Industrials Stocks News and Tips on the ASX.
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 sell – Oz Minerals (OZL)
A recommendation to sell OZL is based primarily on the weakening gold price. Gold price forecasts have been slashed across the board, by between eight and 14%. This has been done to reflect expected US rate rises and lacklustre demand. Technically, OZL is in a downtrend, having sold off from $5.10 in May to presently be trading near support in the $3.70 region. The EMAs are bearish, momentum has turned bearish and the stock is not yet oversold.
Share Tip Transpacific Industries Group (TPI)
Transpacific Industries (TPI) is a recycling, waste management and industrial services company operating in Australia and New Zealand. Its clients range from small businesses to larger commercial and industrial companies. The group’s core responsibilities include recycling solutions, waste management services, parts washing equipment and waste oil collections. Key Points FY13 results: Revenue grew 0.4% over the year, which in the current environment is a good result, The group did report a loss of $218.7 million, but there was $286.6 million of significant non-cash impairments, On an underlying basis the group recorded a net profit of $67.9 million, a rise of 17.1% from the prior year’s result. The underlying result was on the back of a $73.1 million reduction in net debt, which helped lead to underlying interest expense decrease by $35.9 million, Allowing the group to achieve this reduction in debt has been a strong operating cash flow, which rose 4.5% over the year to $282.4 million. Asset Sale: The group announced the sale of its Commercial Vehicles business for $219 million, We think the asset sale was a good move for the following reason; A reasonable price for the business was achieved, The funds will be used to pay down the group’s debt, which is expected to reduce its net interest expenses by $12 million and it allows the company’s management to focus on its core waste management business. Outlook We like the steps the group is taking to refocus its business. An internal view of the business has identified 42 branches that are either non-core or underperforming and are to be sold or closed. The eventual proceeds of these sales are likely to be used for further debt reduction, which we believe alive investors debt concerns and leading to further share price gains. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files. Read more: http://www.australianstockreport.com.au/share-tips/#ixzz2fDepyaOT
Fortescue Metals (FMG) Drop In Ore
Fortescue Metals Group (FMG) is the third biggest iron explorer and producer in Australia. Its operations are located in WA’s Pilbara region, which also hosts mining giants BHP and Rio Tinto. FMG’s holdings in the region cover close to 85,000 sq km, with resources estimated at 13.2 billion tones. Iron ore outlook In the last three months of 2012 the price of iron ore soared over 70%. The move was the result of increased demand from China and several high-cost Chinese miners shutting operations. The chart above shows the price of iron ore prices since the start of this year. Since the February 2013 high of US$159.9 per tonne, the price of iron ore has decreased around 30%. The main contributor to the weakness in iron ore markets has been the slowing growth in China. China, which accounts for approximately 60% of global iron ore demand, is facing slowing growth as evident by the recent manufacturing sector data. The HSBC Purchasing Managers Index (PMI) returned a reading of 49.6 this month, worse than the 50.4 expected by economists. A reading below 50 indicates that the sector is contraction rather than expansion. Outlook FMG has a strong long-term production outlook, with the company planning to triple its production over the next few years. The problem with this is that Brazil-based Vale – the largest iron ore miner in the world – is also expanding along with Rio Tinto and BHP. There is going to be a major amount of new supply entering the market over the next few years, and with the China demand story not as compelling as it once was, we could easily see a structural surplus in the iron market. This is likely to further pressure iron ore prices, leading to further share price deterioration for FMG. Fortescue Metals was listed as a sell share for our members on May 30th. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Goodman Group (GMG) Good Assets Combined With Solid Growth
Goodman Group (GMG) is an integrated commercial and industrial property group that owns, develops and manages real estate including warehouses, large scale logistics facilities business parks and offices globally. The group also offers a range of investment property funds, giving investors access to specialist fund management services and commercial and industrial property assets. The company is broken up into three main division: Investment, Development & Management The company operates in Australia, New Zealand, Asia, Europe and the United Kingdom. GMG is a stapled security comprising a unit in the trust and a share in the management company. FY12 Results GMG’s FY12 results showed another year of continued growth. Operating profit was $463 million, up 21% on FY11. Operating EPS was 30.5 cents a security, which was an 8% improvement on the FY11 result. The group was also able to increase its dividend on FY11 by 3% to 18 cents a security. GMG’s results were impressive and the group guided for continued growth in FY13, with an expected operating profit increase of 13.2% to $524 million. The assets A breakdown of the GMG’s divisions shows the quality of its assets. The investment division managed to maintain an occupancy ratio of 96%, a retention rate of 80% and like-for-like rental growth of 2.8%. These are tremendous results given the state of global economy and are real reflection of the quality of the property portfolio and the quality of GMG’s customers. The group’s development division has over $1.9 billion in work in development spread around Europe, Asia, and Australia. GMG also expects to grow its work in development to $2.5 billion in this half, with entry into the North America market adding to diversity. The development segment takes a low risk strategy on new developments, getting an average of 80% pre-commitment on all new projects. This ensures that that the group is not left ‘holding the bag’ with excess properties. The management division grew its assets under management by 12% in FY12. We expect continued growth in this segment as the hunt for yield continues. Outlook GMG’s FY12 results were impressive, with all divisions recording solid growth. The group is also expecting double digit growth in FY13. We are inclined to believe that they will achieve these results, given the quality and diversity of its asset base. Overall we think GMG has good growth prospects and quality assets that will see continued share price appreciation. This article was distributed to our members on October 23rd, if you would like further information you can sign up for FREE 7 day recommendations and access all our research files on not only Goodman Group but all our current trading ideas. Simply click here and starting trading today.
