Best calls to action: 20 August 2015
About the author:
- Author name:
- By Tom Sartor
- Job title:
- Senior Analyst
- Date posted:
- 20 August 2015, 8:29 AM
- Sectors Covered:
- Junior (Emerging) Resources, Bulk Materials
Happy to Buy today
Challenger Limited - Still good value
CGF's FY15 result was solid across the board. The company delivered double digit normalised NPAT growth and is forecasting 11% life COE growth into FY16. We continue to believe that CGF, trading on only 12.5x FY16 PE, is good value given its strong organic growth profile versus an otherwise fully valued financials services space. CGF is also now offering a c4% fully franked dividend yield. Add maintained.
Villa World Ltd - Building scale
VLW delivered a strong FY15 result and issued what looks to be relatively conservative FY16 guidance. Cyclical assistance aside, we believe VLW is building a structurally larger business and management is focussed on through-the-cycle growth. With a strong FY16 year in sight, an undemanding PE (8.4x FY16) and an attractive yield (7%), we maintain our Add recommendation.
Happy to Buy after some heat comes out of the share price
SMS Management - Back in the game
SMX reported an impressive 36% EPS and DPS growth. Organic growth was low double digits, margins expanded, operating cash flow increased nearly fourfold and SMX ended the period in a net cash position. With Victoria returning to growth and earnings headwinds look to have become tailwinds, we think risk now lies to the upside so have upgraded to an Add recommendation from Hold.
Looking difficult short term
Seek Limited (A$12.27) - Whoops-a-daisy
SEEK surprised the market with its second downgrade to FY16 earnings expectations in two months, shattering the market’s confidence in the stock. While laudable heavy investment in new products and technology explains much of the projected margin contraction, the market wants more predictable results and better explanations of changes. Having disappointed twice, the company's rating will suffer short-term.
Woodside Petroleum (A$32.86) - Looking for catalysts
As expected 1H15 earnings and dividend both declined ~40%, on lower oil prices and production. Despite the diminished returns, also felt by its peers, recent share price moves have cut the downside potential in our forecast total return to -5% (from -11%). As a result we move our recommendation on Woodside Petroleum (WPL) to Hold (was Reduce). We continue to see WPL as a well-run business, but short on yield and growth appeal along with a potential lack of near-term catalysts.
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Disclaimer(s): An Analyst or Analysts in the Morgans Research Team may own shares in some or all of these companies.
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