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Share Tips
Broker Stock Recommendations 1 December – 6 to BUY, 6 to SELL and 6 to HOLD
Anthony Black - December 1, 2008
 Steven Hing
NOVUS CAPITAL
BUY RECOMMENDATIONS
Incitec Pivot (IPL
This fertiliser company recently raised cash at $2.50 a share, which was a 40 per cent discount to its share price at the time. It’s managed to hold on to its placement price much better than some other companies raising money in recent times. The business looks solid despite the share price taking a pounding since splitting1 for 20. I am a buyer at $2.50 levels. The company was trading at high $2.50 levels on November 28. My price target is $4.40.
Bradken (BKN)
Bradken is an industrial engineering firm, supplying castings and other heavy engineering equipment to the mining and infrastructure industries. The company just completed the acquisition of AmeriCast. Bradken recently announced a solid profit result, but its share price has failed to perform, falling almost 50 per cent from $6 in the past month. I suspect the company has been over-sold on the back of its association with the mining industry and would not be surprised to see a quick move back above $6. On November 28, it was trading at $3.50 levels.
HOLD RECOMMENDATIONS
CSL (CSL)
This blood products company has held up well under the current market conditions, with its share price only losing about 25 per cent to $30 levels. It was trading at $32 levels on November 28. Despite shorters trying to take advantage of this out-performance, the company continues to perform well globally, and the share price should move back to $40 when the recovery begins.
BHP Billiton (BHP)
The stock touched $20 recently, but has rallied. Apart from global concerns about economic conditions, the company still looks well placed to ride out any storm, We feel that recent falls have more to do with sentiment than fundamentals. Expect a rally back to $32 in the short term. It hit $30 a share in early trading on November 28.
SELL RECOMMENDATIONS
Macquarie Group (MQG)
Despite a reasonable profit result and rosy outlook, the stock only managed to hold together on a higher than expected dividend payout. I would be surprised if this company performs when the recovery begins. Globally, peer investment banks have folded or been taken over, so I have concerns about Macquarie’s business model. I would be a seller of any rallies to $32, as I think the company has a much lower valuation.
West Australian Newspapers (WAN)
Despite Kerry Stokes and the Seven Network taking a significant stake, I believe traditional media companies will struggle in the new world of information technology. News Corp and Fairfax have suffered much sharper falls than West Australian Newspapers. Its price reflects a bid premium rather than comparative value, so I would sell the stock as I feel it will fall in-line with its peers.
 Peter Rudd
CARROLL, PIKE & PIERCY
BUY RECOMMENDATIONS
Incitec Pivot (IPL)
Bolstered by a three-month contribution from the acquisition of explosives group Dyno Nobel, Incitec Pivot is set to gain from low world food stocks that require higher levels of agricultural nutrients, such as fertiliser. Also, miners will use more explosives with their open cuts deepening and the ore becoming less weathered and harder.
Wesfarmers (WES)
Despite a far tougher economic environment in the past few months, the changes implemented at Coles are laying the foundations for a successful turnaround along the lines of the Bunnings hardware chain. Interestingly, Bunnings’ revenues are about a third of Coles, yet it has comparable profitability.
HOLD RECOMMENDATIONS
Bradken (BKN)
This leading supplier of rail wagon wheels, bogies and grinding balls, used in ore mills, continues to benefit from continuing demand for these items. It’s also benefiting from the AmeriCast acquisition and its US-based haul truck and locomotive chassis production.
Programmed Maintenance Services (PRG)
Although the group is cautious about the impact of the economic slowdown on its activities, the company’s diverse customer base across a range of property, facilities maintenance services and labour hire provision offers revenue resilience in uncertain times and, also, once conditions improve.
SELL RECOMMENDATIONS
Babcock & Brown Infrastructure (BBI)
Suspension of dividends until further notice provides little incentive to hold shares in this formerly high paying infrastructure group. To reduce debt, it’s placed half of its most prized asset, the world-class Dalrymple Bay export coal loader, in Queensland on the market.
Crown Limited (CWN)
The gaming group’s share price is likely to remain under pressure for as long as funding uncertainties exist over its Macau gambling joint venture. The group itself carries high levels of debt that shareholders may be called upon to help reduce.
 Michael Zollo
TAYLOR COLLISON
BUY RECOMMENDATIONS
Leighton Holdings (LEI)
For many years, Leighton has been a key player in the Australasian contracting market. Its good balance sheet and active capital planning leaves it well placed to finance future growth. The company’s increasing presence in Asia and the Gulf opens the door to a more geographically diverse revenue base in coming years. Leighton is supported by a strong pipeline of work. Significant growth prospects underpin the company's expansion strategy into India and the Middle East.
CSL (CSL)
CSL is the world's second biggest plasma player, with strong industry fundamentals after years of oversupply and intense price competition. Merck's HPV cervical cancer vaccine, Gardasil, is a blockbuster drug that will deliver CSL large royalties for years. CSL's proposed acquisition of Talecris would move it further down the cost curve and should provide opportunities for sizeable synergy gains. CSL should become a major global vaccine player in time. We hold a favourable long-term view of CSL.
HOLD RECOMMENDATIONS
Qantas (QAN)
The recent success of Jetstar and Jetstar Asia gives us some comfort that Qantas is well equipped for the global challenge. It appears the national carrier intends to maintain its two-thirds market share of the domestic market, while fending off competitors in its lucrative international routes by keeping air fares low. As a result, earnings growth will be difficult unless crude oil and currency move in a favourable direction for the company and traffic holds up. We expect that Qantas can realise significant value from a number of restructuring alternatives, but do not see any other positive share price catalysts in the next 12 months.
Coca-Cola Amatil (CCL)
The increasingly competitive beverages landscape has put pressure on CCL to expand its product range. Its shift to higher value products is starting to gain traction and we are optimistic about the company diversifying into alcoholic beverages. Its position in the non-alcoholic beverage market is strong and its distribution platform is first-class. These long-term strengths have been emphasised by the takeover approach from brewer Lion Nathan. CCL's brand portfolio is second to none; however, pressure from high commodity prices is behind our neutral 12-month outlook.
SELL RECOMMENDATIONS
Babcock & Brown Japan Property Trust (BJT)
BJT's property portfolio comprises office, retail and residential assets. Over the long-term, we expect the Japanese property market to favour quality assets close to the Tokyo CBD. Given market concerns surrounding debt, we expect to see some consolidation of the BJT portfolio. The potential for future acquisitions is limited given the current economic climate. Today’s recessionary conditions present risk to BJT's portfolio metrics. We have a negative long-term view.
Ten Network (TEN)
TEN has dominated its core 18-39 age group audience and has regained advertising market share. Eye Corp's ongoing earnings before interest and tax losses from international start-ups will most likely drag margins down in the medium term. We feel that a weaker economic outlook combined with softening consumer sentiment will weigh heavily on TEN's advertising revenue stream. We note that a softening in advertising demand will probably result in weaker pricing power across the free-to-air advertising market.
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:
Stocks: Broker Recommendations December 1st – 6 to BUY, 6 to SELL and 6 to HOLD
Economic and Company Calendar: Outlook - Stocks and stats to watch out for this week
Stocks: Stock of the week - JB Hi Fi
Commodities: The risk of punting on junior resources
CFDs: CFDs - top five shorts and top five longs for the week
Companies: Westpac complete $15b St George takeover
Global Crisis: China losing competitive edge: Hu
Rates: Large rate cut likely as pressures dive
Economics: Climate change fight 'may create jobs'
Markets: Listed Australian companies getting hurt
Companies: Futuris downgrades profit guidance
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