Archive for July, 2011

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    • The Covered Call – Part 2 of Options Trading for All Types of Market Environments

    Friday, July 22nd, 2011

    Part 2 – The Covered Call

    The Covered Call, also known as a Covered Buy Write or Covered Call Write, is the options trading strategy that most beginners learn about. It is a strategy which seeks to make a monthly income by selling call options against existing stock holdings.

    The Covered Call allows you to generate a regular monthly “rental” income on your current stock portfolio, even when the stock prices remain stagnant. The Covered Call can also be used to protect against a moderate short term drop in stock price, to a limited extent. These characteristics make the Covered Call an attractive options trading strategy for all traders who hold long term stock positions.

    Use a Covered Call when you wish to hold on to a stock that is trading sideways to slightly higher, while making a monthly income from it. You can also use a Covered Call to protect your equity when the stock goes into a slight correction, but only to a specific price limit. A Covered Call consists simply of writing 1 contract of out of the money call options for every 100 shares of the underlying stock owned.

    The Covered Call is ideal for generating a regular monthly “rental” income from your current stock position.

    A recent trade that paid handsome dividends was Fosters, which we entered when there was takeover speculation, back in June.

    We bought Fosters at $4.55 and wrote the $4.65 Jul11 Calls for $0.22 and closed the position on the 22nd of June 2011 after the takeover bid was announced, for a tidy 7% profit.

    Investors who took advantage of our High Yield Covered Call strategy actually made 30% on the same trade. This strategy will be discussed in a later article, or you can call me on 1300 610 024 to talk about it further.

    Fosters Covered Call Trade

    Chart 1: Fosters Covered Call Trade (Took Profits on Takeover Announcement)

    Covered Call Profile

    Covered Call Profile

    You can plan and analyse your trade as shown above, using the Derivative Profiler option in the Market Analyser software.

    Trade Note

    We could have made a higher return on the trade if we just bought the stock (14% return), but by using the Covered Call strategy we reduced our risk as we were being paid $0.22 or 5% to wait for the bid to come along. At the time we entered the trade Fosters was saying that they had not been approached by any interested party.

    The Trade

    Options can be used in order to reduce your risk while participating in the profits from a significant move by the underlying stocks. Here we’ve explained the Covered Call strategy which is used to generate monthly “rental” income from your current stock position.

    In future articles we will talk about the Covered Call Collar strategy, which is similar to the protective put options strategy in that you also buy put options as protection, and the Stock Repair strategy which is particularly relevant to this market.

    Utilise the features in the Market Analyser software to trade plan your options trades for the particular options strategy using your specific trade selection criteria. You will save time and potentially reduce your trading risk.

    By Michael Hevern
    Head of Research

    See Also:

    Options Trading for All Types of Market Environments (Part 1): The Protective Put

    For Buy and Sell recommendations on ASX listed companies register for a free trial of MDS Financial Research.

    MDS Financial Advisory Services offers general advice on trading options to generate consistent steady income on your investment portfolio. Call 1300 610 024 for further information.

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    Stock Market Analysis: Investors Hunt For “Risk-On” Trades

    Friday, July 22nd, 2011

    * U.S. stock markets surged overnight and look set to test their multi-year highs near-term.
    * European stock markets also surged overnight, as European leaders edged closer to a fresh financing package for Greece and avoiding contagion concerns in other debt-laden members of the euro zone.
    * Asian stock markets ended mixed yesterday, as Chinese manufacturing data weighed on sentiment.  Expect Asian markets to play catch up with the U.S. and European markets as investors look for “risk-on” trades.
    * Commodities prices traded generally mixed, but Gold prices remained below record levels again, closing below $US1,600.

    The SPI Futures is trading below the key pivot level of 4600, ending up 1.0% (or 45 points) at 4,579. The key levels for our index today are 4600 and 4530.  Australian shares are set to trade higher today after positive leads from key markets in the U.S. and Europe. 

    Investors received a boost as EU leaders made progress on the debt crisis, but the U.S. debt ceiling issue is still unresolved.  Expect to see some bargain-hunting taking today, as we appear to have found a base, providing the U.S. can get their debt ceiling issues resolved.

    See below for ASX listed companies in the news today.

    Economics News Today

    *  Q2      International Trade Price:  Import & Export Reports.

    U.S. Markets

    U.S. stock markets surged overnight and look set to test their multi-year highs near-term.  Investor optimisim blossomed as the EU made progress on containing their sovereign-debt crisis, taking steps towards a fresh Greek financing package and as the U.S. moves closer to addressing its debt ceiling issues. 

    The Dow Jones Index finished higher, as all but one stock in the DOW 30 participated in the rally, and it is now within 0.5% of its multi-year high.  In the broader market the S&P 500 stock index gains were led by the financials, energy and materials sectors and it is now within 1.5% of its multi-year high, while the tech-heavy Nasdaq continued higher on the back of more solid earnings reports. 

