Westfield Group (WDC) is the world’s largest listed retail property group was listed as a share to buy in our traders report on Tuesday April 16th. The group has a global portfolio, comprising 105 shopping centres across five countries.

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

FY12 results

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.

WDC also extended its share buyback for another 12 months, a move likely to provide a good degree of support for its share price.

Shedding non-core assets

In the latest example of the group optimizing its asset structure, WDC sold its 49.9% stake in six Westfield shopping centres in Florida, USA, to O’Connor Capital Partners.

The sale is expected to bring in net proceeds of US$700 million and will result in a joint venture between the two firms, with Westfield retaining its role as property, leasing, and development manager.

By shedding non-core assets, WDC is freeing up capital to help fund its $12 billion development pipeline and engage in capital return initiatives such as the expansion of its buyback program.

Outlook

Last week WDC commenced a plan to redevelop Westfield Garden City at Mt Gravatt, Queensland.

The $400 million project will be jointly funded by WDC and Westfield Retail Trust (WDC). The redevelopment will include a full line Myer department store, a new Target store and over 100 new specialty retailers.

The Mt Gravatt project is expected to yield 6.75% – 7.25%, in line with the yield generated by WDC’s other development projects in the US and Australia.

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.

In our view, the group’s selling of non-core assets and investment in high yielding projects will increase the return from its assets and ultimately translate into further share price appreciation.

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Transpacific Industries (TPI) is a recycling, waste management and industrial services company operating in Australia and New Zealand.

Its clients range from small businesses to larger commercial and industrial companies. The group’s core responsibilities include recycling solutions, waste management services, parts washing equipment and waste oil collections.

1H13 result

Despite a poor 1Q result, TPI’s 1H13 result were solid. The group’s revenue improved to $1.16 billion, a 3.8% increase on the prior corresponding period.

TPI’s 1H13 NPAT of $32.3 million, was up significantly from the $7.8 million reported in 1H12. Disappointingly, underlying EBITDA did fall 3.6% over the period to $120.1 million.

The decrease in EBITDA was largely the effect of overall volumes decreasing 24%. NSW volumes, being the main culprit, were down 55% mainly due to the landfill levy differential between NSW and Queensland.

Most of the company’s upside came from its Commercial Vehicles division, with revenue up 16.6% to $228.1 million.

Alleviating debt concerns

The balance sheet has been, and still is, a key source of uncertainty for TPI. The group has been trying to rectify this with a raft of cost savings and debt reduction initiatives.

To this end, TPI reduced its net interest expense by 24% from the previous half to $54.9 million. The company also reduced its operating costs by $5 million in the first half with a further $45 million targeted over the next two and half years.

Outlook

The group’s first half results were solid and while the company has not provided any specific guidance for the second half, it mentioned that it expects similar conditions the first half.

The group outlined several key priorities for the remainder of the financial year:

›	Delivering on the cost savings targets of $10 million in 2H13
›	Restore returns in core businesses through debt reduction
›	Continue debt repayment at circa $10 million per month
›	Continuation of divestment program

 
The company is well on its way with its cost saving efforts, with 200 management positions currently under review. If TPI can execute its priorities in this financial half, then we believe that the market will continue to push the company’s share price higher.

Transpacific was issued as a share to buy to our members on March 28th, if you would like further information you can sign up for FREE share recommendations and access all our research files on not only TPI but all our current trading ideas. Simply click here and starting trading today, free for 7 days.

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JB Hi-Fi (JBH) is a chain of electrical stores, selling leading brands of hi-fi, speakers, televisions, DVDs, cameras, car sound, home theatre, computers, white goods, portable audio and a variety of music, games and movies.

The company has been able to grow its sales over the last 5 years in what can only be described as one of the most difficult trading conditions for retailers in over 20 years.

JBH’s strategies for growth are simple: increase the number of stores, increase sales, and through that, increase profit.

JBH’s expansion is not only in the Australian market, but also in New Zealand. Since entering the New Zealand market in early 2007, it has opened 14 stores.

1H13 Results

JBH’s 1H13 results impressed on several fronts. Sales for the six months to December 31 were $1.81 billion, up 3.1% on the prior corresponding half.

Net profit was $82.1 million, up 3% on the 1H12 result. The group also declared an interim dividend of 50 cents per share, fully franked. This equates to a solid yield of around 6.5% at current prices.

Perhaps the most surprising number released by JBH was its gross margin, which rose by 28 basis points. This number is made even more impressive when it is compared to competitor, Harvey Norman, whose gross margin dropped 260 basis points over the same period.

Consumer environment

The operating environment for the retail sectors has been subdued over the last few years, but this appears to be abating. The latest release of the Westpac Consumer Sentiment survey, showed the consumer sentiment index rising 2% to 110.5 in February.

It is the highest level the index has reached since the end of 2010. A reading above 100 indicates that more consumers are optimistic about the economy rather than pessimistic, with the index having been in the positive territory for the past five months.

There are likely a few reasons for the uplift, with the RBA cutting the cash rate to 1.75% between November 2011 and December 2012, probably the key reason.

