Geoff has over 10 years’ experience researching and analysing Australian stocks, with a passion for fundamental analysis and specialty in identifying undervalued companies – particularly at the smaller end of the market.

Shares To Buy -

The Reject Shop (TRS) – Recent capital raising to fund expansion a positive. Same store sales growth running ahead of targets. Expect outperformance to continue.

Energy Action (EAX) – Small energy services kicking goals with its energy management services and novel energy auctions. Company on track for fifth straight year of revenue and profit growth.

Shares To Hold -

Seek Limited (SEK) – High quality company enjoying strong domestic and international growth. ROE and margins remain very high, but valuation looks stretched at current levels.

James Hardie (JHX) – US property market continues to turn around and there is room for fibre cement to increase market share, but sales growth looks more than priced in.

Shares To Sell –

Matrix Engineering (MCE) – Embattled engineering company’s recent quarterly results showed some signs of life but we still expect FY13 results to underwhelm investors.

Elders Limited (ELD) – Still faces a bleak future despite selling off assets to reduce debt. Chances of a bailout via takeover look stymied by existence of hybrid securities.

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Buy, Sell, Hold Recommendations – Herald Sun 5/5/2013 is a post from: Australian Stock Report Share Tips

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Rising cash costs squeezing margins

In late January, KCN revealed a 13.4% slide in 2Q13 gold output relative to the same period a year earlier. Compared to 1Q13, gold output rose slightly by 4%.

Production was affected by the temporary closure of the Chatree North Expansion Plant (Plant 2) and interruptions at Challenger following the establishment of two new mining fronts.

The biggest disappointment with the result was another rise in the group’s cash costs. Cash costs rose 37% from 1Q13 to US$975/oz. However, compared to 2Q12 costs surged 60%.

KCN attributed the cost squeeze to lower ore grades at Chatree and ore sourced from an area of Chatree’s Pit A that was known to have lower recoveries.

The poor 2Q13 production result contributed to a 76% slide in 1H13 net profit to $8.1 million. Revenue was up 10% on-year, however the growth was driven primarily from stronger gold sales. Weaker output from Challenger and a lower realised average gold selling price detracted from the growth in revenue.

Gold prices trending down

The price of gold has weakened noticeably in recent months. Spot gold is trading around 7% below KCN’s 1H13 average realised selling price of US$1676.

The outlook for the precious metal has declined amid signs of weakening physical demand and diminished prospects for further monetary easing. In an example of waning demand, the US Mint sold 62,000 ounces of American Eagle gold coins last month.

This was much lower than the sale of 80,500 ounces in February and 150,000 ounces in January. Holdings in gold-backed exchange-traded funds are also 6.9% weaker in the year-to-date.

Furthermore, with the world economy stabilising, central banks like the US Federal Reserve are less inclined to implement additional monetary easing measures.

In our view these are among the key factors that will handicap gold prices, and by extension, KCN’s revenue growth.

Outlook

KCN stuck to its FY13 gold production guidance of between 200,000 and 220,000 ounces. 1H13 production totalled 90,413 ounces, meaning KCN is relying on stronger 2H13 output numbers in order to meet its guidance. Although Chatree’s Plant 2 is now back online, development at Challenger is expected to continue.

Also, the limited availability of stoping areas at Challenger the company highlighted in its 2Q13 production report indicates difficulties accessing the ore body being mined. Therefore we don’t share KCN’s optimism that full year production guidance will be met.

Moreover, the upward trend in its cash costs is coming at a time when gold prices have been retreating. This is creating pressure on cash margins and will ultimately translate into poor earnings in our view.

Transpacific was issued as a share to sell to our members on April 3rd, if you would like further information you can sign up for FREE share recommendations and access all our research files on not only KCN but all our current trading ideas. Simply click here and starting trading today, free for 7 days.

Kingsgate Consolidated Limited – Stock To Sell is a post from: Australian Stock Report Share Tips

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Super Cheap Auto (SUL) is Australasia’s leading retailer of automotive and boating, camping and fishing products.

The company boasts a number of brands, including Super Cheap Auto, BCF Boating/Camping/Fishing, GoldCross Cycles, Ray’s Outdoors and Rebel Sport.

1H13 Results

The group’s recent 1H13 results were a solid improvement on the 1H12 results.

Revenue rose 37% to $1.04 billion, helped by strong Like-for-like (LFL) sales. LFL sales for SUL’s Supercheap Auto division were up 5.2% while its Leisure and Sports divisions sales rose by 2.8% and 8.3% respectively.

