ASX Top 500 All Ordinaries news and tips.
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
Webjet (WEB) Share To Sell
Webjet (WEB) is an online travel website, specialising in both domestic and international online flight bookings, accommodation, car rental, and insurance. WEB is Australia’s largest independent online travel site, competing mainly with companies offering similar leisure-related services, such as Jetset (JET), Flight Centre (FLT), Wotif.com (WTF), Expedia, and Bestflights.com.au. Earlier this year, the company acquired rival Zuji and launched business-to-business hotel aggregation platform, Lots of Hotels, for the Middle Eastern and African markets. The company derives its revenue primarily through booking charges and fees, with its main customers being the general public and tourists. Weak FY13 results WEB’s FY13 results weren’t that impressive for a company that traditionally trades on a high P/E multiple. Revenue of $66.5 million represented a rise of 15% on the prior year’s result. Underlying net profit was only 5.6% higher on FY12’s result, missing previous guidance of 15% growth. EBIT margin contracted 10 basis points to 32.4%, continuing a worrying trend where profit margins have fallen for three straight years. Business momentum is also heading in a negative direction, with Total Transaction Value (TTV) and flight booking volumes both declining from 1H12 to 1H13. Outlook WEB trades on a forward P/E of 13.5x, which is a discount to other online service providers, including closest rival, Flight Centre (FLT). The trend of shrinking profit margins is a worry, suggesting that WEB is losing market share to FLT and not getting enough return for each dollar spent on marketing and advertising. WEB followed up its disappointing results by offering relatively subdued guidance earlier this month. It warned that FY14 EBITDA was likely to be unchanged from a year earlier, at $21.5 million. The group admitted that the Australian market had been flat over the past year, but that it would still push on with plans to spend $3 million on marketing and technology, which was expected to weigh on the bottom line. This is a big worry given how important Australia is to WEB’s business. Moreover, the increased marketing and ad spend comes on top of the resources needed to integrate Zuji and support the launch of Lots of Hotels. Although the longer-term outlook appears more promising, FY14 is shaping up to be another disappointing year for FLT. The prospect for further margin erosion will be a key factor behind continued share price weakness in our opinion. 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.
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.
TPG Telecom LTD Buy Share
TPG Telecom Limited (TPM) wholesales bandwidth and other telecommunications services. The company also delivers a full range of telecommunications products and services to home and business consumers through its retail operations. Its network infrastructure includes fixed line, fibre and wireless services connecting voice customers with call collection areas throughout Australia and data and internet customers with more than 350 exchange areas. Key Points FY13 Results impress:
>> Revenue was $725 million a 9% increase on the prior year’s result >> Underlying profit grew by 31% over the year to $149 million, this translating to an impressive 340 basis point expansion in the NPAT margin >> The strong result was on the back of organic growth in its broadband and mobile subscriber base’s >> The group paid total dividends of 7.5 cents a share fully franked, an increase of 36% on FY12 >> Free cash flow grew to $175 million, a 17% increase over the year. The group used $107 million of this excess cash to pay down its debt >> TPM’s net debt is now sits at $16 million, equating to net debt to equity of only 2%
Atlas Iron (AGO) Buy Share
Atlas Iron (AGO) is an iron ore producer and explorer located in Western Australia. The company has a growing number of high quality iron ore projects and one of the largest landholdings in the lucrative Pilbara region. AGO is now one of the area’s largest iron ore producers. The company has a significant number of direct shipping ore (DSO) projects in WA. DSO projects are those that are in close proximity to ports, which helps to significantly lower capital costs. AGO has several projects in varying stage of development, with its Abydos mines in production and its Mt Webber mine due to e commissioned in December. Key Points: Quarterly Production:
>> A record 2.4 million tonnes of iron ore shipped in third quarter, up from $2.2 Million tonnes in the previous quarter >> Production rate of 10 million tonnes achieved in the quarter >> Operating costs for the quarter were within the $49-$53 region >> Average sale price increased 9% from the previous quarter to USD 117 a tonne, which on an Aussie dollar basis would have been much higher
Share Tip AGL Energy Limited
AGL Energy Limited (AGK) listed as an asx share tip on October 14th is Australia’s second largest retailer of electricity and gas behind Origin Energy (ORG). It services over 3.3 million retail electricity and gas customers in the eastern and southern Australian states representing a 27% market share. The company is Australia's largest private owner, operator and developer of renewable generation assets. AGK has major investments in hydro and wind, as well as ongoing developments in key renewable areas including solar, geothermal, biomass, bagasse and landfill gas. Key Points: Good FY13 Results:
>> Revenue came in at $9.72 billion, a 30.3% increase on the prior year’s results. The growth was mainly the result of the acquisition of power plant Loy Yang A, but the retail division did make a solid contribution >> The increased revenue translated to an underlying profit of $598.3, a 24.1% climb on the FY12 results >> The higher earnings and a focus on working capital helped operating cash flow climb around 30% over the year to $602 million >> Gearing (Net Debt/Net Debt + Equity) at the end of the financial year was 27.8%, this was higher than the previous year, but the result of the worthwhile Loy Yang A acquisition >> The solid financial year saw the group increase its total dividends payment to 63 cents a share, fully franked, a 3.3% increase on FY12 >> Over the last two years AGK has traded on a PE discount of around 17% to its major rival ORG >> That discount now sits at 29% and given the solid FY13 result by AGK we don’t think it is justified >> The groups forecast dividend yield of 4.2% is also superior to ORG’s 3.5%, which we think will play a factor in narrowing the valuation gap