Looking ahead

JBH’s 1H13 results showed sales growth and more importantly, expanding margins. While these expanding margins initially helped the company’s profitability, they will be more significant when industry wide sales growth return to trend.

Retail sales figures in January already have hinted of such a return, with an increase of 0.9% from December. Confirming these retail numbers, JBH noted that its sales climbed 11.7% during January (4.2% like-for-like sales growth).

With the consumer sentiment reading at all-time highs and sales growth starting the year off with such a strong number, we see a solid result ahead for JBH, which should translate to further share price appreciation.

JB Hi-Fi was issued as a share to buy to our members on March 27th, if you would like further information you can sign up for FREE share recommendations and access all our research files on not only JBH but all our current trading ideas. Simply click here and starting trading today, free for 7 days.

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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.

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Amcom Telecommunications Limited (AMM) is a fiber-based telecommunication service provider. AMM has three key business segments; Fibre, Business Services and Amnet.

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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Forge Group Limited (FGE) identified as a share to buy is a multidisciplinary Engineering, Procurement, and Construction (EPC) service provider. The group, with over 1,700 employees delivers end-to-end EPC turnkey solutions to the power and infrastructure, minerals and resources, and oil and gas sectors in Australasia and Africa.

FGE services some of Australia’s and the world’s most reputable mining and energy companies such as BHP Billiton, Rio Tinto, Fortescue Metals Group, Woodside, Chevron, MCC and AngloGold Ashanti.

The group has four divisions, branded as follows:

•	Forge Group Construction
•	Forge Group Minerals & Resources
•	Forge Group Africa
•	Forge Group Power

 
1H13 Results

FGE’s results for the first half of the financial year were impressive. Revenue was $502.9 million for 1H13, up a staggering 123% when compared to the prior corresponding period.

Net profit for the half was $49 million, a massive 60% increase on the 1H12. Much of the above was helped by the acquisition of Forge Group Power (formerly CTEC), which it acquired in early 2012 for $38.6 million.

FGE balance sheet is also in a very healthy position, with a net cash position of $161.9 million at the 31 December 2012, up from $81.8 million at the same time in 2011.

Cash flow from operations was very solid, almost tripling to $79 million from $28 in 1H12. The group also increased its interim dividend by 60% to 10 cents a share.

Growth driven by Power

The above shows steady revenue growth up until the 2H12, after that revenue exploded due to the acquisition of Forge Group Power (formerly CTEC). As of 23 January 2013, the group had an order book of $1.04 billion, $462 million of which was secured in the December half.

The order book includes such projects as: power stations for mining giants Rio Tinto and BHP; an ore processing facility for Fortescue Metals; and Navy Fleet Maintenance for the Australian Navy.

Outlook

FGE’s 1H13 results were spectacular and its outlook appears to be promising, with a range of projects on the go. The company’s should be able to continue leverage its current relationships with mining majors BHP, Rio Tinto and Fortescue into new contracts in the future.

Interestingly 82% of the new contacts secured in the 1H13 were for the power division, which we see as a good move. While many other mining service contractors are fighting over the more common capital expenditure projects, FGE has recently been positioning itself in the less competitive power solution business.

We believe that groups position as a power provided coupled with its strong balance sheet will continue to see the company growth its earnings and as a by-product its share price.

The Forge Group was issued as a share to buy to our members on March 6th, if you would like further information you can sign up for FREE share recommendations and access all our research files on not only WDC but all our current trading ideas. Simply click here and starting trading today, free for 7 days.

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Cash Converters (CCV) is a company-owned and franchised retail network that specialises in the sale of second hand goods.

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.

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Commonwealth Bank (CBA) is the nation’s largest bank by market capitalisation, holds the greatest amount of deposits, the most home loans, and also controls a fair chunk of the wealth management market through Colonial First State.

The bank also operates Australia’s largest discount online brokerage operation, Commsec, as well as a multitude of international operations. Importantly, the bank has used its size to grow even bigger over the years. While many financial institutions collapsed over the global economic downturn – or neared collapse – CBA used its massive deposit base to maintain funding and buy depressed assets.

The banking giant also has diverse exposure geographically with stakes in several banks in the fast growing China.

1Q13 Trading Update

Despite facing slowing credit growth, CBA was still able to generate solid earnings growth in 1Q13. The group reported a 1Q13 statutory profit of $1.8 billion.

Unaudited cash profit, a measure more reflective of underlying performance, was $1.85 billion, a 5.7% increase on the prior corresponding quarter.

A breakdown of the results revealed net interest margins (NIM) were broadly stable in the quarter, relative to 2H12 NIM of 2.06%. The company noted that asset repricing impacts were largely offset by continued deposit pricing pressures.

The company’s’ trading income improved to a level consistent with the company’s long-term average run-rate, the result was also helped by a positive Credit Valuation Adjustment. CBA’s asset growth was mainly a function if of increased retail deposits, which now make up of 63% of the group’s total funding.

