Small Caps | Jul 08 2015
This story features QUBE HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: QUB
– MYO, QUB front Citi's key picks
-Goldman removes ATM.NZ, SKE
-Credit Suisse favours OSH, TAH
By Eva Brocklehurst
This month Citi considers MYOB ((MYO)) is trading at an unwarranted discount to global software accounting peers. Opportunities and obstacles are similar across the sector but MYOB should be primed to capture a substantial share of the desktop users who are moving to cloud-based software, given its investment in cloud solutions.
Meanwhile, the broker is also re-evaluating Qube Holdings ((QUB)), a diversified business which has delivered very high incremental returns on capital. Confirmation that the Moorebank intermodal terminal will deliver above the company's targets is a positive while the impact on the rail business from the disruption at the Patrick terminal in Sydney is considered a short-term issue.
Citi's top industrial Buy ratings include the above two stocks as well as AWE ((AWE)), Charter Hall ((CHC)), McMillan Shakespeare ((MMS)), News Corp ((NWS)), Super Retail ((SUL)), Tower ((TWR)) and Veda Group ((VED)). Top resources Buy-rated stocks include OZ Minerals ((OZL)) and Resolute Mining ((RSG)).
Goldman Sachs removes A2 Milk Co ((ATM.NZ)) and Skilled Group ((SKE)) from its Australian Small & Mid Cap Focus List. The broker does not cover A2 Milk but since its inclusion in the list a month ago the stock is up 50.4% relative to the Small Ordinaries Accumulation Index. The removal of Skilled Group follows its downgrade to Neutral from Buy in the wake of the takeover bid from Programmed Maintenance ((PRG)). Skilled Group was included in the focus list in 2013 and since then it is down 36% relative to the index.
These two stocks, along with Sirtex Medical ((SRX)), outperformed the index in June while Flexigroup ((FXL)) and Super Retail underperformed. In June the broker's focus list was down 1.3% while the Small Ordinaries Accumulation Index was down 7.8%. Over the past 12 months the list is up 5.3% while the index is up 1.2%, implying outperformance of 4.8%.
Oil Search ((OSH)) has been added to Credit Suisse's top picks having underperformed the market by 25% in the past 12 months. The broker believes the stock has become compelling again and the base business underpins the current share price, with upside potential from company's options. If oil prices do rally then this stock is the place to be. Tabcorp Holdings ((TAH)) has also been added, given favourable prospects in wagering on the back of the stimulus from mobile technology. This should support at least 5.0% earnings growth over the next few years, in Credit Suisse's view.
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For more info SHARE ANALYSIS: CHC - CHARTER HALL GROUP
For more info SHARE ANALYSIS: FXL - Flexigroup
For more info SHARE ANALYSIS: MMS - MCMILLAN SHAKESPEARE LIMITED
For more info SHARE ANALYSIS: NWS - NEWS CORPORATION
For more info SHARE ANALYSIS: OSH - OIL SEARCH LIMITED
For more info SHARE ANALYSIS: OZL - OZ MINERALS LIMITED
For more info SHARE ANALYSIS: QUB - QUBE HOLDINGS LIMITED
For more info SHARE ANALYSIS: RSG - RESOLUTE MINING LIMITED
For more info SHARE ANALYSIS: SUL - SUPER RETAIL GROUP LIMITED
For more info SHARE ANALYSIS: TAH - TABCORP HOLDINGS LIMITED
For more info SHARE ANALYSIS: TWR - TOWER LIMITED