Blue Chip Shares To Buy On The Australian Stock Market
While there is no specific definition of a blue chip stock, they are generally financially very strong companies with a solid track record of producing earnings. They are typically leaders in their industry with a strong brand name and product or service.
Investing in blue chip stock is a good strategy, since they have usually been in business for a substantial amount of time, have a large market capitalisation, and are considered very stable.
If you’re looking for all the information you need to know the ins and outs of blue chip shares on the Australian Stock Exchange, Australian Stock Report is the place to come. We’ve got a whole range of information about all Australia’s best blue chip shares, including the big four banks, mining majors BHP and Rio Tinto, and oil and gas producer Woodside Petroleum.
Whether you’re interested in buying shares in Telco giant Telstra, health care giants CSL, or goldminer Newcrest, browse our information below for full analyses, news and tips for blue chip stock trends.
Share to buy – BHP Billiton (BHP)
The big question on every investor’s lips right now is, ‘Should I buy BHP?’
The Big Australian has fallen sharply in the last 12 months, having given up half of its value.
The rout has come about due to slowing growth out of China and a subdued outlook for global economic growth.
The Samarco mine disaster in Brazil has also weighed heavily, with BHP and partner Vale expected to be footing a multi-billion dollar bill for the tailings dam failure.
These factors, coupled with massive oversupply in key iron ore and oil markets, have driven the share price south.
But commodity slumps don’t last forever; booms turn to busts and back to booms in due course.
And over the cycle, BHP has remained and will remain one of, it not the world’s best diversified mining companies, with an enviable portfolio of world-class assets.
If you have a long-term investment horizon and are willing to put up with some volatility, now could be an ideal time to revisit BHP given the depressed share price.
Share To Sell Coca Cola Amatil Limited (CCL)
Coca-Cola Amatil (CCL) is an Australasian bottler for US-based The Coca Cola Company, with operations spanning Australia, New Zealand, Fiji, Indonesia and Papua New Guinea. CCL manufactures, sells and distributes Coca-Cola products, including carbonated soft drinks, mineral waters and other non-alcoholic beverages, plus packaged fruit via its SPC Ardmona business. The company also sells and distributes the premium spirits portfolio of Beam Global Spirits and Wines. Profit squeeze Earlier this year CCL admitted that it was facing increased competitive pressures from rival Pepsi’s new low-sugar drink, Pepsi Next, launched in 2012. This has magnified the pressure on the domestic beverage business, which was already contending with weak volume growth but now has to deal with aggressive competitor pricing activity. The disparity in price between Coca-Cola and Pepsi Next was as much as 50%, enough of a difference for consumers to switch their cola allegiance. A combination of weak volume growth and limited ability to raise prices is likely to squeeze CCL’s margins and harm profitability. Also, the SPC Ardmona business continues to be a drag on earnings. CCL is seeking government support for co-investment with SPC Ardmona, a tacit admission that it simply cannot compete with the cheaper importation of private label packaged fruit and vegetables. Outlook Today data showed confidence among Australians during December slid at the fastest pace in seven months. The Westpac Consumer Confidence Index returned a reading of 105, almost 5% weaker than the 110.3 recorded in November. Confidence took a dive this month as consumers became more pessimistic about the outlook for the jobs market and the broader economy. CCL has cited consumer caution as a key factor behind the slowdown of its domestic business and today’s Westpac survey is likely to make them even more nervous about the outlook. In November the company guided for a 5% - 7% fall in FY13 underlying EBIT (the financial year ending this month). With the Australian beverage business comprising around 70% of group revenue, the recent economic data trends suggests the weakness in CCL’s business is likely to persist into FY14.
