Stocks to Watch Leighton Holdings (LEI)

Leighton Holdings (LEI) has evolved significantly from the construction company of its origins over 50 years ago, and is now the world’s largest contract miner.

LEI owns seven diverse and independent companies: Thiess, Leighton Contractors, John Holland, Habtoor Leighton, Leighton Asia, Leighton International and Leighton Properties.

The group operates in more than 20 countries from headquarters in Australia, Hong Kong, Malaysia and Dubai.

On 29 November, LEI was given an undertaking by ACS – the potential acquirer of LEI’s parent, Hochtief – that it will enshrine existing governance arrangements between LEI and Hochtief in the event of any takeover.

Among these are a promise by ACS not to increase its shareholding in LEI beyond 55% and maintaining LEI’s existing structure.

LEI’s involvement in the potential acquisition of its parent makes it one of the stocks to watch in coming months.

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Finance Market News and Investing Analysis November 29 2010

Finance Market News and Investing Analysis 29/11/2010. Receive daily free updates, analysis and recommendations with a free report.

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Blue Chip Stocks News Telstra (TLS)

Telstra (TLS) is a provider of telecommunications and information products and services, arguably Australia’s dominant telco company.  TLS has also long considered among the market’s blue chip stocks.

Its principal activities are the provision of telephone lines; national local, and long distance, and international telephone calls; mobile telecommunications; data; internet and on-line; wholesale; telephone directories; and pay TV.

TLS has been one of the shares to sell almost since the T2 float, independent of economic conditions, as customers have been shifting away from spending on landline products.

On 26 November, the Australian Senate has passed a bill to split TLS into separate retail and wholesale networks.

TLS will be required to give up parts of its existing copper-wire network in order to make way for the rollout of a fibre-optic network.  In return, the group will receive $11 billion in compensation.

CEO, David Thodey, said the compensation will be used to help fund acquisitions, pay down debt and/or initiate a share-buyback.

The bill will now head to the lower house for final approval.

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Stock of the Week Straits Resources (SRL)

Straits Resources (SRL) is a coal miner, with secondary interests in copper and gold mining.

SRL’s flagship operations include the Sebuku and Jembayan coal mines in Indonesia, which are owned by SRL’s subsidiary Straits Asia Resources.

SRL is now looking at a vastly changed future owing to a demerger, and a takeover offer from Thai-based PTT Mining.

The development will result in SRL becoming a pure coal play, whilst SRL will demerge its metals businesses under a new ASX-listed company, MetalsCo.

SRL says the demerger will provide greater clarity of identity to each of the businesses by creating a pure coal company and a pure metals company.

Operational update

In this month’s AGM presentation SRL updated the market as to its operational achievements and goals.

Straits Asia is targeting 16-18 million tonnes of production from Sebuku and Jembayan by 2013, and Tritton is targeting 25,000t copper production for FY11.

SRL’s Brunei drilling has commenced and Madagascar feasibility has reached completion.

Mt Muro Gold boasts a stable production platform and SRL anticipates it will be cash flow positive by the end of FY11.

The group is also actively exploring, investing around $20 million across the group in FY11.

Lessened loss

On 31 August, SRL posted an FY10 net loss of $69.4 million, which was less than FY09’s $235.3 million loss.

The result was impacted by the $72 million write-down associated with its Hillgrove Mine, whereas on an underlying basis, SRL posted a net loss of $18.5 million.

SRL’s focus in 2010 was on the recapitalisation of its Tritton copper mine in NSW and the Mt Muro gold mine in Indonesia, with the group investing $62 million in capex at its core operations during the year.

As a result of the capitalisation, SRL was confident enough to announce a 10% share buyback in addition to a 5 cent final dividend.

SRL boasts a strong balance sheet with cash and investments of $218 million.

SRL said that it was in a strong position to leverage off an upturn in global economic activity, targeting production of 27,000 tonnes of copper at Tritton in FY11.

Demerger delight

SRL has agreed to a demerger, and a takeover offer from Thai-based PTT Mining.

PTT has proposed paying $544.1 million for SRL's existing 40% interest in PTT Asia Pacific Mining Pty, which is also 60%-owned by PTT.

The development will result in shareholders receiving $1.72 cash per SRL share, in addition to one share in a new listed company called MetalsCo, which will include SRL’s existing metals and associated businesses.

