Tag Archives: Uranium

article 3 months old

The Short Report

 By Chris Shaw

The past week has seen a number of relatively significant changes in short positions on the Australian Stock Exchange, with 10 companies seeing a change of more than 1% in their total short positions relative to the previous week.

Among those where shorts came down were Beach Energy ((BPT)), shorts here falling by 3.39% over the week to 0.60%. The change follows news the Tantanna to Gidgealpa pipeline is back online, something UBS noted would boost oil volumes for Beach.

Paladin ((PDN)), BlueScope Steel ((BSL)) and James Hardie ((JHX)) also experienced falls in short positions of more than 2% over the past week. For Paladin the change may reflect the Federal Government's proposal to end the ban on uranium sales to India, BA Merrill Lynch seeing this as increasing the pressure on those opposed to uranium mining.

BlueScope has announced a capital raising and the market has likely adjusted its views on the stock given the move will strengthen the balance sheet, while the second quarter report from James Hardie last month came in above most market expectations.

David Jones ((DJS)) has also seen shorts come down, the fall of 1.58% bringing total shorts down to 8.42%. The expected Reserve Bank of Australia rate cut announced yesterday is regarded as a potential positive for the retail sector.

Shorts in Aston Resources ((AZT)) also fell by 0.65% to 0.50% in the week from November 23, which may reflect preliminary merger discussions between Aston and Whitehaven Coal ((WHC)). UBS suggests such a merger would deliver some shared synergies.

In terms of increased short positions, the largest gain over the week from November 23 was in Campbell Brothers ((CPB)), this despite a strong interim profit result. Valuation seems a concern for Campbell Brothers, JP Morgan noting the stock is priced for a continuation of buoyant conditions in its core markets.

Shorts in White Energy ((WEC)) also rose by nearly 2% for the week to just over 3.0% in total, the market still adjusting to the announcement earlier in November of an apparent fall-out with joint venture partner and coal supplier PT Bayan.

Western Areas ((WSA) saw a jump in shorts of 1.26% to 6.7% despite the company announcing the start of underground mining at Spotted Quoll. The start of new operations is when mining companies tend to experience the most teething difficulties, so investors may be adopting a cautious approach while expecting operational hiccups.

Unlike the fall in shorts for David Jones, fellow retailer Myer ((MYR)) has seen shorts rise by 1.25% to more than 11.3% in the past week. This continues a trend of increased short positions in the stock over the past month. RBS Australia estimates Myer is currently trading at a discount to David Jones. This might explain the diverging trend between the two.

RBS also notes an increase in shorts in OM Holdings ((OMH)) over the past week, which may indicate traders continuing to position themselves ahead of an expected equity raising to help fund the Sarawak smelting project.

From a longer-term perspective of a few weeks, RBS Australia notes short positions in ASX ((ASX)) have been creeping up over the past month and now stand at around 1.36%. This is up from around 0.8% a month ago, the change possibly explained by the market accounting for softening volumes in both equities trading and new listings, as well as increasing competitive threats that are emerging.

Another major increase over the past month has been in Bank of Queensland ((BOQ)), shorts here rising from 2.88% late in October to more than 4.5% in late November. Poor credit quality in the core Queensland market has been a major market concern, though some stockbrokers feel this threat has been overplayed and so the stock is seen offering value.

Shorts in Flight Centre ((FLT)) have also risen over the past month, increasing by more than 2.0% to a total short interest of nearly 9.0%. This comes despite the most recent update from the company in early November indicating a strong outbound leisure travel market. This is causing earnings to track well above year ago levels.

Another significant increase over the past month has been to short positions in Wotif.com ((WTF)), which have risen by just over 2.5% to more than 6.2%. Over the last few weeks broker commentary on Wotif.com has reflected increasing concern over the group's growth profile as competition continues to increase.

Falls in short positions of 1-2% over the past month have been experienced by Carsales.com ((CRZ)) and Goodman Fielder ((GFF)), the latter coming at the same time as management indicated a strategic review was still being undertaken to find the best way forward for the company.