Fairfax Media (FXJ) On The Way Back
Fairfax Media Limited (FXJ) is an Australian multi-platform media group with a broad range of activities including news publishing, information and entertainment, advertising sales in newspaper, magazine and online formats, and radio broadcasting. FXJ conducts its core activities throughout Australia and New Zealand. Its major newspaper brands are The Sydney Morning Herald, The Age and The Australian Financial Review. Additionally, FXJ owns a range of business magazines, websites, and regional and community newspapers. Stayz sale part of restructure This week FXJ announced the sale of Australian holiday rentals site, Stayz, to HomeAway for $220 million. The sale is part of a focus on restructuring the business in response to an ongoing deterioration in advertising revenue. Earlier this year the group consolidated its Australian publishing businesses under the Australian Publishing Media division in an effort to drive efficiencies and simplify its business model. Also, the Domain and Digital Ventures businesses were separated into standalone divisions, allowing the group to devote increased resources and management attention to areas of the business likely to drive its future growth. FY13 results FXJ’s FY13 results revealed a net loss of $16.4 million and a 5.9% slide in revenue to $2.2 billion. On an underlying basis, net profit fell 28.6% 108.3 million. This accounts for the divestments of Trade Me Group, US Agricultural and Victorian Community Publications, as well as continued impairments of mastheads, goodwill and licenses. The asset sales and impairments were needed, however, to streamline the business and repair the balance sheet. Net debt to EBITDA fell from 1.8x in FY12 to 0.4x in FY13. Also, interest cover increased from 4.5x to 6.4x. On both measures, FXJ is comfortably ahead of its debt covenants. Outlook Following the Stayz sale the balance sheet is in even stronger shape. FXJ said it is on track to achieve cost savings of $1.6 billion in FY14. This will help alleviate pressure on the Metro and Regional businesses, which were suffering falling revenue at the start of FY14. In a positive, however, the group is expanding its digital footprint, with The Sydney Morning Herald and The Age experiencing strong growth in digital subscriptions. So it appears the FXJ is growing by shrinking, shedding non-core assets and driving cost efficiencies to offset weak revenue. At the same, the investment into its digital capabilities is yielding early success, helping to improve sentiment towards the stock.
Good News Gets Better For Rio Tinto
Rio Tinto (RIO) is an international mining company listed on both the Australian Stock Exchange and the London Stock Exchange. The group is an industry leader in most of the major commodities, including aluminium, coking and thermal coal, copper, manganese, iron ore, uranium, nickel, silver and titanium. Rio also has sizable interests in oil, gas and natural gas. China manufacturing growing again Iron ore makes up the most significant component of RIO’s business, around 44% of its overall revenue. Not only have iron prices risen around 19% since the end of June, but the outlook for the mineral appears to be improving. The iron ore recovery has coincided with data showing a return to growth for China’s manufacturing sector. On Monday, the HSBC Final PMI returned a reading of 50.8 for September, representing a slight acceleration in manufacturing growth from October’s 50.4 reading. It was also the third month in a row where China’s manufacturing sector expanded, adding to signs the economy is regaining its footing after a year slowing growth. Outlook Following a poor 1H13, RIO is generating a healthy dose of momentum and is ahead on a number of some of its strategic goals. Last week, RIO announced that iron ore production capacity will rapidly increase towards its targeted 360 million tonnes a year (MT/a), and at significantly lower cost than originally estimated. From a base run rate of 290Mt/a, RIO expects to reach its target between 2014 and 2017, with the majority of the increase to be delivered in the next two years. The miner expects to achieve this by expanding production at existing mines and securing productivity gains. The costs savings works both ways for RIO – helping to alleviate margin pressures in a weak commodity environment and increase earnings leverage to rising commodity prices. For all of our latest australian 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/#ixzz2nKRlceAE
Buy, Sell, Hold Recommendations – Herald Sun 24/11/2013