SRL will hold onto its coal business and intends to become a pure coal company.

SRL says the demerger will provide greater clarity to each of the businesses by creating a pure coal company and a pure metals company. Moreover, the separation of distinct businesses creates efficiencies and a more appropriate platform for both metals and coal businesses going ahead.

Conclusion

SRL’s decision to demerge its coal and base metal assets is an important step in unlocking value for shareholders, and SRL’s stock has already risen on the development.

The new demerged company will be copper focused, with the Tritton copper mine near Nyngan in NSW targeting 25,000 tonnes in FY11.

SRL is positioned in three of the best commodities of the moment - coal, copper and gold.

Though SRL performed below expectations in FY10, the recapitalisation programs at Tritton and Mt Muro will be completed towards the end of FY11 and lay the foundations for sustained growth.

Given this potential upside, SRL is going to be one of the stocks to watch in coming months.

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Australian Stock Exchange & Finance Market News November 25 2010

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Hot Stocks Lynas Corporation (LYC)

Lynas Corporation (LYC) is involved in the exploration and development of rare earth minerals, and has been one of the market’s hot stocks in recent months.

LYC owns the richest deposit of Rare Earths in the world at Mt Weld (Western Australia), 35km south of Laverton in Western Australia.

Yesterday, LYC signed a strategic alliance with Japan-based Sojitz Corporation.

The agreement relates to securing additional rare earths for the Japanese market by accelerating the expansion of LYC’s rare earths project.

LYC will now seek US$250 million to cover the cost of accelerating the expansion in return for allocating 8,000 – 9,000 tonnes of rare earths per annum to Japan, for the next ten years.

LYC jumped over 10% on the news, making it one of the top performers in the Australian share market.

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Australian Blue Chip Shares News Qantas (QAN)

Qantas (QAN) is one of the world’s leading airlines, an Australian icon, and is considered among the market’s blue chip shares.

On top of its standard domestic and international flights, QAN also owns budget airline Jetstar, regional airline QantasLink and related travel businesses Qantas Flight Catering.

On 23 November, QAN advised that it plans to resume Airbus A380 flights from this Saturday, but only certain routes that don’t require the aircraft using full thrust.

The decision to restore flights follows an engine inspection program carried out in the wake of this month’s emergency landing in Singapore.

The initial flights will operate on routes between Australia and the UK.

QAN shares edged up 0.4%, making it one of the few gainers in the stock market on the day of its update.

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Australian Stock Market News and Finance Analysis November 23rd

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Australian Stock Market News and Finance Analysis 23.11.2010 Get free daily analysis.

Shares to Sell Karoon Gas (KAR)

Karoon Gas (KAR) is focused on identifying, exploring and developing acreage that is highly prospective for oil and gas.

KAR advised last Friday that it has discontinued plans to list on the Brazilian stock exchange, citing unfavourable market conditions.

KAR has been one of the shares to sell since reaching a high of $11 in late October, with the stock having plunged almost 30% since then.

KAR based its decision on recent oil and gas company capital raisings not performing to stock market expectations.

Karoon Gas also said that it will wait for conditions to improve before assessing other opportunities.

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Stock of the Week, AMP Limited (AMP) AXA Bid

AMP Limited (AMP) is a leading wealth management company with more than 3.4 million customers across Australia and New Zealand.

It is Australia’s largest retail and corporate superannuation provider, one of the region's most significant investment managers, and is widely considered among the blue chip stocks.

After bouncing back in 2009 after a disastrous 2008, AMP encountered further challenges in 2010 on fears of a global economic slowdown.

However, the company is now looking at a stronger future on the likelihood of its latest bid for AXA Asia Pacific Holdings going ahead and on a recovering global and local economy.

Overcoming obstacles

In August, AMP released its 1H10 results. Net profit for the half rose 17.4% to $425 million on growth initiatives, and ahead of analysts’ forecasts for around $383.4 million.

Of concern was AMP’s underlying profit result of $383 million. Though this was up from $367 million in the same half a year ago, it was below market expectations for around $420 million.

AMP declared a half dividend of 15 cents per share, which was up on a dividend of 14 cents a year ago.

One major upside was cost guidance. AMP expects costs in the Australian Financial Services division to rise just 3% in 2010, down from a prior forecast for 4%-5% higher costs.

Holding onto bid hopes

AMP’s stock has regained ground over its proposed $13.3 billion takeover of AXA Asia Pacific Holdings, announced yesterday.