    Traders pushed stocks prices higher on hopes that U.S. negotations over raising of the debt ceiling will be resolved, though there is still no confirmation from Washington on this matter. 

    In corporate news Morgan Stanley climbed 11% after showing resurgent revenue in the company’s investment-banking, trading and wealth-management units. Intel actually fell -0.8%, despite reporting its second-quarter profit rose a better-than-expected 2.3%, but margins fell.

    All ten company groups that make up the S&P index traded generally higher: Industrials were up 1.5%, the Technology sector was up 0.5%, Materials were up 1.2%, while the Financials sector was up 2.4%, Consumer Staples were up 1.2%, and the Energy sector was up 2.0%.

    The Dow Jones closed up 1.2% (or 152 points) at 12,724, the S&P 500 index closed up 1.4% (or 17 points) at 1,343, the Nasdaq ended up 0.7% (or 20 points) at 2,834, and the smaller cap Russell 2000 was up 1.1%.

    European Markets

    European stock markets surged overnight, as European leaders edged closer to a fresh financing package for Greece and avoiding contagion concerns in other debt-laden members of the euro zone. The Stoxx Europe 600 index recovered from an early sell-off to end 1% higher on news of the package. 

    Traders went in search of “risk-on” assests and equities to add to their portfolios, and banks were also the big gainers as investors went bargain hunting after their recent heavy sell-off. 

    In the PIIGS markets Greece rose 2.5%, Italy jumped 3.5% and Spain rose 2.9%. 

    In London the FTSE 100 rose 0.8%, led by the banks, but miners such as Rio Tinto and Xstrata declined 1% after data in China showed that Chinese manufacturing activity contracted in July. In Germany the DAX also rose led by the financials.

    In London the FTSE 100 index was up 0.9% (or 50 points) at 5,903, the German DAX was up 0.9% (or 69 points) at 7,290, while in France the CAC was up 1.7% (or 62 points) at 3,817.   

    Asian Markets

    Asian stock markets ended mixed yesterday, as Chinese manufacturing data weighed on sentiment.  Trading remained cautious ahead of an EU financial summit of euro zone leaders in Brussels, but improved as an agreement was reached late in the session between France and Germany on a second bailout package for Greece. 

    Sentiment across the region was overshadowed by data out of China as a preliminary reading showed the HSBC China purchasing managers’ index (PMI) fell to 48.9 in July from 50.1 in June, as a measure below 50 indicates a contraction. 

    In Japan the Nikkei Stock Index ended flat, while in Hong Kong the Hang Seng Index also ended flat. 

    In China the Shanghai Composite Index fell -1%.  The Chinese government has managed to slow down industrial growth through its tightening measures and this is expected to continue in the months ahead.  However the government investment in infrastructure projects should still support gross domestic product (GDP) growth of 9% for the rest of this year, according to a HSBC leading economist. Expect Asian markets to play catch up with the U.S. and European markets as investors look for “risk-on” trades.

    In China the SSE Composite was down -1.0% (or -28 points) at 2,766, while in Hong Kong the Hang Seng Index was down -0.1% (or -16 points) at 21,987 and in Japan the Nikkei 225 Index was up 0.1% (or 4 points) at 10,010. The South Korean KOSPI was down -0.5% for the session, while the Indian market was down -0.4%.    

    Commodities

    The Dollar Index was lower at 73.92 on a higher Euro, while the Australian Dollar last traded lower at 108.41. Commodities prices were generally higher.

    For the session the benchmark crude NYMEX for July delivery was up 0.8% (or $US0.75) to settle at $99.15. Copper prices are still below 2-year highs as copper for July delivery was down -1.2% (or -5.1 cents) at $US4.375.  July gold was down -0.6% (or -$US9.90) at $US1,588.00.

    ASX News Today

    CZN – Corazon Mining (formerly Xanadu Resources Limited) the explorater with mineral projects in Australia and Canada, says Macquarie is now a substantial holder with 5.2% interest.

    FNP – Freedom Foods Group wants to exercise an option to take a further 18.7 million fully-paid ordinary shares in Auckland-based dairy company A2 Corporation Ltd.

    GBG – Gindalbie Metals has completed the institutional component of  its new share sale.  The miner raised $35 million in an accelerated non-renounceable entitlement offer at 67 cents per new share, while the instito component was oversubscribed with $150 million worth of demand.

    NCM – Newcrest Mining has posted a 16 percent rise in gold production in the fourth quarter, and annual production in line with earlier guidance by the company.

    NWS – Two former Victorian supreme court judges have been appointed to assess an internal review of News Corporation’s Australian arm.

    RSG – Resolute Mining’s full year production has declined 6 percent to 330,859 ounces of gold.

    SXL – Southern Cross Austereo CEO says he does not see a need to have yet another media inquiry in response to the News of the World scandal in the UK.

