Which two stocks to buy and which one to hold?

Sirtex Medical Limited


SRX Details
 
Revision of full year dose sales growth guidance and license received for core SIR-Spheres Y-90 resin microspheres: Sirtex Medical Limited (ASX: SRX) recently provided an update on its second half operating performance. Americas sales growth is expected to be 18-20% but the company announced for lower than anticipated dose sales performance in EMEA and APAC regions. This is due to the delay in achieving product reimbursement in few EMEA countries, delay in publication of SIRFLOX clinical study in Journal of Clinical Oncology preventing timely sales and marketing initiatives, strict funding environment in European markets and supply disruptions in few Asian markets. Accordingly, SRX revised the full year dose sales growth guidance at 15-17% compared to prior corresponding period and not in line with the last five years CAGR growth of 19.7%. However, SRX’s long term growth prospect with regard to SIR-Spheres Y-90 resin microspheres are said to be strong.  In fact, SRX has received Medical Device License (MDL) by Health Canada (Santé Canada) for SIR-Spheres Y-90 resin microspheres which is used for primary as well as secondary (metastatic) forms of liver cancer. The group intends to launch this during the second half of the 2016 year and completed patient recruitment for RESIRT study investigation of the use of SIR-Spheres Y-90 resin microspheres for the treatment of primary Renal Cell Carcinoma.
 

Sirtex performance over the years (Source: Company Reports)
 
Moreover, Discovery Health, the leading South African private health insurer, has agreed to reimburse SIR-Spheres Y-90 resin microspheres for the treatment of all forms of inoperable liver tumors. To improve its America’s focus, SRX also appointed Mr Kevin Richardson as Chief Executive Officer of Americas effective from 01 July, 2016. The shares of SRX have fallen 5.84% in the last five days (as of June 02, 2016) but we believe the stock to recover in the long term. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of $29.01
 

SRX Daily Chart (Source: Thomson Reuters)
 
Woodside Petroleum Limited


WPL Details

Enhancing exploration potential: Woodside Petroleum Limited (ASX: WPL) plunged over 25.92% (as of June 03, 2016) in the last one year owed to the falling oil prices pressure on the group’s performance. On the other hand, the group has reported an increase of its estimate of contingent resource by 83 MMboe to 4,481 MMboe from its two offshore gas discoveries of Myanmar in Q1 2016. The company has also achieved an annualized loaded LNG production rate equivalent of 4.8 mtpa at Pluto LNG (100% project) which is more than expected annual production capacity of 4.3 mtpa. Woodside has started charter of a 174,000 m³ LNG carrier, the fourth vessel in the fleet, for trading activities and long term supply.
 

Building solid growth prospects (Source: Company Reports)
 
The group also made a Project Development Agreement with Sempra LNG & Midstream to assess the potential 10 mtpa natural gas liquefaction facility in Port Arthur, Texas. Woodside Energy Trading Singapore Pte Ltd even made a Heads of Agreement (HOA) with PT Pertamina (Persero) for the supply of approximately 0.5 to 1.0 million tonnes of LNG per annum from Woodside’s LNG portfolio for a period of 15 to 20 years (commencing 2019). The group also intends to start exploration of four to seven wells by early 2017. Given the improving prospects of LNG, recent oil rally and strong resource base, we maintain our “Buy” recommendation on the stock at the current price of $26.86
 

WPL Daily Chart (Source: Thomson Reuters)
 
Lendlease Group


LLC Details

Investment vehicle established and strong pipeline: Lendlease Group (ASX: LLC) recently signed a document for the establishment of a $400M managed investment vehicle, Lendlease Public Infrastructure Investment Company (LLPIIC) to invest in three projects that are already in deliver and will commence operational phases over the next 12 months. LLC now expects to deliver a profit after tax of between $680 million and $710 million for FY 2016. The company has recently issued a 10-year USD$400 million of senior unsecured notes maturing in May 2026 to fund Lend lease’s pipeline through debt by payment of drawings. As per the issue, the fixed rate notes were at US Treasuries plus 280 basis points, and have a coupon of 4.5% per annum which is payable semi-annually. Moreover, management reported that they intend to have a mix of funding via proper balance between bank facilities and global capital markets. On the other side, the company has posted 10% increase in EBITDA to $512 million in the six months ending on 31 December 2015, and a 12% increase in earnings per share of 60.9 cents. The group’s development pipeline increased 15% to $46.6 billon and has a construction backlog increase of 19% to $18.6 billion as compared to corresponding period previous year. This strong performance is owed to buoyant domestic housing and apartment market in both Australia and the UK with the group having strong growth trajectory and earnings visibility with embedded earnings in the existing pipeline.
 

Outstanding pipeline for LLC (Source: Company Reports)
 
Meanwhile, LLC also appointed the former Chief Financial Officer of Commonwealth Bank of Australia David Craig to the Board as an independent Non-Executive Director and a member of the Risk Management and Audit Committee to leverage his expertise in finance, accounting, audit, risk management, strategy and mergers and acquisitions. LLC stock rallied over 5.18% in the last four weeks (as of June 02, 2016). Still the stock is trading at an attractive P/E and has a decent dividend yield. We believe there is more momentum in the stock and accordingly recommend investors to “Hold” the stock at the current price of $13.62
 

LLC Daily Chart (Source: Thomson Reuters)

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