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.

The share tip for Skilled Group was listed to our members on April 10th, if you would like further asx share market information you can sign up for FREE 7 Day Trial and access all our research files on not only SKU but all our current trading ideas.

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.

ANZ Banking Group (ANZ) is the nation’s third-largest bank by market capitalisation, and is among the top 50 banks in the world.

The group provides a variety of banking and financial products and services to around 8 million customers, and employs 48,000 people worldwide.

ANZ operates in Australia, New Zealand, Asia, the Pacific, the Middle East, Europe and America. In recent years the group’s strategy has shifted to become a super-regional bank. To this end, the bank is aiming for between 25-30% of its earnings to come from its Asia, Pacific, Europe and America Division (APEA) by 2017, with the major focus being the high growth Asian region.

China manufacturing in expansion mode

For much of the early part of 2012 the discussion surrounding China was whether it was heading for a hard landing or a soft landing. The fears of a hard landing abated by the end of 2012’s second half, helped by China’s central bank adopting an easing bias towards monetary policy.

Measures including lower interest rates and targeted fiscal stimulus appear to be flowing through to China’s manufacturing sector, which is beginning to expand after an extended period of contraction. Last month, the HSBC Flash PMI showed factory activity accelerated to a two year high in January.

A pickup in manufacturing activity is important for ANZ as it implies Chinese companies are taking advantage of easier credit conditions and borrowing money in order to expand.

What to look for in trading update

ANZ’s FY12 results revealed a 2.6% increase in FY12 cash profit to $5.75 billion.  The APEA strategy also continues to be a key driver for ANZ’s overall business.

In FY12 this region’s income comprised 21% of overall profit, putting the group on track to achieve its aim for APEA to contribute 25% – 30% of overall profit by 2017.

Today CBA reported a 6% on-year rise in 1H13 cash profit to $3.78 billion.  Impressively, the result came on the back of a 6% increase in revenue.

The group’s net interest margin rose 4 basis points from the previous half, in a sign wholesale funding pressures are easing for the four majors. CBA’s first half results are a healthy indicator for the industry, and we expect ANZ to announce a similarly positive result when it provides a trading update for the first quarter later this week.

Outlook

ANZ’s FY12 results provide it with a good base to tackle FY13, and we expect some good news in its first quarter trading update. We will look for an improvement in interest margin and asset quality, as well as a cash profit driven by good cost control and evidence of top line growth.

The group’s exposure to Asia will continue to be an important earnings driver, and the benefits of this leverage will translate to further share price appreciation in our view.

This article was distributed to our members on February 11th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only ANZ but all our current trading ideas. Simply click here and starting trading today.

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.

ANZ Banking Group (ANZ) is the nation’s third-largest bank by market capitalisation, and is among the top 50 banks in the world.

The group provides a variety of banking and financial products and services to around 8 million customers, and employs 48,000 people worldwide. ANZ operates in Australia, New Zealand, Asia, the Pacific, the Middle East, Europe and America.

In recent years the group’s strategy has shifted to become a super-regional bank. To this end, the bank is aiming for between 25-30% of its earnings to come from its Asia, Pacific, Europe and America Division (APEA) by 2017, with the major focus being the high growth Asian region.

FY12 results

ANZ’s FY12 results were good without being great. The banking major recorded FY12 statutory profit of $5.7 billion, up 6% from the FY11 result.

An increased capital base saw EPS only rise by 2% year on year, to 213.4 cents a share. Dividend growth over the financial year managed to outpace inflation, with a 4% increase to 145 cents a share.

We were most impressed with direction of the group’s super-regional strategy.

 
As the above shows the group managed to grow the income from APEA by 5% over FY12 to 21%. Notably the group also managed to slow down operating expense growth in the region from 11% to 4%.

The group’s APEA strategy continues to be a key driver for ANZ’s overall business results and we think this will continue as the group strives for a contribution of 25% – 30% of overall profit by 2017.

China expanding again!

For much of the early part of 2012 the discussion surrounding China was whether the slowdown in growth would be a hard landing or a soft landing. The fears of a hard landing abated by the end of the second half, helped by China’s central bank adopting an easing bias towards monetary policy.