    SFH – Specialty Fashion opens on Thursday a La Senza branded store in the refurbished Westfield Shopping Centre in Sydney city.

    STO – Santos has produced 8 percent more energy product in the second quarter of calendar 2011, although production is down -5 percent on a year to date basis.  Sales were up 11 percent and sales revenue rose 20 percent over the period.

    VBA – Virgin Australia’s proposed service from Brisbane to Abu Dhabi from February 2012 is under review.
     

    Local Corporate Reporting

    Hastie Group Ltd (HST)      EGM re ratification & approval of shares  Initial / Conditional placement
    Kingsgate Consolidated Limited June Quarterly Report
    St Barbara Limited (SBM)   June Quarterly Results

    Ex-dividend Date

    None

    Market Summary

    ASX – to open higher
    US & UK/Europe – higher
    US ADRs – broadly higher

    BHP up 1.7% & RIO up 0.5%; AWC up 1.5%
    ANZ up 1.8% & NAB up 3.2%
    NEM  up 0.8%, JHX up 3.0%, NWS up 3.4%

    Commodities Stock Index up 1.4%
    Gold Stocks Index down -0.2%
    Oil Stocks Index up 1.9% 

    By Michael Hevern
    Head of Research

    For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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    ASX Company News: AdEffective Enters Display Advertising Market

    Friday, July 22nd, 2011

    AdEffective Limited (ABN) is pleased to advise that a Platform Publisher Agreement (PPA) has been signed with The Rubicon Project Incorporated. It will provide access to the Display Advertising, which is expected to reach over 24% ($7.61 Billion) of all online advertising market spend in the US in 2011. It will allow Footar publishers to fill display advertising inventory needs with higher monetisation and in turn increase revenue growth. It will also allow Footar to access Rubicon’s advertising yield optimisation platform and technology, along with providing Footar publishers access to the most sophisticated platform built to optimize online advertising. AdEffective and Rubicon have entered into an agreement to allow AdEffectives’s online advertising delivery product, Footar, access the Rubicon Project REVVTM yield optimisation platform and the ability to help its publishers fill advertising inventory needs with higher monetisation. With the combination of the Footar Product joint venture and the Rubicon Publisher Agreement, AdEffective Display Advertising revenues are expected to match AdEffective search advertising revenues within 12 months. Currently more that 95% of all revenue generated by AdEffective is in the search advertising sector.

    AdEffective is an online advertising business focusing on the distribution of advertising to publishers and publisher networks and more recently, on the design and development of innovative new platforms and technologies in the online advertising space to help improve advertiser ROI and generate more revenue for its publisher partners. AdEffective served more than 1⁄2 a Billion Ad Units in May 2011 through its partner syndication network. Ad units server through AdEffective’s partner syndication network include search (ads based on keyword input), contextual (ads based on the content of a page) and Footar ads (ads which appear fixed to the bottom of a web page).

    www.adeffective.com.au

    http://www.traderdealer.com.au/fundamentals/abn

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    ASX Company News: Mint Wireless Sells 3000 Mobile Terminals

    Friday, July 22nd, 2011

    Mint Wireless Limited (MNW) announced that its 51% owned subsidiary, J&C Pacific Sdn. Berhad, a mobile airtime reload and transfer company based in Malaysia, has executed binding agreements and received orders from distributors for 3,000 mobile airtime reload and micro remittance terminals to be supplied in monthly installments from July to the end of December 2011. The value of these orders should contribute revenues to J&C in the range of RM$14 – 15M (US$4 – 5M) to the end of December 2011. The distributors will install, distribute, maintain and market the terminals for authorised resellers and agents in Malaysia. The orders follow the successful deployment of terminals since June where the monthly transaction revenues generated from these terminals significantly exceeded management’s expectations.

    “We are very pleased with the performance of the terminals to date. Given the the successful launch of our mobile airtime reload and micro remittance terminals in select locations throughout Malaysia, our distributors are now committed to scaling up the deployment of our mobile airtime terminals throughout Malaysia” said Marcus Lee, CEO of Mint subsidiary J&C Pacific. Commenting on the agreement and orders received from the Malaysia market, Mint Wireless’ CEO Alex Teoh said “J&C continues to deliver strongly on its business plan for the Malaysian market. These agreements provide Mint Wireless with an excellent foundation for achieving its targets for this financial year.” “The succcess achieved to date in Malaysia validates the market opportunity for providing a micro airtime reload and remittance solution for the unbanked in emerging markets. We believe that this will provide a solid platform to successfully roll out our solution in other dominant pre-paid airtime and remittance sending markets globally” Mr. Teoh added.

