In terms of quantity of gold, combining reserves and resources (i.e. 3P, Proven, Probable and Possible), Newcrest is third highest with 78 million ounces. Number one and two places go to Barrick with 102 Million ounces and Newmont with 88 million ounces.

Using calendar 2013 as a basis for comparison, reserve life (i.e. 2P, Proven and Probable) for Newcrest is highest with 33 years. Next, in order are Gold Fields with 26 years, Goldcorp with 21 years, and Newmont with 17 years.

Let's consider costs to produce one ounce of gold on a level playing field. Here the "all in sustaining cost" methodology gives a reasonable comparison. Newcrest reported US$886 per ounce for the last reported quarter. That compares favourably with Kinross at US$1,001; Newmont at US$1,002; AngloGold at US$1,015 and Gold Fields was worst for the majors at US$1,054.

Therefore, Newcrest can remain profitable, producing a positive cash-flow, at lower gold prices than four of its major international competitors. That puts Newcrest in a position where it can weather sustained lower gold prices, and can do so for many years. As prices of bullion go lower, high cost operations have to cease production, bringing supply and demand into balance. Newcrest has positioned its operations favourably with respect to all in sustaining costs.

Of course, when the bullion price escalates, all producers increase profits as margins escalate. Those companies that produce the most bullion, will earn the highest profits.

In addition, with a well-diversified geographical spread of mines throughout Australia, Papua Nui Guinea, Indonesia and Africa, Newcrest has insured its future very sensibly. Strikes or repatriation do not pose a serious threat to this company. It is a similar scenario to Rio Tinto Limited (ASX: RIO), which lost its rich copper mine in Bougainville many years ago but was able to sustain its overall performance due to diversification.

In conclusion, I see no overall risk of Newcrest failing to generate profits, year after year, being able to weather the bad ones, as well as making excellent profits during good times.

The post Why Newcrest Mining Limited might be a bargain appeared first on The Motley Fool Australia.

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Southern Cross Media Group Ltd (ASX: SXL) is an Australian broadcaster with regional TV and metropolitan and regional radio assets. Its national broadcasting reach is about 95%. Historically regional television and radio are relatively stable, moderate growth markets. In weak advertising markets, metropolitan radio is also relatively resilient but more prone to competition. Primary TV affiliation is with Ten Network Holdings Limited (ASX: TEN). Both companies aim to differentiate from competitors by serving the younger demographic.

Southern Cross Media Group engages in the creation and broadcasting of content on free-to-air FM and digital commercial radio, TV, and online media platforms in Australia. The company's radio networks deliver entertainment, music, sport, comedy, and big events; and TV stations offer various markets local news updates and community announcements. Southern Cross Media Group owns 78 radio stations; and 19 regional free-to-air television licenses. It also owns approximately 80 websites that serve approximately 1,000,000 clients. Overall, it serves approximately 8.34 million radio and TV subscribers.

Southern Cross Media Group is tightly held. Its top five shareholders are well-known banks or nominee companies of these banks. They hold 76% of its shares. The P/E is a very attractive 8.2 times. Dividend yield is 8.6% fully franked. Earnings per share for the year ending June 2013 were 14.3 cents. Operating margin has held up at over 30% for each of the last four years, compared with the Ten Network, which has experienced a dramatic fall in margins over the same period from 16.8% to 6.4%. Therefore, compared to the Ten Network, Southern Cross has demonstrated a much more sustainable business, which points to a better choice of investment.

As the current price is near its historic low point at $1.08, this company's shares are offering a high dividend relative to other companies in the S&P / ASX 200 Index (ASX: XJO), with a bright future too.

The post Why you should buy Southern Cross Media Group Ltd appeared first on The Motley Fool Australia.

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With renewed activity in the building sector it pays to consider those companies best placed to prosper from supplying building materials. Whether it is new housing, development of commercial premises or renovations to existing buildings, here are three stocks all primed for growth and paying reasonable dividends.

Brickworks Limited (ASX: BKW) is Australia's largest brick manufacturer. The company manufactures and supplies bricks, pavers, concrete masonry and roofing tiles to the building and construction industry. A reciprocal investment in Washington H Soul Pattinson and Co Ltd (ASX: SOL) has given mutual protection from any takeover. However, in September shareholders in both companies are expected to vote on de-coupling shareholdings as 48% of Brickworks is held by Washington H Soul Pattinson.

