Australian Stocks: What Happened Today?

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    [0] => Array
        (
            [0] => ((WBC))
            [1] => ((FWD))
            [2] => ((AGO))
        )

    [1] => Array
        (
            [0] => WBC
            [1] => FWD
            [2] => AGO
        )

)

This story features WESTPAC BANKING CORPORATION, and other companies.
For more info SHARE ANALYSIS: WBC
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Stephen Hogan, Senior Private Client Adviser, Equities/Derivatives

Australian Market

The Australian market (XJO) closed up 19.7 points or 0.40% to 4901.4 today. We had a big charge higher in the morning but pulled back for the afternoon today. Overnight the Dow Jones rose 75.65 points or 0.50% to 15,300.30. We began trading today following suit from overseas, making a high of 4949.9 but after some data releases from China around mid day the market slipped almost back to opening price. The last hour of trading was a small rally. The best performing sector for the day was Health Care, rising 1.60 and the worst was the A-REIT, falling -1.02%.

In economic news, the Customs Administration announced today that China's exports dropped 3.1% in June compared to the year earlier, the first decline since Jan 2012.  Imports dropped 0.7%, leaving the country with a trade surplus of U.S. $27.1 billion for the month. That compared with market forecasts of a 4.0% rise in exports, an 8.0% increase in imports and a trade surplus of U.S. $27.0 billion.  

Domestically, the Westpac Consumer Sentiment survey released today showed a fall of -0.05% in July from June, which rose 4.7%. Year on year the index was 3.0% higher. The outlook for finances over the next 12 months dipped by 2.7%, but was still up 15.8% on July last year. The survey is taken by 1,200 people.

Virgin Australia Holdings Limited ((VAH)) and Air New Zealand Limited ((AIZ)) have been approved by the competition regulator Australia Competition and Consumer Commission (ACCC) to go ahead with extending their alliance on trans-Tasman routes for 3 more years. However the ACCC wouldn't drop the conditions requiring the two airlines to retain a certain number of flights on some routes. Also a request for a 5 year extension was denied on the grounds of the dynamic nature of the aviation industry.

Westpac Banking Corporation ((WBC)) is intending to raise up to $750 million via subordinated notes through investors. The subordinated notes should pay holders a return of 2.3%-2.45% as well as the 90 day bank bill swap rate. The bank has said the debt issue will bolster its capital position, as regulators require banks to make their balance sheets more conservative. This comes after ANZ ((ANZ)) announced yesterday that its own offer of a hybrid debt issue had received $1 billion worth of buying interest.

Kingsgate Consolidated Limited ((KCN)) has received environmental approval from the Chilean government for its local gold and silver mine. Kingsgate said an environmental impact assessment submission for the Nueva Esperanza project, in the Atacama region of Chile, had been approved, but the feasibility study was still being completed. KCN's chief executive Gavin Thomas said ''we remain confident that the project will continue to advance despite the volatile metal price conditions.''

AUD is currently trading at $0.9188, up $0.0013 against the USD.

Top Performers

Bradken Limited ((BKN)) up $0.32 or 7.21% to $4.76

Energy World Corporation Limited ((EWC)) up $0.025 or 5.88% to $0.45

Mount Gibson Iron Limited ((MGX)) up $0.03 or 5.83% to $0.545

Linc Energy Limited ((LNC)) up $0.06 or 5.61% to $1.13

Resolute Mining Limited ((RSG)) up $0.03 or 5.36% to $0.59

Bottom Performers

Billabong International Limited ((BBG)) down -$0.025 or -10.42% to $0.215

Fleetwood Corporation Limited ((FWD)) down -$0.46 or -10.02% to $4.13

Discovery Metals Limited ((DML)) down -$0.015 or -8.11% to $0.17

Cudeco Limited ((CDU)) down -$0.115 or -6.27% to $1.72

Perseus Mining Limited ((PRU)) down -$0.03 or -5.83% to $0.485

Our Comments

Today we purchased Atlas Iron ((AGO)) for the model portfolio albeit only a small position. The iron price is trading really well in a seasonally weak time for the iron price when inventories are generally high however importers in China are still ordering up in big numbers. Atlas is a reasonably low cost producer in expansion mode with very little debt and plenty of cash on hand. As production ramps over the next 18 months earnings are forecasted to increase to 12cps 2014, putting it on a forward P/E of 6.4. Will also believe that AGO is a very big potential takeover target for an overseas business looking to get iron ore exposure in Australia premier resource area. Consensus short term targets amongst major brokers is $1.40 in the short term.

We have designated $20k or 4% of the portfolio to this position and have long term targets around $2.20.

We also bought a small position in Mermaid Marine ((MRM)) in line with our overweight position in the oil and gas sector. Mermaid is a brilliant business that provides marine services to offshore oil and gas producers and explorers. Consistent earnings per share growth in the vicinity of 10%-20% and return on equity of over 26% makes this attractive with a 3% yield fully franked to cushion any downside.

(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)
 

Re-published with permission. Views expressed are not by association FNArena's (see our disclaimer).

Stephen Hogan is an Authorised Representative of Novus Capital. Authorised Representative No.345411 – http://www.stephenhogan.com.au

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