As featured in the Herald Sun on November 24th 2013, here are the latest buy, sell and hold recommendations from Geoff Saffer Equity Analyst & Educational Facilitator at the Australian Stock Report. Geoff has over 10 years’ experience researching and analysing Australian shares, with a passion for fundamental analysis and specialty in identifying undervalued companies – particularly at the smaller end of the market. Buys Challenger Limited (CGF) – CGF’s profit will drop in FY14, but super low P/E, demand for annuities and rebounding stockmarket make it good value. Ingenia Group (INA) – Retirement property manager is a turnaround play after exiting loss-making US business and cleaning up its balance sheet. Expect strong growth in next two years. Holds Woodside Petroleum (WPL) – Most recent quarter saw higher production offset by lower prices. Prospects for Browse project improving, but would like to see more strength in LNG prices. Crown Resorts (CWN) – Record gambling revenue in Macau driving Macau JV’s fortunes. Sydney Crown also offers huge upside but hype has pushed stock past value levels. Sells UGL Limited (UGL) – Property services demerger could unlock value, but otherwise under pressure from shrinking margins, weakening order book and struggling Engineering division. PanAust Limited (PNA) – Cash costs on the rise and metals prices don’t look headed higher. Further weakness in operating cash flow could see dividend cut. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Newcrest Mining Limited – Sell Stock
Newcrest Mining (NCM) is an Australian gold producer, with operations in Australia, Indonesia, Papua New Guinea, Fiji and West Africa. The group’s flagship mine is PNG-based, Lihir, with the other offshore operations being Gosowong in Indonesia, Hidden Valley (50%-owned) in PNG and Bonriko in Ivory Coast. NSW-based Cadia Valley and WA-based Telfer make up the company’s domestic operations. Gold weakness Although gold prices have stabilised in recent months, gold exchange traded funds (ETFs) have continued to shed their bullion holdings, highlighting weak investment demand for the yellow metal. Last Friday night’s better-than-expected US jobs report has increased the likelihood of the US Federal Reserve bringing the forward the date it begins tapering stimulus to December. The market response will likely be a rise in US bond yields and the US dollar, both of which are negative for gold. This reduces the incentive for ETFs to hold bullion and if they continue to sell their holdings – which we expect they will - gold prices are likely to head south. Outlook NCM’s cash costs for the September quarter were $1093 an ounce (oz), whilst the average realised gold price was $1442/oz. With gold prices recently trading around $1285/oz that implies NCM’s cash margin has shrunk by approximately 44% since the end of the quarter, to $192. It also means that Lihir, with a cash cost of $1152/oz, Telfer, with a cash cost of $1296/oz and Bonriko, with a cash cost of $1889/oz, have either become uneconomical or are very close to it. The balance sheet worsened considerably in FY13, with the net debt to equity ratio soaring from 14% to 41%. High costs and falling gold prices are hammering the group’s cash flows, limiting its options to arrest the balance sheet deterioration. This increases the odds of a capital raising. NCM stuck to its FY14 production guidance of 2.0 – 2.3 million ounces. Unfortunately, it is mining lower grade ore from its gold mines, as evidenced by the September quarter production report. A repeat performance in subsequent quarters increases the risk of missing production guidance. Amidst all these concerns, we think there is enough bad news to send NCM shares even lower from current levels. For all of our latest australian sell shares and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
WPL Woodside Petroleum – Share Tip
Woodside Petroleum (WPL) is Australia’s largest oil and gas explorer and producer. WPL operates the $27 billion North West Shelf (NWS) Venture in offshore WA, which produces around 40% of Australia’s oil and gas. The company also has several key LNG projects, which include, Pluto (WA), Browse (WA) and Sunrise (East Timor). The Pluto project is up and running, but the Browse basis LNG project has been delayed for a period of the two years. Key Points Quarterly Report: WPL reported strong production of 21.9 mmboe for the 3Q13, which was up 9.5% quarter on quarter, the result was mainly due to increased production from the North West Shelf following planned maintenance shutdowns in 2Q13 Sales volumes of 20.9 mmboe up 33.5% on 2Q13 Revenue came in flat at US$1.34 billion, with the higher sales offset by slightly lower realised average prices Leviathan and Browse
>> The groups growth profile has been questioned over the past few years, with issues and delays over two potential projects, Browse LNG project in WA and the Leviathan fields located offshore Israel. However a number of key issues in these projects have been alleviated of late. >> The Browse project which was shelved early in the year looks to be back on the table. WPL and its Joint Venture partners have decided to take USE floating LNG technically to commercialise the Browse gas fields. >> While no costing has been done for the new concept, we would expect it to be less capital intensive than its previous options. >> The Leviathan gas fields is one of the world’s largest off shore gas finds of the past decade. >> WPL successfully bid for a 30% stake in project almost 12 months ago, but the deal is yet to be finalised, with the Israeli government trying to set gas reservation on the field. >> The Israel Supreme Court has recently dismissed the right to do this which paves the way for WPL to proceed with its offer.
