It’s official! Australia is the largest nation of shareholders with direct share ownership more than doubling since 1997 to 40.6 per cent. That figure rises to 54 per cent of all adult Australians when managed funds are taken into account.
((((( the market is getting bearish ))))
private share ownership. For example, almost one million of the two million people who invested in our largest telecommunications company were first time investors. They haven’t been disappointed with their return on capital and many have branched out into other well-known stock such as Coles-Myer, Qantas, AMP, Commonwealth Bank and others.
Smaller and less-well known companies are also floating on the stock exchange in record numbers. In the last half of 1999 more than 104 new companies went public.
Share ownership in Australia cuts across all age groups, socio-economic, ethnic and geographical boundaries. The motivation for most investors is to make money and create wealth.
Newer investors have been in a rising or “bull” market and seen their so-called “paper profits” soar. Internet and technology based companies have also been floated in record numbers with astonishing results. Many “Mum and Dad” investors are instant experts and looking for that next “dot com” company on which to make their fortune.
But what are the keys to successful share investing? Ron Bennetts is Principle Manager WA for stockbrokers J.B. Were and author of “The Australian Stock Market: A Guide for Players, Planners and Procrastinators”.
His advice is simple, “invest some time as well as money, look for quality management in quality companies with earnings growth.”
Bennetts defines these companies as ones that are strong and likely to increase their earnings per share. He believes the technology area is a growth sector and the bubble may burst but there will be growth.
“Look at the companies that have the qualities rather than a marketing plan that has little chance of bearing fruit,” he says.
One of the keys too successful investing is diversification and Bennetts says you don’t need more than 12 stocks to diversify your portfolio. He also believes 15 per should be overseas shares and this is often 25 per cent for more aggressive investors.
WorleyParsons (WOR) have a retained Hold share trading recommendation and an increased price target of $25.83 (from $22.01) from analyst Citigroup Investment Research (CIR). The analyst values WOR on an average of its peer group and DCF. WOR offers significant upside on the new TP but is likely to open higher when it resumes next Wednesday. WOR has announced the acquisition of the Colt (Engineering) group of companies based in Canada for A$1.1bn. This is a very positive acquisition for WOR, giving it a quality operating base in the high-growth Canadian oil sands market with a significant immediate EPS uplift. Colt is one of the
leading oil sands engineering services firms. Development capex from identified projects in the region is expected to exceed C$120bn over the next 10 years. Colt has established relationships with the key operators and appears to have good visibility on workflow given the high-cost, multiyear nature of oil sands projects. While the acquisition multiple of 9.7x CY2006 EBITDA is not cheap the transaction is highly EPS accretive, as the multiple is a significant discount to WOR’s valuation and the deal will be partly funded by debt. CIR have increased their EPS forecasts by 7% in FY07E, 16% in FY08E and 15% in FY09E incorporating the acquisition and lower tax rate assumptions. WOR also released its 1H07A result with a reported NPAT of $94.5m, up 53% on the pcp. This was above its guidance range given last week and above their upgraded forecast. The difference from forecasts was in a low tax rate. CIR have reduced the tax rate forecasts. Their operational assumptions (excluding Colt) remain unchanged. Meanwhile, WOR have a retained Buy 2 share trading recommendation from analyst UBS and a target of $30.20 which approximates their midpoint of their valuation range.
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