At the start of a new year traders and investors alike invariably look to the potential that the new horizon brings.

After a tumultuous 2011, this year that sentiment is even more pronounced as market participants put the last 12-months in their rear-view and look to better times ahead.

At Australian Stock Report we don’t particularly care for long dated predictions about the market as a whole – too much can change too quickly.

We are prepared however, to outline a few stocks that will make for interesting reading in 2012.

Below is a list of stocks to watch in 2012 and a brief outline as to why we think so.

QR National (ASX:QRN) / Asciano (ASX:AIO) – Both companies operate in the transportation industry and are highly leveraged to the mining sector. While they are in competition with each other, both can prosper with the mining boom likely to drive industry revenue. QRN and AIO are likely to experience strong growth from the Queensland area as the state’s coal output moves back into full swing after last year’s floods caused havoc with production.

ANZ (ASX:ANZ) – Our bank of choice is ANZ. While we can’t see an extreme decoupling in price between the big four over the next year, ANZ is our preferred exposure to this sector. ANZ has the second lowest P/E based on current earnings and has a dividend yield approaching 7%, which should provide some support for the stock at this level. The company also has the most exposure to the growing Asian region and one of the lowest exposures to the slowing domestic residential market.

BHP Billiton (ASX:BHP) / Rio Tinto (ASX:RIO) – These mining giants are poised for growth in 2012. Both companies were weighed down last year as the market factored in the effects of a possible hard landing in China. It is becoming more evident however, that any slowdown in the Chinese economy will be akin to a soft landing instead. The other factor that could buoy the mining giants is increased commodity prices due to the likely introduction of further monetary stimulus by the US Federal Reserve.

WorleyParsons (ASX:WOR) – Worley’s provides professional engineering and management services to the energy, resources and complex process industries. The company has significant leverage to the energy sector, specifically through its hydrocarbons (compounds founds in crude oil) division. The company will benefit from any oil supply/demand imbalance that drives up prices. Indeed, some analysts are predicting the price of oil will increase dramatically due to the political unrest in the Middle East. Higher oil prices will encourage the big oil companies to ramp up capital expenditure to the benefit of WOR. The company also has demonstrated an ability to land contracts with the major oil players, evidenced by its recent contract win for the Chevron project in Indonesia.

Saracen Mineral Holdings (ASX:SAR) – On the smaller side of the market, Saracen is a mid-tier WA gold producer that was added to the S&P/ASX 200 on the 28^th of December, 2011. This company has forecast gold production of between 120,000 -130,000 ounces of gold a year, which was reaffirmed in a recent update. Saracen is also trying to expand its business with $35 million of capital expenditure planned for the current financial year. The capital expenditure is substantial for a company of SAR’s size, but a strong net cash position of $58 million significantly reduces the funding risk.

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Resolute Mining (ASX:RSG) is a gold mining and exploration company, operating primarily in Africa and Australia.

It is the second largest gold producer by volume listed on the Australian stock exchange.

The group has a portfolio of three operating mines in Africa and Australia.

Its three operating mines are: Golden Pride in Tanzania, Ravenswood in Queensland, and the newly re-developed Syama in Mali, which was once a BHP Billiton operation.

RSG’s operations are well-placed, and exploration is likely to lead to further resource discoveries, underground, and in nearby pits.

Being unhedged, RSG continues to benefit from a boom in gold prices.

Doubling exploration budget

RSG today announced an annual group exploration budget increase to $20 million in FY12, from $10 million in FY11.

The news comes after RSG identified some high priority exploration targets at Syama in Mali and Ravenswood in Queensland.

RSG has a strengthening balance sheet on the back of operating improvements at Syama.

Results from current exploration at both projects will be provided in the miner’s June Quarter Report.

It is targeting an increase in production from its flagship Syama project to 250,000oz of gold a year after an extended ramp-up and commissioning period

Golden update

Last month, RSG provided its Group gold production and cash cost guidance for FY12.

Gold production in the coming year is forecast to increase to 410,000 ounces at a cash cost of $730 per ounce.

This cements RSG’s position as the second largest primary listed gold producer on the ASX.

It also represents a substantial increase in production and reduction in cash costs.

RSG’s continued improvement in outlook is underpinned by ongoing progress being achieved at the Syama operation in Mali.

