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Top Gainer: Envestra (ENV)

 Closing price  $0.675
 Change  +0.04
 % change  +6.3%

 

Gas stocks are on the move. After ESG rocketed 41.2% yesterday and another 4.2% today on Santos’ takeover bid, Investra (ENV) joined in on the action today as it jumped 6.3% to be the day’s biggest gainer.

Now up 32% over the past year, ENV has been a great performer for investors in recent times – hitting its highest point since December 2008 on July 7th this year. However even with today’s gains it’s a far cry from the level it was at before the GFC, when it was trading around the $1.20.

ENV is one of Australia’s largest natural gas distribution companies, and according to its website it owns 21,000 kms of natural gas distribution networks and 1,000 kilometres of pipelines, with more than one million customers Australia-wide. It then generates its revenue by charging retailers to transport natural gas through its networks.

ENV was listed on the ASX in 1997, then it acquired part of the former Gas and Fuel Corporation’s distribution network in Victoria for $1.2 billion bringing the total value of the Company’s assets to $2.1 billion. Envestra claims that it has strong and predictable cash flows from a natural monopoly business, infrastructure assets that can reliably supply gas to consumers for over 100 years or more and solid growth prospects in an expanding natural gas market.

In recent news, ENV jumped a regulatory hurdle with its plans to replace 1,300 km of ageing gas pipes across South Australia have been backed by the Australian Energy Regulator. The company also says that the carbon tax shouldn’t have a material impact on its bottom line, as it believes that it will be able to pass on the costs to consumers.

More significant may be the smell of takeovers in the air. APA Group (APA), which owns Australia’s largest natural gas distribution and storage infrastructure network, has interests in 12,700 kilometres of natural gas pipelines and also a minority interest in ENV. With takeovers all the rage at the moment and a depressed share price, it’s not impossible that APA – or another suitor – is weighing up a takeover bid.

Based on Thomson Reuters data, three analysts have a buy on the stock, three have a hold, two have a sell. 

 

Chart: Share price over the year to 19/07/2011 versus ASX200 (XJO)

Stock code: ENV

Charts: Envestra Limited

More news: Envestra Limited

Investor Centre: Envestra Limited

 

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Biggest Loser: Pacific Brands (PBG)

 Closing price  $0.635
 Change  -0.03
 % change  -4.5%

Investors in Pacific Brands – which manages some of Australia’s most recognised brands, such as Bonds, Slazenger, Hard Yakka, KingGee and Dunlop – must be wondering how much further the stock can fall. After hitting an all-time high of $3.70 in July 2007, four years later PBG sits at a paltry 63.5 cents, having lost 83% of its value. It was the day’s biggest loser on Tuesday, falling a further 4.5%, taking its losses since the beginning of the year to 35%.

After David Jones’ shock announcement last week that it had a record fall in sales for the quarter – which sent it’s shares diving 25% – the retail sector has experienced heavy selling pressure, and PBG has not been immune.

Kien Trinh quant analyst with Patersons Securities recommends investors avoid Pacific Brands for the moment given it is currently losing earnings momentum. Matthew Kidman portfolio manager Wilson Asset Management agrees, reminding investors that while it may “look cheap”, PBG has already been hit with an earnings downgrade and there could be more to follow.

Kidman also says that it’s conceivable that the market could hit 3400 points before finishing the year somewhere between 4000-4500 points, and then bounce lower in 2012. “Unless interest rates are cut, Australia is going to head into recession if it’s not already there,” says Kidman. “Within the current secular bear market, we’re not going to get any decent returns for quite a while.”

Back in November 2010 when PBG announced that it was selling its Sleepmaker division, Steven Hing of Novus Capital identified that the stock looked like it was in trouble, predicting a fall to 80 cents (it was trading at $1.16 at the time).  The company is struggling in the current market environment as margins are squeezed amid a stronger Australian dollar making imports cheaper,” said Hing. It seems that things became even worse than Hing had imagined, with the stock now at 64 cents.

More recently, Cameron Bell of Intersuisse, and Chris Elliott, Shadforth Financial Group told TheBull this month that they each have sells on Pacific Brands.

Bell says that the company has been trying to turn things around for a while now, but it’s stuck in a struggling retail sector and is exposed to a possible retreat in the Australian dollar and higher costs in China. “Uncertainty surrounding the restructure and a reliance on acquisitions to boost revenue also concerns us,” he says.

Elliott agrees that there will be revenue pressures for some time. “In the past 12 months, PBG has been restructuring – and culling non-performing brands – but it’s failed to meet expectations with the stock price continuing to fall,” says Elliott.

Other analysts are more bullish on PBG’s prospects. Based on Thomson Reuters data, 8 analysts have a buy on the stock, 6 have a hold, 2 have a sell. 

 

Chart: Share price over the year to 19/07/2011 versus ASX200 (XJO)

Stock code: PBG

Charts: Pacific Brands Limited

More news: Pacific Brands Limited

Investor Centre: Pacific Brands Limited

 

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.