The group’s underlying earnings EBIT and NPAT increased 35% and 30% respectively compared to the prior corresponding half. On the back of the strong result, the group was able to increase its interim dividend by 31% to 17 cents per share, fully franked.

Operating metrics

SUL has a history of delivering healthy returns, with its return on equity (ROE) averaging 19.2% since 2008. The group has also grown its half-year revenue by an average rate of 18% over the last five halves.

Moreover, while many retailers have been suffering margin contraction, SUL’s EBIDA margin has risen over 140 basis points. These are extremely impressive results given the tough retail-operating environment over the last few years.

Looking ahead

Going forward, we expect SUL to deliver more robust revenue and earnings growth. The company has shown solid same stores sales growth, with an ability to control costs through supply chain initiatives.

We believe SUL’s good supply chain management will be essential, especially given the company long-term aim to open another 40 Super Cheap Auto stores, 44 more stores in Leisure and 59 more stores in Sports.

Overall, we see continued growth for SUL’s business, which should translate to further gains for SUL’s share price.

Super retail group was issued as a share to buy to our members on March 25th, if you would like further information you can sign up for FREE share recommendations and access all our research files on not only SUL but all our current trading ideas. Simply click here and starting trading today, free for 7 days.

Super Retail Group Limited (SUL) is a post from: Australian Stock Report Share Tips

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The company is the dominant player in the Aussie job ads market. However, with a slowdown in the domestic market, the international and education divisions are the group’s major drivers.

1H13 Results

The group’s 1H13 results were a solid improvement on the prior corresponding period, with a few of the key highlights being:

 
Seek’s EBITDA margin did fall from 43% in 1H12 to 39% in 1H13, but this was the result of the company obtaining a controlling interest in Brasil and OCC. Without these inclusions, the group’s underlying margin stayed steady at 43%.

The company had $96.5 million on hand at the end of the December half, helped by operating cash flow increasing 5.3%. Overall, the group reported great results despite the challenging macro conditions experienced in the half.

Growth

The above shows the group’s solid history of growing its revenue, much of which has been driven by its domestic business.

With online employment volumes under increasing pressure, the group has turned its focus to international expansion for growth. The group’s approach to this expansion was to target high growth regions.

In the first half of the fiscal year, the group took controlling interest of OCC (Mexico) and Brasil Online (Brazil), both the leading online employment sites in their respective countries.

SEK is also in the process of taking a controlling interest in JobsDB (Asia based) and Zhaopin (China), both are leading online employment sites in high growth areas with increasing internet penetration.

Outlook

SEK’s 1H13 was solid, especially given that its main domestic business experienced an 11% decline in volumes. The key take away from the results was the group’s ability to make up for domestic weakness via its growing international footprint. We particularly like SEK’s approach in this area with the company targeting the high growth regions of Asia and South America.

While domestic volumes are likely to be subdued, its international expansion will see the company’s earnings and share price continue to grow.

Seek Limited was issued as a share to buy to our members on March 13th, if you would like further information you can sign up for FREE share recommendations and access all our research files on not only SEK but all our current trading ideas. Simply click here and starting trading today, free for 7 days.

Seek Limited (SEK) Share Tip is a post from: Australian Stock Report Share Tips

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The Fibre division provides a comprehensive range of high speed products to blue chip corporate clients, government agencies and other telecommunication providers through its own extensive fibre network in all main capital cities across Australia.

Business services offers voice services, data centre management and managed IT services. The Amnet division supplies a variety of communication products with the principal focus being broadband services.

1H13 Results

AMM has an extremely good track record when it comes to growing its earnings, and its 1H13 result was no different. The company recorded an underlying net profit of $10 million, a 20% increase on 1H12. The

Revenue over the year jumped 43% to $136 million, with the November 2011 acquisition of L7 solutions contributing $36.5 million. The uplift in earnings was due to strong organic sales growth from the group’s core data networks and expanded hosted and cloud services offerings.

The group is also showing the ability to increase its recurring revenue base, with the annuity streams of the business at $97 million at 31 December 2012, up from $90 million at June 2012.

AMM also paid an interim dividend of 2 cents a share, a 11% jump on the previous interim payment.

L7 Solutions and the Fibre business

The group acquired L7 Solutions in November of 2011, but is still unlocking many of the synergy benefits that it promised upon acquiring. FY13 will mark the first full year of L7 being integrated within the AMM business, and we expect further opportunities to emerge, especially as group moves into the cloud services space.

The group is expanding its Fibre network, and as it grows, economies of scale will seep through, as shown below by the decreasing capital expenditure per $1 of revenue created.

Outlook

At the release of its 1H results, the company reiterated its FY13 underlying earnings guidance of at least 20% growth. We believe this forecast is achievable considering the company’s history of growing earnings by well over 20% year-on-year over the last 10 years.