The central bank actually began its stimulus measures in December 2011 when it implemented the first of a series of reserve requirement ratio (RRR) cuts. After cutting the RRR by 1.5% the PBOC then cut the country’s official interest rate by a little over 0.5% in the months of June and July.

These stimulus measures have began to show signs of flowing through to China’s manufacturing sector, which was the cornerstones of the country’s explosive growth of the last 10 years.

The month of November saw the HSBC Flash Manufacturing Index return a reading of over 50 for the first time in 12-months, indicating the sector had returned to expansion. Every month since that return to expansion was followed by an increase in the index, with yesterday’s reading of 51.9 marking a 24-month high.

Outlook

ANZ’s FY12 results provide it with a good base to tackle FY13. The year was not an easy one for the global banks in general, with the eurozone crisis leading to higher funding costs, which increased pressure on bank interest margins.

ANZ’s net interest margin contracted 11 basis points over the year. That being said, it was the group’s exposure to Asia that allowed it to grow earnings.

We believe that ANZ’s leverage to the growing Asian region will continue to benefit the company and this is expected to result in further share price appreciation.

This article was distributed to our members on January 25th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only ANZ but all our current trading ideas. Simply click here and starting trading today.

Atlas Iron (ASX:AGO) is an emerging iron ore producer and explorer.

With a growing number of high quality iron ore projects and one of the largest landholdings in the lucrative Pilbara region, AGO is now one of the area’s largest iron ore producers.

The company has a significant number of direct shipping ore (DSO) projects in WA. DSO projects are those that are in close proximity to ports, which helps to significantly lower capital costs.

One of the more recent ones, the Mount Dove DSO Project, is expected to contribute to AGO’s shipping tonnes later this calendar year.

Iron ore in spotlight

Iron ore miners have been in focus over the past few weeks due to a combination of factors. Among these is the improving prospect for iron ore.

We don’t believe the current spot price around $142 a tonne reflects what is still a favourable supply/demand dynamic for Aussie miners.

The European debt crisis forced some of the higher cost iron ore miners to cut back production last year.

This is likely to ensure the iron market remains in a supply deficit for a few more years yet, which not only supports prices but provides an opportunity for low-cost producers like AGO to fill the breach.

Also, the Glencore/Xstrata merger proposal has thrown the spotlight on pure play iron ore miners. Given the commodities giants’ lack of iron ore assets, the merger may encourage existing iron ore companies to either consolidate or potentially be the subject to an offer.

Output hit by cyclone

For the December quarter, Atlas Iron reported an 11% quarter-on-quarter fall in iron ore mined.  This was due to Tropical Cyclone Heidi, which impacted mining operations and damaged the Utah Point ship loading facility at Port Hedland.

As a result, AGO downgraded its FY12 production target to 5.5 – 5.7 million tonnes, from the previous 6 million tonnes.  However cash costs were within AGO’s targeted $42/ton-$45/ton range for FY12.

AGO, like other iron ore miners, suffered from a fall in iron ore prices during the quarter. However it also positioned itself to take advantage of a recovery in prices.

The company moved from quarterly pricing of its contracts towards shorter term reference points. This means it is more directly exposed to spot prices, which have trended higher in recent months.

Outlook

Despite last quarter’s operational issues, AGO managed to grow its cash pile from $373 million to $380 million.

With strong operating cash flows and competitive cost of production, AGO has significant capacity to fund development projects such as the Mt. Dove mine.

Although AGO faced a number of headwinds in the December quarter, we think it is well placed to take advantage of a recovery in iron ore prices. Atlas Iron (AGO) is an emerging iron ore producer and explorer.

With a growing number of high quality iron ore projects and one of the largest landholdings in the lucrative Pilbara region, AGO is now one of the area’s largest iron ore producers.

The company has a significant number of direct shipping ore (DSO) projects in WA. DSO projects are those that are in close proximity to ports, which helps to significantly lower capital costs.

One of the more recent ones, the Mount Dove DSO Project, is expected to contribute to AGO’s shipping tonnes later this calendar year.

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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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WorleyParsons (ASX:WOR) provides professional engineering and management services to the energy, resource and complex process industries.

It offers a broad range of services, from feasibility studies to design and project services, and is exposed to a number of sectors.

The group is a leader in its industry and has established long-term relationships with a number of blue-chip companies.

