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Share to buy – Westfield (WFD)
Westfield has added five new assets to its flagship portfolio, it was revealed at the recent quarterly update. Portfolio metrics are generally healthy, with sales and rents up, albeit occupancy and rent per sqm have slipped. Ongoing positives are the potential for a restructure, material apartment earnings, and exposure to a lower Aussie dollar. Technically, WFD has recently bounced strongly off its longer-term EMA filter (green line) and has broken higher from a consolidation zone.
Share to buy – Macquarie Group (MQG)
Activity trends for MQG were positive in the recent quarter and the group should benefit from a medium-term positive earnings upgrade cycle. Optimism about MQG’s upcoming results has been gaining momentum of late, with the investment bank likely to benefit from further growth in FUM, volatility in financial markets and a lower AUDUSD. MQG will report full-year earnings on May 8, with consensus estimates suggesting net profit will come in at $1.51 billion. We wanted to position ourselves appropriately ahead of the announcement, hence our recent buy recommendation. The technical evidence is also strong, with a strong uptrend in place coupled with a recent retest and confirmation of a key round number - $80 – as support. With everything lining up fundamentally and technically, we wouldn’t be surprised to see a move towards $90. Read more tips on Blue Chip stocks on the ASX.
Share to buy – Premier Investments
On March 5th our Head of Research Chris Conway appeared on Sky Business and placed a BUY rating on Premier Investments (PMV), citing the company’s optimisation strategy and growth in its Peter Alexander and Smiggle brands as potential highlights ahead of the company reporting. On March 23rd Premier reported, delivering a 9% increase in half-year profit in defiance of harder times being faced its major department store competitorsPremier lifted its net profit to $56.3 million after stronger sales growth from across its key brands such as Smiggle and Peter Alexander. On the day of reporting, Premier closed up an impressive 11.1% [video width="640" height="360" mp4="http://www.australianstockreport.com.au/21jan_share-tips/wp-content/uploads/Premier-Investments.mp4"][/video]
Share to Buy – Seek Limited (SEK)
In November last year, SEK reaffirmed guidance for 2015, expecting strong domestic online employment business as well as solid growth internationally. SEK's positive structural growth story being continues to be complemented by domestic cyclical momentum. The recent ANZ jobs ads numbers were supportive, with the widely-watched series rising 1.3% in January, and now 10% higher than they were a year ago. The bank said the more stable trend figure has now been going up for 15 months. Whilst the above is all good news, SEK is reporting on 17 February and this trade will be a play on those numbers. The graphic below shows that SEK typically rallies into and out of its reporting date. The blue line shows the average outperformance by SEK of the ASX 200 in the 30 days pre- and post-earnings. The statistical analysis if performed over the last 18 reporting events. Technically, SEK stacks up as well. There is an overarching bullish structure in place and although there appears to be stubborn resistance through $18.50, a strong result should see this region cleared. Using the reporting date as a catalyst, we’re targeting a move into $20.
Share to buy – My Net Fone (MNF)
My Net Fone Limited provides broadband Voice Over Internet services (VOIP). The Company offers services to both residential and business customers. MNF shares have rallied almost non-stop since August last year, almost tripling from a little over $1 to its current level around $3.25. The stock took a tumble in August this year in the lead-up to its FY14 report, but snapped back higher on strong profit results. After that, the stock rallied strongly to reach an all-time high of $3.30 last month before being dragged lower again as the market pulled back. Since the market bottomed out earlier this month, MNF shares have rallied impressively and the shares have set fresh all-time highs yet again.
Share to buy: CQR
Our bullish view on CQR is based on expectations of steady earnings growth and asset revaluations, a defensive rent base, its healthy balance sheet and reasonable valuation. CQR’s 1H14 like-for-like net operating income (NOI) showed modest growth of 2.5%, despite a tough retail environment. This came on the back of 3.3% rent growth from specialty stores and a 3.6% increase in sales from anchor tenants, Woolworths and Wesfarmers. CQR was able to achieve this growth because occupancy costs for its specialty stores are among the lowest in the industry, increasing those stores’ ability to absorb rent increases. Acquisitions and asset redevelopments contributed to a 16% lift in the value of the Australian portfolio in 1H14. Notably, the company is considering six future projects in the next two years at a cost of approximately $94.6 million. Upon these projects’ completion, we’d anticipate further asset valuation upside from the domestic portfolio. The balance sheet was in reasonable shape, with a gearing ratio of 31.6% at the end of December 2013. This was unchanged from June 2013 and comfortably inside management’s 25% - 35% target range. Moreover, debt refinancing risk has been mitigated with the average maturity of CQR’s debt extended to 3.6 years in 1H14 (compared to 2.8 years six months earlier). The stock is looking good on three key valuation metrics, as the following chart highlights. Its P/E is around 12.7x (purple line), compared to a 15x average of its closest peers); the distribution yield is 7.3% (yellow line), compared to a 6% average of its closest peers; and its net tangible asset per share (grey line) has recently turned higher after years of declines. Source: Bloomberg Amidst the challenging retail environment, CQR benefits from the defensive nature of its rent base - Woolworths and Wesfarmers comprised 53% of CQR’s base rent. As the following graph illustrates, national food expenditure is outpacing spending on discretionary categories like department stores, clothing, and household goods. CQR’s focus on non-discretionary retail allows for further steady NOI growth in our opinion. Source: CQR 1H14 Presentation
Share to sell: GWA Group (GWA)
GWA's result in February missed consensus estimates and guidance was lowered. Cost increases, the A$ and price declines all offset attempted cost savings, so GWA needs to work harder. Bathrooms & Kitchens saw margin expansion but with 70% of products imported and GWA's 32% premium pricing to peer product ranges, there are concerns over the company's structural issues. Those concerns are reflected in the company’s share price, which has fallen from a high around $3.25 in October, to presently be trading around $2.60. We have a solid bearish structure in place, with the shorter-term EMAs crossed lower and the price action below the longer-term EMA filter, which remains negative. More recently, the price action has been back to retest and confirm as resistance the $2.70-75 region, an area which previously acted as support on multiple occasions.