Under the terms of the proposal, AXA shareholders will receive 0.73 AMP shares for every AXA share owned, $2.55 in cash, as a well as a final dividend of 9.25 cents per AXA share.

Importantly, AMP said that it will remain soundly capitalised following the merger, and would maintain its policy of paying out 75% - 85% of its underlying profit in dividends.

The deal is also expected to be EPS accretive from FY12 and will assume annual net synergy benefits of $120 million.

As a result, the combined AXA/AMP entity will be one of the stocks to watch in coming years.

Conclusion

Market interest in AMP has returned in spades owing to the group’s latest bid for AXA Asia Pacific Holdings, which looks likely to go ahead.

Investors are optimistic over the deal, and if it goes through as planned it is likely AMP will see significant upside.

Though AMP recently reported mixed 1H10 results, recovering global markets and strength for the Australian finance sector should also put the group in good stead going forward.

Following AMP’s renewed AXA bid, we would like to upgrade our rating on AMP to a Hold (from Sell) in anticipation of upside from the deal.

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ANZ Stock News, Korea Exchange Bank Acquisition?

Australia and New Zealand Banking Group (ANZ) is the nation's third-largest bank by market capitalisation, is among the top 50 banks in the world, and is also widely considered among the blue chip stocks.

ANZ operates retail and business banking in Australia, New Zealand and throughout the South Pacific.

Recent news reports have suggested that ANZ’s attempt at acquiring Korea Exchange Bank has been thwarted by Lone Star Funds.

Lone Star, which owns 51% of Korea Exchange, has reportedly sold its stake to another bank, believed to be South Korean-based Hana Financial Group.

ANZ denied the rumours, instead stating that it is continuing to participate in the due diligence process.

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Blue Chip News BHP Billiton (BHP)

BHP Billiton (BHP) the world’s largest diversified resources company, with a global portfolio of high quality assets and more than 100 operations in 25 countries.

It is an industry leader in most of the major commodities markets, including aluminium, coking and thermal coal, copper, manganese, iron ore, uranium, nickel, silver and titanium.  On top of this, BHP has sizeable interests in oil, gas, natural gas and diamonds.

BHP is also the largest company (by market cap) in the Australian share market, and is widely considered among the blue chip stocks.

On 15 November, BHP formally withdrew its US$39 billion offer for Potash Corp.  The offer’s withdrawal followed Canada’s recent decision to block the bid on grounds it did not provide a net benefit to the country.

BHP maintained that its bid would have resulted in a significant net benefit to Canada, with its concessions ranging from foregoing tax benefits in which was entitled to as well committing large sums on exploration and development.

However, BHP’s undertakings appeared to be too little too late, with Canadian authorities believed to have been unhappy with the extent of BHP’s concessions.

With the bid now cancelled, BHP has promised to return US$4.2 billion to its shareholders through a share buy-back program.

In addition, BHP plans to invest US$15 billion in its global business in the coming financial year.

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ASX Stocks to Watch Myer Holdings (MYR)

Myer Holdings (MYR) is among Australia’s largest department stores, retailing apparel, fashion, fragrances and cosmetics, homewares, electrical goods and general merchandise.

The company floated on the ASX in November last year and became one of the stocks to sell in the months that followed amid a generally bearish outlook for retailers.

Although MYR recovered from those lows, rising interest rates have again clouded the sales outlook meaning it will be one of the stocks to watch in coming months.

On 12 November, MYR reported a 1.5% drop in 1Q11 sales from a year ago to $706 million.  Like-for-like sales were down 1.7% on-year.

MYR attributed the fall in sales to price deflation for its flat screen TVs and other entertainment products.

However, MYR advised that sales for the remainder of 2011 will benefit from a number of growth initiatives such as new stores, refurbishments, and a total rebuild of the Myer Melbourne store.

The group also reaffirmed its previous FY11 guidance of a 5% - 10% growth in net profit to $177 million - $186 million.

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Australian Stock Exchange News and Analysis November 12 2010

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Australian Stock Exchange News and Analysis 12/11/2010 Click for a free report.

Stock of the Week Galaxy Resources (GXY)

Galaxy Resources (GXY) is an S&P/ASX300 emerging mining and chemical company focusing on lithium production.