 

Top Ten Largest Short Positions

Rank Symbol Short Position Total Product %Short
1 FIX 209662 407763 51.42
2 BBG 28297259 255102103 11.11
3 BOQ 11865233 225369547 5.26
4 ALL 25035750 543181024 4.62
5 APN 25522616 630211415 4.03
6 ARU 10658766 367980342 2.87
7 AUT 11710494 411655343 2.82
8 ALS 2494569 94193403 2.64
9 ALK 6992475 269028158 2.60
10 ANN 2792718 131197201 2.12

To see the full Short Report, please go to this link

IMPORTANT INFORMATION ABOUT THIS REPORT

The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.

It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position “naked” given offsetting positions held elsewhere. Whatever balance of percentages truly is a “short” position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, “short covering” may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.

Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to “strip out” the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.

Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option (“buy-write”) position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a “long” position in that stock.

Another popular trading strategy is that of “pairs trading” in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a “net neutral” market position.

Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are “short”. Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.

Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.

FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

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article 3 months old

Uranium Term Prices Slip

By Greg Peel

Industry consultant TradeTech closed out its spot price indicator for November month-end at US$51.50/lb, down US25c from end-October. The slight drop in price belies activity earlier in the month when a burst of enthusiasm pushed the spot price US$4 higher, only to see buying interest quickly wane once more.

The month saw 34 transactions reported totalling over 5 million pounds of U3O8 equivalent, with traders rather than end-users doing most of the buying, TradeTech notes. Traders, producers and hedge funds were present on the sell-side.

Looking at last week's activity, month-end saw sellers keen to close out positions before some buying interest returned once we moved into December. Eight transactions totalling 1.2 million pounds saw TradeTech's indicative spot price tick up US25c to US$51.75/lb by week-end, but that's still down US50c from the previous week's price. Utilities were on the buy-side and producers on the sell-side with traders and hedge funds playing both sides of the spread.

The month of November saw only one transaction in the term market, involving one million pounds of U3O8. TradeTech has nevertheless lowered its indicative pricing for both the medium and long term markets, with the medium term down US50c to US$54.50/lb and the long term down US$1 to US$62/lb.

In a last minute sector update, the industry consultant reported overnight its daily spot price indicator regained US25c to US$52/lb.


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article 3 months old

The Short Report

By Chris Shaw

On face value the second week of the FNArena Short Report looks very similar to last week, as eight of the top 10 securities are the same and the top seven are in the same order as the week before. But as with last week, the significance comes in identifying changes to short positions rather than the actual percentage of a particular security that has been sold short.

The top 10 short positions over the past week on the ASX have been JB Hi Fi ((JBH)), ISO, the Small Ordinaries index tracker, Fairfax Media ((FXJ)), Billabong ((BBG)), Myer ((MYR)), David Jones ((DJS)), Flight Centre ((FLT)), Gunns ((GNS)), Perpetual Trustees ((PPT)) and Lynas Corporation ((LYC)).

Shorts in Gunns have increased significantly to nearly 8% from just over 5% the previous week, this adjustment occurring in the lead-in to the company's annual general meeting. In contrast, most of the rest of the top 10 have seen little change, the likes of Myer, JB Hi Fi, Fairfax and Flight Centre all recording only minor adjustments in total short positions in the past week.

Numbers have risen slightly for Billabong, which coincides with share price weakness last week some in the market attributed to investors selling given potential for the stock to be removed from the ASX100 index. Removal from such an index would cause some fund selling given the mandates fund mangers have in place in regards to what stocks they can hold in their portfolios.

Outside the top 10, short positions have increased for the likes of Resolute Mining ((RSG)) to more than 2.6% from less than 1.0% previously, this coming after the issue of more than 5.6 million new shares following the exercise of some listed and unlisted options.

Shorts have also increased in Cochlear ((COH)) to more than 6% from around 5% previously, the general uncertainty of the company's product recall being added to by a report from Credit Suisse of market share in bone conduction devices coming under pressure from competitor Med-E1.

