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.

Seek Ltd (SEK) is a provider of online employment services in Australia and New Zealand, but it is also expanding its interest globally. The company’s three main divisions are:

 
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.

Perseus Mining (PRU) is a gold explorer and producer, focused on under-explored gold belts in West Africa. The group’s main assets are located in Ghana and the Ivory Coast, consisting of the Edikan Gold Mine (EGM), the Tengrela Gold project (TGP) and the Grumesa Gold Project (GGP).

The Edikan Gold Mine in Ghana has 5.6Moz of Measured and Indicated gold resources, including reserves of 3.4 million ounces of gold, and 1.7Moz Inferred gold resources. Production began at the mine in the 3rd Quarter of 2011.

The Sissingue Gold Project which is part of the Tengrela Gold Project. It is the group’s most advance non-producing project.

Quarterly Production

As mentioned, EGM has been producing gold since the third quarter of 2011.  Since the initial ramp of production PRU has reported four quarters worth of production numbers.

The first two quarters were within guidance, however the last two set of figures released have missed. The December 2012 quarterly production result was the more disappointing of the two misses.

Gold production over the quarter was 51,090 ounces, 13% below the lowered guidance provided in November and also below the previous quarter’s production of 52,610 ounces.

Cash costs for the December quarter was $588 per ounce, 2.3% higher than the revised guidance and much higher than the $475 per ounce in the September quarter. The group blamed the production short-fall principally on lower crusher output since its initial downgrade on 23 November 2012.

The Sissingue Gold Project

The Sissingue Gold Project located in the Ivory Coast is the project PRU is planning on getting to production. The group is targeting a mid-2014 commissioning date, but given its 12-month build time from the start of construction we see this timeframe as unrealistic.  PRU still needs to:

 
Finally PRU will need to approve development of the project, which it has put on hold pending clarity of the some of the aforementioned tasks.

Outlook

PRU has missed two quarterly production results in a row. The production issue of late is relating to a mechanical issue to do with the drive shaft for the crusher, which has results in poor mill utilisation.

The drive shaft is scheduled to be replaced in February, but given the downtime that will be required for the replacing and testing of the new shaft we can’t see the group meeting its previous guidance range of between 127,000 to 143,000 ounces.

PRU offers long-term value at these levels, but until the company can stick to its guidance we have too many short-term concerns.

This article was distributed to our members on February 8th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only PRU but all our current trading ideas. Simply click here and starting trading today.

STW Communications (SGN) is Australasia’s largest marketing communications group, comprising over 75 specialist companies.

Through its subsidiaries, SGN works with Australasia’s biggest brands and some of the world’s biggest companies, including IBM, Ford, Panadol, Bendigo Bank, PepsiCo, Hyundai, Castrol and Dick Smith, to name just a few.s.

The acquisitions

In late October 2012, the company announced plans to acquire three companies, paid for via a $40 million capital raising. Markitforce (75% SGN ownership) is a leader in promotional campaign execution and point of sale fulfilment for local and global clients, with clients such as has Unilever, L’Oreal and Boehringer Ingelheim.

The acquisition will strengthen SGN’s execution capabilities and offer it exposure to the attractive retail and shopper marketing segment, which only adds to its already well diversified portfolio.

Maverick Marketing and Communications(Maverick) (80% SGN ownership) is a leader in experiential marketing from strategic and creative development through to execution. It has clients such as, Telstra BigPond, Coca Cola, Westpac, Bonds, Target and Vodafone to name a few.

The acquisition will provide SGN with experiential marketing capabilities, but we think it will provide a great opportunity for SGN’s current companies to leverage Maverick’s client base.

Switched on Media (SOM) (75% SGN Ownership) is a digital agency specialising in search engine marketing and social media. SOM’s client base includes Canon, Fairfax digital, Cochlear and Westfield. The acquisition of SOM will not only boost but also compliment SGN’s current digital capabilities.