Adelaide Brighton Ltd. (ASX: ABC) is a leading integrated construction material and lime producing group of companies. It focuses on the construction, engineering, infrastructure and resource sectors in Australia.

Adelaide Brighton's strategy involves focused vertical integration, expanding lime production and improving operational efficiency and sustainability. Achieving scale through vertical integration has increased the profitability of the business due to guaranteed plant throughput and increased volumes and higher margins. Ownership of upstream materials guarantees supply and quality while lowering costs.

CSR Limited (ASX: CSR) is one of Australia's leading building products companies. The company has undergone a significant transformation in recent years. With the sale of the sugar business, Sucrogen, in 2010, it created a more focused building products group. I expect that improved housing market conditions will drive solid earnings growth in the medium term. Market positions in building products provide some pricing power but success is more reliant on management and competitive cost structures.

All three building products companies have sound financial positions but let's look at the performance indicators to select the most desirable from a shareholder's perspective. The best is Adelaide Brighton with the highest dividend yield of 5.7%, 100% franked (based on the latest interim and final dividends paid); the lowest P/E ratio of 14.5 times; and the highest return on equity of 14.3 times.

The post 3 star building product stocks for your portfolio appeared first on The Motley Fool Australia.

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Economic Background

A toll road operator is a "price maker," unlike a company such as Fortescue Metals Group Limited (ASX: FMG), which is a "price taker." A price maker does not suffer the vagaries of adverse price changes. Rather, a price maker can benefit by increasing prices as the consumer price index changes. Price increases, due to consumer price rises, mainly drop to the bottom line, as most of the cost of the business was taken during toll road development. Also earnings grow as traffic volume increases. Furthermore, well planned upgrades, including lane additions, can generate excess returns.

Transurban's strategy is to diversify its portfolio of toll roads, drive operational efficiencies and upgrade roads as needed. The cost reduction program initiated in June 2008 is progressing well and further savings should negate inflation pressures and see costs remain well contained over the medium term.

Future Prospects

With a portfolio of excellent toll road assets and an experienced management team, Transurban is well positioned for lots of growth potential. This type of enterprise has low risk being a price maker. With a stated dividend of 35 cents for the year ending June 30, the dividend yield 4.7%. Forecast dividend yield is 5.2% for 2015; and 5.6% for 2016.

Therefore, I would be happy to buy at current prices for safety and increasing income returns for the long term.

The post Why Transurban Group looks to have a bright future appeared first on The Motley Fool Australia.

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With the current interest in infrastructure stocks following the latest budget, Sydney Airport Holdings Ltd (ASX: SYD) continues to be one to watch. The recent decision to proceed with a second airport at Badgery's Creek is a long-term positive as Sydney Airport has acquired the valuable first right to develop and operate.

2014 AGM presentation

• Given on the 15 May, 2014, salient factors were:
• Strong international passenger growth year to date
• Sydney Airport is one of the world's largest airports to accommodate the A380 airbus
• It has 205 retail leases and more than 360 property leases
• It has 16,000 car park spaces
• There are three runways, three terminals and 99 aircraft parking bays

The last 12 months were exceptional with these highlights

• Strong underlying revenue growth across all key businesses
• 7.3% EBITDA growth on 4.1% international passenger growth
• $241 million of capital invested in capacity expansions and business improvements to accommodate ongoing growth
• Over half of the 36 international airlines landing at Sydney increased seat numbers
• Growth from both emerging markets and more traditional markets
• Strong demand to date for Chinese New Year, in addition to a solid Easter and Anzac Day period
• Key target markets were China, Philippines, India and Indonesia

Strategy to deliver sustainable EBITDA and distributable cash growth going to involve

• Increase in revenue from duty free operations
• Prudent management of costs and capital expenditure

Foolish Takeaway

Returning a reasonable dividend of 5.25% per annum and showing a 19% total investor return for the latest year, Sydney Airport has provided a compound return of 22.5% for shareholders since 2009. An expected increase in passenger numbers augurs well for a continuation of similar results going forward. I would be happy to acquire shares in this financially sound company, especially if there is a significant pullback at the end of this financial year.