Despite facing obstacles in FY11, WOR was able to grow its profit and revenue, with the Hydrocarbons business driving the result.

Moreover, WorleyParsons is ideally placed for the future, as the lure of high energy prices is likely to drive demand for its services from the bigger oil companies.

Hyper about Hydrocarbons

The majority of WOR’s earnings are in the Hydrocarbons (oil and gas) division.  WOR’s leverage to the energy market is a key attraction, particularly as demand for oil and gas is expected to strengthen due to emerging market growth.

The oil supply/demand imbalance (dwindling oil supplies vs. growing energy demand) is only expected to worsen due to this growth.

The lure of energy price appreciation is likely to encourage oil companies to ramp up capex spending, which puts WorleyParsons in an ideal position to accelerate its contract win rate.

WOR has had a positive start to 2012, winning two major contracts in January.  The first was a US$115 million contract with ExxonMobil, and the second was a US$180 million contract with Chevron (split with a 50/50 JV partner).

LNG is the future

The big oil companies have recognised that the world is moving towards more unconventional sources of energy such as LNG.

There are a number of massive projects being undertaken throughout Australia, and WOR has had a hand in some of the key ones such as Pluto and Wheatstone.

WOR’s experience in developing LNG projects, coupled with the established relationships it has with its blue-chip clients, makes it ideally placed to benefit from this increased focus on alternative energy.

Outlook

As the global growth engine continues to shift from developed economies to the developing regions, there will be increased demand for commodities.

As mining companies look to meet this demand, there is going to be a significant increase in capex activities over the coming years.

This will strengthen the market for WOR’s services, providing it with plenty of growth opportunities, especially in the hydrocarbons space.

WOR is in a sound financial position and is expected to continue the positive earnings momentum into FY12.

Based on one year forward earnings, WOR is trading at a more than 50% premium to the industry average.

Whilst this may appear to suggest the company is overvalued, we feel the premium is justified when considering WOR’s relatively stronger growth prospects, cash flow generation and a five-year average return on equity of over 20%.

The long-term relationships WorleyParsons has fostered with its blue-chip clients is likely to yield considerable benefits for the company, particularly as miners look to capitalise on rising commodity prices as well as the world’s shift to alternative energy sources.

We believe that WOR is poised for growth, and is defiantly a stock to watch for 2012.

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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.

James Hardie Industries (ASX:JHX) is a leading international building materials group that produces a wide range of fibre cement building materials used in the exterior and interior of residential and commercial buildings.

The company is also the largest seller of home siding (imitation wood) in the US, and produces fibre cement in the US, Australia, New Zealand and the Philippines.

Approximately 80% of JHX’s sales come from the housing industry, and the majority of this exposure is via the US housing market.

Although the US property crash has been a millstone on JHX, recent evidence suggests the market may have turned the corner.

JHX focus on efficiency and market share gains has placed it in an advantageous position to benefit from increased US housing activity.

US housing recovery

Although the US housing sector has been in a well established decline for much of the past five years, recent evidence is pointing to a long-awaited recovery.

Among the relevant housing indicators for James Hardie are housing starts and building permits.

Housing starts measure the number of new monthly building constructions, whilst building permits are more of a leading indicator in that they measure the number of new monthly residential building permits.

Since May 2011, both these indicators have been steadily rising in a sign Americans are beginning to take advantage of the country’s record low interest rates.

Furthermore, we see this momentum continuing due to the slowly strengthening US jobs market and the Federal Reserve’s pledge to maintain low interest rates until the end of 2014.

Operating results

In late November, JHX reported a 1Q12 net operating profit of US$41.2 million, which was double its result in 1Q11.

Despite reporting low demand, James Hardie was able to achieve its profit on the back of operational improvements such as a reduction in fixed costs, as well as an increased share of the fibre cement market.

This increased market share, positions JHX well in the event of an acceleration of the US housing recovery.

Outlook

JHX forecast FY12 net operating profit of US$126 – US$140 million.  Although management was cautious about the outlook for US housing, recent data points to a noticeable pickup in this industry.

With US employment inching higher, housing affordability high and the Fed committed to a record low interest rate environment, there are enough incentives to drive continued improvement in residential construction activity.

We at the Australian Stock Report believe that a focus on cost control and increasing market share has placed JHX in a strong position to leverage off any US housing recovery.

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