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.

For more share tips on not only the Westfield Group, get our latest asx share market trading ideas by signing up for FREE 7 Day Trial and access all our research files.

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:

 
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.

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.

The Reject Shop (TRS) is a discount variety retail company, targeting Australian consumers through low price points, bargain-purchasing and convenient shopping locations. As of 30 June 2012, TRS had 239 stores in Australia, with plans to open another 40 in FY13.

At these stores the company 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 AUD benefits earnings due to lower import costs, whilst the substitute nature of its products can appeal to cost-conscious consumers.

Consumer environment

The environment in which TRS and all retailers have been operating has been challenging to say the least, but there are signs that some of these challengers area abating.

The latest reading of the Westpac Consumer Sentiment survey showed the index rising 0.6%, to 100.6 – its third consecutive month above the 100 level.

A reading above 100 indicates that more consumers are optimistic about the economy than pessimistic. Unfortunately the increase in consumer confidence has not translated into an increase in retail sales, which declined 0.2% in the month of December.

Oddly enough the release of the poor retail sales saw the sector move higher, as the market took the view the numbers add to the likelihood of further cash rate cuts.

FY12 results

TRS’s FY12 results were a big improvement on what was a disappointing FY11. The company grew its net profit by 35.6% on-year, to $21.9 million.

The addition of 18 new stores over the year helped sales climb 9.9%, to $555.3 million. An increase in stores was not the only reason for the jump in sales; comparable store sales grew 0.5% over the year, with a 3.2% jump in the second half.

We believe that the 2H12 momentum will continue into TRS’s 1H13 results, which are scheduled to be released on 20 February 2013.

Outlook

TRS’s FY12 results were impressive on several fronts. Besides from the strong store sales growth the group was able to reduce its debt by $16.9 million in FY12, while increasing free cash flow from $1 million in FY11 to $25.2 million in FY12.

Another notable item in TRS’s results was that gross margins rose from 38.9% in FY11, to 44.1% in FY12, likely a combination of a strong Aussie dollar and a reduction in shipping costs.

While retail sales numbers are an important indicator for the retail space, the substitute nature of TRS’s products can appeal to cost-conscious consumers, thus giving the company the ability to grow its sales in a weak environment.

Overall we believe that the aforementioned healthy balance sheet, strong comparable sales growth and expansion of gross margin will continue to drive TRSs earnings and in turn push its share price higher in the near-term.

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

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.

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 CCP but all our current trading ideas. Simply click here and starting trading today.

Telstra Corporation Limited (TLS) is a full service domestic and international telecommunications provider and is without question the dominant telco in Australia.

The company provides telephone exchange lines to homes and businesses, supplying local, long distance and international telephone calls and supplying mobile telecommunications services. TLS also provides data, internet, on-line services and directory services.

TLS has five key business segments:

 
FY12 Results

The groups’ FY12 results revealed low, but stable growth. EBITDA was $10.2 billion, a 2.1% increase on the prior year’s result on a guidance basis. Revenue over the year climbed 1.3%, to $25.4 billion.

TLS’s mobile division, which accounted for over 30% of entire group’s EBITDA, continues to be one of the company’s strongest contributors. The Mobile division reported an EBITDA of $3.12 billion, an 18.4% increase on the prior year’s result.

The group’s margins in this division also grew over the year from 33%, to an impressive 36% in FY12.

Investor day – strategy

The group’s investor day focused on the medium/long-term strategy and positioning of TLS. A few of the key points we gleamed from the presentation in regards to th core/mature business’s fixed lines, mobiles and internet:

 
The group plans to extract growth out of the less mature segments such as the Network Applications and Storage, Mobile Broadband or Foxtel.

Investor day – Decrease in Capex

A real positive announcement to come out of the investor day was the targeting of a lower capex/sales ratio.

TLS set it will target a capex/sales ratio of 14% in the medium-term, down from the 15% it has forecasts for FY13. This is most likely a result of the group’s involvement in the NBN, which is likely to be less capital intensive than its current network.

Looking ahead

TLS’s FY12 results showed the type of consistent growth we have come to expect. The investor update was a realistic approach to the business, with TLS understanding that it needs to protect its mature business rather than strive for unrealistic growth.

TLS is currently trading on a forecast yield (28c for FY13) of over 6.1%, fully franked, or 8.7% on a pre-tax basis. This yield, while not as attractive as before, is still likely to be enticing to investors given the low interest rate environment.

The aim of a lower capex/sales ratio is also good news as the high capital intensive nature of the business has always been a concern to market pundits. Overall we expect a solid result from TLS for the 1H13 and this should translate to further share price growth.

This article was distributed to our members on January 24th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only TLS but all our current trading ideas. Simply click here and starting trading today.