Steel plays remain out of favour as short positions in both BlueScope ((BSL)) and OneSteel ((OST)) have risen over the past week, this on the back of BlueScope's move to raise equity to address balance sheet concerns.

Aston Resources ((AZT)) announced changes to its board earlier this month and the market has responded by an increase in short positions, while shorts in Goodman Fielder ((GFF)) also rose leading into the group's annual general meeting.

Bathurst Resources ((BTU)) also saw an increase in short positions leading into the announcement of first coal exports from the Buller project, while investors took the opportunity to increase shorts in Beach Energy ((BPT)) prior to that company's annual general meeting.

On the other side of the market, shorts fell in Energy Resources of Australia ((ERA)) as the company completed a bookbuild for the retail shortfall of a recent equity raising. There are no signs of any major shift in preferences in the uranium sector, as the level of shorts in Paladin are largely unchanged.

Santos ((STO)) has enjoyed a reduction in short selling positions since the last FNArena Short Report, which comes just prior to what was a disappointing update from rival Woodside ((WPL)) in terms of production guidance for the coming year.

While White Energy ((WEC)) has yet to fully resolve its feed coal supply issues, the market has reduced short positions in the stock from more than 2.8% to less than 1.4%, while the market also lowered total shorts in Western Areas ((WSA)) from about 6.3% to less than 5.5% leading into the company's annual general meeting. 

Top Ten Largest Short Positions

Rank Symbol Short Position Total Product %Short
1 JBH 20294875 98833643 20.53
2 ISO 885115 5401916 16.39
3 FXJ 289084551 2351955725 12.30
4 BBG 28575703 255102103 11.19
5 MYR 62657295 583384551 10.71
6 DJS 52701616 524940325 10.02
7 FLT 8507685 99990391 8.50
8 GNS 66008241 848401559 7.77
9 PPT 2890642 41342420 7.01
10 LYC 110615212 1713846913 6.41

To see the full Short Report, please go to this link

IMPORTANT INFORMATION ABOUT THIS REPORT

The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.

It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position “naked” given offsetting positions held elsewhere. Whatever balance of percentages truly is a “short” position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, “short covering” may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.

Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to “strip out” the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.

Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option (“buy-write”) position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a “long” position in that stock.

Another popular trading strategy is that of “pairs trading” in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a “net neutral” market position.

Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are “short”. Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.

Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.

FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Uranium And The French Threat

By Greg Peel

Due to the Thanksgiving holiday weekend in the US, industry consultant TradeTech did not publish its usual weekly update on uranium spot market activity other than to note a US50c drop in the consultant's spot price indicator to US$52.25/lb, which has since been followed by a daily spot price move yesterday of another US25c down to US$52.00/lb. It seems the US$4/lb jump in the spot price from three weeks ago has proven no more than a blip.

In the meantime, Deutsche Bank analysts have been closely watching political developments in France. France has embraced nuclear energy for thirty years and at 74% of electricity generation, France was the highest proportionate consumer of nuclear power in the world in 2010.

France will hold presidential elections in two rounds in April and May followed by parliamentary elections in June. Polls currently suggest Socialist Party candidate Francois Hollande would knock off incumbent president Nicholas Sarkozy if elections were held today.

Assuming presidential polls also reflect parliamentary preferences, Deutsche suggests the nuclear industry should be rather concerned about a policy agreement between the Socialist Party and the French version of the Greens. The agreement, which is yet to be formerly signed, is to undertake to close 24 of France's 58 nuclear reactors by 2025. Two would be closed immediately and a moratorium would be placed on any new construction outside of the one plant currently being built.

In the scheme of things, suggests Deutsche, such a move would be a lot more significant than Germany's decision to wind down nuclear power made earlier this year after the Fukushima disaster. It would likely also prompt a nuclear rethink across all of the European Union, with Belgium an obvious first candidate for change.

Interestingly, the analysts estimate a switch to gas power as nuclear power is decommissioned in France would amount to an extra 73Mt of CO2 being released in 2012-20. Aside from how this fits into to European emission restrictions, one presumes it must also put the French environmental party somewhat at odds with itself. We note however that Germany's policy response has been to champion a much greater contribution from renewable energy. Whether polly-speak can be matched by reality within commercial bounds is still a matter of conjecture. 