    Mint Wireless Limited’s (MNW) core businesses include innovative mobile payment services for the developed and emerging markets. Intermoni, a wholly owned subsidiary of Mint Wireless, has the sole rights to deploy a micro airtime reload and micro remittance solution that provides a cost effective and efficient mobile money transfer service to the unbanked population in emerging markets globally.

    www.mnw.com.au

    www.mintwireless.com

    www.mint-technology.com.au

    http://www.traderdealer.com.au/fundamentals/mnw

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    ASX Company News: Ceramic Fuel Cells Enters Netherlands

    Friday, July 22nd, 2011

    Ceramic Fuel Cells Limited (CFU), a leading developer of high efficiency and low emission power products for homes and other buildings, has signed a distribution agreement with Zestiq B.V., for Zestiq to market and sell Ceramic Fuel Cells’ BlueGen gas-to-electricity products in The Netherlands. Zestiq is part of the consortium of innovative companies which in March 2011 bought and installed a BlueGen in a 17th century canal house “De Groene Bocht” in the centre of Amsterdam. The aim of Zestiq is to accelerate ‘clean technology’ which is market ready. By developing smart business models for the different technologies, Zestiq aims to significantly reduce the time to mass market. Zestiq and its partners will market and sell BlueGen units to small commercial and residential customers in The Netherlands. The units will be installed and maintained by the service company of Eneco, Eneco Installatie Bedrijven.

    The other members of the consortium include several leading energy companies in The Netherlands: Liander is a distribution company with 2.9 million electricity customers and 2.1 million gas customers. GasTerra is an international natural gas trading company owned by Royal Dutch Shell, Exxon Mobil and the Dutch Government. Responsibility for the planet and for society go hand in hand at GasTerra, which is why sustainability is an important component of GasTerra’s policy. The company supports the development of gas technologies, such as BlueGen units, that could make a significant contribution to the transition to sustainable sources of energy. A BlueGen unit is also installed at the home of a Director of GasTerra. The other consortium member, Eneco, currently provides services for a range of heating and cooling technologies, including other small scale combined heating and power products. Eneco invests in sustainable energy sources such as wind, hydro and solar energy, biomass, heating and cooling and decentralised, local generation of energy. Eneco is active in the North West European market with operations in Belgium, France, Germany and the United Kingdom. Eneco is mission partner of the World Wildlife Fund (WWF) and the world’s first energy company to participate in the international Climate Saver programme.

    Matthijs Guichelaar from Zestiq said “Zestiq sees a huge market potential for BlueGen in the Netherlands. With its dense gas network, large gas reserves in the North and growing interest in distributed generation, we think the Netherlands and the BlueGen are a perfect match. We see great possibilities in carbon reduction and smartgrid applications. Together with Eneco we are looking forward to starting to make sales.”

    Ceramic Fuel Cells Limited is a world leader in developing fuel cell technology to provide highly efficient and low-emission electricity from widely available natural gas. Ceramic Fuel Cells is developing fully integrated power and heating products with leading energy companies E.ON UK in the United Kingdom, GdF Suez in France and EWE in Germany.

    www.cfcl.com.au

    http://www.traderdealer.com.au/fundamentals/cfu

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    Stock Market Analysis: Profit-Takers Step In As Debt Issues Still Concern

    Thursday, July 21st, 2011

    * US stock markets saw some profit-taking overnight, as traders took profits and chose caution over the unresolved debt-ceiling standoff.
    * European stock markets closed higher, as investor sentiment was boosted by gains in tech stocks in the U.S. and hopes for progress in the eurozone debt crisis ahead of the finance ministers meeting tonight.
    * Asian stock markets closed mostly higher following U.S. stocks sparking a relief rally as the U.S. made some progress on raising its debt ceiling and thereby avoiding default, and as the EU digests their bank stress test results.
    * Commodities prices traded generally lower, but gold prices remained around record levels again closing just below $US1,600.

    The SPI Futures is trading below the key pivot level of 4600, ending down -0.2% (or -8 points) at 4,517. The key levels for our index today are 4530 and 4450.  Australian shares are set to trade lower today after negative leads from key markets in the U.S. and Europe.  Investors are likely to remain cautious as the debt issues in Europe and the U.S. are still unresolved.  Expect to see some profit taking on our market today.

    See below for ASX listed companies in the news today.

    Economics News Today

    *  June     Foreign Exchange Transactions and Holdings of Official Reserve Assets.

    U.S. Markets

    US stock markets saw some profit-taking overnight, as traders took profits and chose caution over the unresolved debt-ceiling standoff. 

    The Dow Jones Index and the S&P 500 ended flat, while the tech-heavy Nasdaq Composite shed 0.4%.  The financials sector was the S&P 500′s strongest sector, rising 1.1% and bellwether banks rose as much as 3%, including Goldmans, Morgan Stanley and Bank of America.  Apple’s results pushed the stock to all-time highs, as the company more than doubled its quarterly earnings and reported higher revenue on strong iPhone and iPad sales. 

