Steven Hing, Novus Capital
Bow Energy (BOW)
This oil and gas explorer raised $40 million via a share placement at $1.25. It plans to expand into power generation by stgeloping a 30-megawatt coal seam gas power plant near Blackwater in Queensland. The company is offering a share purchase plan to eligible shareholders at $1.25 a share. Bow says the power station will be fuelled by gas from its coal seam field in Queensland. With $95 million in cash, after costs, the company will be well placed after the capital raising.
Mount Gibson Iron (MGX)
A hematite iron ore producer exporting to China, the company’s in a good position with low capital expenditure requirements. It has the lowest capital intensity of any Australian iron ore producer. The stock appears to be consolidating its recent price break out. I expect a move towards $2 from its $1.46 level in morning trade on November 20.
Lihir Gold (LGL)
Lihir is substantially higher than its August low of $2.40. The gold price is being driven by two stories – the fear of inflation and massive US debt weakening its currency. The issue for Australian gold producers is a strong Aussie dollar. As the Aussie dollar closes in on US parity, it negates the rally in the US dollar gold price. However, gold fundamentals suggest the price will continue to rise, so I’m prepared to hold gold producers at this stage.
Tabcorp Holdings (TAH)
The stock seems to have stalled despite a strong wagering month driven by the Melbourne Cup. Online bookmakers are challenging. At this stage, the chart suggests the price could go either way, so unless it falls through $7, I will hold for further stgelopments and its profit update post Melbourne Cup.
JB Hi-Fi (JBH)
The chart has effectively been a straight-line rise for the past 12 months, from $7 to $22.19 during trading on November 20. It surely must be getting expensive at these levels despite expansion plans and strong sales. The company is trading around 25 times earnings, so I would be happy to bank some profits at these levels.
The stock price has fallen from $8.40 to trade at $6.59 on November 20. The company faces increasing pallet competition and struggles to control inventories. If world growth continues to struggle, I’d suggest company earnings will do likewise. I am a seller, seeing the stock dip back to $5.70.
Michael Heffernan, Austock
Mermaid Marine (MRM)
A marine engineering services business, likely to be a beneficiary of the huge oil and gas Gorgon project in Western Australia. Its sharemarket fundaments are positive. It pays a moderate dividend and is in the right sector at the right time.
ARB Corporation (ARP)
This manufacturer and distributor of 4-wheel drive accessories has been one of the genuine strong performers during the financial turmoil of the past year. It’s an innovator in a competitive sector, and improving local and global economies paint a bright outlook.
JB Hi-Fi (JBH)
The electronics retailer has stunned the market with its resilience amid the economic and market turmoil of the past year. Its fundamentals and future growth still look good even if its price/earnings ratio is higher than other retailers. JB Hi-fi’s flexible and adaptable business model is most attractive to its younger customers.
The recent decision by the ACCC (Australian Competition and Consumer Commission) not to oppose a takeover of hardware chain Danks paves the way for Woolworths to be a genuine competitor to Bunnings in the next few years. Woolworths continues to be a reliable and solid sharemarket performer.
Aristocrat Leisure (ALL)
This gaming machine maker continues to face headwinds in Australia and the United States. Government changes to the regulatory environment is a continuing risk, and it faces a competitive threat from a US gaming machine maker that intends to sell machines in New South Wales. Until Aristocrat demonstrates that it can shrug off competitive challenges, investors should look elsewhere.
BlueScope Steel (BSL)
Disappointed the market with its recent profit downgrade. It also cautioned that its transition to recovery will be slow as steel tends to be a late market performer. In the short term, investors can find stronger growth opportunities elsewhere.
Les Szancer, Kinetic Securities
Australian Pharmaceutical Industries (API)
API’s pharmacy wholesaling business operates in an intensely competitive market, exposed to ongoing Federal Government efforts to restrain PBS (Pharmaceutical Benefits Scheme) spending on drugs. Expect the company’s revitalise program to yield significant savings, which will boost earnings from 2011. We see value at current prices.
Woodside Petroleum (WPL)
Offers high quality oil and gas assets and is a leader in LNG, which contributes a significant portion to earnings. Adding a fifth train at the north-west shelf facility has lifted LNG volumes during a time of depressed oil-linked prices. While the oil price is recovering from its lows, we expect LNG revenues to improve going forward.
Lihir Gold (LGL)
Gold is in a significant up trend and, while there may be some profit taking along the way, we are hanging on to our two main gold plays. The Lihir gold mine is a world-class resource, with a significant mine life. We have a favourable view on Lihir’s mostly unhedged position relative to today’s gold price. Demand for gold investments should remain strong during this period of global economic and financial uncertainty.
Newcrest Mining (NCM)
Australia’s largest gold producer, it offers the best asset suite of the few remaining independent Australian gold producers. After closing all gold hedging and loan contracts, Newcrest is fully exposed to a continuing strong gold price. The company is also a prodigious copper miner. Copper has languished for several years and is now starting to show signs of an upward trend.
Aristocrat Leisure (ALL)
The earnings outlook for this gaming machine maker appears to be challenging across all key operating regions. Regulatory issues in mature markets are likely to limit scope for growth. However, the company’s foray into emerging markets brings growth opportunities, but also higher risk. This stock price has been very volatile – you need a strong stomach to trade the shares.
Elders has stgeloped core rural and automotive businesses organically and through acquisitions. It reported a 15-month loss of $466.4 million to September 30, 2009, reflecting several non-recurring losses and write downs. The underlying loss of $51.8 million was largely in line with prospectus forecasts. The chart looks dreadful and volume is generally low.
Other articles in this week’s newsletter
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