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Mr Bearbull: Picking Winners for 2008

Opinion piece by Brett Wilkinson, Wilkinson + White Ltd

Friday 18th January 2008

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It is interesting reading the 'Brokers Picks' for 2007 in the press with a number of brokers focusing on corporate / takeover activity and stock selection as against sector selection.

The mid cap and smaller cap stocks have performed very well over the past few years and I think that this year's best performers will come from stocks with a market cap of $200m or less.

Here are several companies you might like to consider that don't appear in the 'Brokers Picks'.

My 2007 selections were:

% +/-
- 52.7
+ 110.5
Team Talk
- 11.5
includes div
Cavotec MSL
- 8.0
CER Group
+ 67.3
Total gain

This year I notice that brokers have once again focused mainly on the larger stocks and in particular have favored the FAP twins. Once again I think investors will see better gains in some of the small to medium stocks. If you missed the brokers picks for 2008, click here.

I have taken a fairly conservative approach this year due to the volatility of world markets. Here are some companies you might like to consider.

OIC .. Opus International Consulting Group @ $1.87
Opus is an international multidisciplinary consultancy providing asset development and asset management solutions for infrastructure. Opus Group employs professionals in the fields of architecture, engineering, planning and property management. Opus has its origins in the Ministry of Works and Development which was established in 1885 and brings together the experience of more than a century of infrastructure development.
In the last four years, Opus has grown from a New Zealand company with limited international presence to a global consultancy with an established presence in the United Kingdom, Australia and Canada.

Consensus 12/07 281 13.5 10.0 18.7 4.5 2.4
Consensus 12/08 314.8 15.8 11.7 16.0 5.7 3.1
Consensus 12/09 354 18.5 13.7 13.6 6.7 3.6
Consensus 12/10 380 20.4        

IMP .. ING Medical @ $1.17
The investment in ING Medical has two components, a good yield which will see share price appreciation if interest rates drop, and the possibility of corporate activity.
This from the Chairman 'looking forward', the Trust remains in a healthy position, with excellent assets, quality tenants and secure long-term leases.
Barring unforeseen circumstances, the Board is projecting further improvement in distributions to unit holders for the 2007/2008 year, as has been shown to date with the first quarter gross distribution of 2.45 cents per unit, equating to an annualized 9.8 cents per unit distribution, an increase of 3.2% on the 9.5 cents per unit in 2007.
I would like to reiterate that the Trust's property portfolio has strong defensive characteristics based around its medical and healthcare focus, consistent growth profile, long weighted average.

BRM .. Barramundi @ .78
I am recommending Barramundi because the shareprice is now at a 30% discount to NTA. Note that the warrants will only be taken up if the share price is above $1.00 so this also has appeal as will have a small dilutionary impact unlike say Salvus.
The fund manager has a buy back underway which will also assist in enhancing NTA.(would be selling the warrants and buying ordinary share)
The unaudited net asset value per ordinary share of the Company as at 31 December 2007 was $1.1103. The unaudited diluted net asset value per ordinary share as at 31 December 2007 was $1.0741. This diluted net asset value describes the effect if all warrants in existence were exercised today at $1.00. At 31 December 2007, 49,452,184 warrants remain to be exercised at any time up to and including 26 October 2009.

The five largest portfolio holdings at 31 December 2007 are approximately as follows:

Arrow Energy Limited 19%
Bravura Solutions Limited 10%
Aevum Limited 9%
Treasury Group Limited 6%
Pipe Networks Limited 6%


PRC .. Pike River Coal @ $1.09
Pike River Coal is an interesting stock which I have included along side parent company New Zealand Oil and Gas 62%. More conservative investors would stay with NZO.
The reasons that Pike River Coal might surprise to the upside include:
- The possibility that a higher coal price will be negotiated this year with predictions of US$120 a tonne
- If production goes to plan PRC will compare very favorably with its Australian peers.
- To date the company has failed to live up to timeline expectations and consequently the market is rather cynical.
In short, if Pike River can deliver on timelines and forecast tonnages the stock has good upside potential, that been said there is no rush to acquire until these objectives have been met.
Check Macarthur Coal MCC, Felix Resources FLX, Gloucester Coal GCL.

HSI .. Holly Springs Investments @ .12
Holly Springs Investments is just a shell company with approx $250,000 sitting on term deposit with the ASB and at this stage looking to complete a reverse listing transaction some time over the next 12 months.
This is the more speculative selection at 12 cents a share. Wilkinson + White is a major shareholder.

The markets are likely to remain choppy until the sub prime issues and the recession word starts to disappear. While many investors are adopting the 'Grim Reaper' approach it is also worth considering that the Dow is already back some 12%. Off its highs and a few interest rate cuts should mean that a further pullback of 5% be about it.

Next month we will look at the property sector.


Brett Wilkinson, director of Wilkinson + White has 20 years experience in investment markets. The focus at Wilkinson + White Ltd is to assist private companies to become publicly listed, and where possible to continue with that relationship and to assist those companies with growing their business.
Visit his website at:

Disclaimer: It is strongly recommended that investors consult their own investment advisor before acting on any information in this article.
All care has been taken to present ideas and information that has been obtained from reliable recourses, however no responsibility will be taken for any mistakes omissions or errors.
Wilkinson + White and associated parties will hold shares in companies mentioned in these articles.

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