Transfield Services (TSE) Shares To Sell
Transfield Services (TSE) delivers essential services to key industries in the resources and industrial, infrastructure services and property and facilities management sectors. A leading global provider of operations, maintenance, and asset and project management services, TSE’s operations span Australia, New Zealand, the United States, the United Arab Emirates, Qatar, New Caledonia, South East Asia, India, Chile and Canada. Late August the company released its FY12 results and announced the departure of CEO Peter Goode. Earnings disappoint TSE’s FY12 results showed a return to profit that fell short of market expectations. The company reported FY12 NPAT profit of $85.0 million which was a swing from the $19.2 million loss a year earlier. However on an underlying bias NPAT was down 15.1%. Revenue over the period jumped 13.9% to $3.14 billion. Another worrying sign was return on capital employed, which fell to its lowest level in over five years, to 8.8% from 12.4% in FY11. Easternwell and Goode Back in December 2010 TSE purchased Queensland-based resources services provider, Easternwell, for $575 million. The business has generally disappointed with FY12 earnings missing the guidance the company provided in April. The business is going to be under continued pressure as conditions in the mining sector remain subdued on the back demand weakness out of China. We make mention of the Easternwell business because we think that the incoming CEO may look at writing down some of the $346 million in intangibles assets currently on the books. Outlook TSE’s underwhelming FY12 results and lacklustre guidance of $125 million -$135 million are not good signs for the company. The share buy-back, which we believe has been underpinning the stock price, has now ended, so that’s one piece of support that is no longer there. Whilst TSE is less leveraged to the mining sector than other service contractors, it has some exposure which will come under pressure. We believe these concerns, combined with the possibility of writedowns in the future, will weigh on TSE’s share price in the near-term.
MBN Cash Problems Despite Capital Raising
[caption id="attachment_22461" align="alignleft" width="195" caption="MBN Cash Problems Despite Capital Raising"][/caption] Mirabela Nickel (MBN) is a mining company focused on the production and sale of nickel concentrate. The miner’s key asset is the Santa Rita nickel operation in Bahia, Brazil. MBN has faced a number of headwinds in recent times, ranging from lower nickel prices, higher cash costs and a deteriorating cash position. Cost pressures Sentiment towards MBN has nosedived since it announced an 11% surge in December quarter cash cost to US$7.42/lb. Although cash costs fell slightly to US$7.37/lb in the March quarter, investors are still questioning whether the group can fulfil its aim of getting cash costs down to US$6/lb by year end. Cost reductions are expected to come from higher nickel production volumes (through improved grades and increased plant throughput), as well as lower staff costs and rationalisation of contractor costs. MBN therefore has little margin for error in its attempt to bring costs down, and we would expect a harsh reaction from investors if the group falls short on this aim. Cash problems despite capital raising MBN’s problems led to a very low cash balance of US$41 million as at May 9. At the end of March, cash on hand totalled US$60 million. In less than two months cash reserves slid ~33% due to the rapid deterioration in the nickel market. Ratings agency, S&P, picked up on this in late March when it downgraded MBN’s credit rating due to concerns over a prolonged period of negative operating cash flow. It therefore came as no surprise when MBN announced a $120 million capital raising in mid-May. The group said the funds would be used to strengthen its balance sheet. Whilst the raising may have alleviated short-term funding pressures, the group is still likely to face cash flow problems given its operational issues and the dire outlook for nickel prices. Outlook As an unhedged producer, MBN is particularly sensitive to the recent weakness in nickel prices. Lower selling prices compound the problems for higher cost miners. In MBN’s case, we have seen just how severely cash reserves can get depleted from a weaker nickel market. The group’s deteriorating financial position necessitated a capital raising, but we are of the view that its cash flow problems are likely to persist unless nickel prices stage an unexpected recovery in the near-term. We at Australian Stock Report believe these headwinds are likely to weigh on MBN’s share price for a while yet. Click Now for FREE Trading Recommendations
Boral Adjust Profit Guidance
Boral Limited is a manufacturer and supplier of building and construction materials in Australia and internationally. Boral supplies building products to the residential and commercial building markets, operates clay brick business in the U.S. (for clay roof tiles and fly ash) along with the production of plasterboard, timber products and concrete products. The group is listed on the Australian Stock Exchange and is a member of the S&P/ASX 200. Boral has downgraded its profit guidance for the second time in a little over two months. [caption id="attachment_22371" align="alignleft" width="234" caption="Boral Adjust Profit Guidance"][/caption] It now expects net profit to be between $100 million and $110 million, down from the previously downgraded guidance of $128 million to $153 million. Interim CEO Ross Batstone said in a statement “a number of recent events have come together to weaken Boral's trading performance in the fourth quarter which add to the impact of ongoing weakness in the Australian new housing construction market." Boral also noted that the business continues to operate comfortably within its Banking covenants.
