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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Skilled Group (SKE) is an established national workforce services company and is listed in our traders report as a share to buy as of April 10th 2013. It has over 170 offices spread across Australia, New Zealand, United Kingdom, Malta and United Arab Emirates.

SKE has a broad service offering to suit changing client needs. Its three main divisions are;

>> Workforce Services, which provides labour hire services to the mining sector
>> Technical Professionals, which provides professional and white collar staffing
>> Engineering and Marine Services, which provides contract maintenance and engineering, as well as offshore marine staffing and management services

SKE has a strong position in key growth markets and sectors, namely mining & resources, oil & gas, and civil & infrastructure.

1H13 results

In February, SKE reported a 17.4% increase in 1H13 net profit to $29.2 million. This was delivered on the back of a 4.1% rise in sales to $973.6 million.

The company grew its profit against the backdrop of a weak macroeconomic environment. Specifically, Workforce Services suffered from lower volumes due to the mining slowdown.

Because SKE is diversified across different industries, Technical Professionals revenue climbed amid demand from the oil & gas and telco sectors.

The group is still in the process of cost reductions with the automation of key process and systems including; integrated rates calculator, candidate on-boarding, re-developed web portals and continued centralisation of distributed activities.

The cost cutting initiatives led to $5 million in indirect savings during the half, and SKE expects to deliver a total of ~$10 million in cost reduction over FY13.

Valuation upside

Whilst the group anticipated challenging conditions for its Workforce Services division would continue in 2H13, demand from the oil & gas and telco sectors would help soften the blow.

When factoring in expected cost savings, we think Workforce Services will experience a 2H13 earnings rebound. Trading on an undemanding one-year forward P/E of 14.3x, we believe the impact of a challenging mining sector outlook is at least partly factored into the share price.

Outlook

SKE’s 1H13 results impressed the market, and we expect the momentum to carry into the rest of the year. Although the outlook for Workforce Services remains somewhat uncertain, SKE’s cost cutting program should continue to provide a degree of support for the division’s earnings.

Also, Engineering and Marine Services is experiencing healthy growth in revenue and EBITDA due to the group’s exposure to the oil & gas sector. The division is benefiting from increased activity in new project and maintenance contracts, which is likely to translate into more revenue growth.

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Kingsgate Consolidated (KCN) is a gold miner, operating in South East Asia, South America and Australia. The company’s major operation is the Chatree Mine in Thailand, and it also has the smaller Challenger Mine in South Australia.

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.

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Westfield Group (WDC) is the world’s largest listed retail property group. 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

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.

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Credit Corp Group (CCP) is a receivables management company, specialising in debt purchase and debt collection. CCP’s primary business is the acquisition of purchased debt ledgers (PDLs) comprised of distressed debt from Australian and New Zealand credit issuers.

Over the past several years’ the company has made significant investments in technology and resources, which has led to solid infrastructure that is geared to produce sustainable long term performance.

With the infrastructure in place the group has begun to expand into the large US market, where it now employs 30 full-time staff.

1H13 results

CCP enjoyed a solid 1H13, in which underlying net profit rose 12% to $14.6 million.  The higher profit came on the back of a 6% increase in underlying revenue.

Over the half, the company grew its PDL collections and fee income to a record $72 million, a 54% increase on the same period in FY12. CCP also reported that the contracted pipeline for purchasing grew to $105 million in the 1H. This is a great result considering that the upper end of the guided range for FY13 was only $70 million.

The group also declared a half year dividend of 20 cents per share, fully franked – a 54% increase on 1H12’s interim dividend. Collections as % of total PDL continues to improve, rising from 71% at the end of FY12 to 72% at the end of December.

The rise in the collection rate highlights the company’s disciplined approach to purchasing, especially in the face of the strong competition from sector peers.

CCP’s US operations, which are only in the second year of operations, grew debt purchasing from $2.2 million as of June 30, 2012 to $4.0 million at the December 31, 2012.

The Australian loan book branded ‘MoneyStart’ also had solid growth over the half, doubling to $12 million in six months to December.

Outlook

The two most impressive points we took out from CCP’s 1H13 results were the massive increase in PDLs and the company’s disciplined investment approach, which has allowed it to increase its collection rate.

The Australian and US commercial loan books look solid and we expect further growth in the coming six-month period. The group has made specific mention of its plans to grow its US operations through optimisation and technology upgrades, which we believe will show exponential growth given the size of the market.

The group has plenty of room to grow its consumer loan books given its almost unleveraged balance sheet. Overall we were pleased with CCP’s 1H12 result and we expect the company’s current earnings momentum will translate into further share price appreciation.