Impact of acquisition

The total cost of the acquisitions (including Amblique) is $30.6 million; this includes an estimate of the likely earnout payments to the previous owners.

SGN forecast a full year contribution from the acquisitions for CY13 as follows: revenue of $29.8 million and EBITDA of $6.1 million. For CY13 the acquisitions are likely to be EPS neutral on a pre-synergy basis.

We expect synergy benefits, especially the cross selling opportunities to some very large blue-chip companies, to provide SGN with some major growth potential.

Outlook

When SGN reported its 1H12 results, it acknowledged the challenging macro economy and stuck to its FY12 forecast for mid-single digit net profit growth. Longer term, however, it remains in a strong position to benefit from the ongoing shift to digital publishing.

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Woolworths Limited (WOW) operates supermarkets, specialty and discount department stores, a liquor business and electronics stores throughout Australia.

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.

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Wotif.com Holdings (WTF) is an online travel services business, which represents 23,500 in more than 67 counties. The group’s main website is wotif.com, but it also operates under lastminute.com.au, travel.com.au, Asia Web Direct, LateStays.com, GoDo.com.au and Arnold Travel Technology.

WTF, through the aforementioned websites, offers a variety of services that include flights, insurance, car rental, and travel accommodation and packages across hotels, motels, serviced apartments, resorts, guesthouses and bed & breakfasts. The service allows customers to book rooms at a heavy discount and at the same time help hotels better manage their vacancies.

FY12 impress, while 1H13 disappoints

At first glance WTF’s FY12 results looked good, however when placed in the context of the weak domestic travel market, the results were fantastic. Revenue over the year was up 5%, to $145.3 million. Net profit was $58 million, up 13.8% on the FY11 result.

The results were driven by an increase in accommodation rates and sales, and also some significant growth in WTF’s flight booking service. WTF’s operating profit margin also increased from 56% to 59%, with the group demonstrating good cost control whilst expanding revenue.

On a more disappointing side, WTF said the first quarter of fiscal year 2013 continues to reflect economic weakness. The 1Q13 performance was in line with the 1Q12 and likely to continue for the remainder of 2012.

The group is essentially saying that it expects little revenue or margin growth for the 1H13 as the operations continue to endure a period of prolonged weakness.

The good news

The AGM was not all bad news with WTF announcing its plans to lift its booking commission rate by 1% from 1 January 2013. This will be followed by a further lift of the same amount on 1 January 2014.

The group had $1.16 billion worth of transactions in FY12, and a 1% increase in commissions on this figure would increase of $11.6 million in revenue.

If the group’s strong operating profit of 59% stays consistent, the increased commissions would equate to a pre-tax profit increase of $6.8 million.

Even with flat transaction growth over the next two years, the two sets of increased commissions suggest the company still has the ability to grow earnings.

Outlook

WTF’s FY12 results showed a company that is able to grow earnings even in a tough environment. We think that the increase in commissions starting 1 January 2013 will negate the effect of continued weakness within the domestic accommodation market.

We would also expect some of the increased revenue to be redirected towards expanding into the less mature flight and holiday letting businesses, which has already started to show promising signs. Given the aforementioned factors we feel WTF has plenty of scope to continue growing its earnings, providing further support for the share price.

This article was distributed to our members on December 18th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Wotif but all our current trading ideas. Simply click here and starting trading today.

QBE First State Negotiations For two Bolt On Acquistions

QBE Insurance Group Limited is an insurance company which underwrites most forms of commercial and industrial insurance policies, as well as individual policies.

QBE also manages Lloyds syndicates and provides investment management services. The Company provides its services both domestically and internationally.

Financial Stock QBE Insurance announced that it is in the final stages of negations to acquire two ‘bolt on’ acquisitions.

The acquisitions are expected to contribute up to US$500 million in annual written premium to the QBE business.

The company which recently raised $450 million from an institutional capital raising said that it will pay for the acquisitions from internal resources.