The miner’s shares surged 7.6% on the day of the announcement.

Looking ahead

RSG could be debt free by the end of December should existing share options and convertible note debt be converted to equity.

The miner has a highly prospective tenement package with the potential to add significant value for shareholders.

Gold has gained significantly this year, reaching fresh record highs this week as global economic uncertainty pushes investors towards the safety of the shiny metal.

The metal printed highs of around US$1610 this week and continues to hold its ground well above US$1500.

Following the recent production and reserves updates, RSG seems well placed to benefit from the surging gold prices so it will be one of the stocks to watch in coming months.

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Resolute Mining (RSG) is a gold mining and exploration company, operating primarily in Africa and Australia.

The group’s portfolio focus is on Africa, but the miner also has projects in Australia, Mali and Tanzania.

RSG has three operating mines: Golden Pride in Tanzania, Ravenswood in Queensland, and the newly re-developed Syama in Mali, which was once a BHP Billiton operation.

RSG’s operations are well-placed, and exploration is likely to lead to further resource discoveries, underground, and in nearby pits.

The company continues to benefit from a boom in gold prices.

Golden update

RSG this week provided its Group gold production and cash cost guidance for FY12.

Gold production in the coming year is forecast to increase to 410,000 ounces at a cash cost of $730 per ounce.

This cements RSG’s position as the second largest primary listed gold producer on the ASX.

It also represents a substantial increase in production and reduction in cash costs.

RSG’s continued improvement in outlook is underpinned by ongoing progress being achieved at the Syama operation in Mali.

Resolute mining shares surged 7.6% on the back of the news.

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Beach Energy (BPT) is an oil and gas exploration and production company based in South Australia. BPT has oil and gas reserves of 66 million barrels of oil equivalent (mboe) equivalent and contingent resources of 297 mboe.

The company holds interests in more than 300 exploration and production tenements in Australia, New Zealand, Papua New Guinea, Tanzania and Egypt among others.

BPT was among the worst performers in the Australian share market last year on the back of declining oil and gas production.

The drop in output was due to planned and unplanned downtime at the Basker Manta Gummy project and a natural resource decline and downtime at the Cooper Basin.

Unsuccessful exploration in the Bass Basin also resulted in a $64 million writedown.

The end of last year saw things start to turn around for BPT as it gained majority control of Impress Energy in an on market takeover.

A revival of shale gas assets in the Cooper Basin helped by enhanced drilling technology gave BPT further upside.

This year has been all in all positive for Beach Energy as oil prices surge to new highs.

Impressive takeover

On 6 December 2010, BPT announced a recommended and unconditional on market cash offer of 8.5 cents per share for all the issued and outstanding shares of Impress Energy it did not own.

BPT subsequently gained majority control of Impress on 14 December 2010.

Overall, BPT spent $38.1 million on the Impress acquisition.

The Impress takeover gives BPT access to the Cooper Basin Western Flank oil. Impress holds a 40% interest in highly prospective Western Flank oil acreage.

Drilling has commenced and if successful will provide a material reserves upgrade and subsequent significant increase in operated production during FY11 and FY12.

A dominant shale gas acreage in the Cooper Basin has shown encouraging results with potential for a material resource booking in 2011.

Saved by oil again

Beach Energy this week reported its 1H11 results, keeping the market happy.

Gross profit for the half of $37 million was down 18% on the prior year, driven mainly by lower production.

Sales revenue gained 2% to $265 million due to higher prices, partly offset by higher Aussie dollar.

Oil sales revenue was up $3 million due to higher sales volumes, which included the sale of crude from the Jackson-Moonie pipeline.

Underlying profit for the half totalled $19 million, 27% lower than the previous year’s half.

BPT declared a 1 cent per share dividend based on its FY10 results and has further announced a half dividend of 0.75 cents per share.

Oily time

For the first half of FY11, BPT achieved an average oil price of US$81 a barrel, up 8% on year. Average gas prices were also up 8%.

Oil prices have since had an impressive run, currently hovering around the US$100 a barrel level.

Tension in the Middle East and North Africa is threatening oil supply which has resulted in a run up in oil prices.

However, a stronger Aussie dollar is likely to offset part of the oil price gain effect.

