Current
Stockland (SGP)
Fund manager AREIT with upside
Initiation of coverage of SGP which offers exposure to investment property, residential development, retirement communities and an UK property company.
Two thirds of the operating profit of the trust is underwritten by a geographically and sectorally diversified portfolio of Australian investment property, valued at over $8.6 bn.
Earnings growth will be modest until the housing market improves with capital growth constrained by bear market sentiment towards the development, retirement and UK businesses.
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Previous
Wesfarmers Limited (WES)
WA gas shortages a minor irritation
Impact of Varanus Island Gas Disruption
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Telstra Corporation Limited (TLS)
T3 completed - 3G flying!
T3 is now history. Thankfully the market performance was much better than T2.
At present download the speed of Next G? is 14.4 megabytes/second (Mbps) - superior to anything currently on offer in addition to 98% plus coverage - with at least a 50% increase targeted by December 2008 and a further doubling to 42 Mbps by December 2009.
The competition to build Australia's fibre-to-the-node (FTTN) network has increased although few rational people would argue TLS is best placed to build, own and operate it.
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BHP Billiton Limited (BHP)
Varanus Island Impacts Managed
An explosion at the Apache operated export gas pipelines from Varanus Island has cut supplies to WA. Varanus Island gas supplies BHP's Newman iron ore mines, Nickel West mines, Kwinana nickel refinery, and Worsley Alumina operation. Early in the piece, BHP was quoted as saying that its iron-ore production and Nickel West businesses had not been affected. However Worsley Alumina was thought to be operating under reduced gas supplies - long term impact unknown - although in the short term, hydrate could be stored on site for calcination later.
The latest news is that a re-build of the Kalgoorlie Nickel Smelter furnace will be brought forward to now. The rebuild was planned to occur later in FY09. The official line is that accelerated deterioration of the furnace is the cause. The Varanus gas shortage would at least have made the decision easier. BHP can re-allocate that gas to the Worsley Alumina refinery.
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Woodside Petroleum Limited (WPL)
Upgrade on Oil Price
The oil spot price has increased well above our previous long term number. The futures curve is over US$125/bbl out to December 2013. Forecasting accurately is extraordinarily difficult with energy pricing surprising even industry heavyweights, but we do aim to get the trend right.
We increase our long term oil price forecast 43% from US$70/bbl to US$100/bbl. Conventional oil supply is unlikely to keep pace with global demand. Moderating oil intensity of use in the first world, particularly the US, is outstripped by growing demand from the BRIC economies with emphasis on China.
OPEC spare capacity has shrunk to 2mmbopd from over 15mmbopd in the 1980s. Meaningful new discoveries in a global context are elusive. The growing tendency to nationalise production, including in Russia and Venezuela, deters investment and exacerbates the shortfall.
As well, consumption is growing in the domestic oil producer economies.
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