Either way, Deutsche will watch political developments closely given the potentially “profound” implications for uranium prices on the one hand and gas prices on the other, as well as the impact on European CO2 pricing (which might be interesting for Australia).
 

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article 3 months old

Another False Dawn For Uranium

By Greg Peel

It looked for all the world like long awaited buying interest from utilities – the real end-users of uranium – had appeared the week before last and might be set to gain momentum. But industry consultant TradeTech reports two US utilities seeking a total of 500,000lbs of U3O8 equivalent and a producer seeking 900,000lbs for short term delivery have found little trouble in securing supplies. This meant little buying interest in the spot market last week where hedge funds continue to line up as sellers.

Only four transaction totalling 900,000lbs of U3O8 equivalent were reported last week compared to the previous week's thirteen transactions for 1.8mlbs. Prices were hammered early in the week although began to creep up again towards the end, but TradeTech's indicative spot price is still down US$3.50 for the week at US$52.75/lb.

False dawn or just a stumble? 

The big news in the local uranium world last week was the Australian government's push to sell uranium to India despite India's non-signatory to the Nuclear Non-Proliferation Treaty. This had investors rather excited and saw them push up the prices of local uranium producers. One must remember however, and this point was reinforced by BHP Billiton ((BHP)) CEO Marius Kloppers at his company's AGM, that India already buys uranium from others, particularly Canada. India is not a new customer and thus will not alter net global uranium demand overnight.

The uranium market is global, as Kloppers pointed out. Outside of BHP's Olympic Dam site which will take years to expand, and Rio Tinto's ((RIO)) Ranger mine which remains underwater, Australia's other major uranium mines are foreign-owned. For Australian listed uranium miners Rio, Paladin Energy ((PDN)) and Extract Resources ((EXT)), production is centred in Africa, and Rio is also trying to buy into production in Canada.

In other words, having India as a customer will not alter the state of play that much and particularly not when some state governments, particularly that of uranium-rich Queensland, persist with uranium mining bans.

TradeTech's indicative term prices remain at US$55/lb (medium) and US$63/lb (long).
 

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article 3 months old

Uranium Awakes

By Greg Peel

Two weeks ago the spot uranium market remained fairly quiet but expressions of interest for supply began to be sought by buyers. This proved enough to spark up interest from traders, it would seem, because last week saw a sudden surge in activity. There is still a producer out there looking for 900,000/lbs of U3O8 equivalent and last week two utilities joined the fray seeking a total of 500,000lbs, reports industry consultant TradeTech.

Sensing upside afoot, traders piled in last week to take out most of what was on offer which has now cleared the market of material available in 2011, notes TradeTech, as well as the lowest priced material available for the first quarter 2012. Thirteen transaction were completed totalling 1.8mlbs of which half was traded on Thursday and Friday. To put the week's volume into perspective, eighteen transactions totalling 2.2mlbs were completed in the entire month of October.

The buying rush was enough to send TradeTech's spot price indicator up US$4.00 for the week to US$56.25/lb.

Has uranium now shaken off the Fukushima blues or is this just a false dawn? Early days.

TradeTechs' term price indicators remain at US$55/lb (medium) and US$63/lb (long).
 

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article 3 months old

Uranium Buying Interest Returning

By Greg Peel

Uranium industry consultant TradeTech closed its indicative spot uranium price at US$51.75/lb for the month of October. That's down US25c from the previous weekly spot price and also US25c down from the end-September closing price. And that about sums up the uranium market over the past couple of months – a whole lot of not much.

October proved a very quiet month in the market, with 18 transactions completed for a total of only 2.2mlbs, down from 4.2mlbs in September. All month the spot price fluctuated in a range of less than US$2.00/lb. The lack of action is largely reflective of a stalemate between buyers and sellers, in which the buyers have not been all that keen, but sellers have not been prepared to lower prices to settle deals. It still appears US$50/lb is a rough line in the sand.