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The Reject Shop (TRS) is a discount variety retail company, targeting Australian consumers through low price points, bargain-purchasing and convenient shopping locations.

TRS offers a wide variety of general consumer merchandise, with a focus on everyday needs, such as toiletries, cosmetics, homewares, personal care products, hardware, basic furniture, household cleaning products, kitchenware, confectionery and snack food.

The company has two key advantages that many of its mid-to-upper market rivals don’t – a strong Australian Dollar benefits earnings due to lower import costs, whilst the substitute nature of its products can appeal to cost-conscious consumers.

After a disappointing finish to FY11, TRS got itself back on track in 1H12, with net profit and sales rising on the back of a resumption in operations at its Ipswich Distribution Centre.

1H12 results

TRS grew its 1H12 net profit 4% on-year to $16.6 million.

New store openings helped sales climb 6.1% to $292.8 million, but this could have been higher had TRS not face capacity constraints in the early part of the half.

These capacity constraints were due to the early-2011 Queensland floods, which impacted operations at the Ipswich Distribution Centre.

TRS was able to generate sales momentum in the second quarter, helped by improved seasonable trade and the reinstatement of the Ipswich Distribution Centre.

A strong AUD combined with a reduction in shipping costs saw the company’s underlying gross margin rise from 44% in 1H11, to 45.4% in 1H12.

This was particularly impressive considering TRS faced price deflation over the period. It also illustrates how for TRS a high AUD can provide a hedge against price deflation, unlike many other retailers.

Outlook

With the Ipswich Distribution Centre now fully functional, TRS can focus on continuing the sales momentum generated in the second quarter.

Furthermore, with inventory management back to normal, we expect TRS to further improve margins (via less stock markdowns) and build on 1H12’s strong operating cash flow performance (via better working capital management).

Although it expects a tough trading environment to persist into 2012, TRS said second half comparable sales to date were positive. We expect TRS’ new store rollout to continue to underpin sales growth into this year.

The group forecast FY12 net profit to be between 27% and 36% higher than FY11. Even taking this strong growth into account, TRS is trading on reasonable multiples and we expect this to translate into further gains in its share price.

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Seven Group Holdings (SVW) is a diversified operating and investment group listed on the Australian Stock Exchange. The operating business encompasses WesTrac, a global top five Caterpillar dealership. It also is a minority holder in Seven West media and major shareholder National Hire.

Seven Group Holdings announced a 1H FY12 profit of $52.1 million, a 57.8% fall on the previous corresponding period.  The result was better than the market expected.

Despite the fall in profit, revenue grew 29.3% to $2 billion over the same period.

The result was spoiled by $165.2 million impairment charge on the carrying value of its investment in Seven West Media.

The company will pay an interim dividend of 18 cents a share, fully franked.

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Westfield Group (ASX:WDC)  is the largest retail property group in the world by equity market capitalisation. It has investment interests in 126 shopping centres in Australia, New Zealand and the United States

Westfield, which is among the blue chip stocks, revealed a full year 2011 profit of $1.53 billion, a 37.5% rise on the previous corresponding period, slightly ahead of analyst expectations.

Full year revenue climbed 10.5% to $1.46 billion, year on year.

WDC declared a final distribution of 24.2 cents, in line with expectations.

The group also announced it would start an on-market buyback of securities for up to 10% of its issued capital.

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Western Areas NL (ASX:WSA) is an exploration company that is involved in the development of the Fox Nickel mine and the exploration of nickel sulfides, platinum group metals and gold.

Material stock Western Area reported a 1H FY12 net profit of $24.1 million, reflecting a 64% drop compared to same period a year earlier.

The company said the price of nickel averaged US$8.51/lb in the first half of its financial year compared to an average of US$ 11.61/lb a year earlier.

WSA slashed its interim dividend in half, declaring $0.05 dividend, unfranked.

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Leighton Holdings Ltd (ASX:LEI) offers a variety of project development and contracting services to public and private sector clients in the Asia-Pacific region. Leighton provides design management, civil engineering construction, building, mining, process engineering, telecommunications, waste management and infrastructure operation and maintenance and property development and management. Leighton is listed on the Australian Stock Exchange and is a member of the S&P/ASX 200.

Leighton announced a 1H FY12 NPAT of $340 million, a 57% jump on $216.7 million a year earlier.

Revenue jumped 25% to $12.2 billion compared to the same corresponding period in FY11.

LEI said in statement that the group is confident it is positioned in the best possible markets in the world for at lead the foreseeable future.

The company also said it will pay an interim dividend of 60 cents per share.

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