Transpacific Industries (TPI) downgraded its FY12 profit
[caption id="attachment_22336" align="alignleft" width="227" caption="TPI reduces FY12 profit guidance"][/caption] Transpacific Industries Group Ltd. provides integrated industrial cleaning and waste management solutions to customers across Australia and New Zealand. The Company also imports and distributes heavy-duty commercial vehicles. The group is listed on the Australian Stock Exchange and is a member of the S&P/ASX 200. Transpacific Industries downgraded its FY12 profit guidance from $17.3 million to between $8 million and $13 million. The group also lowered its EBITDA to between $435 million and $442 million. It had previously guided an EBITDA between $445 million and $459 million. The company blamed the fall in EBITDA on a decrease in Cleanaway’s volumes, exacerbated in Queensland by customers deferring the disposal of waste pending expected removal of the landfill levy from July 1, and subdued activity in the manufacturing sector. To Access FREE Daily Trading Recommendations, Click Here!
Weekly Buy Report: Car Sales (CRZ)
[caption id="attachment_22316" align="alignleft" width="160" caption="Weekly Buy Report: Car Sales (CRZ)"][/caption] Carsales.com Limited (CRZ) is an Australian business offering online access to automotive classifieds. It is the largest consumer website in the country that covers automotive, plant machinery, motorcycle, caravan, marine and display advertising. Revenue is principally derived from online advertising, which includes dealer and private sales, and display adverting, where corporate customers such as insurance companies place ads on CRZ’s website. The group also has a data and research services division, which provides solutions to customers including importers, dealers and industry bodies. Industry leader CRZ prospers even in uncertain economic times because it has been at the forefront of the continuing migration from print to online advertising. Being proactive in identifying market trends has helped CRZ maintain leadership in its market. Although the online advertising industry has low barriers to entry, CRZ’s trusted brand and new product offerings are key reasons it has been able to stay ahead of the pack. Reflecting this point, 75% of the time looking at auto ad websites was done on a carsales-owned site, this according to CRZ’s 1H12 results presentation. 1H12 earnings CRZ’s 1H12 results continued a pattern of robust earnings and revenue growth. For the most recent half, net profit rose 20% on-year to $27.6 million. Revenue was up a similarly healthy 22%. CRZ declared an interim dividend of 11.3 cents per share, up from 9.4 cents in 1H11. Since FY07, half year net profit has increased at a compound annual growth rate of 40.6%, whilst revenue has grown at 28.9%. Dealer revenue growth of 16% was delivered on the back of a steady increase in used vehicle enquiries and strong growth in new vehicle enquiries. Private ad growth was up a more modest 7%, but with the release of new product initiatives throughout the half, coupled with a premium price rise in November, CRZ is well positioned for the second half. Outlook Following a buoyant first half, CRZ forecast a similarly strong second half. The group maintains a dominant share of the online car ad market, and with new product initiatives lined up for 2012, is unlikely to relinquish its grip any time soon. CRZ is cashed up, and with no debt, has the flexibility to pursue external growth opportunities and support its dividend. Whichmakes it a stock to watch in the future.
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Nov 2014 - Nov 2016
Our short-term focused Trading Report returned 30.03%, outperforming the ASX/200 Accumulation Index by 6.45%*
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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