    Profit-takers stepped in after the U.S. markets had enjoyed its strongest 1-day rally this year, driven by stellar earnings from companies like Apple, IBM, JP Morgan and Coca-Cola. 

    Investors continue to exercise caution as the debt-ceiling stand-off remains unresolved, with Treasury officials warning that the U.S. government may default on some Treasury securities due in August if the debt ceiling isn’t raised by lawmakers ahead of the 2 August deadline. 

    In economic news a report showed existing home sales in the U.S. fell 0.8% in June, the lowest level in 7 months. This data came a day after housing starts were reported to have risen to their highest level in 5 months.

    Among the S&P sectors: Industrials were up 0.2%, Technology was down -0.3%, Materials were down -0.1%, while the Financials sector was up 1.1%, Consumer Staples were down -0.5% , and the Energy sector was down -0.3%.

    The Dow Jones closed down -0.1% (or -16 points) at 12,572, the S&P 500 index closed down -0.1% (or -1 point) at 1,326, the Nasdaq ended down -0.4% (or -12 points) at 2,814, and the smaller cap Russell 2000 was down -0.3%.

    European Markets

    European stock markets closed higher, as investor sentiment was boosted by gains in tech stocks in the U.S. and hopes for progress in the eurozone debt crisis ahead of the finance ministers meeting tonight.  The Stoxx Europe 600 index rose 1.3%. 

    Across the region banks led the rally gaining up to 5%. Having been sold off severely in recent weeks, bargain hunters have stepped in now that the results of the bank “stress tests” are known.  The eurozone debt summit is being held in Brussels and investors remain cautious given the failure of past meetings to deliver a lasting solution. 

    In London the FTSE 100 index closed higher led by the banks.  Shares in oil company BP jumped 2.5% on market speculation they could be getting a payment from Anadarko Petroleum, a joint operator of the Deepwater Horizon oil rig that exploded in the Gulf of Mexico last year.  In Germany the DAX also closed higher but off its highs.

    In London the FTSE 100 index was up 1.1% (or 64 points) at 5,854, the German DAX was up 0.4% (or 29 points) at 7,221, while in France the CAC was up 1.6% (or 60 points) at 3,794. 

    Asian Markets

    Asian stock markets closed mostly higher following U.S. stocks sparking a relief rally as the U.S. made some progress on raising its debt ceiling and thereby avoiding default, and as the EU digests their bank stress test results.

    Across the region tech stocks led gains and financials also generally traded higher.  In Japan the market closed higher as tech firms saw buying after the strong IBM and Apple earnings reports. 

    In Hong Kong the market closed higher, while in China the Shanghai Composite closed flat as property developers and banks dropped due to concerns about slowing economic growth and high inflation.

    In China the SSE Composite was down -0.1% (or -3 points) at 2,794, while in Hong Kong the Hang Seng Index was up 0.5% (or 101 points) at 22,003 and in Japan the Nikkei 225 Index was up 1.2% (or 116 points) at 10,006. The South Korean KOSPI was up 1.2% for the session, while the Indian market was down -0.8%.    

    Commodities

    The Dollar Index was lower at 74.85 on a higher Euro, while the Australian Dollar last traded lower at 107.05. Commodities prices were generally lower.

    For the session the benchmark crude NYMEX for July delivery was up 0.7% (or $US0.64) to settle at $98.03. Copper prices are still below 2-year highs as Copper for July delivery was down -0.7% (or -3.5 cents) at $US4.4350.  July gold was down -0.3% (or -$US4.20) at $US1,596.50. 

    ASX News Today

    AIO – Asciano has signed a new five year container contract with Danish shipping giant Maersk Line.

    BHP – BHP Billiton says it achieved production records in four commodities in 2010/11, with production of iron ore posting an eleventh consecutive record.

    GBG – Gindalbie Metals plans to raise $209 million by issuing new shares to help fund the development of the Karara iron ore project in WA.

    MAP – Sydney Airport has posted a 4% rise in earnings in the 1H11 of the year, as its parent company signs a deal which will leave it focussed on its key asset.

    NWS – News Corporation’s shares jumped after executives Lachlan and Rupert Murdoch’s insistence they does not plan to resign because of the phone-hacking scandal.

    PAG – PrimeAg Australia the rural property investor is in a trading trading halt while the company completes a capital raising.

    OZL – OZ Minerals says it is on track to meet full year guidance for copper production and confirmed a $200 million buy-back.

    QAN – Qantas says long-haul pilots will take industrial action from Friday.

    NAB – National Bank will keep its UK subsidiaries, but is not commenting on whether it will bid for some of the 632 branches Lloyds Banking Group is being forced to sell.

    TAH – Tabcorp Holdings says the Victorian government has awarded it the new wagering licence, and will pay a $410 million premium up front.

    TOE – Toro Energy is attempting to develop WA’s first uranium mine, as it provides its environmental plan for public scrutiny next week.