The Australian Retail division had a particularly good quarter, with improved lending margins, improved credit quality and good growth in customer numbers at its Bankwest subsidiary.

The Wealth Management and Insurance division produced solid volume growth, with Funds under Administration and Funds under Management growing by 6% and 4% respectively. Insurance premiums grew by 3%, with cross selling to the banks retail customer base showed signs of improved penetration.

With regards to CBA’s other division, the bank said most were trending at similar run rates to the 2H12.

Looking ahead

CBA’s quarterly update was solid, with a clearly improved tone from previous periods. Although the company did note slower revenue growth, it did increase profits by over 5%, this is an indication that the group has been able cut its expenses to cover for any reduction in revenue.

On a return on equity (ROE) basis, CBA does look attractive to its major rivals, with an average (ROE over the last three years of 17.6%, which is over 1% higher than any of its rivals.

Overall we expect a continuation of growth for CBA’s earnings in the current quarter, and this should hopefully translate into continued share price appreciation.

This article was distributed to our members on November 30th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Commonwealth Bank but all our current trading ideas. Simply click here and starting trading today.

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Goodman Group (GMG) is an integrated commercial and industrial property group that owns, develops and manages real estate including warehouses, large scale logistics facilities business parks and offices globally.

The group also offers a range of investment property funds, giving investors access to specialist fund management services and commercial and industrial property assets.

The company is broken up into three main division: Investment, Development & Management

The company operates in Australia, New Zealand, Asia, Europe and the United Kingdom. GMG is a stapled security comprising a unit in the trust and a share in the management company.

FY12 Results

GMG’s FY12 results showed another year of continued growth.  Operating profit was $463 million, up 21% on FY11. Operating EPS was 30.5 cents a security, which was an 8% improvement on the FY11 result.

The group was also able to increase its dividend on FY11 by 3% to 18 cents a security. GMG’s results were impressive and the group guided for continued growth in FY13, with an expected operating profit increase of 13.2% to $524 million.

The assets

A breakdown of the GMG’s divisions shows the quality of its assets. The investment division managed to maintain an occupancy ratio of 96%, a retention rate of 80% and like-for-like rental growth of 2.8%.

These are tremendous results given the state of global economy and are real reflection of the quality of the property portfolio and the quality of GMG’s customers.

The group’s development division has over $1.9 billion in work in development spread around Europe, Asia, and Australia. GMG also expects to grow its work in development to $2.5 billion in this half, with entry into the North America market adding to diversity.

The development segment takes a low risk strategy on new developments, getting an average of 80% pre-commitment on all new projects. This ensures that that the group is not left ‘holding the bag’ with excess properties.

The management division grew its assets under management by 12% in FY12. We expect continued growth in this segment as the hunt for yield continues.

Outlook

GMG’s FY12 results were impressive, with all divisions recording solid growth. The group is also expecting double digit growth in FY13.

We are inclined to believe that they will achieve these results, given the quality and diversity of its asset base. Overall we think GMG has good growth prospects and quality assets that will see continued share price appreciation.

This article was distributed to our members on October 23rd, if you would like further information you can sign up for FREE 7 day recommendations and access all our research files on not only Goodman Group but all our current trading ideas. Simply click here and starting trading today.

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Karoon Gas Australia (KAR) is an energy exploration company and is a member of the S&P ASX200. The company is focused on identifying, exploring and developing acreage that is highly prospective for oil and gas.

KAR currently has four focus areas – the Browse Basin (Western Australia), the Santos Basin (Brazil), Tumbes Basin (Peru) and the Maranon Basin (Peru).

Santos Basin

KAR has a 100% equity interest in five oil blocks in the Santos Basin, offshore Santa Catarina in Brazil.

The Basin has a history of oil discoveries, and importantly, KAR anticipates that new fields within its acreage can quickly be brought to production due to relatively shallow water depths and their proximity to existing infrastructure.

Recently KAR announced that it had reached a farmout agreement with Pacific Rubiales Energy (PRE) for the Santos Basin. The agreement was for 35% equity of its 100% interest in four offshore exploration blocks, with options for a fifth.

KAR will receive $40 million in cash and PRE has agreed to pay for the first US$70 million of the costs for each of the first two wells in KAR’s upcoming 3-well Santos Basin exploration program.

PRE will also share its 35% of the costs and KAR will remain the operator.

Browse Basin

KAR’s Browse Basin drilling campaign holds long-term promise for the group. It owns 40% of the project with the remainder being owned by joint venture

KAR will begin drilling at the Browse Basin in Western Australia in the coming weeks. The drilling will begin at the Boreas-1 well, the first of up to an eight well exploration and appraisal project.

Outlook

KAR is an exciting oil and gas explorer, with several promising drilling campaigns about to get underway.

In particular, drilling at the first well, Kangaroo 1, at the Santos basin will commence in November this year and will take anywhere between 60 to 80 days. The company is also beginning drilling at the Boreas-1 well, which has some very promising targets.

Overall we think the company has plenty of near-term catalysts on the horizon with the aforementioned drilling projects likely to drive KAR’s share price.

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