Also complicating matters have been differences in product demand (U3O8 and UF6) and differences in location of delivery requests across the globe, all of which underlines the fact there is no “real” global spot price for “uranium”, and that's why TradeTech offers only an indicative price based on its market observations.

The industry remains unsure about levels of Japanese stockpiles no longer required, about ongoing US government plans to convert tailings stockpiles into useable product, and about the world's intentions from here with respect to nuclear energy, despite the Fukushima event now being eight months in the past. On the other hand however, the market has also been able to note ongoing corporate interest in uranium mining, most recently exhibited by rival bids for Canadian miner/explorer Hathor from industry heavyweights Cameco and Rio Tinto ((RIO)).

The good news is that a primary producer entered the market last week seeking 900,000lbs of U3O8 split between four different points of delivery. When a producer is buying spot uranium it usually implies a contract shortfall through lost production. TradeTech further notes several utilities – the real end-users of uranium – are contemplating entering the market for product in coming weeks.

The bad news is that the insignificant spot price movements of the last few months are an indication of sellers unwilling to sell too low, rather than a lack of sellers. Thus if some decent bids do begin to hit the market, TradeTech suspects they may be jumped on.

TradeTech settled its indicative spot price for last week at US$52.25/lb which is up US25c from the week before. Indicative term prices remain at US$55/lb (medium) and US$63/lb (long).
 

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article 3 months old

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The tide appears to have well and truly turned in favour of ratings downgrades on the Australian market, as over the past week brokers in the FNArena database have pushed through 18 cuts in ratings compared to just four upgrades. This brings total Buy ratings to 57.6%, down from 58.2% previously.

A resilient interim earnings result from Macquarie Bank ((MQG)) was enough for BA Merrill Lynch to upgrade to a Buy rating, the change also a reflection of what the broker sees as strong valuation support at current levels. 

As BA-ML points out, if current funding sources prove sustainable the value available from annuity-style income alone is enough to justify most of the current market value of the bank. This implies upside when an improvement in market conditions boosts earnings in other divisions. Others in the market have adjusted forecasts and price target for Macquarie post its profit result.

QR National ((QRN)) was also upgraded, Deutsche Bank moving to a Buy rating from the potential for upside to volumes, which should translate into increased earnings. Further justifying the upgrade in rating was Deutsche's new numbers translate to an increase in price target.

BA-ML also upgraded Santos (STO)) to Buy during the week, this following a review of its model resulting in a revaluation of the group's assets. While the value of the GLNG assets were reduced, this has been offset by increases to the value of the Cooper gas assets.

Expected price tension in gas markets in the coming year should be a further positive and support BA-ML's upgrade. Price target has also been increased modestly. Credit Suisse went the other way, downgrading Santos to Neutral on the back of recent share price outperformance.

A restructuring of debt and a capital raising by Transpacific Industries ((TPI)) has seen both RBS Australia and Credit Suisse upgrade to Buy ratings from Hold previously. The improved balance sheet removes some headwinds in the view of RBS, while management will be able to focus on operational rather than financial issues and this should boost the company's financial performance according to Credit Suisse.

On the downgrades side, OneSteel's ((OST)) revision to earnings guidance on the back of lower iron ore prices saw brokers cut earnings forecasts and price targets significantly. Both Deutsche Bank and RBS Australia downgraded ratings to Sell and Hold respectively, reflecting concerns over debt covenants and ongoing tough market conditions.

While quarterly production for Aquila Resources ((AQA)) was solid, RBS Australia has still downgraded to a Sell rating, this reflecting the broker's concern over the company's ability to raise sufficient cash to meet its development ambitions. This implies a capital raising is a possibility in coming months.

A similarly disappointing production report from Kingsgate ((KCN)) saw both Deutsche and Citi downgrade the stock to Hold from Buy previously, with targets and earnings estimates cut accordingly. A disappointing quarterly from Paladin ((PDN)) was also enough for RBS to downgrade to Hold from Buy, with earnings and price target also reduced.

