Six top 100 stocks to buy in February

About the author:

Author name:

By Fiona Buchanan

Job title:

Co-Head of Research, Senior Analyst

Date posted:

04 February 2014, 10:01 AM

Sectors Covered:

Property, AREITS

Our high conviction picks are companies we believe will outperform the market based on short to medium-term catalysts. Here are our six top 100 stocks for February:

Crown (CWN)

Crown offers investors exposure to significant growth opportunities in the Australian casino space as well as overseas in Macau and potentially Sri Lanka.

Reasons to buy Crown

• An attractive increasing earnings profile, and we expect further upside from the company's investment in Melco Crown by way of dividends.
• We expect CWN to be successful in gaining a strong market share in the VIP gaming market in Sydney once Crown Sydney is built.

We retain our Add recommendation for CWN with a share price target of A$18.46ps.

Harvey Norman (HVN)

Harvey Norman is an integrated retailer, specialising in electrical goods, furniture, bedding, white goods and small appliances.

Reasons to buy Harvey Norman

• Leverage to an improving retail and housing market which is under way.
• A more rational pricing environment (inflation is back = positive leverage).
• HVN has A$2.3bn of net asset backing providing asset support. In tougher sales periods, HVN typically provides franchisee support. Last year they spent 2.7% of sales on tactical support to franchisees. This will fall in the better sales environment, providing extra leverage.

We retain our Add recommendation for HVN with a share price target of A$3.60ps.

Sonic Healthcare (SHL)

Sonic Healthcare is Australia's largest pathology operator with significant operations in the US and Germany. In addition, SHL operates radiology and GP centres which positions the business well to benefit from an aging population and an increasing trend towards genetic testing and personalised medicine.

Reasons to buy Sonic Healthcare

• SHL recently reconfirmed its FY14 EBITDA guidance of 11% growth at current exchange rates.
• At current prices, SHL is our key pick in large cap healthcare sector, trading on an FY14 PE ratio of 16.6x and offering a partly franked yield of 4.3%.

We retain our Add recommendation for SHL with a share price target of A$16.91ps.

Flight Centre (FLT)

Flight Centre is one of the world's largest travel agency groups.

Reasons to buy Flight Centre

• With expectations of a strong 1H14 result and possible earnings upgrade, we believe that FLT's share price will outperform this reporting season as the market rewards stocks that can report solid earnings growth.
• We believe that FLT is well positioned to report double digit earnings growth over the next few years. The diversity and strength of its business model allows it to deliver strong profit growth year in, year out.

We upgrade our recommendation to Add for FLT with a share price target of A$50.80ps.

SEEK (SEK)

SEEK is the leading provider of online employment services in Australia, China, Southeast Asia and Latin America. The company owns a rapidly expanding online education business.

Reasons to buy SEEK

• The Australian recruitment cycle is at or near to all-time lows in churn rates.
• Overseas employment portals are at an early stage of development, offering years of double digit growth.
• We expect strong margin improvement from education over the next three years as product mix improves.

We retain our Add recommendation for SEK with a share price target of A$15.86ps.

Sydney Airport (SYD)

Sydney Airport provides infrastructure and aeronautical and commercial operations at Sydney Airport.

Reasons to buy Sydney Airport

• Low risk exposure to global trends in aviation travel, particularly the potential growth opportunity from Chinese traffic.
• Strong competitive position, with the airport being an origin destination airport located 8km from the Sydney CBD.
• Attractive distribution yield with growth in distributions over time.

We retain our Add recommendation for SYD with a share price target of A$4.25ps.

More information

Morgans clients can access detailed reports on all our high conviction stock picks. If you would like more information, please contact your nearest Morgans office.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.