As the company grows, its economies of scale benefits will begin to show in all areas, as it has already in the fibre division.

Given the group’s relatively small market share we believe that a combination of organic growth and acquisition based growth (L7 Solutions) will hold the company in good stead in the coming years.

Amcom Limited was issued as a share to buy to our members on March 11th, if you would like further information you can sign up for FREE share recommendations and access all our research files on not only AMM but all our current trading ideas. Simply click here and starting trading today, free for 7 days.

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It also manages all aspects of shopping centre development, from design and construction through to management and marketing.

FY12 results

Today WDC reported an 18.3% rise in FY12 net profit to $1.7 billion. Funds from operations – which strip out asset revaluations – climbed 6% to $1.5 billion.

Net property income rose 7%, with the UK contributing a large part of the growth as the London Olympics led to an increase in shopping centre traffic.

There was positive 2H momentum in the US, with net operating income growth exceeding previous guidance as specialty sales rose due to a record number of shops opened.

Another highlight was the high occupancy rates. Global occupancy was 97.8%, up 30 basis points on-year with most of the growth coming from the US portfolio.

Buyback extended

WDC declared a final distribution of 24.5 cents, bringing the full year distribution to 49.5 cents. This was a 2.3% increase on FY11’s distribution. The group forecast an FY13 distribution of 51 cents, representing a yield of 4.5% at current prices.

Although this is not as high as some other high yielding stocks in the market, WDC did extend its share buyback for another 12 months, a move likely to provide a good degree of support for the share price.

Outlook

WDC commenced $1.4 billion in new projects during 2012, and forecast another $1.25 – $1.5 billion in new projects during 2013. The overall development pipeline now stands at $12 billion, providing plenty of scope for WDC to continue delivering steady profit growth.

With the US economy continuing to heal from the GFC, we expect stronger retail activity in the group’s largest market. In our view that will help drive the share price higher in the near-to-medium term.

This article was distributed to our members on February 27th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only WDC but all our current trading ideas. Simply click here and starting trading today.

The Westfield Group WDC Share To Watch is a post from: Australian Stock Report Share Tips

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Since the company sold its hotel management business in December 2011, the company comprises of two core divisions, Investments (MPT/MRES), which is a trust structure and includes office and retail portfolios. The division also includes its Investment Management arm. Development, which develops a variety of property types including, residential, apartments, master planned communities and commercial.

MGR has been undertaking a restructure of its business with a focus on de-risking its earnings stream.

1H12 Results

Last week MGR reported its results for the six months to December 2012, which we think showed some promise of things to come. Statutory profit was $55.2 million for 1H13, impacted by $273 million of inventory impairments.

Revenue was $619.4 million, a 7.1% decline on the same period a year earlier. On an operating profit basis – after tax but before specific non-cash items and significant items – the company made $194.2 million, a 3.6% decline on the previous corresponding period.

Although a decline in profit, it is important to note that the company did increase its operating margin by 120 basis points. The increase in margin was on the back of a higher price received for it development projects.

Tangible Book and Yield

On the back of revaluations in the half, MGR’s NTA increased to $1.64 per share. At the group’s current price it is actually trading at a 1.2% discount to this level as opposed to the property sector which is currently trading at a 16% premium to NTA.

At the release of its first half results the group declared a healthy distribution of 4.2 cents per stapled security and confirmed its full year distribution of between 8.5-8.7 cents per security (cpss).

This equates to a yield of 5.3%, which is slightly higher than the property sector’s average 5.2% and higher than its comparable peers Lend Lease and Goodman Group which are both expected to be around 4.3%.

Looking ahead

Despite a slight decrease in MGR’s 1H earnings the company is looking in much better shape, especially on a balance sheet level. The group’s gearing dropped from 27.4% in 1H12 to 23.8% in the 1H13 and impressively dropped its average borrowing cost from 7.6% to 6.4%.

We believe this will see ratings agencies upgrade the group’s BBB credit rating, with the flow on effect being a further reduction in borrowing costs. In the 1H13 results MGR reaffirmed is guidance of an operating EPS of 10.7-10.8cpss   and DPS of between 8.5-8.7 cpss, which would be a solid result.

We think that tight costs controls as shown by increased operating margins, a solid distribution yield and the chance of the ratings upgrade will see the current divergence in price to NTA between MGR and the rest of the property sector decline over the next few months.

This article was distributed to our members on February 20th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only MGR but all our current trading ideas. Simply click here and starting trading today.