Australian Pipeline Trust ((APA)) has been downgraded on valuation grounds by Macquarie following recent share price gains, while valuation has seen Credit Suisse make the same shift to Hold from Buy on Australian Worldwide Exploration ((AWE)) while RBS Australia issued a similar downgrade for Consolidated Media ((CMJ)).

UBS also downgraded Mirvac ((MGR)) to a Hold following a review of sector valuations, while Citi resumed coverage on Spotless ((SPT)) with a downgrade to a Neutral rating as tough market conditions have caused the broker to lower earnings expectations. Price target was also reduced.

Ongoing increases to the N5 implant failure rate have Credit Suisse concerned enough about Cochlear ((COH)) to downgrade to an Underperform rating on the stock, with the broker also cutting its price target.

Ongoing tough market conditions are behind Deutsche Bank downgrading to Hold from Buy on CSR ((CSR)), the broker also lowering earnings estimates and price target leading into the company's interim profit result. James Hardie ((JHX)) was downgraded by both Credit Suisse and JP Morgan, in both cases the rating moving to Underperform from Neutral.

Harvey Norman ((HVN)) copped two ratings downgrades to Neutral from Outperform post a 1Q sales result that showed the company has had to sacrifice margins to defend market share. Brokers across the market also lowered earnings estimates and price targets for the stock on the back of the report.

For Iron Road ((IRD)) it was a review of magnetite projects and changes to foreign exchange assumptions that saw RBS Australia downgrade to a Hold rating from Buy, the broker's price target also being reduced.

Tatts ((TTS)), GPT ((GPT)) and Blackmores ((BKL)) were also downgraded during the week, with valuation the key factor in the decisions of brokers to lower ratings for the three stocks, while tough ad market conditions saw forecasts, price target and rating for Ten Network ((TEN)) lowered by RBS.

Earnings and price targets for AMP ((AMP)) were trimmed to reflect weak fund flows in the September quarter, while construction delays have pushed out earnings expectations for Lynas ((LYC)) and this has resulted in Deutsche Bank also trimming its price target for the stock.

A mixed quarterly result has seen earnings estimates and price targets revised for Independence Group ((IGO)), while earnings expectations for Qantas ((QAN)) have come down to account for the impact of the grounding of the group's fleet and the industrial action of recent weeks.

Slightly lower than expected production for OceanaGold ((OGC)) has seen a trimming of earnings estimates and price targets, while it has been a similar story for earnings expectations for Horizon Oil ((HZN)) post its quarterly.

On a more positive note, earnings expectations for Campbell Brothers ((CPB)) have been lifted slightly following two bolt-on acquisitions by the company, while National Australia Bank's ((NAB)) result was enough to see minor increases to earnings estimates. Forecasts for Miclyn Offshore ((MIO)) have also moved higher as the company is to acquire the balance of Samson Marine it doesn't already own.


 

Total Recommendations
 Recommendation Changes

 

Broker Recommendation Breakup
Suisse,Deutsche<*br*>Bank,JP<*br*>Morgan,Macquarie,RBS<*br*>Australia,UBS&b0=125,119,129,104,88,144,193,159&h0=73,92,77,118,88,94,106,77&s0=39,15,14,6,26,22,7,13" style="border-bottom: #000000 1px solid; border-left: #000000 1px solid; border-top: #000000 1px solid; border-right: #000000 1px solid" />

 