ARB Corporation (ARP) is a designer, manufacturer and distributor of accessories for four wheel drives (4WDs). ARP operates throughout Australia from state sales offices with attached warehouses. State sales offices distribute products primarily to ARB branded stores across the country.

The company also sells its products to vehicle manufacturers (OEMs) and exports direct from Australia and Thailand, as well as to customers via its US subsidiary, Air Locker Inc. Aftermarket operations accounted for 66% of overall sales in FY12, whilst export sales represented 22% and OEM sales made up 12%.

4WD sales

According to the Australian Bureau of Statistics (ABS), sport utility vehicle sales grew 5.9% year-on-year in November.  Year-to-date sales in this vehicle category have risen 8.7%. There has also been longer-term shift towards demand for four wheel drives (4WDs) in the Australian vehicle sales market.

Passenger car sales increased 6.4% from November 2009 to November 2012. However, sport utility vehicles grew a far more impressive 37.3% over the same period. We expect this trend to continue as vehicle affordability improves due to the current low interest rate environment.

Moreover the high Aussie dollar has helped to contain car import costs, with the savings able to be passed onto consumers. As 4WD sales rise, there is expected to be greater demand for 4WD accessories.

History of growth

ARP capped off a solid FY12 by reporting a 1.7% increase in net profit to $38.5 million. Sales were up a healthy 5.7%, thanks largely to new store and warehouse growth in the Australian aftermarket (ARB stores) segment.

The recovery in 4WD production from the Japanese earthquake and Thailand floods in 2011 led to a spike in demand for ARP’s products during the financial year. The balance sheet was in healthy shape with a net cash balance of $33.2 million at the end of June 2012.

The results continue a history of robust growth for the group.  In the ten years to FY12, revenue has risen at a compound annual rate of 13.2%, with net profit increasing at a rate of 15.8%.

Outlook

The outlook for ARP is positive despite the still uncertain economic outlook.  The group acquired Northern Territory-based Top Gear Accessories in July 2012 and plans to transform this business into an ARB store by 2013.

Moreover it acquired a property in Perth in preparation for another ARB store there.  In our view, the geographic expansion combined with new store growth will drive even stronger growth in sales

Whilst the high Aussie dollar is hurting ARP’s export sales, we feel the growth in the core domestic market will more than offset this, translating into further gains for ARP’s share price.

This article was distributed to our members on December 20th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only ABR but all our current trading ideas. Simply click here and starting trading today.

SP Ausnet (SPN) is an energy infrastructure company, operating mainly in Victoria. It also operates a gas distribution network in WA. The group has three energy networks, electricity transmission, electricity and gas distribution.

All networks are 100%-owned and located in Victoria, operating as regulated natural monopolies given the high barriers of entry.

• The Electricity Transmission Network carries electricity from power stations to electricity distributors around Victoria
• The Electricity Distribution Network carries electricity from the transmission grid to customers throughout eastern Victoria
• The Gas Distribution Network carries gas from the transmission grid to customers mainly located in western Victoria

1H13 results

SPN’s 1H13 results were a significant improvement on 1H12, mainly driven by an increase in regulated tariffs.

Net profit climbed 15.6% on-year to $169.0 million, which came on the back of a 6.5% increase in revenue.  EBITDA over the half grew an impressive 6.5% to $525 million.

SPN’s balance sheet also improved in the half, with net gearing ratio dropping from 60% to 56% and interest cover increasing form 2.6x to 2.7x. On the funding front, the group has $775 million debt maturing in March 2013.

While the company does have the ability to pay this from current cash (approx. $427 million) and $625 million in undrawn committed bank debt facilities, we wouldn’t be surprised given the current low interest rate environment if SPN refinanced the loan at a significantly lower rate.

Distributions

SGN’s monopoly-like business gives it a stable and predictable income stream in which to pay distributions. This saw the company pay a 4.1 cent distribution in 1H13, a 2.5% increase on the prior corresponding half.

The groups also reaffirmed its full-year guidance of 8.2 cents a security.

Based on a closing share price of $1.045, this represents an attractive yield of approximately 7.5%, or a gross yield of 8.5% if franking stays consistent at 33.3%. In the 1H13, 89% of SPN’s revenue was regulated and essentially inflation protected.

SPN’s yield makes it extremely attractive to income-seeking investors, especially given the recent RBA rate cut and the fact that interest rates are at their lowest since the GFC.

Outlook

SPN is forecasting capital expenditure for 2013 to be around 24% higher than 2012. This investment should help the company continue to grow its earnings and distribution. SPN has not only forecasted for FY13 distribution growth of 2.5%, but also for FY14 growth of 2%.

