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Top Gainer: Beach Energy (BPT)

 Closing price  $1.00
 Change  +0.06
 % change  +6.4%

 

On Friday Beach Energy (BPT) – an Australian-based oil and gas exploration and production company with key assets in the Cooper Basin oil and gas fields in South Australia – continued its rollercoaster ride as it jumped 6.4% to $1.00 to take out the biggest’s gainer’s spot and it is now up almost 20% in the last two weeks. On Tuesday, the oil and gas company gained almost six per cent after it said flow rates from a shale gas well in the Cooper Basin had exceeded expectations. The following day most of those gains evaporated as investors took profits, sending the share price tumbling 5.1% to be the day’s biggest loser. 

The company had reported that initial gas flow rates from BPT’s Holdfast-1 shale gas well were as high as two million standard cubic feet per day and exceeded expectations. Holdfast-1 had been averaging 1.8 million standard cubic feet per day and as a result the well is considered a strong result, sending the share price higher on Tuesday.

Though well off the high of $1.75 hit in July 2006, Beach Energy has had a solid year, up 40%. In fact, it is up 17.6% since June 28th and is trading near three-year highs.

Macquarie has an Outperform on the stock, with a 12-month price target of $1.35 and a valuation of $1.40. The investment bank notes that although rain dampened the March quarter production result, revenue is supported by storage and higher realisations. “Despite the production miss, revenue of A$122m was only 4% below our estimate due to stronger than expected Cooper Basin gas sales as storage continues to be utilised,” it notes in its report. “While Cooper Basin production continues to be impacted by adverse weather, storage and higher crude realisations have mitigated the impact on sales volume and revenue.” You can read the full Macquarie report here.

John Young, Senior Resources Analyst, Wilson HTM expects the proposed oil-indexed formula to lead to higher gas prices to support the development of unconventional resources – including tight gas and shale gas – with the GLNG project providing a large and expandable outlet within a relatively short time frame, with first sales from around 2015. 

Meanwhile Morgan Stanley has a price target of $1.05, with a Bull case of $1.37 and a Bear case of $0.74. In its report Morgan Stanley states that BPT has assembled a balanced portfolio with strategic appeal. “It now has an ability to sustain and add incrementally to current production over the medium term, as well as leverage to key opportunities emerging in Australia and African Rift Oil plays, particularly in Tanzania,” it says. “The upside is large if Shale and African opportunities can be derisked.” Morgan Stanley says that the company has leverage to oil price, and is in strong financial position, with no debt and a large cash balance. “But we expect cash to decline as exploration and development activity ramps up,” it notes. You can read the full Morgan Stanley report here.

According to Thomson Reuters broker consensus data, 3 brokers hold Buys on BPT, 6 have Holds, with one Sell.

 

Chart: Share price over the year to 15/07/2011 versus ASX200 (XJO)

Stock code: BPT

Charts: Beach Energy Limited

More news: Beach Energy Limited

Investor Centre: Beach Energy Limited

 

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Biggest Loser: Gunns (GNS)

 Closing price  $0.25
 Change  -0.015
 % change  -5.7%

 

It seems the shorters know what they’re on about. As the third most shorted stock on the ASX, and a regular inclusion in the top ten shorted stocks, Gunns (GNS) has been dumping for many months now as investors have deserted the company. Today saw it take out the biggest loser position as well as hitting an all-time low of 25 cents. The forestry group is down 60% in the last three months alone and is worth only 7% of what it was three years ago.

According to its website, GNS employs 2,200 employees in Tasmania, Victoria, South Australia and Western Australia across four divisions – Forest Products, Plantations, Timber and Pulp Mill. Currently Timber far and away employs the largest proportion of staff with over 80% of employees operating in the division and ten sawmills Australia-wide. 

With a dumping share price it’s impossible to find a broker or analyst with a positive word to say about the forestry company. Chris Elliott from Shadforth Financial Group had a firm sell on Gunns earlier this year in the 18 Share Tips column, saying that the company had been restructuring its business as other forestry groups fell by the wayside. “However, with tough trading conditions remaining and continuing delays regarding financing and construction of the Bell Bay pulp mill, GNS carries more downside risk than upside,” he said.  As early as mid-last year Grant Dwyer from Patersons Securities was warning investors about the timber company in last May’s 18 Share Tips. “Gunns is struggling on all fronts, and is unlikely to see any significant recovery in earnings until there’s improving demand for pulp and paper products,” said Dwyer. “Also, a short-term recovery in the managed investment scheme sector seems unlikely.”

According to Thomson Reuters consensus broker data the stock is classed as “UNDERPERFORM”. With the stock down 93% in three years underperform is hardly strong enough a word.

 

 

Chart: Share price over the year to 15/07/2011 versus ASX200 (XJO)

Stock code: GNS

Charts: Gunns Limited

More news: Gunns Limited

Investor Centre: Gunns Limited

 

More articles from this week’s newsletter

18 Share Tips – 18 July 2011

Bearish analysts outline stocks to avoid

Copper looking ready for a run

Premium coal stock portfolio soars 10.1% in four weeks

Is The US Already In A Double-Dip Recession?

Equity Valuation In Emerging Markets

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TRADING: Top ten shorted stocks on the ASX

Breaking News – all the latest Australian stockmarket news

Market Data: check out our market data section for charts, stock quotes and company news

 

Each trading day we will look at the top gainer and biggest loser for the day. Note that these are not recommendations to buy or sell, although we do include broker views on these stocks in the article.

Please note that TheBull.com.au simply publishes broker views on this page. The publication viewsof these  does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.