Broker Rating

Order Company Old Rating New Rating Broker
Upgrade
1 MACQUARIE GROUP LIMITED Neutral Buy BA-Merrill Lynch
2 QR NATIONAL Neutral Buy Deutsche Bank
3 SANTOS LIMITED Neutral Buy BA-Merrill Lynch
4 Transpacific Industries Group Ltd Neutral Buy RBS Australia
Downgrade
5 AQUILA RESOURCES LIMITED Neutral Sell RBS Australia
6 AUSTRALIAN PIPELINE TRUST Buy Neutral Macquarie
7 AUSTRALIAN WORLDWIDE EXPLORATION LIMITED Buy Neutral Credit Suisse
8 COCHLEAR LIMITED Neutral Sell Credit Suisse
9 CONSOLIDATED MEDIA HOLDINGS LIMITED Buy Neutral RBS Australia
10 CSR LIMITED Buy Neutral Deutsche Bank
11 HARVEY NORMAN HOLDINGS LIMITED Buy Neutral Citi
12 HARVEY NORMAN HOLDINGS LIMITED Buy Neutral Credit Suisse
13 IRON ROAD LIMITED Buy Neutral RBS Australia
14 JAMES HARDIE INDUSTRIES N.V. Neutral Sell Credit Suisse
15 KINGSGATE CONSOLIDATED LIMITED Buy Neutral Citi
16 KINGSGATE CONSOLIDATED LIMITED Buy Neutral Deutsche Bank
17 MIRVAC GROUP Buy Neutral UBS
18 ONESTEEL LIMITED Buy Neutral RBS Australia
19 ONESTEEL LIMITED Neutral Sell Deutsche Bank
20 PALADIN ENERGY LTD Buy Neutral RBS Australia
21 SANTOS LIMITED Buy Neutral Credit Suisse
22 SPOTLESS GROUP LIMITED Buy Neutral Citi
 

Recommendation

Positive Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 TPI 17.0% 50.0% 33.0% 6
2 MQG 43.0% 57.0% 14.0% 7
3 AMP 75.0% 88.0% 13.0% 8

Negative Change Covered by > 2 Brokers

Order Symbol Previous Rating New Rating Change Recs
1 KCN 60.0% 20.0% - 40.0% 5
2 BKL 67.0% 33.0% - 34.0% 3
3 OST 86.0% 57.0% - 29.0% 7
4 HVN 50.0% 25.0% - 25.0% 8
5 TTS 57.0% 38.0% - 19.0% 8
6 GPT 50.0% 33.0% - 17.0% 6
7 AWE 86.0% 71.0% - 15.0% 7
8 MGR 86.0% 71.0% - 15.0% 7
9 SIP - 14.0% - 29.0% - 15.0% 7
10 CMJ 57.0% 43.0% - 14.0% 7
 

Target Price

Positive Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 TPI 0.842 0.872 3.56% 6
2 MQG 30.611 30.999 1.27% 7
3 CWN 10.263 10.350 0.85% 8
4 SIP 0.583 0.587 0.69% 7
5 MGR 1.369 1.371 0.15% 7

Negative Change Covered by > 2 Brokers

Order Symbol Previous Target New Target Change Recs
1 OST 2.104 1.619 - 23.05% 7
2 HVN 2.558 2.321 - 9.27% 8
3 KCN 9.444 8.804 - 6.78% 5
4 PDN 2.456 2.333 - 5.01% 7
5 TEN 1.090 1.036 - 4.95% 8
6 AMP 5.244 5.141 - 1.96% 8
7 TTS 2.410 2.363 - 1.95% 8
8 NWS 18.720 18.483 - 1.27% 7
9 COH 55.315 54.840 - 0.86% 8
10 CSR 2.805 2.798 - 0.25% 8
 

Earning Forecast

Positive Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 IMD 20.467 22.040 7.69% 3
2 AIX 22.300 23.033 3.29% 6
3 DMP 35.250 36.317 3.03% 6
4 FLT 185.338 188.838 1.89% 8
5 NAB 265.138 267.775 0.99% 8
6 MIO 20.904 21.070 0.79% 3
7 NWS 130.886 131.913 0.78% 7
8 CPB 282.029 283.886 0.66% 7
9 CTX 115.817 116.483 0.58% 6
10 BPT 4.040 4.060 0.50% 5

Negative Change Covered by > 2 Brokers

Order Symbol Previous EF New EF Change Recs
1 PDN 2.074 - 1.623 - 178.25% 7
2 LYC 4.475 0.850 - 81.01% 3
3 IGO 24.334 12.820 - 47.32% 5
4 AQP 31.065 16.798 - 45.93% 5
5 OST 24.343 15.114 - 37.91% 7
6 QAN 20.513 15.075 - 26.51% 8
7 AWE 8.857 6.871 - 22.42% 7
8 OGC 18.673 15.449 - 17.27% 3
9 HZN 2.720 2.425 - 10.85% 4
10 TEN 7.963 7.204 - 9.53% 8
 

