emerging markets will not evaporate. However beware volatile mining stocks, if the situation for miners worsens the stock could easily plunge below levels you could ever imagine.

>> 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.

 



FROM THE NEWSLETTER

Seeking Safety in High Yield Stocks

We searched the ASX for dividend paying stocks... More

Abbott's G20 agenda: climate still the elephant in the room

To date, the Australian government has made it... More

The 10 Biggest Energy Company Bankruptcies

Here are the bankruptcies that will be etched... More

Stocks on a roll: ASX rolling 52-week highs

ASX rolling 52-week highs for the previous... More



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

TheBull.com.au

TheBull.com.au

TheBull PREMIUM article search

STOCK QUOTE

Don't know the company code? Click here



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

Festive season stocks handpicked by leading brokers

Broker buys

  • ASX Code
  • Company
  • Broker
  • TPMTPG TelecomCalibre
  • VEDVeda GroupCalibre
  • LLCLend LeaseAlpha Securities
  • MQGMacquarieAlpha Securities
  • OSHOil SearchPhillipCapital
  • CWNCrown ResortsPhillipCapital

Broker sells

  • ASX Code
  • Company
  • Broker
  • MINMineral ResourcesCalibre
  • AGOAtlas IronCalibre
  • MYRMyerAlpha Securities
  • CCLCoca-Cola AmatilAlpha Securities
  • QANQantasPhillipCapital
  • MINMineral ResourcesPhillipCapital

Central Banks Rates

  • RBA2.50%
  • FED0.25%
  • BOE0.50%
  • BOC1.00%
  • RBNZ3.25%
  • ECB0.15%
  • SNB0.00%
  • BOJ0.10%

Upcoming dividends

  • ASX Code
  • Company, Div., Franking
  • Ex-Div.

Eight brokers like these stocks

  • ASX Code
  • Company Name
  • Consensus Target
  • DOWDowner EDI Limited$5.78
  • FMGFortescue Metals Grp Ltd$6.89
  • ORAOrora Limited$1.51
  • RIORio Tinto Limited$81.22
  • CSLCSL Limited$73.30

Upcoming Floats

  • ASX Code
  • Company Name
  • Float Date

PLEASE SUPPORT OUR SPONSORS, AUSTRALIA'S LEADING BROKERS:



© Copyright The Compare Group Pty Ltd. All rights reserved.