The post A stock picker's guide to Sydney Airport Holdings Ltd appeared first on The Motley Fool Australia.

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An innovative mining method is used at Cadia East. It is known as "panel cave mining." Put simply this technology uses gravity by undermining the ore-body and letting ore fall in a controlled manner for subsequent extraction. The word "panel" refers to the process of dividing the ore-body into a series of parallel vertical sections for individual processing. The benefit of panel cave mining is the significantly lower cost of extraction compared with traditional methods, due to moving less waste to the surface.

Cadia has been mined for many years and this development will be a major expansion. To give some idea of the enormity of the project, it is expected that this undertaking will generate 1,900 direct and indirect jobs. Newcrest CEO, Greg Robinson, said at the official opening: "Cadia East is a large, long life asset and a cornerstone of our Company's strategy. It is one of the largest gold and copper deposits in the world, with 2.8 billion tonnes of ore estimated to contain 37 million ounces of gold and 7.5 million tonnes of copper. With an approved mine life of 21 years, Cadia East will deliver significant economic benefits to the local community, the workforce and suppliers, local, state and federal governments, and of course Newcrest's shareholders for the long term."

Therefore, Newcrest is gearing itself for tremendous expansion over the next 20 plus years. Undoubtedly the innovation and investment of more than $2 billion is a strong vote of confidence for the future, the local gold industry, and this company.

The post Is Newcrest Mining Limited planning its way to a prosperous future? appeared first on The Motley Fool Australia.

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Newcrest is one of the world's largest gold companies. It has a portfolio of first class operating mines with considerable gold reserves and a strong pipeline of growth options, located primarily in the Asia Pacific region. The company's assets comprise low cost, long life mines and brownfield and greenfield exploration projects. In recent years, Newcrest has placed significant focus on investing in strategic research and development of underground bulk-mining technologies. It has applied its underground mining methods at Telfer, and plans to do likewise at Cadia East and Wafi-Golpu.

Successful companies such as BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) have new mines in the pipeline to replace old ones. Similarly Newcrest has lasted the test of time by developing new mines and not just relying on one massive mine such as Telfer, once the largest gold mine in Australia.

Miners by their very nature are price takers. Future commodity prices can be volatile and just about impossible to predict with any degree of accuracy. At times, when the gold price is depressed, it's the low cost producers that can continue to mine and meet their commitments. High cost producers may run out of working capital. Unless they can raise capital they become vulnerable to being taken over. Raising funds from shareholders or financial institutions becomes increasingly difficult when times are tough. Therefore, to weather contracted periods of low commodity prices, it is imperative to be a relatively low cost producer, which Newcrest has become.

Newcrest is well placed to deliver competitive returns over the long term. It is an unhedged gold producer with a relatively low cost of production, sound balance sheet and strong operating cash flow. It has extensive technical capability and a pipeline of organic growth opportunities. Shares in this company should be acquired for long-term benefit rather than short-term gain.

The post Here's why Newcrest Mining Limited has a bright future appeared first on The Motley Fool Australia.

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An essential part of the company's strategy for survival has been the use of several geographically diverse operations. There are six large mines in operation, Telfer, Western Australia; Cadia Valley, New South Wales; Lihir, Papua Nui Guinea; Hidden Valley, Papua Nui Guinea; Gosowong, Indonesia; and Boniko, Cote D'Ivoire, Africa. Also there are three projects in advanced stages of development, being O'Callaghans, Western Australia; Wofi-Golpu, Papua Nui Guinea; and Namosi, Fiji.

Improved cost of production is the result of a concerted drive to ensure operations remain profitable during the current extended period of relatively low gold prices. Examples where costs have been curtailed are reduced open pit mining activity at Telfer, cessation of processing low-grade stockpiles at Cadia Valley, and reduced mining activity coupled with increased stockpile processing at Lihir.