Looking ahead

BPT had $179 million cash on hand and no debt as at 31 December 2010 which gives it plenty of room for further exploration.

The company has a large resource base and excellent prospects for reserves growth via resource conversion and exploration.

BPT has given FY11 production guidance of 7 mboe which may be upgraded following the Impress takeover.  It has been one of the hot shares to buy in recent months, surging more than 30% since early December.

We feel the stock has significant upside potential on the back of the Impress takeover and rising energy prices.

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Australia and New Zealand Banking Group (ANZ) is the nation’s third-largest bank by market capitalisation, is among the top 50 banks in the world, and is also widely considered among the blue chip stocks.

ANZ operates retail and business banking in Australia, New Zealand and throughout the South Pacific.

Recent news reports have suggested that ANZ’s attempt at acquiring Korea Exchange Bank has been thwarted by Lone Star Funds.

Lone Star, which owns 51% of Korea Exchange, has reportedly sold its stake to another bank, believed to be South Korean-based Hana Financial Group.

ANZ denied the rumours, instead stating that it is continuing to participate in the due diligence process.

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Resolute Mining (RSG) is a gold mining and exploration company with operations in Africa and Australia.

RSG’s key mines are located at Golden Pride in Tanzania, Obotan in Ghana, while it also owns the Ravenswood gold mine in Queensland.

RSG has been one of the market’s hot stocks in recent weeks, with its share price surging on record high bullion prices.

Recently, RSG completed a $40 million capital raising, which was designed to close out its hedge book and fund working capital requirements.

RSG will now become fully unhedged and exposed to gold price movements, whilst the excess funds will help to improve its operating cash flow.

RSG jumped 4.6% on the day of its announcement, making it one of the best performers in the Australian share market.

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Australia and New Zealand Banking Group (ANZ) is the nation’s third-largest bank by market capitalisation, and is among the top 50 banks in the world and is one of the shares to buy in a bull market.

ANZ operates retail and business banking in Australia, New Zealand and throughout the South Pacific.

Australia’s banks held up relatively well during the global economic downturn, with provisions for problem loans being the primary issue. However, our major banks believe that provisions have passed their peak and recent results are evidence of this.

ANZ’s 3Q10 results, released today, are a sign of recovery for our major banks. Troublesome bad debt charges decreased whilst underlying profit surged (up 37% for the quarter).

Also in the news is ANZ’s latest foray into Asia. ANZ is eyeing off a 57.27% stake in Korea Exchange Bank, worth $3.8 billion and giving ANZ the opportunity for a solid platform in South Korea.

Tentative Recovery Mode

Like all of our banks, financial institutions, and companies in general, ANZ was hit hard by the global credit crunch, with most of our banks reporting large writedowns and bad debts.

ANZ addressed the global economic downturn in its 1H10 results release, noting that the scale and depth of the crisis in the US and Europe meant that recovery will not happen smoothly.

The US economy is starting to show signs of a sustainable recovery, whilst Europe is still suffering at the hands of the Greek debt crisis, which will impact on credit spreads globally.

Still, ANZ believes the problems in Greece are unlikely to affect underlying economic growth globally and are not going to be very significant for Australia.

The bank has forecast the Australian economy will grow by 3% in 2010, with Asia, excluding Japan, forecast to grow by 8%.

Fitch Recognises Asian Strength

Earlier this week, market chat surrounding ANZ focused on the group’s proposed majority stake ownership in Korea Exchange Bank.

ANZ is participating in a due diligence process for a 57.27% stake in the South Korean bank, worth $3.8 billion on current market values.

Allegedly, private equity fund MBK Partners is still trying to put together a bid for the 51% stake in KEB that Lone Star Funds is trying to offload. MBK is also apparently in discussions with other investors to form a consortium.

A majority stake in KEB would give ANZ a solid platform in South Korea, Asia’s fourth-largest economy and an increasingly important trade partner for Australia.

ANZ will only go ahead with a deal if it satisfies its strict criteria, including that the deal is accretive to shareholder value within the short to medium term.

The latest deal is part of ANZ’s strategy of becoming a super regional lender.

Fitch Ratings agency has recently revised up ANZ’s long-term Issuer Default Rating (IDR) to AA- Outlook Positive from AA- Outlook Stable,  noting ANZ’s Asian expansion strategy and generally improved financial profile.