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The company manufactures processed foods, exports and wholesales food and offers petrol retailing. WOW’s hotel operations include pubs, food, accommodation, and gaming.

1Q13 Sales

WOW’s 1Q13 sales continued to show an improving sales trend. Sales from continuing operations were $14.8 billion for the quarter, up 4.7% on the prior corresponding period.

The supermarket division (including liquor), which accounts for ~88% of sales, reported a 3.4% rise in sales to $12.99 billion.

Areas growth

While a majority of WOW’s 1Q13 sales were good without being great, there were a few standout divisions. Big W reported like-for-like (LFL) sales growth of 3.4%, showing the success of the group’s recent marketing campaigns.

The group’s newly entered Masters Home Improvement segment showed spectacular growth, with 62.2% increase in sales. Most of this was driven from seven new store openings in one quarter and greater brand recognition.

The company plans to open 150 stores over the next five years, with at least 30 stores to be opened by the end of FY13. We believe that exposure to this sector can only be beneficial to WOW’s earnings in the long run.

Looking forward

A real solid sales trend has begun to emerge for WOW and 1Q13 sales may continue this positive trend. Another fact we like about the group is that such a large proportion of its sales come from the more reliable supermarket division, as this provides more consistent earnings.

WOW’s ability to generate cash will become increasingly important to fund the Masters Home Improvement expansion and we believe this will be beneficial to WOW going forward.

This article was distributed to our members on January 14th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Woolworths but all our current trading ideas. Simply click here and starting trading today.

Share Tip: Woolworths Limited (WOW) is a post from: Australian Stock Report Share Tips

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This half-day forum will deliver the best information you’ll find anywhere for investing in the share market. In addition to this you’ll also enjoy complimentary refreshments and post-event drinks and canapés plus a FREE book – Futures made simple (RRP$29.95), by professional trader and panellist Kel Butcher. Regardless of whether you are an experienced investor or a complete novice this event will be the smartest and most prosperous way to start the New Year.

Participants in our last What’s Hot, What’s Not Forum were provided with a number of investing tips which have proven to be extremely rewarding, see for yourself below.

 
Want to know more, click below to register and we can show you the way in 2013.

What’s Hot & Whats Not In The Share Market For 2013 is a post from: Australian Stock Report Share Tips

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The stores located around the world offers a range of service which varies with pawn-broking loans available in selected markets as well as a personal finance business that operates in various forms in the micro-lending category around the world.

The group has managed to survive through the global economic crisis via its counter-cyclical characteristics – people look to second-hand goods and cash advances in tough times.

The company after a recent capital raising is in a very strong financial position, enabling the acceleration of store acquisitions and an increase to its loan books in Australia and the UK. CCV currently has 106 corporate stores, with 61 in the UK and 45 in Australia.

First quarter trading update

CCV’s 1Q13 results were impressive. The group reported a 1Q13 EBIT of $14.2 million, a massive 43% increase on the prior corresponding period.

The result was driven by a 155.4% increase in EBIT from the UK operations. With the UK loan book growing to 15.3 million pounds, a 146.1% increase on the prior correspond quarter and a 20.8% jump on the June 2012 quarter.

The Australian loan book also preformed strongly, growing to $67.1 million, a 32.7% increase on the same quarter in FY12. The group also noted that it acquired two new stores and opened up another two new in the quarter.

Capital raising

The group last month raised $32.7 million by issuing 38.5 million new shares at $0.85. The funds from the placement will be used to acquire stores within the franchised network, to open new corporate stores and to finance the growth of the Australian and UK personal loan books.

The offer was substantially oversubscribed, by both existing and new institutional investors. The stock price jumped over 12% the day it came out of a trading halt, this in essence signalling the markets approval of  the company’s capital raising.

CCV currently has 708 stores around the world with the largest concentration being in the UK were there are 222 stores of which 61 are company owned. The company has a target of 400 UK stores of which at least 25% of those will be company owned.

The capital raising makes the aforementioned expansion plans possible and with gearing only at 17.6% it still has plenty of room to expand further via debt.

Outlook

CCV delivered spectacular quarterly results and see no reason why this won’t be the case in the next quarter.  We think that the group’s capital raising will be earnings accretive immediately as a decent portion of the funds will be used to buy mature franchise stores.

The funds will also be used to expand its loans books, which it should be able to increase without too much delay.  Overall CCV’s expansion plans should continue to help it continue earnings and we believe this will translate into further share price appreciation.

This article was distributed to our members on December 7th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Cash Converters but all our current trading ideas. Simply click here and starting trading today.

Share Tip: Cash Converters (CCV) Stock To Buy is a post from: Australian Stock Report Share Tips

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