Buy, Sell, Hold Recommendations – Herald Sun 9/6/2013

As featured in the Herald Sun on June 9th 2013 here are the latest buy, sell and hold recommendations

Buy Shares

Next DC (NXT) – Data-centre company is now approaching profitability. The sale-leaseback of its properties will provide NXT with the cash to pursue opportunities in this high-growth industry.

Ardent Leisure Group (AAD) – Expect FY13 results to surprise to the upside, driven by strong growth and margins in the US and at its local Health Clubs division.

Hold Shares

Regional Express (REX) – Facing rising costs, but this solid performer remains the pick of the airline sector. Trades on a P/E of just 8x and a div yield of almost 6%.

Iluka Resources (ILU) – Experiencing a tough FY13, with demand and pricing soft. However potential sale of iron ore royalties a positive and will strengthen the company’s financial position.

Sell Shares

Beach Petroleum (BPT) – Mid-tier energy producer is struggling under increasing costs. Potential stagnation by Chinese economy could overshadow BPT’s recent supply deal with Origin Energy.

Invocare Limited (IVC) – Acquisitions have driven growth and investment portfolio has appreciated but stock looks significantly overvalued at current prices.

You can visit the Australian Stock Report for all their current trading ideas and Australian share tips, get the help you need in this volatile market.

What are contracts for difference?

As a trader have you ever wondered what contracts for difference are? A contract for difference (or CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time.

CFDs were originally developed in the early 1990s in London as a type of equity swap that was traded on margin. The invention of the CFD is widely credited to Brian Keelan and Jon Wood, both of UBS Warburg, on their Trafalgar House deal in the early 90s.

So to look at some of the benefits and potential drawbacks of using CFD's we have attached a couple of links below to give a better explanation of CFD's. Please bear with the technical side of things as you will gain a real appreciation on how this type of trading can be very lucrative.

Resource 1 - What are contracts for difference http://www.australianstockreport.com.au/trading-advice/what-are-contracts-for-difference.html

Resource 2 - Contracts for difference https://en.wikipedia.org/wiki/Contract_for_difference
 

Iinet Limited - One To Keep Your Eye On

The following has been taken from the Australian Stock Report share tips section. iiNet (IIN) is the second largest Internet Service Provider (ISP) in Australia.

IIN has built its own network (the iiNetwork), boasts the largest Voice over IP network in the country, abolished monthly phone line rental with Naked DSL and has released wireless modem-and-phone-in-one BoB to the world.

The firm was included in the ASX 200 in 1999 and employs about 2,000 people at present.
The group’s strategy to increase its value is to grow organically and inorganically. IIN recently acquired TransACT in 2011 and Internode in 2012.

These acquisitions are expected to deliver considerable synergies to the firm in the coming years.

Recent Results

In its 1H13 report, the firm’s NPAT increased to $31.9 million, 122% higher compared to the prior corresponding period.

Aside from the aforementioned, one of the main highlights of the recent report is the significant 73% increase in the firm’s EBITDA compared to the 1H12. This translates to a 35% improvement in the firm’s EBITDA margin from the prior corresponding period.

The solid results were primarily due to the strong organic growth and synergies realized from its acquisitions.

Despite the recent rally IIN’ share price, the company stacks up rather well when compared to its peers. IIN is trading on a forward P/E of 16.8x.

This compare to peers Amcom (AMM) and TPG Telcom (TPM) which are trading 22.1x and 19.6x next year’s earnings. IIN’s forecast dividend yield is around 3.8% more or less in line with AMM’s and higher than the 2.5% forecast for TPM.

Outlook

As previously mentioned, the firm’s recent acquisitions are expected to deliver synergies to the firm.
More importantly, both TransACT and Internode has a solid customer base, which will translate to higher potential earnings growth in the coming financial years.

Some of the benefits from the acquisitions have already manifested in the firm’s recent 1H13 results.

We expect the firm to realize the full benefits from the aforementioned in the medium to long term.
Moreover, the firm has been successful with increasing its market share on the back of competitive rates, attractive combination of services, and its acquisitions.

For more information on australian shares to buy in 2103 vist the Australian Stock Report.