ASX Market Sectors News
Shares to buy: Fortescue Metals Group (FMG)
FMG recently confirmed that it is on track to hit the top end of its iron ore export guidance, and possibly exceed it, whilst at the same time continue to cut costs. The company also took its unit costs below $US13 per tonne for the first time in the December quarter, with an average "C1" cost of $US12.54 per wet metric tonne. Fortescue has now lowered its cost for a 12th consecutive quarter. The company managed to pay down another $US1 billion of debt in the past quarter and said it held $US1.2 billion in cash at the end of December, while net debt stood at $US4 billion. After reporting another strong quarter of shipments and cost cuts, chief executive Nev Power said shareholders could be in line for better returns. "We need to continue diverting most of our cash flow to repaying debt. But we will progressively look to increase returns to shareholders," he told reporters. The company declared a 12 cents per share final dividend in August, exceeding analyst expectations. It will declare its next interim dividend on February 22. These are obviously all positives for a company that continues to deliver on its guidance, cut costs and pay down debt, and we believe that market will continue to reward FMG by bidding up its shares. Technically, the stock is in a fairly well defined uptrend, where momentum is strong but not currently overdone. Targets are towards $8.
Share to buy: Nanosonics (NAN)
December quarter sales were up 41% on the prior quarter, as North American direct sales gained momentum.
The company's move into the US market seems to be paying off, with gross margins improving significantly.
The next driver of share price could be publication of decontamination guidelines in the UK and Scotland favourable to Nanosonic products.
Technically, the stock remains strong and has broken out to fresh all-time highs recently on rising volumes.
Share to buy – Whitehaven Coal (WHC)
Until recently, we've viewed a lack of market confidence as mis-pricing WHC.
Over the journey, the company has maintained an earnings margin average of $13/t but it appears the market has been factoring in the future coal price and giving management little benefit for being able to sustain its margins, despite its track record.
The risk lies with the thermal coal price outlook and whether China continues to retreat from the trade.
Today the company announced record high ROM coal production of 5.7Mt for the March quarter, up 21% compared with the previous corresponding period and 44% YTD.
The company also recorded its highest quarterly saleable coal production of 5.3 Mt for March, up 28% compared to a year earlier, and 48% YTD.
Whitehaven Coal says that it is on track to meet FY2016 guidance for saleable coal to be in the range of 19.5 Mt to 20.1 Mt.
The miner says that costs guidance for the full year FY2016 is now expected to be $57/t.
We think momentum can now build in the stock and are prepared to be buyers..
Share to buy – APN Outdoor Media (APO)
The evolution of Billboards from static to digital has presented significant growth opportunities for APO.
The company, since IPO (Nov 2014), has secured both existing Static Billboards as well as development options to develop Digital Billboards.
Given the ability to modify advertising on-demand using sophisticated yield management techniques for digital formats, the potential revenue uplift is significant.
This can be observed by recent revenue trends whereby revenues have far exceeded the company's and market's expectation.
Given the scalability of digital formats, this translates strongly for profitability.
At their most recent update, the company has also upgraded guidance due to acquisitions, increased market share and an increase in penetration of digital formats.
The company also confirmed the renewal and expansion of key Airport related contracts, in particular with Sydney Airport.
Share to buy – Rio Tinto (RIO)
Since bottoming out near $38 in December, iron ore has rallied to presently be trading above $48.
- Overnight, the bulk commodity jumped 3%.
- The bounce in iron ore, unsurprisingly, has coincided with a bounce in Rio Tinto which has completed a basing pattern and now appears poised to push higher.
- We are looking for a short-term rally in Rio and active traders can consider being buyers.
Share to buy – Magellan Financial (MFG)
MFG's recent numbers speak for themselves:
- 41% increase in profit
- 38% increase in dividend
- exceptional net inflows and a reduction in employee expense to income
Technically, after a sharp pullback the stock found support around $20 and has bounced strongly.
The recent bullish candle was a confirmation candle and a signal that traders should be happy to buy into.
Share to buy – Ramsay Healthcare (RHC)
- Market cap: $12.01 Billion
- Recent share price: $59.9
- Cash/debt: $315.86 million/$3.17B
- Trailing P/E: 32.64
Ramsay Healthcare is the largest private hospital operator in Australia and one of the top five hospital companies in the world. It has a presence in the UK, France, Indonesia and Malaysia. In Nov 2015, they inked a joint venture agreement with one of China's leading medical universities to build a number of new private hospitals in China's Pearl River Delta thus expanding its reach further.
RHC has a strong competitive advantage, which it has leveraged to grow its business. Key features include;
- Guaranteed demand given the growing ageing populations on a global scale
- Pricing power over its customers, insurers and governments, which often have no alternative but to use Ramsay’s services.
- Buying and building hospitals is very expensive and this is a major deterrent to other companies looking to enter the market.
- Ramsay has also proven to be very astute at building new beds at just the right pace to grow earnings without increasing supply beyond demand.
- Ramsay delivered solid growth in FY15 with revenues, core earnings per share and full year dividends increasing by 49.8%, 20% and 18.8% respectively.
- Management has provided guidance of 12-14% earnings per share growth in FY16 barring any unforeseen circumstances.
Share to buy – NIB Holdings Limited (NHF)
- Market cap: $1.48 Billion
- Recent share price: $3.38
- Cash/debt: $58.81 million/$63.89Million
- Trailing P/E: 19.54
NIB health funds is one of Australia’s largest health insurers, providing health and medical cover to more than 1.1 million Australian and New Zealand residents
Private Health insurers are a segment of the market worth watching over the coming 12 months.
Both Medibank Private and NIB have become increasingly vocal about the need to improve efficiencies in the healthcare system and to put a lid on the spiralling cost of care.
With federal reviews into private health insurance and the Medicare Benefits Schedule, among other parts of the health system, there could be significant changes in fortune for the insurers who pay medical bills.
Throughout 2015, NIB shares have been volatile after rising to nearly $3.90 in March before falling to a low of $3 in October.
However, consistent profit and dividend growth has been a regular feature from NIB in recent years helping the company’s share price lift 10% for FY 15/16.
Share to sell – Graincorp (GNC)
GNC’s FY15 result was in line with the company’s guidance. We suspect that FY16 will be another below-average year for cropping and the winter harvest is likely to be downgraded over coming weeks. With the effects of the El Nino weather phenomenon also likely to weigh – through lower crop yields and less revenue from GNC’s grain handling business – as well as the stock being on the verge of breaking down technically, we feel shorts are an appropriate course of action. We wouldn’t be surprised to see the stock move towards the $6.50 region over the next 6-12 months.
Share to buy – Computershare (CPU)
Computershare maintained FY16 guidance and provided greater clarity around cost savings and gearing targets at its recent AGM. We see the company responding to market feedback and this suggests a more communicative stance in the months ahead. With a rise in the Fed funds rate around the corner, which would be a positive for CPU, we see further upside on offer with $12.50 a potential target.
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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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