Share To Buy Telstra Limited (TLS)
Telstra Corporation Limited (TLS) is a full service domestic and international telecommunications provider and is without question the dominant telco in Australia. The company provides telephone exchange lines to homes and businesses, supplying local, long distance and international telephone calls and supplying mobile telecommunications services. TLS also provides data, internet, on-line services and directory services. TLS has five key business segments:
>> Telstra Consumer and Country Wide, which is responsible for servicing metropolitan, regional, rural and remote parts of Australia with a full range of products and services. >> Telstra Wholesale, which provides a wide range of wholesale products and services to the Australian domestic market. >> Telstra Business is responsible for serving the unique needs of Australia’s small to medium enterprises (SMEs). >> Telstra Enterprise and Government unit is responsible for providing innovative Information and Communications Technology (ICT) solutions to large corporate and government customers in Australia and New Zealand. >> Other, which includes all division that are not covered above and includes; Telstra Operations, Sensis and Telstra International Group. >> Revenue over the year grew by 1.9% to $26 billion. >> Net profit for the year came in at $3.9 billion a 12.9% increase on the prior year’s result. The profit increase was ahead of consensus estimates of $3.69 billion. >> The strong results continue to be driven by a lead mobile growth with revenue rising by six per cent to $9.2 billion. >> The mobile division added 1.3 million subscribers for the year, which is likely the result of glitch-plagued Vodafone Australia whose network infrastructure has become overstretched. >> Telstra continued to build momentum in its Network Applications and Services (NAS) portfolio, with revenue increasing 17.7% for the year. >> The group returned a dividend of 28 cents per share fully franked dividend for FY13.
Crown Limited (CWN) Share To Buy
Crown (CWN) manages a variety of gaming and entertainment facilities, including, bars, restaurants, nightclubs, cinemas and retail outlets. It also develops hotels and conference centre facilities. The company wholly owns and operates two integrated resorts; the Crown Entertainment Complex in Melbourne and Burswood Entertainment Complex in Perth. Mr James Packer currently owns a 50.1% stake in the group. CWN also has an interest in several different projects including:
>> 33.7% interest in Melco Crown Entertainment (MCE), which is based in Macau >> 50% interest in online gambling site Betfair >> 24.5% interest in Cannery Casino Resorts in the US >> 50% interest in Crowns Aspinall’s (UK) which operates three regional casinos in Newcastle Swansea and Northampton >> Normalised operating revenue grew 5.6% to $2.89 billion >> Net profit before significant items came in at $473.2 million, a 14% jump on FY12 >> The groups’ total dividends over the year were 37 cents a share, fully franked, which was in line with the previous year’s payment >> The groups EBITDA margins were very impressive, especially in Melbourne where it grew 140 basis points in the 2H13 to 28.5%. The expanding margins a result of a continued cost-out focus and came despite a negative margin mix shift between higher proportion of VIP play relative to the main floor >> The group’s recent refurbishment of the Burswood casino started to pay benefits, with main floor gaming growth of 9.7%. This result especially pleasing given the weakening Perth consumer environment
Buy, Sell, Hold Recommendations – Herald Sun 8/9/2013
As featured in the Herald Sun on August 4th 2013, here are the latest buy, sell and hold recommendations from Geoff Saffer Equity Analyst & Educational Facilitator at the Australian Stock Report. Geoff has over 10 years’ experience researching and analysing Australian shares, with a passion for fundamental analysis and specialty in identifying undervalued companies – particularly at the smaller end of the market. Buy Shares Credit Corp (CCP) – Debt collection business boasts robust margins, high ROE yet trades @ 13x P/E. Low interest rates and strong balance sheet will allow more debt ledger purchases. Pura Vida Energy (PVD) – Speculative energy play is high risk, but Moroccan project offers huge upside. Capital raising and $15m farmout fee provide funding for exploration efforts. Hold Shares JB Hi-Fi Limited (JBH) – FY13 results beat expectations, highlighted by same store sales growth in 2H. With 14 new stores set for FY14, JBH looks to be in for solid year ahead. Santos Limited (STO) – High energy prices have helped cushion dips in production and sales volumes. LNG production in PNG on track for second half of 2014. Sells Shares Treasury Wine Estate (TWE) – We see more trouble ahead in the US, where a wine glut led to writedowns. TWE still trades on high multiples and will struggle to boost profit margins. Paladin Energy (PDN) – Recently raised capital but operations are still leaking cash as prices plummet. Outlook for uranium sector remains bleak, highlighted by failed asset sale. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
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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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