Shares to Sell on the ASX.
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 sell – Crown Resorts (CWN)
Since topping our around $16 in February, Crown has really struggled and is presently trading near $11. Macau continues to weigh on the stock, while pressure on VIP remains. The Melco JV has been the primary cause of volatility and caution prevails regarding Macau because of China's macroeconomic environment. Technically, we're seeing everything that we want; the EMAs are in a bearish configuration, momentum is to the downside, the stock is only approaching oversold levels and the recent massive reversal provides our price action signal.
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 to sell – WorleyParsons
Back in May WorleyParsons suggested second half FY15 earnings would be flat on the first half. At the March quarter update the company noted revenues were holding up but margins were under pressure. A lack of recent awards and project sanctions leaves the FY16 earnings picture as opaque. The company can generate cash in a downturn, and its strong balance sheet offers acquisition potential, but we do not believe the downgrade cycle is over yet in an uncertain oil & gas industry. In terms of some of the recent M&A deals, question marks remain. Recent acquisitions such as Evans & Peck, Rosenberg and TWP have not brought the necessary earnings to justify the price paid. On the technical front, WOR appears to be breaking down once more after forming a range over the past six months. Momentum is to the downside and the stock is not yet oversold.
Share to sell – Fortescue Metals Group Ltd.
Fortescue Metals Group Ltd. explores for and produces iron ore. The Company conducts business worldwide. The decision to short sell Fortescue is based upon two things; downgraded iron ore price forecasts and bearish technical momentum. Demand for iron ore is weak and supply continues to surge, with Chinese producers unlikely to pick up the slack in any meaningful way coming into the traditional restocking period. This was brought to bear overnight, with iron ore prices slumping a further 4.4%, to $71.80 per metric tonne. On the technical front, FMG is displaying significant bearish momentum and the path of least resistance is clearly to the downside.
Share to sell: GWA Group (GWA)
GWA's result in February missed consensus estimates and guidance was lowered. Cost increases, the A$ 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 Sell: Panaust Limited (PNA)
anAust (PNA) is a mid-tier miner that holds mineral assets in Laos, Chile and Thailand. In Laos, PanAust operates the large Phu Kham copper-gold operation, which commenced production of copper-gold concentrate in April 2008. The Ban Houayxai Gold-Silver mine, which is also located in Laos, commenced commercial production in June 2012. Copper sell-down There has been a big copper sell-down in 2014, with prices down approximately 14% in the year-to-date. The copper price sell-off follows a period of sustained declines in copper inventories at the London Metals Exchange (LME) and the US-based Commodity Exchange (COMEX). These trends are graphed below; front month copper futures (white shaded line), LME inventories (pink line) and COMEX stockpiles (green line). Even though copper inventories have been falling for almost a year, prices have come under pressure amid growing fears over China. Last weekend’s data revealed the biggest monthly slide in Chinese exports since 2009, heightening concerns about a slowdown in the world’s second biggest economy. China’s exports crashed in February, dropping by 18.1% year-on-year, compared with 10.6% gain in January. The slide in its exports saw China swing from a surplus of $31.9 billion in January to a deficit of $23 billion in February. Given copper’s widespread industrial use, the slowdown in China’s economy has stoked fears of a collapse in demand for the red metal. The copper price drop reflects concerns demand is plummeting at a faster rate than the drawdown in inventories.
Share to Sell: The Reject Shop Limited (TRS)
The Reject Shop (TRS) is a discount variety retail company, targeting Australian consumers through low price points, bargain-purchasing and convenient shopping locations. TRS offers a wide variety of general consumer merchandise, with a focus on everyday needs, such as toiletries, cosmetics, homewares, personal care products, hardware, basic furniture, household cleaning products, kitchenware, confectionery and snack food. Shock trading update TRS shocked the market late last month when it warned that 1H14 net profit was likely to $16.6 - $16.9 million, down on last year’s $20.1 million. First half sales growth of 17.7% was almost exclusively due to new store openings, as comparable sales were actually flat overall. TRS blamed the weak same-store sales result on a poor performance from stores in major shopping centres. This contributed to a weaker-than-expected gross margin, as the group was forced to mark down prices more than it had wanted to. This is a worry as the group spent heavily on new stores during the half, suggesting magnifying the pressure on its profit margins. Consumer confidence falling The operating environment continues to remain challenging for retailers. The latest Westpac Consumer Confidence survey showed confidence slipping to a six month low. The index dropped 1.7% to 103.3 in January and is down approximately 7% from the peak reached towards the latter part of 2013 (illustrated below). Source: Bloomberg Although the latest reading is above the 100 level that indicates the number of optimists outweigh the number of pessimists, the trend in confidence is nonetheless heading in a negative direction. Amid the recent global market turbulence and rising domestic unemployment we think confidence is will continue to deteriorate in the short-to-medium term.
Share to Sell Cabcharge Australia Limited (CAB)
Cabcharge Ltd (CAB) is a diversified Australian technology, financial services, taxi payments and a land transport company. Its business is predominantly a taxi charge account system allowing customers to pay via credit card for their tax trips for a servicing fee. CAB also has two affiliate businesses; UK-based account, booking and dispatch services provider, Cityfleet (49%-owned), and Australian-based commuter bus operator, ComfortDelGro (49%-owned). Regulatory uncertainty In a major blow for the company, Victoria’s government announced in late May 2013 that it intended to limit the industry credit card servicing fee from 10% to 5%. CAB’s FY13 taxi service fee income came in at $90.7 million, with Victoria representing around half of total revenue. A 5% reduction in the servicing fee therefore takes a huge chunk out of Victoria’s contribution to taxi service fee income. Policy uncertainty is another issue impacting the outlook, with NSW and Queensland saying they too will consider a 5% cap on servicing fees. If these two states follow Victoria’s lead it would result in a greater hit to taxi service fee income, further eroding CAB’s profitability. Competitive Threats CAB is facing increased competitive threats from Uber, which is a private car hire booking app. Uber’s UberTAXI service (currently available in Sydney) connects passengers with licenced taxi drivers who are also using Uber. UberTAXI is also a cheaper way to book a taxi. The only fees involved are a $2 booking fee and no credit card surcharge, undercutting CAB, which charges a 5% fee. Uber is backed by major international companies like Google and Goldman Sachs. It can therefore invest in technology to help it win market share, and leverage existing systems to operate at lower cost than CAB.
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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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