Collected Wisdom

This week we look at Alumina, DUET Group, Navitas, ASX Limited and Western Areas.

Summary: Analysts increase dividend expectations for Alumina Ltd after the sale of the Dampier to Bunbury Natural gas pipeline, while now sole owner of the pipeline, DUET, sees a small raise in earnings expectations. Student enrolment numbers at Navitas were ahead of expectations despite the windup of the Macquarie University contract. A softening in capital raisings sees analysts trim price targets for ASX, where consensus is a hold.

Key take out: A capital raising at Western Areas has been mostly well received in the face of a weak nickel price, and consensus is a buy, with the number positive on the stock just outweighing those more cautious.

Key beneficiaries: General investors. Category: Shares.

This is an edited summary of the Australian investment press: It includes investment newsletters, major daily newspapers and broker reports. The recommendations offered represent the views published in the other publications and may not represent those of Eureka Report. This article is general advice only which has been prepared without taking into account your objectives, financial situation or needs. Before acting on it you should consider its appropriateness, having regard to your objectives, financial situation and needs.

Alumina Limited & DUET Group (AWC & DUE)

Last week (March 31), Alcoa of Australia sold its stake in the Dampier to Bunbury Natural Gas Pipeline to DUET Group for $205 million. Alumina owns 40 per cent of Alcoa of Australia. It is estimated Alumina will receive $US46m from the sale.

Analysts unanimously believe AWC will use the cash to shore up the payment of dividends to shareholders throughout 2016 and 2017. Analysts have increased their dividend expectations and current FY16 consensus data points towards dividend per share of 7.2 cents and 7.8 cents for FY17.

DUET Group now take one hundred per cent ownership of the pipeline, and has launched a capital raising for the acquisitions. The outlook is mildly positive from analysts, with all marginally raising their earnings expectations.

Analysts maintain their hold call for both companies. For AWC the share price has been tracking in line with the average 12 month price target of $1.34 and DUE’s price target has just ticked upwards to $2.30, away from the share price of $2.20.

Investors are generally advised to hold Alumina Limited and DUET Group at current levels.

Navitas Limited (NVT)

Last week the global education service business Navitas gave an update on its student enrolments after the windup of the Macquarie University contract. The windup on the Macquarie contract was offset by recent acquisitions and overall enrolments were flat, coming in 1.1 per cent down on the prior corresponding period.

Despite the flat result, it was better than most analysts anticipated and management took the opportunity to reaffirm guidance as well.

The flat numbers saw a handful of analysts increase their earnings expectations and therefore the 12 month price targets as well. The share price (currently $4.96) has just edged above the average 12 month price target of $4.67.

The consensus has NVT as a hold and the most bullish case among them is set at $5.15. The implied upside for the most bullish case is marginal at best.

Investors are generally advised to hold Navitas Limited at current levels.

ASX Limited (ASX)

It has been an up and down last few weeks for ASX Limited and none of it has had to do with the underlying business. Firstly we saw the resignation of chief executive Elmer Funke Kupper, with Chairman Rick Halliday-Smith stepping in as chief executive in the interim. Now the Australian government has announced it will allow competition in cash equity clearing. Also announced was a relaxation to ownership restrictions for ASX. 

The ASX will remain the sole provider of cash clearing for the next 18 months. The risk of competition so far is unknown and as of right now analysts believe the two changes balance each other out and with the ASX now being on an equal playing field with ownership restrictions analysts commented it now opens the door to future M&A activity.

While there were no real changes brought on by the above news analysts did take the chance to lighten their guidance and marginally trim price targets due to a softening in capital raisings. The 12 month average price target now sits at $40.72 with the share price at the time of writing sitting at $41.33.

Investors are generally advised to hold ASX Limited at current levels.

Western Areas Limited (WSA)

Nickel producer Western Areas Limited past the hat around last week as it announced and completed a capital raising in the form of a placement to the tune of $60m.

The raising essentially was undertaken to support up the balance sheet and pay down debt in the face of ongoing weakness in the nickel price. The overall consensus from analysts was “fair enough”. It had to be done. There was some questioning of a placement being the right way to go and if it was fair on all shareholders due to the dilutionary effect but all agreed it needed to be done.

Some analysts with a negative outlook questioned if it was enough and if the nickel price continues to decline other cost reduction measures will be required. The opposing camp \ are positive on WSA point towards one thing, their belief in the nickel price increasing from here. Right now those positive on the stock just outweigh those who are negative.

Currently the average 12 month price target for WSA sits at $2.42 hovering above the share price at the time of writing which sat at $2.01. The most bullish case for Western Areas weighs in at $2.90 and the bearish at $1.80.

Investors are generally advised to buy Western Areas Limited at current levels.