In its presentation this week, Newcrest told Bank of America Merrill Lynch that it is making sound progress in controlling costs. Also, guidance for gold production in the 2014 financial year was given as 2.3M ounces, subject to market and operating conditions. Therefore, Newcrest has more than fourfold the production of its nearest Australian rival Northern Star (ASX: NST), which, with recent acquisitions, has just been boosted to an estimated 0.55M ounces annually. Newcrest has gold reserves of 78M ounces, which is way out in front of any Australian company and even ahead of overseas gold majors such as Anglo Gold, Goldcorp, Gold Fields and Kinross.

When one considers total reserves and their geographical spread, combined with a relatively low all in cost, Newcrest remains my preferred long term gold investment.

The post Newcrest Mining Limited, Australia's number one gold stock appeared first on The Motley Fool Australia.

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Aquila Resources Limited is a growth-oriented resource explorer and developer focused on metallurgical coal, iron ore and manganese. Since listing on the Australian Securities Exchange in 2000, Aquila has grown rapidly to become a well-respected ASX 200 public company with a large portfolio of bulk commodity assets. Aiming to bring substantial new independent supply to the seaborne metallurgical coal and iron ore markets, Aquila is progressing development of two major Australian projects.

The Eagle Downs Hard Coking Coal Project is an underground longwall coal mine, located in the Bowen Basin, Central Queensland. Construction is well underway, with completion scheduled in the first half of 2017. However, it is the West Pilbara Iron Ore Project, 50% owned by Aquila and the remained equally shared between the private equity firm AMCI and the Korean steel giant POSCO, that is of greater interest.  Even more importantly is the port at Anketell Point, Western Australia, and the associated heavy rail that will serve the Western Pilbara iron mines.

Infrastructure in the Pilbara, from which two in every five tons of iron ore shipped globally are sent, is tightly held by Rio Tinto (ASX: RIO) and BHP Billiton (ASX: BHP). Rio Tinto controls Cape Lambert and BHP Billion ships from Port Hedland and Dampier. Therefore, the jewel in the crown for this takeover is control of a new deep-water port at Anketell. This is located between Dampier and Cape Lambert. Other companies that could use Anketell are Fortescue Metals Group (ASX: FMG), Flinders Mines (ASX: FMS), Iron Ore Holdings (ASX: IOH), Atlas Iron (ASX: AGO) and Brockman Mining (ASX: BCK).

Fortescue Chief Executive, Nev Power, said building a port at Anketell Point would help cement his company's position as the world's fourth-largest iron-ore producer and support its plans to develop iron-ore reserves in the western corner of the Pilbara. Mr Power went on to say "it's not essential to own infrastructure – it depends on us getting the right deal." Fortescue had held talks previously with Aquila about Anketell, but its interest cooled when Aquila struggled to raise enough funds to build it.

The consortium of Baosteel and Aurizon would have the means to construct the port and associated rail facilities linking it to the Western Pilbara. Aurizon is in the business of developing and operating large rail systems. Aurizon has stated that 432 kilometers of heavy duty rail would be a "multi-user," whereas the two majors have avoided allowing others to use their railways.

Atlas Managing Director added that the potential new arrangement was "healthy to diversify and facilitate alternative sources of supply." Starting with 40 million tonnes per annum in 2017, Baosteel and Arizon aim to be shipping up to 350 million tonnes per annum.

Therefore, Fortescue and other mining companies with interests in the Western Pilbara stand to benefit substantially if the proposed takeover proceeds. Development of the fourth deep-water port in Western Australia and associated rail connections would occur sooner and with more assurance now that Baosteel and Aurizon are likely to be involved.

The post What's cooking in the Pilbara? appeared first on The Motley Fool Australia.

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Due to sustained lowering of earnings Goodman Fielder (ASX: GFF) has seen its share-price continually disappoint shareholders over recent years. In fact earnings per share have dropped every year from 15.6 cents in the 2008 fiscal year down to 3.7 cents for the year ending June 2013. In unison, return on shareholders' equity has shrunk from over 10% to less than 5% in five years. In April 2014, Goodman Fielder received a takeover offer of 65 cents per share but this was rejected by the board as materially undervaluing the company.