Lithium is used in a range of electronics such as mobile phones, but crucially is a key ingredient in batteries for electric cars - which is set to become a major part of the car market.

As a premium supplier of battery grade, GXY is looking into starting up a battery factory and moving into manufacturing as well as mining on forecast demand for lithium in electronic products.

Amazing applications

Lithium is used in a number of electronic applications. Lithium usage in electronics has grown 25%-30% from 1999-2008, and is currently employed in Porsche starter batteries, energy storage and E-Bikes.

China is a major driver of E-Bikes, with production in Asia totalling 44 million bikes per annum. GXY forecasts 2016 sales of US$20 million for E-Bikes, with a large proportion of E-Bikes utilising lithium batteries.

An obvious major future driver for lithium battery demand will come via cars. Car lead acid batteries will convert to lithium ion batteries, which have already been employed in the Porsche 911 GT3 model.

Innovations such as airbags, electronic windows and electric mirrors in cars all started with high-end cars, and lithium batteries look set to follow the same trend.

China is slated to drive growth of electronic vehicles into the future, with 50% ownership of EVs and hybrids predicted by 2030 and 10% of vehicles forecast to be emission-free by 2013.

Operations

GXY is at an advanced stage of developing its Mt Cattlin Lithium Project (hard rock spodumene) in Ravensthorpe, Western Australia.

The project encompasses a mine and minerals plant which will produce 137,000 tpa of 6% Li2O spodumene concentrate.

GXY intends to add value to the Mt Cattlin Project by establishing its own downstream lithium processing facilities in China.

Recent activities

Earlier this month, GXY confirmed it was establishing its Asian footprint and funding growth through listing on the Hong Kong stock exchange (SEHK), opening the group up to a larger pool of institutional and retail investors.

The company has also just finalised a capital raising of $91.5 million to meet its funding requirements and for ramp-up of production at Mt Cattlin and the continuing construction of Jiangsu.

The group’s most recent major financial results were for the June 2010 half, where the group reported cash and cash equivalents of $18.3 million, up from $3.4 million in the June 2009 half.

Its positive result has seen GXY become one of the hot stocks in recent months, surging from around 95 cents in August to be currently trading around $1.60.

Conclusion

GXY is set to benefit from forecast future demand for lithium in electronic products, particularly in electronic car batteries, with demand from China set to drive the boom.

Lithium usage in electronics has already grown 25%-30% from 1999-2008, and is currently employed in Porsche starter batteries, energy storage and E-Bikes.

GXY’s focus on lithium puts the company at the forefront of expected lithium demand as a premium supplier of battery grade.

Further upside could also come from GXY’s move into manufacturing, and as result, it will be one of the stocks to watch in coming months.

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Australian Stock Exchange and Finance Market News November 11 2010

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Shares to Sell Programmed Maintenance Services (PRG)

Once simply a painting services company, Programmed Maintenance Services (PRG) has expanded into a full-scale property maintenance group.

PRG directly employs more than 11,000 staff and tradespeople across a broad range of government and private sector industries in the resources, infrastructure, education, manufacturing & logistics, commercial/retail and tourism and recreation markets.

It has also been one of the shares to sell over the past year, with its stock price tumbling from around $4.60 in October 2009, to close yesterday at $1.38.

Highlighting its woes, PRG announced yesterday that it will restructure its property services business to reverse recent under-performance.

The group cited reduced demand for its services and lower indexation revenue as the key reasons behind the restructure.

PRG advised that restructuring costs are expected to total $15.8 million.

The news saw PRG plummet over 20% on the day, putting it among the worst performers in the Australian share market. Learn more with a free trial.

Australian Stocks News Adeliade Brighton (ABC)

Adelaide Brighton (ABC) manufactures and distributes lime, ready mixed concrete and concrete products and materials to the construction, engineering, infrastructure and resource industry sectors in Australia.

ABC is also the market leader in the Western Australian, Northern Territory and South Australian cement and lime markets, and its underlying strength has seen it as one of the shares to buy in recent months..

However, on 9 November, ABC warned it may not renew some of its major cement and lime supply agreements expiring at the end of 2010 and during 2011.

The group is cautiously confident of retaining around 50% of a supply contract with Cement Australia, in addition to other major supply agreements.

The threat of losing its contracts was a major reason behind an 11.4% plunge in ABC’s share price on the day.  This made it one of the worst performers in the Australian stock market.

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