Fitch said the change takes into account ANZ’s improved earnings diversity following the full acquisition of its wealth management operations.

Quarterly Analysis

ANZ today confirmed that its 3Q10 underlying profit surged 37% to $1.3 billion on year, taking underlying profit for the nine months to 30 June to $3.6 billion, up 26% on year.

Impressively, bad debt charges for the period were at $1.44 billion, a 34% decrease.

The quarterly figures impressed the market today, even offsetting somewhat gloomy outlook guidance.

ANZ said that a global economic recovery was in swing, with the improving economic cycle continuing to see ANZ’s provisions trend lower.

However ANZ cautioned that the global outlook is unusually uncertain on a combination of consumer, business and public sector de-leveraging, domestic and international reregulation, and the implications of high unemployment and other protracted structural challenges in the US and in Europe.

ANZ warned that banks around the world are facing permanently higher costs, with continuing pressures on wholesale funding and deposit rates.

The bank hasn’t yet determined its 2011 funding task but this is expected to come in at around $20-$25 billion.

At the end of June, ANZ had a Tier 1 capital ratio of 10.3%.

Outlook

Australia’s banks held up relatively well during the global economic downturn, with provisions for problem loans being the primary issue. However, our major banks believe that provisions have passed their peak and we agree.

ANZ’s 3Q10 results, released today, are a sign of recovery for our major banks. Troublesome bad debt charges decreased whilst underlying profit surged (up 37% for the quarter).

Also of interest is ANZ’s latest foray into Asia. ANZ is eyeing off a 57.27% stake in Korea Exchange Bank, worth $3.8 billion and giving ANZ the opportunity for a solid platform in South Korea.

Though the market was initially concerned about ANZ’s aggressive Asian growth strategy, ANZ is continuing to benefit from strong growth in Asia as the bank battles softened domestic credit growth.

And while global market volatility continues to mar the future, the improving economic cycle is helping ANZ’s provisions trend lower.

ANZ closed up 1.3% to $22.47 yesterday.

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Stock of the Week – Resolute Mining (RSG)

Resolute Mining (RSG) is a gold mining and exploration company, operating primarily in Africa and Australia and may be one of the shares to buy.

The group’s portfolio focus is on Africa, but the miner also has projects in Australia, Mali and Tanzania.

RSG has three operating mines: Golden Pride in Tanzania, Ravenswood in Queensland, and the newly re-developed Syama in Mali, which was once a BHP Billiton operation.

RSG’s operations are well-placed, and exploration is likely to lead to further resource discoveries, underground, and in nearby pits.

The company continues to benefit from a boom in gold prices.

Growing production

RSG’s notable Australian asset is its Ravenswood project, located 95kms south west of Townsville, which includes the Mt Wright underground project. Mt Wright continues to progress to expectations, with resource drilling upgrading the resource from indicated to measured.

At Ravenswood, whilst the milling priority will be the higher grade Mt Wright ore, it will continue to operate at around five million tonnes per annum, using low grade stocks left over from the now-closed Sarsfield open pit.

In April, RSG confirmed it has intersected high grade gold mineralisation at its Welcome Breccia prospect, 40km north-west of the company’s Ravenswood gold mine in North Queensland.

RSG’s Golden Pride project is situated in a lucrative area of Tanzania, with the mine having produced over 1.68 million ounces of gold since commissioning in 1998. The coming year should see an increase in gold production with ore grade from the open pit increasing, as the fresher ore is exposed in the central pit.

The Syama gold mine (80% owned by RSG, 20% by the Malian Government) is located in the southern part of Mali, West Africa, which is an emerging gold belt region. The mine has the potential for over ten years of operation.

Syama has suffered a few interruptions and small component failures, but overall progress will achieve expected results. RSG intends the operation to ramp up to 250,000 ounces production per annum.

A golden time

While base metals suffered over the global economic downturn, one metal to emerge from the metals slump looking strong has been gold, which demonstrated amazing strength in 2009-10.

The precious metal remains in high demand due to a volatile US dollar and economic uncertainty.

Such uncertainty includes fears of Greece’s economic troubles, which has dominated global economic sentiment of late.

These fears have driven investors to gold as a safety investment. With the precious metal now up above US$1,200 per ounce, it seems likely that investors will continue to turn to gold as a refuge from euro-region risk.