SPN will continue to deliver stable and predictable revenue growth over the coming years and we think investors chasing yield will continue to drive the share price higher.

This article was distributed to our members on December 14th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only SP Ausnet but all our current trading ideas. Simply click here and starting trading today.

Technology One (TNE) is an end-to-end software solutions provider, catering for a number of industries including government, education, financial services, health and community, utilities, and managed services such as mining, property and media.

Diversified product base

TNE is diversified across a number of different products in that it is able to tailor software solutions to meet the needs of its various clients. For example, TechnologyOne Financials offers solutions that can more easily interpret accounting and financial information.

Because it generates revenue from multiple streams including business and non-business, TNE is not as sensitive to the economic cycle as some other tech companies.

Strong operating metrics

TNE has a history of earnings and revenue growth. Revenue has increased at a compound annual rate of 14% per annum since 2003, with net profit growing at 10%.

Moreover, the group’s EBITDA margin has hovered around 20% over the past five six-month reporting periods. TNE derives the bulk of its revenue from software licensing and consulting fees. The company receives an initial licensing fee for each of its software, which is supplemented by annual licensing fees and consulting service fees.

In 1H12, TNE’s annual licensing fees grew 18% due to high customer retention and satisfaction rates. Although R&D expenses jumped 11% on-year, the Connected Intelligence (Ci) enterprise suite has enjoyed a positive reception thus far. Ci is the group’s flagship suite of products.

TNE’s R&D spend is being ploughed into the next generation Ci, and we would expect the product improvement to be a key driver of sales going forward.

Future is in the cloud

TNE is currently in the process of building its own cloud product, TechnologyOne Cloud. The aim is to offer the Ci enterprise suite through the TechnologyOne cloud.

Cloud computing is the process of storing applications and other data on web-based servers, enabling end users to access the centrally-stored information from multiple locations.

The cloud’s key benefit for TNE’s clients is that they don’t have to install software on all of their computers and devices, which significantly reduces the cost of doing business.

The tech industry is only beginning to scratch the surface with cloud services. Apple released their own version of the cloud with the iPhone 4S, known as the iCloud, late last year.

TNE’s version is currently in the trial phase, but we would expect strong demand for this service once it is up and running after the next few years.

Outlook

TNE has enjoyed solid growth since 2003 due to the quality of its product and service offering. The software industry has low barriers to entry, so there has to be a continual focus on maintaining higher customer satisfaction levels and investing in future technology.

The 18% growth in 1H12 annual licensing fees demonstrates TNE’s customer focus, whilst its investment in TechnologyOne cloud is expected to reap long-term benefits.

This article was distributed to our members on November 20th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Technology One but all our current trading ideas. Simply click here and starting trading today.

Tox Free Solutions (TOX) is a hazardous and toxic waste disposal company focusing on the recovery and recycling of hydrocarbons and other waste streams.

The company implements technologies for the remediation of contaminated soils recovery and recycling of waste oils, treatment of oil contaminated water, treatment of acids and alkalies and separation of hazardous waste.

TOX operates in three main segments: Waste Services, Hazardous Waste Services, Industrials Services

The group has operations throughout Australia with a growing presence on the east coast via recent acquisitions.

FY12 results

TOX’s FY12 results continued to impress especially given the current environment. FY12 revenue was $207.9 million, a massive 45% increase on the prior year’s result.

Over the year NPAT grew 31% to 17.2 million, whilst EPS increased 15% to 16.3 cents a share. The company also managed to increase its dividend over the period by 33% to 4 cents a share, fully franked.

The group’s gearing ratio rose from 11% to 30%, but that was largely due to the acquisition of DoloMatrix earlier in the year. Despite the rise in gearing TOX’s balance sheet remained healthy, with free cash flow increasing from $63.4 million in FY11 to $142.5 million in FY12.

Diversification and growth

The above graph shows the diversity of TOX’s earnings stream. The segments we would consider to be most at risk are oil and gas, and mining.

TOX’s client base in these areas include Woodside Petroleum, Fortescue Metals and Origin Energy, all of which are less likely to cut TOX’s services than the smaller commodity players.

The acquisition of DoloMatrix, which was completed in February, only contributed about a quarter’s worth of revenue in FY12 and as such we see it being a major contributor to growth in FY13.

The synergy benefits of the acquisition should begin to come through in the coming year, and are likely to fully materialise following the acquisition’s successful integration.

Outlook

TOX’s FY12 results represented another year of stellar growth. We are expecting another strong year from the company, with the DoloMatrix acquisition likely to spur growth in the current period.

We see this growth translating to further share price gains in the near-to-medium term.

This article was distributed to our members on November 2nd, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Tox but all our current trading ideas. Simply click here and starting trading today.