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Share Tips
Stock Broker Recommendations 22 September – 6 to BUY, 6 to SELL and 6 to HOLD
Anthony Black - September 22, 2008
 MARK GOULOPOULOS
TOLHURST
BUY RECOMMENDATION
Woodside Petroleum (WPL)
The sharp oil price fall in the past two months has caused a corresponding decline in the Woodside share price. This has created an excellent buying opportunity in Australia’s premier energy stock. Despite a volatile oil price, the long-term supply/demand equation will underpin an improving share price going forward. Complementing this is Woodside’s strong production growth profile.
Orica (ORI)
Orica will soon be divided into two companies to better reflect its two main businesses. These are mining services and consumer products. Of particular interest is the mining services business, which provides explosives to mining companies. Recent price falls in resources has drawn attention away from underlying strong growth in demand, which will underpin higher production in the long term. This, in turn, will drive demand for Orica’s products.
HOLD RECOMMENDATION
AMP (AMP)
Strong negative sentiment in financials and subsequent outflows from funds management companies has also hurt AMP’s share price. Looking through this short term window reveals a strong business and brand. Expect a sharp price rise as global sharemarket’s begin to recover.
Westfield Group (WDC)
Westfield is the largest shopping centre owner in the world. Despite its substantial operations in the US, the share price has held up relatively well in comparison to other property trusts. Also, it has not cut dividends and is unlikely to do so, despite difficult market conditions. This reflects the quality of the business and it continues to form part of most diversified portfolios.
SELL RECOMMENDATION
Consolidated Media (CMJ)
Consolidated Media (formerly PBL) owns 25 per cent of PBL Media as well as 25 per cent of Foxtel and 26 per cent of Seek. Given it’s primarily a holding company for a wide range of media assets, it’s likely to trade at a discount to true value. Due to this holding company discount, it’s worthwhile considering a switch to a direct media company where the holding discount does not apply. New media stocks, such as Seek would be an attractive alternative.
Bluescope Steel (BSL)
Bluescope’s earnings are forecast to fall by about 15 per cent in 2009, primarily due to a blast furnace reline. Also company earnings are highly sensitive to commodity steel export prices, and these prices are particularly volatile. A switch to OneSteel may be an attractive alternative in the same sector.
http://www.tolhurst.com.au/
 SCOTT MARSHALL
SHAW STOCKBROKING
BUY RECOMMENDATION
Telstra (TLS)
Subject to regulatory outcomes, projected free cash flow of between $6 billion and $7 billion will support the cost of the expected national broadband network rollout, depending on the scale, scope and definition of the project. The cash flow also gives TLS flexibility to consider increasing returns to shareholders, selective acquisitions, and/or reducing debt levels.
Leighton Holdings (LEI)
We maintain our positive recommendation on LEI due to the size of the order book, abundant growth opportunities, its strong market position, solid balance sheet and an excellent performance record. Return on equity was 41 per cent in 2008. The major risk is the shortage of human and other resources needed to complete the projects in its order book.
HOLD RECOMMENDATION
Billabong International (BBG)
BBG has agreed to buy Dakine Hawaii, a premium accessories business in surf, skate, snow and windsurfing markets for US$99.9 million plus a deferred amount of US$33.3 million. BBG expects 2009 earnings per share growth of between 8 per cent and 12 per cent, assuming an A$/US$ exchange rate of US88c. Our 2009 earnings forecast is above BBG’s guidance, as we believe it’s being conservative.
CSL (CSL)
This blood products company has agreed to buy Talecris, a leading global manufacturer and marketer of plasma therapies for US$3.1 billion. This deal is forecast to lift earnings per share by 10 per cent in 2010, including anticipated merger synergies. Growth will continue to be driven by volume and price strength, and new product sales in the company's core plasma markets.
SELL RECOMMENDATION
Hastie Group (HST)
HST is exposed to the non-residential construction sector. This industry has an accentuated cycle, albeit one that tends to be out of step with the broader economy. Hastie provides air conditioning and refrigeration solutions to the industrial and commercial sectors. The long time lines for non-residential companies tends to ensure they are late into the downswing and, equally, late coming out. If this downswing turns out to be deep and protracted, then this sector will be badly hurt, and HST with it.
Tabcorp Holdings (TAH)
TAH has accepted it will lose its licence in response to the Victorian Government’s decision to change the structure of the gaming industry beyond 2012. The gaming business in Victoria is effectively in run-down mode, but TAH intends to chase market share and “collect” the available $4 billion of revenue during the next four years. Regulatory issues continue to overhang the share price. TAH is still waiting for the Victorian Government to announce the funding structure for its racing industry (expected later this year) as a precursor to awarding a single wagering licence when TAH’s existing licence expires in 2012.
 STEVEN HING
NOVUS CAPITAL
BUY RECOMMENDATION
WORLEYPARSONS (WOR)
Provides professional services to the energy, resource and infrastructure industries. The stock has suffered a decline in line with resource stocks in recent times. But the company continues to produce strong results, and has managed to hold 12-month support levels at $30. It looks like breaking out of its downward trend, and heading back to $42.
TOLL HOLDINGS (TOL)
This transport logistics company was sold heavily as crude oil raced to US$150 a barrel. The oil price fall to US$100 a barrel should have relieved some fuel cost issues as the stock has recovered from recent lows, breaking its six-month down trend. Look for a move to $10.
HOLD RECOMMENDATION
CSL (CSL)
Biotech CSL has managed to defy the recent downturn in the markets. Although the stock is trading at a relatively high price/earnings ratio of 30 times compared to the market average of 15 times, it maintains premium because of its premier position. Like Cochlear, the businesses remain solid and relatively shielded from the economic downturn. I am not a buyer of the stock at current levels, but am happy to hold, buying on any dips to $32.
WOOLWORTHS (WOW)
The supermarket giant continues to hold firm despite margin issues from higher food, fuel and transportation costs. The company remains a staple portfolio stock, with an annual dividend yield of 3.5 per cent, and maintaining its price/earnings ratio of 20 times. Longer term price range appears to be between $26 and $29, but it will move higher as the market recovers.
SELL RECOMMENDATION
WESTFIELD GROUP (WDC)
The shopping mall operator’s price has recovered from lows near $14, but it’s running into major overhead resistance at $18.50. We still feel the property trust sector remains under pressure after the collapse of Centro and others due to the credit crisis. I am prepared to risk being out of the sector and would offload this in favour of other blue chips.
FLIGHT CENTRE (FLT)
After recovering off low levels in June and July as fuel costs soared, the stock appears to have hit turbulence at the $20 level. Although we are seeing interest rate cuts, demand for flights and holidays is likely to decline in the short term. I would not be surprised to see a fall back to $16 as a result.
Anthony Black is a long-standing journalist, having worked in newspapers for more than 20 years. He was the Sunday Herald Sun’s finance editor for eight years and his reports were published in News Limited papers across Australia.
More articles from this edition of CompareShares:
Uranium stocks: Time for a turnaround in uranium stocks?
Share tips: Broker Stock Recommendations 22 September – 6 to BUY, 6 to SELL and 6 to HOLD
Ask the Expert – Share Trading: Where does the money I have invested in a company, or the market, go when the stock prices fall?
Stocks: Stock of the week – Australian Pharmaceutical Industries
Markets: ASIC extends ban on short-selling
Superannuation: Funds hit up to 2.5%: Australian Super
US Economy: US financial rescue plan raises hackles
Stocks: Short-selling ban 'draconian', says CBOE
US Loans bailout: Battle brews over US loans bailout plan
Companies: Commodity prices sustainable: Fortescue
Economy : What crisis? Export boom on the radar
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