    TSE – Transfield says its subsidary has been awarded contracts worth $102 million for well construction and servicing from Santos, the oil and gas producer.

    WES – Wesfarmers has reported lower quarterly production at 2 of its 3 coal mines, but output at its Curragh operation in Queensland’s Bowen Basin recovered strongly from flooding earlier this year.

    WOW – Woolworths has reported a 4.7 percent lift in annual sales to $54.1 billion despite a challenging year due to falling prices, natural disasters and declining consumer sentiment.

    WPL – Woodside Petroleum has reported a 7 percent fall in production in the second quarter of calendar 2011 from the 2Q in 2010, but a 17 percent rise in revenue.

    Local Corporate Reporting

    Newcrest Mining Ltd (NCM)   June 2010 Quarterly Results
    PanAust Ltd (PNA)           June Quarterly Report
    Santos Ltd (STO)            Q2 2011 Activities Report
    Macquarie Atlas Roads (MAQ) June quarter traffic
    Mount Gibson Iron (MGX)     Q4 2011 Activities Report 

    Ex-dividend Date

    None

    Market Summary

    ASX – to open lower
    US & UK/Europe – mixed
    US ADRs – broadly higher

    BHP up 1.4% & RIO up 1.0%; AWC up 2.7%
    ANZ up 2.3% & NAB up 2.5%
    NEM  down -0.6%, JHX up 0.1%, NWS up 3.1%

    Commodities Stock Index up 0.1%
    Gold Stocks Index up 0.8%
    Oil Stocks Index down -0.3% 

    By Michael Hevern
    Head of Research

    For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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    ASX Company News: Downer EDI Secures Rail Car Contract

    Thursday, July 21st, 2011

    Downer EDI Limited (DOW) announced  that it had been awarded a contract, through a 50:50 joint venture with Bombardier Transportation Australia, with Western Australia’s Public Transport Authority (PTA) for the supply of passenger rail cars. The value of the contract is more than $160 million, of which Downer’s share is in excess of $80 million. Downer Bombardier will supply 15, three car, single-deck electric trains to grow the PTA’s existing B Series fleet. The trains will be manufactured at Downer’s facility in Maryborough.

    The Chief Executive Officer of Downer, Grant Fenn, said today’s announcement builds on Downer’s strong and long standing relationship with the PTA. “Downer Bombardier has been supplying the PTA with trains since 1991 and we are very pleased to continue our partnership in order to provide essential services to the people of Perth and the state’s growing public transport network.”

    Downer’s Rail division has over 100 years’ experience and is the leading provider and maintainer of passenger and freight rolling stock in Australia. The division’s broad range of capabilities and expertise includes passenger cars, locomotives, freight wagons and light rail. Downer EDI Limited provides comprehensive engineering and infrastructure management services to the public and private Minerals & Metals, Oil & Gas, Power, Transport Infrastructure, Communications, Water and Property sectors across Australia, New Zealand, the Asia Pacific region and the United Kingdom.

    www.downergroup.com

    http://www.traderdealer.com.au/fundamentals/dow

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    ASX Company News: Sedgman Secures Mongolian EPCM Contract

    Thursday, July 21st, 2011

    Leading resource sector services company Sedgman Limited (SDM) announced it had received a formal Notice to Proceed with an USD$24 million Engineering, Procurement and Construction Management (EPCM) contract at Energy Resources LLC’s Ukhaa Khudag (UHG) mine in Mongolia.

    Sedgman Managing Director Nick Jukes said the contract was another significant milestone for Sedgman as it continues to advance its position as a leading provider of engineering services in the world’s major emerging coal production regions. He said the contract also strengthens Sedgman’s relationship with Energy Resources at UHG where Sedgman commenced work on the Stage 1 coal handling and processing plant (CHPP) in 2009. “We are very pleased to announce that Energy Resources has provided us with a formal Notice to Proceed with this significant contract. We look forward to our upcoming work on Stage 3 of UHG’s coal handling and preparation plant,” Mr Jukes said. “The South Gobi region of Mongolia continues to emerge as one of the world’s most exciting coal production regions. It has been a significant achievement for Sedgman to have delivered the region’s first coal plant for UHG, to be involved in its ongoing management and initial expansion and to now continue with this expansion.

    The Stage 3 contract, which increases CHPP capacity to 15 Mtpa, takes the value of Sedgman’s work at UHG to approximately AUD$75 million. Sedgman in March 2009 announced the initial Stage 1 AUD$20million EPCM contract at UHG. In January 2011 Sedgman announced further Stage 1 Operational Management and Stage 2 EPCM contracts with a total value of USD$31million.