Technical limitations

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article 3 months old

Paladin Not Ready For Sustainable Rally Just Yet

LAYMANS:
The picture for PDN has been turning decidedly negative over the past few months with little evidence suggesting a strong reversal is on the cards. That said, nothing goes down in a straight line indefinitely so the recent show of resilience is only to be expected. Theoretically an interim low could be in position though further evidence is required before getting overly confident that a more substantial rally is going to unfold. If we are looking for positives then there has been a significant increase in volume around the recent lows which suggests accumulation is taking place. That doesn’t automatically mean that a strong, powerful leg higher is going to unfold although it’s a step in the right direction nonetheless. A small pull-back is unfolding at the present time and if this trait continues it will be interesting to see whether those same buyers step up to the plate again. If they do it could well be that a sideways consolidation is going to unfold over the coming months providing some type of a base. This would be a positive characteristic and provide a launching pad for a more significant trend higher to commence further down the track. The problem with the company is that it’s entrenched in a downtrend. With the major lows recently breached it just reiterates the weak relative strength of the company.

TECHNICAL:
With our oscillator in the oversold position both on the daily and weekly time frames we’re technically in a position to see a larger bounce although no divergence is apparent. The positive volume attributes mentioned above can’t be ignored and imply that the 5-leg move from the high of wave-X has likely run its course. Even if we’re only seeing a counter trend move price should rotate up to the line of resistance. Also notice how the 50.0% retracement level shows good confluence with that area making it a logical target zone. This of course offers plenty of upside potential ahead though we can’t get overly confident quite yet. PDN is still sitting beneath the major lows set back in October 2008 so we’ve got to be slightly sceptical and be open to the possibility that something more sinister is unfolding. If the recent high at $1.855 can be breached with a degree of attitude then the bullish case over the medium term remains firmly in position. The one thing we don’t want to see is a swift reversal breaking beneath the low of wave-(v). Should this be the way forward then the stock becomes much more bearish opening the way for significant falls. Not our highest expectation but remember serious technical damage has been done and it’s by no means out of the woods yet. For the moment though we’ll concentrate on the price action over the rest of the week and into next and see whether the recent show of strength can continue. If some traction can be gleaned there is no reason why the typical retracement zone can’t be met though it’s unlikely to be a straight line move.

Trading Strategy

27/10:
One positive trait is that the upper trend line of the falling channel has been breached with price coming back down to retest. If you’re interested in a trade I’d be looking at the shorter time frame as oppose to a longer term prospect. Buying following a penetration above the recent pivot high at $1.86 would be perfectly acceptable with the initial stop just beneath the prior pivot low which at this stage is today’s low. This would offer a reasonable risk/reward trade assuming of course that our target area is going to be met. Just don’t get married to the idea that a powerful, impulsive multi-month trend is going to unfold as it’s highly unlikely to do so.

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not FNArena's (see our disclaimer).

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article 3 months old

Uranium Goes Nowhere In A Hurry

By Greg Peel

Early last week uranium market participants gather in Arizona for a Uranium Fuel Seminar and such conferences have a tendency to remove players from the market. Industry consultant TradeTech implies this was the case when a seller entered the spot market early in the week and found no one much home, sending the spot price down US75c to US$51.25/lb.

The conference was over by later in the week and while both sides of the price spread remain thin, the spot price recovered to be unchanged at US$52.00/lb where TradeTech has again settled its indicative price. Seven transactions totalling 900,000lbs made for a slightly higher volume week than recent times with the usual suspects on either side of the deals.

It would appear for the moment spot uranium is going nowhere much either side of its US$50/lb support level until more significant interest can return to the market.

Term prices remain unchanged at $55/lb (medium) and $63/lb (long).

 

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