Share to Sell- Seven West Media (SWM)
The bias for Seven West Media (SWM) is firmly bearish. As we have highlighted on the chart below, SWM has been in a downtrend for some time now, falling from around $2.60 in September to presently be trading around $1.90. The shorter-term EMAs are crossed lower and the price action is below the longer-term EMA filter, which is negative. It is also of note that since February, volumes have been increasing, rather than decreasing, which is symbolic of increasing downward momentum in the stock (often when a downtrend is weakening, we see lower volumes).
Share to Buy: Alacer Gold Corp (AQG)
Alacer Gold (AQG) is a gold producer with operations in Turkey and Australia, and was formed through a merger between Anatolia Minerals and Avoca Resources in February 2011. AQG’s sole asset is its 80%-owned stake in the Turkish-based Coplar project. The group sold its Australian-based Higginsville operation last year. Gold price Gold has enjoyed a positive start to 2014, with futures prices up approximately 10% in the year to date. Below we graph the trend in the price of gold (green line), along with the total bullion holdings in global exchange traded funds (white shaded line). Source: Bloomberg As we can see, ETF bullion holdings have stabilised around 56 million ounces and in a bullish sign, gold recently broke through a downtrend resistance line (red line). The market has already priced in stimulus tapering from the US Federal Reserve (Fed). However the recent weak trend in US economic data and Chinese manufacturing activity has stoked concerns over slowing global growth, boosting the safe-haven appeal of gold. Quarterly production Copler output is growing strongly, with production totalling a record 216,850 ounces (oz) in 2013 – up 44% on 2012. The positive trend in cash costs also strengthens the earnings outlook. AQG’s December 2013 quarter cash costs were $865/oz, with the group forecasting 2014 cash costs of $730/oz - $780/oz. The compares favourably to bigger miners Newcrest Mining ($1003/oz) and PanAust (US$964/oz) and is only marginally higher than Regis Resources ($744/oz) With gold prices having steadied and appearing to head higher in 2014, growth in AQG’s cash margin bodes well for profitability even after accounting for the forecasted lower production.
Share to Buy: David Jones Limited (DJS)
David Jones Limited (DJS) is a high-end Australian department store chain. David Jones was founded in 1838 and is claimed to be the oldest continuously operating department store in the world still trading under its original name. DJS currently has 38 stores, located in most Australian states and territories. While its main business is retailing, the company also makes money from ancillary services such as running its own credit card. David Jones' main department store rival is Myer, and DJS recently confirmed MYR made an approach late last year regarding a possible merger between the two department store giants. Latest sales results The company released 2Q14 sales results last week, which showed some positive signs. DJS saw increased foot traffic across its stores, and average purchase sizes also rose. The retailer’s key product categories such as womenswear, menswear, homewares all recorded positive sales growth. The company also completed its exit of underperforming categories such as outdoor furniture, music and DVDs Overall, sales rose 4.7% to $618.1 million, with like-for-like sales (adjusting for changes in store numbers) up 2.1%. Encouragingly, both overall sales and like-for-like numbers were ahead of expectations. While it still only makes up a tiny portion of DJS’s overall sales, online sales were up 150% for the quarter, highlighting the long-term potential of this division. Board upheaval The company’s management has been in the headlines for the wrong reasons recently, with two directors accused of inappropriate trading in DJS shares. The two directors bought DJS shares shortly after the MYR approach and only days before DJS jumped higher on a strong 1Q sales report. Those two directors have since stepped down, as has the company’s chairman who approved the share purchases. To top it all off, the company’s well-regarded CEO Paul Zahra has previously announced his intention to resign from the company. Despite the recent resignations, this can be seen as a positive sign as DJS’s board lacks extensive retail sector experience and this could provide the opportunity to add some much-needed industry expertise. There is also talk that Mr Zahra will stay on as CEO or take over the soon-to-be vacant Chairman role.
VIEW SHARE market recommendations BY CATEGORY
Nov 2014 - Nov 2016
Our short-term focused Trading Report returned 30.03%, outperforming the ASX/200 Accumulation Index by 23.58%*
DISCLAIMER: *Performance is derived from recommendations provided by Australian Stock Report’s Trading Report, opened on or after date of acquisition in Nov 2014 *Return figures are gross returns and do not take into account fees or brokerage costs. *Returns are calculated based on a $50,000 hypothetical portfolio, risking 2% of the overall portfolio balance ($1,000) as a starting point for each trade. *Due to slippage and gapping, losses can sometimes exceed $1,000 on an individual trade. *Opening and closing prices for trades (and therefore the prices used for determining aggregate profit/loss) will be those published on the Australian Stock Report website and will be determined by the price at which they could realistically be executed in the market at the time the recommendation is published. *ASX 200 Accumulation Index Return is calculated based upon the price of the index at the start of the session on the day the first ASX 200 trade was placed, i.e. 24.11.2015
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