    Sedgman Limited (SDM) was established in 1979 and is a leading provider of mineral processing and associated infrastructure solutions to the global resources industry. Specialising in the design, construction and operation of coal handling and preparation plants (CHPPs), Sedgman is recognised internationally for its mineral processing and materials handling technologies.

    www.sedgman.com

    http://www.traderdealer.com.au/fundamentals/sdm

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    ASX Company News: Asciano Secures Maersk Container Contract

    Thursday, July 21st, 2011

    Asciano (AIO) is pleased to announce that its Ports division, Patrick, completed a new five year contract with Danish shipping giant Maersk Line effective immediately. The new contract encompasses the movement of existing volume (approximately 503,000 containers in FY11*) combined with an additional proforma 190,000 containers per annum.

    Asciano Chief Executive Officer, John Mullen said, “The successful execution of this contract with Maersk Line is a significant achievement for our business and is testament to the strength of Patrick’s Container Terminal operations. The agreement celebrates a new stage of a longstanding national partnership between Maersk Line and Patrick. “Our renewed partnership will see Maersk Line Boomerang Service vessels delivering an additional estimated 190,000 containers at our Fremantle, Melbourne, and Brisbane terminals ensuring that Patrick retains its strong position within the Australian market. “To ensure the efficient and timely movement of this additional volume we are continuing to work positively with our employees to reach an agreement which will ensure we achieve continuous operations at each of our terminals, lifting productivity on Australian wharves towards global rates to maintain a high standard of service for Maersk Line and all our other customers,” Mr Mullen concluded.

    To assist in improving service for all Patrick customers, the company has ordered a total of five new cranes for its container terminals to be delivered over the next eighteen months. Patrick has nearly a century of history operating on Australia’s waterfront and has become a frontline interface for Australian trade. Patrick is Australia’s only provider of all services within the crucial ship to warehouse link of the import/export supply chain operating at Australia’s four largest container ports, Sydney, Melbourne, Brisbane and Fremantle.

    www.asciano.com.au

    http://www.traderdealer.com.au/fundamentals/aio

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    Stock Market Analysis: U.S. Markets Surge On Earnings

    Wednesday, July 20th, 2011

    * US stock markets surged higher overnight on the back of strong corporate earnings.
    * European stock markets rose overnight, led by the banks and technology stocks.
    * Asian stock markets ended mostly lower yesterday with as U.S. and European sovereign debt issues kept investors wary. Markets are likely to play catch up today following on from the surge in the U.S. markets.
    * Commodities prices traded generally higher, but gold prices backed off record levels, again closing below $US1,600.

    The SPI Futures is trading below the key pivot level of 4600, ending up 1.1% (or 49 points) at 4,490. The key levels for our index this today are 4550 and 4450.  Australian shares are set to trade higher today after positive leads from key markets in the U.S. and Europe.  Investors are likely to play catch up following the surge of stock prices in the U.S. – look for bargains in the miners, energy and banking stocks.  Traders have a clearly defined stop level for the ASX200 below the 4400 level.

    See below for ASX listed companies in the news today.

    Economics News Today

    *  May     Westpac-Melbourne Institute Indexes of Economic Activity Leading Index
    *  July      Skilled Vacancies Index.

    U.S. Markets

    US stock markets surged higher overnight on the back of strong corporate earnings.  Investor sentiment was also boosted as there was support for President Barack Obama’s $3.7 trillion deficit-reduction plan, an integral step in getting approval for raising the U.S. debt ceiling. 

    The Dow Jones Index jumped higher for its biggest point gain for the year.  In the broader markets the S&P 500 and the tech-heavy Nasdaq also surged higher.  Technology was the best performing sector after IBM the technology company closed at a record high up 5.7%, after reporting growth in all of its major businesses in the second quarter. 

    IBM’s results prompted buying across the tech sector which boosted all markets, as this sector is still leading the overall markets.  In other corporate news Coca-Cola gained 3.3 percent after it reported that profits rose better than expected, up 18% in the second quarter, on solid volume growth worldwide, while Johnson & Johnson the pharmaceutical and health care company fell 0.6% after it reported quarterly profits plunged -9.5% from a year ago.

    All ten company groups that make up the S&P index traded generally higher: Industrials were up 1.3%, the Technology sector was up 2.4%, Materials were up 1.5%, while the Financials sector was up 1.2%, Consumer Staples were up 1.9%, and the Energy sector was up 1.8%.

    The Dow Jones closed up 1.6% (or -95 points) at 12,385, the S&P 500 index closed up 1.6% (or 21 points) at 1,327, the Nasdaq ended up 2.2% (or 61 points) at 2,826, and the smaller cap Russell 2000 was up 2.3%.

    European Markets

    European stock markets rose overnight, led by the banks and technology stocks.  The Stoxx Europe 600 index gained 0.8%.

    Banks were boosted as the yields on Italian and Spanish government bonds retreated in hope of progress at a meeting of euro-zone leaders on Thursday. 

    In London the FTSE 100 index rose, led by bank stocks, while News Corp execs Rupert and James have given evidence to a British parlimentary committee with no new revelations. 

