Out of all the banks, IG markets’ Evan Lucas likes the National Australia Bank (NAB). Lucas remains of the view that the banks will be the ones doing the heavy lifting but notes that with the sale of its UK banking business, NAB should improve its asset quality.
“We think its earnings report in a few weeks may give it a fundamental reason to leg up on ANZ (ANZ) and start to really hone in on the Commonwealth Bank of Australia (CBA) and Westpac (WBC),” Lucas says.
While Lucas is not as bearish on BHP Billiton (BHP) as he was a year ago, he says now is the right time for some profit taking in the stock.
“I believe there is a longer-term fundamental story to buy into, however, the short term pain is still there. BHP itself is bearish on iron ore and is battling with what to do with its thermal coal assets. I see BHP easing back this week,” he says.
On the mining theme, Morgans’ Raymond Chan likes Rio Tinto (RIO).
“Before the China-led resource boom, investors were buying Rio for copper exposure. The chief executive elected (Sebastien Jacques) is currently the head of the smaller copper division. Based in United Kingdom, we believe he’s the right candidate as Walsh’s successor,” Chan says.
Chan still does not like the utility Duet (DUE), despite its attractive yield and notes that the “technical trend looks weak”.
The energy theme continued with CMC Markets’ Michael McCarthy picking Oil Search (OSH) as his preferred stock this week.
“In my opinion the answer to a carbon constrained world is natural gas. Oil Search has quality global asset and a good track record,” he says.
The share rice of $7 could signal excellent long-term value, according to McCarthy.
McCarthy does not like Wesfarmers (WES) because the stock is too expensive, given its growth prospects.
This week, Lincoln Indicators Elio D’Amato likes the Australian receivables management company Credit Corp (CCP). Although there has been negative media attention on payday lending, it is not expected to impact on the business, says D’Amato.
This is because the business is primarily focused on buying distressed consumer debt ledgers from banks, finance and telecommunication companies for subsequent recovery.
“We anticipate strong growth in the near term with a substantial increase in purchased debt ledger acquisitions,” he says.
However, D’Amato does not like gaming and entertainment business Crown Resorts.
The company has recently struggled to grow profitability, with half-year net profit down 22% with declining contributions from the Macau businesses. Gaming revenue over the same period fell 31%
“While the business maintains a positive medium to long term growth outlook, the Macau operations continue to weaken in response to Chinese Government policy affecting all casino operators,” he says.
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