Most forecasts are pointing towards further gains in the gold price.

Quarterly update

RSG’s most recent report is for its March quarter, where the company achieved 89,244 ounces of gold at a cash cost of $828 per ounce.

Production at Golden Pride for the quarter was 35,698 ounces of gold at a cash cost of $566 per ounce, down from $577 per ounce in the prior year.

Gold production at Ravenswood generated 30,034 ounces at a cash cost of $846 per ounce.

Production at Syama in Mali was 23,512 ounces of gold, up from 21,670 ounces of gold in the prior year, at a cash cost of $1,203 per ounce.

As at 31 March, RSG had $16.4 million in cash and bullion. The cash and bullion balance at 31 March was subsequently bolstered by a further $9.5 million on 1 April when the balance of March’s gold produced was shipped from RSG’s mine sites.

On 29 March, RSG confirmed it was to acquire 33.2% of an upcoming float of Viking Ashanti.

In exchange for the shares, RSG will sell its Ghanaian gold assets to Viking Ashanti. RSG believes that its gold assets will benefit from an accelerated exploration program, which will be financed by the IPO.

The IPO is for an issue of 26.7 million shares at 30 cents each.

Outlook

RSG is a gold miner and explorer operating in Africa and Australia, with its flagship projects – Ravenswood, Golden Pride and Syama – all progressing swimmingly.

Though 2006/07 was a rough time for RSG – as was the second half of C2008, in-line with the commodities downturn – more recent times have been positive for RSG.

The gold price is now up near record highs, and as global economic attention continues to focus on Greece’s debt problem, RSG should continue to benefit from its gold exposure into the future.

The group has done well to expand its operations and continue exploration since early last 2008, when its focus was on just two operating mines.

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Australian Share Tips 29 April 2010

Australia and New Zealand Bank (ANZ) is Australia’s third largest bank by market capitalisation, dealing with retail, commercial, institutional and wealth management in Australia, New Zealand and the South Pacific.

ANZ reported its 1H10 results today in Australian news. Cash profit came in at $2.38 billion, which was above analyst expectations of a $2.29 billion cash profit.

The result was driven by a significant reduction in bad debt charges, which were 23% lower from a year ago, and an 8% on-year increase in net interest income.

ANZ recorded the strongest profit gains in its Australian business, whilst the 26% on-year fall in Asia Pacific, Europe and America was attributed to adverse currency movements and a fall in trading income.

An interim dividend of 52 cents was declared, which was slightly below the 55 cents expected by analysts.

ANZ maintained a cautious outlook, and sighted Greece’s fiscal issues as a key threat to its funding costs given that ANZ still needs to raise another 30% in wholesale funding to meets its FY10 target.

Australian stock price for ANZ reached a recent high of $26.23 two weeks before the results release. ANZ last closed at $24.20.

The dividend yield is another important concept in deciding how to buy stocks.

The dividend yield is defined as the dividend per share as a percentage of the share price, and is an important metric in deciding which are good dividend paying stocks.

Resource stocks generally tend to have the lowest dividend yields.  This is because most miners are in an expansion phase, and as such use their profits to re-invest back into the business.

Stable industries like the financial sector, and many real estate companies, tend to have the higher dividend yields.

Some of the leading dividend yield stocks are

Hastings Diversified Fund which is an infrastructure fund with some gas transmission assets. Its dividend yield is 9.7%.

Telstra is still up there but its share price continues to take a beating. We don’t feel its dividend payments are sustainable at 9.6%, given that earnings aren’t expected to grow any time soon.

Tattersalls and Tabcorp are also up there paying over 8% dividend yield.

Stockland is one of our preferred ones, currently has a yield of 6.7%.

Among the big banks, National Bank is leading the way with a yield of 5.5% while Westpac, ANZ and Commonwealth Bank are around 4.3%.

BHP Billiton has a yield of around 2.6%.

A final point to consider in deciding how to buy stocks, is that shares may have high dividend yields because their price has sunk so low.

A company whose dividends are falling at a slower rate than the decline in their share price, will actually see their dividend yield rise.  Consequently, the returns from dividend payments are offset by a declining share price, so the investor ends up losing out on a stock with a higher dividend yield.