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AWE Limited (AWE) Company Announcement

AWE Limited (AWE) is a small oil and gas explorer and producer. The majority of its operations are located in Australia and New Zealand, though the company is becoming increasingly interested in international operations.

The company’s major projects are the onshore Casino gas field (Otway Basin, SA), Cliff Head project (Perth Basin, WA) and the BassGas project (VIC & TAS) and now, in the Perth Shale Gas Basin. AWE is listed on the Australian Stock Exchange and is a member of the S&P/ASX 200.

AWE announced that it has it has been advised that the Western Australian Minister of Environment has dismissed the states EPA appeal against its operations in the Perth Basin.

The company said that based on current availability of equipment, it expects that the hydraulic stimulation activities on all three wells will commence during the second quarter of 2012.

Managing Director Bruce Clement said that he is pleased with the decision, and looks forward to test the potential of the wells.

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Australian Stock Report presents the 2012  Portfolio Review.

Have you ever wanted to know what the “must-have” stocks are that should be in your portfolio? Do you know what 2012 has in store for the markets? Our Panel Does! Come and hear them present a review of your portfolio!

Here’s how the Portfolio Review works: List 5 stocks from your portfolio, or in which you are thinking of investing. Our panel of experts will tally the requests and select the 12 most popular stocks (and a few of their own) to thoroughly analyse and present their results live at the Review. The experts will then host a Q & A session to discuss current market valuations, trends, and their expectations for local and international markets in 2012.

Even if you don’t get all of your picks reviewed, you’ll get the benefit of comprehensive research on no less than 12 of the most interesting stocks on the Australian share market for 2012: What to buy, what to hold, and what to get rid of!

The Panel consists of:

Geoff Saffer
Head of Corporate Research
Australian Stock Report
Fundamental Analysis

Carl Capolingua
Head of Education
Australian Stock Report
Technical Analysis

Kel Butcher
Professional Trader, Author, Trading Coach
World Markets

Your 2012 Portfolio Review Ticket Includes:
>> a copy of Kel Butchers’ latest book
>> sumptuous buffet lunch
>> refreshments on arrivals

Portfoio Review Locations and Dates:

Sydney - Saturday, February 18, 2012 @ Sir Stamford at Circular Quay, 93 Macquarie Street.

Registrations: 8:30 AM, Duration: 9:00 AM – 13:30 PM. Click now to reserve your seat.

Melbourne - Saturday, February 25, 2012 @ Crowne Plaza, 1-5 Spencer Street.

Registrations: 8:30 AM, Duration: 9:00 AM – 13:30 PM. Click now to reserve your seat.

Brisbane - Saturday, March 3, 2012 @ Brisbane Convention & Exhibition Centre, cnr Merivale & Glenelg Streets.

Registrations: 8:30 AM, Duration: 9:00 AM – 13:30 PM. Click now to reserve your seat.

Perth - Saturday, March 10, 2012 @ The Studio Room, Level 2, Burswood Convention Centre
Bolton Ave & Great Eastern Hwy.

Registrations: 8:30 AM, Duration: 9:00 AM – 13:30 PM. Click now to reserve your seat.

Tickets for the Portfolio Review are only $44 (single) of $66 (double). Click now to learn more about this must attend event.

Billabong (ASX:BBG) is a major international retailer whose core business is the marketing, distribution, wholesaling and retailing of apparel, accessories, eyewear, wetsuits and hardgoods.

BBG’s products are licensed and distributed in more than 100 countries, and are distributed through specialised retailers and through their own branded retail outlets.

Billabong provided the market with a trading update today, in which it announced a strategic review of its operations and capital structure after a slowdown in Christmas sales.

The company also downgraded its EBITDA guidance for the first half of FY12 to $70-$75 million compared to the previous corresponding period’s $94.6million

Billabong said reasons for the slowdown varied by region, but it believes fears of a global recession are impacting consumer confidence and spending patterns.

Billabong has been one of the shares to sell amongst recent times.

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