Buy Share – Kathmandu Holdings (KMD)
Kathmandu Holdings (KMD) listed as a buy share on the 3rd of October is a New-Zealand-based designer, marketer and retailer of clothing and equipment for the travel and adventure market. It primarily retails its Kathmandu-branded products, which range from winter clothing through to recreational goods such as sleeping bags and camping accessories. 1H13 Results KMD reported a 26.6% jump in FY13 net profit to NZ$44.2 million. A final dividend of 9 cents was declared, bringing the full year dividend to 12 cents (20% up on FY12). The result was delivered on the back of a 10.6% lift in sales to $36.9 million. In New Zealand, sales and EBITDA were up a solid 8.6% and 10.7%, respectively. In Australia, sales grew 19.5%, which was impressive given the difficult retail environment. Although the Australian sales growth was mostly attributable to the group’s aggressive store rollout strategy, same store sales were still up a healthy 6.7% on-year. The group also demonstrated good cost control, with operating expenses as a percentage of sales falling from 44.1% in FY12 to 43.8% in FY13. KMD has been able to comfortably outperform the broader retail industry due in large part to the strength of its brand, which is synonymous with winter and outdoor apparel. The group is leveraging the strength of its brand through a digital strategy that delivered a 55% surge in FY13 online sales. Online sales now make 4% of overall sales and are growing rapidly. Outlook KMD was vague about its outlook, saying only that it expected another solid result in FY14 amid an uncertain economic environment. We are more optimistic than KMD about the outlook. The group delivered a standout result in FY13, which was arguably a tough year overall for retailers. Whilst the operating environment is likely to remain challenging, the record low interest environment and rising consumer confidence should provide greater support for the Aussie retail sector in FY14. The group is not resting on its laurels, targeting another 15 new store openings in FY14, enhancing its online offering and investing in new product categories. On top of a continued focus on cost control, we believe KMD is on track for another strong result in FY14. For all of our latest share market tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Carsales.com Share to Buy – Zooming Higher
Carsales.com Limited (CRZ) listed as a share to buy in the traders report on September 25th, 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. Strong FY13 Results CRZ capped off a robust FY13 by reporting a 17% lift in net profit to $71.6 million. Impressively this came on the back of a 17% increase in revenue to $184.2 million. Dealer revenue (comprising 45% of group revenue) was up 17%, this despite CRZ upping its advertising rates in February and a reflection of the group’s market dominance. There was a slight lift in EBITDA margin from 55% to 55.8%, which occurred despite a 14% rise marketing costs. Enquiry volumes on new cars were up 23% on-year, whilst overall automotive inventory grew 8% to ~233,000 cars. This tells us that the marketing spend increase is paying off and likely to translate into stronger revenue growth in FY14. Bright Outlook Whilst the overall market is growing, CRZ operates in an industry with low barriers to entry – it’s relatively easy to setup a website offering a similar service. However the group is staying ahead of the pack with the investments it is making offshore and in new products. The group has a 20% stake in iCar Asia, whose auto advertising sites are market leaders in Thailand, Indonesia and Malaysia. In just four months to the end of July 2013, automotive inventory surged 35% on iCar’s sites in these countries CRZ’s focus on product design was on display during the Q32013 launch of tyresales.com.au, a site focused on tyre sales. We think this site has potential because of the way it complements CRZ’s existing automotive sites, its ability to leverage the carsales brand, and the lack of major players in what is a $4.9 billion domestic tyre advertising market. CRZ said that trading for the six weeks post June 30, 2013 had shown solid growth. Along with the RBA’s recent interest rate cuts, consumer confidence is ticking higher and the trend Australian vehicle sales is still pointing up; all likely pointing to a continuation of this momentum. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Caltex (CTX) Share To Sell
Caltex (CTX) is Australia's leading transport fuel supplier and convenience retailer and the only integrated oil refining and marketing company listed on the ASX. Under its Refining and Supply business, CTX operates two major refineries, at Kurnell in Sydney, and Lytton in Brisbane. In 2014, Lytton will be the only refinery following the planned transformation of Kurnell into purely an import terminal. The Marketing business sees CTX sell through its retail arm petroleum, motor oil lubricants, diesel and jet fuel. CTX also operates convenience stores, fast food stores and service stations throughout Australia. Currency Slams Profit
>> CTX reported a 13% drop in 1H13 replacement cost after tax profit (excludes the impact of fluctuating oil prices) to $171 million. >> The group blamed poor performance in its Marketing and Distribution division, which suffered a $5 million wipeout from the sharp drop in the AUD/USD in May and June. >> Because CTX pays for its crude in US dollars, it was hit hard by the significant depreciation in the Aussie dollar. >> The group reported a net exchange loss of $39 million due to the impact of a fall in the AUD/USD from 104 US cents to 93 US cents from late April to the end of June. >> Loss of premium petrol sales in the key Sydney market due to a pipeline outage at Kurnell also hurt Marketing and Distribution earnings, in addition to the Refining and Supply business. >> Marketing and Distribution EBIT of $367 million was flat on-year, whilst Refining and Supply suffered an EBIT loss of $43 million.
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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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