    In Germany the DAX 30 index closed higher led by the banks and tech stocks.  Technology companies were among the strongest performers after IBM reported an 8% rise in profit as both hardware and software sales at the technology company rose sharply, this prompted Software AG to jump 7.1%, while chip maker Infineon Technologies AG rose 4.8%.

    In London the FTSE 100 index was up 0.7% (or 37 points) at 5,790, the German DAX was up 1.2% (or 85 points) at 7,193, while in France the CAC was up 1.2% (or 44 points) at 3,695. 

    Asian Markets

    Asian stock markets traded mostly lower yesterday, as investors remained cautious over debt issues in Europe and the U.S.  Euro-zone leaders are scheduled to meet on Thursday to finalise the bailout package for Greece in an effort to address the EU debt crisis.  The U.S. Treasury Department says it will be unable to meet all obligations after August 2nd if Congress does not vote to raise the legally mandated borrowing limit. 

    Japan’s Nikkei Stock Index was among the region’s biggest losers as it played catch up after the 3-day holiday weekend, as exporters suffered further from a strong yen against the US dollar and utilities also sold-off. 

    Gold miners shone across the region as the gold price traded at all-time highs above $US1,600. 

    Markets are likely to play catch up today following on from the surge in the U.S. markets.

    In China the SSE Composite was down -0.9% (or -20 points) at 2,797, while in Hong Kong the Hang Seng Index was up 0.5% (or 98 points) at 21,902 and in Japan the Nikkei 225 Index was down -0.9% (or -85 points) at 9,889. The South Korean KOSPI was flat for the session, while the Indian market was up 0.8%.     

    Commodities

    The Dollar Index was lower at 75.16 on a higher Euro, while the Australian Dollar last traded higher at 107.19. Commodities prices were higher as well.

    For the session the benchmark crude NYMEX for July delivery was up 1.4% (or $US1.61) to settle at $98.13. Copper prices are still below 2-year highs and copper for July delivery was up 1.5% (or 6.5 cents) at $US4.4555.  July gold was down -0.1% (or -$US1.30) at $US1,583.30.

    ASX News Today

    BKI – BKI Investment Company says it expects to improve dividends in next month’s corporate reporting season and through the current financial year.

    BLD – Boral will buy two quarries and a concrete plant for $81.5 million on Queensland’s Sunshine Coast as the brick maker aims to take advantage of the growing population in that part of the country.

    BTT – BT Investment Management will buy London-based fund manager Hambro Capital Management for $314 million to boost margins and broaden geographic reach.

    FGL – Foster’s Group expects to receive about $390 million in total from the Australian Tax Office, after the company concluded its long-running Ashwick tax litigation in May.

    FMG – An Aboriginal group wants the WA government to appoint a mediator to help end a dispute with iron ore producer Fortescue Metals over a proposed multi-billion dollar mine in the Pilbara.

    GBG – Gindalbie Metals plans to raise $209 million by issuing new shares to help fund the development of the Karara iron ore project in WA.

    PTR – Geothermal energy company Petratherm has passed another major milestone in its plan to generate electricity from hot rocks.

    GRR – Grange Resources the iron ore producer is in talks with companies near its Savage River mine in Tasmania about possibly providing processing services.

    MGR – Mirvac Group says it has sold half its stake in a Sydney commercial property for between $154.4 million and $169.8 million to a Singapore-based property company.

    NWS  – News Corp execs Rupert and James Murdoch have given evidence to a British parlimentary committee, with no new revelations.

    OZL – OZ Minerals says it is on track to meet full year guidance for copper production and confirmed a $200 million buy-back.

    QAN – Qantas says long-haul pilots will take industrial action from Friday.

    TAH – Tabcorp Holdings says the Victorian government has awarded it the new wagering licence, and will pay a $410 million premium up front.

    TTS – Tatts says it was told it would not be awarded the Victorian government wagering licence.

    WPL – Woodside Petroleum has reported a 7% fall in production in the second quarter of calendar 2011 from the 2Q in 2010, but a 17% rise in revenue.

    Local Corporate Reporting

    BHP Billiton Ltd (BHP)  June Quarter Production & Exploration & Development Report
    Woolworths Ltd (WOW)    Q4 2011 Sales
    MAP Airports International Ltd (MAP) June Traffic Results

    Ex-dividend Date

    Mirrabooka Investments (MIR)

    Market Summary

    ASX – to open higher
    US & UK/Europe – higher
    US ADRs – broadly higher

    BHP up 2.6% & RIO up 1.9%; AWC up 2.6%
    ANZ up 2.6% & NAB up 3.5%
    NEM  down -0.6%, JHX up 5.2%, NWS up 3.1%

    Commodities Stock Index up 1.7%
    Gold Stocks Index down -1.2%
    Oil Stocks Index 1.6% 

    By Michael Hevern
    Head of Research

    For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

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