Background

Goodman Fielder is a well known manufacturer of many food products. Traditionally the company has developed strong brand names and supplied a large consumer market. It manufactures and distributes food ingredients, consumer branded foods, beverages, bread, dairy products, small goods, flour and other related products. Goodman manufactures in almost 50 plants in Australia, New Zealand, Papua New Guinea, Fiji and New Caledonia.

The Baking Division has a portfolio of food brands with three of the top five proprietary bread brands in Australia and six of the top 10 proprietary brands in New Zealand. The Dairy Division is a major participant in the New Zealand dairy industry. The Grocery Division supplies consumer food products to supermarkets in Australia and New Zealand. The Asia Pacific division is an important food supplier to the Pacific islands. Also, the company has an emerging presence in the East Asian region with a focus on China, the Philippines and Indonesia. In December 2013, Goodman sold its Biscuits, Meats and Pizza businesses.

The major problem for Goodman has been the almost relentless squeeze on prices, and thus margins of it products, due to pressure from major customers, Woolworths (ASX: WOW) and Coles, the subsidiary of Wesfarmers (ASX: WES).

Merger and Acquisition

Recently Victorian dairy company Warrnambool Cheese (ASX: WCB) was acquired by the Canadian company, Saputo, for $500 million. Bega Cheese (ASX: BGA) and Murray Goulburn had failed in their attempts but walked away with $100 million and $92 million, respectively.

Goodman, with its large dairy holdings, has now become the next target, as the potential for export to South East Asia heats up. The Singaporean agribusiness, Wilmar, and the Hong Kong investment company, First Pacific, have bid $1.27 billion at 65 cents per Goodman share. Should Goodman divest itself of its dairy interests, these suitors have threatened to walk away. The French company, Parmalat, which has the Pauls, Oak and other well known brands, may enter the bidding. Its CEO, Craig Gavin, said "strategically, the New Zealand dairy business is of interest and we will keep an eye on it."

Choices

1. Shareholders accept an offer from Wilmar and First Pacific.

2. Parmalat, or another company, makes a successful superior offer.

3. Goodman sells its New Zealand diary business.

4. An Australian or New Zealand white knight partners with Goodman in a joint venture, to more aggressively export into the massive and growing South East Asia dairy market, particularly that in China.

Shareholders Action

I would advise shareholders not to accept the current 65 cent bid and to wait as long as possible till the last card has been played. Hopefully the third choice prevails, so that the dairy and associated businesses remain in local hands.

The post Goodman Fielder Limited under attack appeared first on The Motley Fool Australia.

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Insurance Australia Group Limited (ASX: IAG) is the parent company of a general insurance group operating in Australia, New Zealand, Thailand and Vietnam. Its businesses underwrite $10 billion of gross written premiums per annum. Insurance is sold under many leading brands, including NRMA Insurance, CGU, SGIO, SGIC and Swann (Australia), NZI, State and AMI (New Zealand); Safety and NZI (Thailand), and AAA Assurance (Vietnam). The company also has interests in general insurance joint ventures in Malaysia, India and China. Standard & Poor's has assigned a 'Very Strong' Insurer Financial Strength Rating of 'AA-' to the company's core operating subsidiaries, indicating a sound balance sheet for the company.

The company's strategy is to enhance value by managing a portfolio of high performing, customer focused diverse operations that provide general insurance in a way that delivers superior performance for shareholders, customers and employees.

The Group's strategic priorities are to:

• accelerate profitable growth in Australia;
• sustain its leading position in New Zealand;
• realise the potential of its Asian platform;
• concentrate on customer focused delivery and execution; and
• leverage its cultural strengths.

Currently P/E is 10.8 times, significantly better than 15.6 times for Suncorp Group Ltd (ASX: SUN), or 19.8 times for AMP Limited (ASX: AMP). Likewise, dividend yield of 6.2% compares very favourably with Suncorp at 5.0% and AMP at 4.7%. Insurance Australia reported the best return on investment of 22.2% as at June 2013, compared with 3.5% for Suncorp for the same period and AMP of 8.2% for the year ending December 2013.

The company has total investments of over $13.6 billion, with over 80% in fixed interest and cash; the rest are in shares. Insurance Australia announced on 16 December 2013 that it had agreed to purchase the insurance underwriting businesses of Wesfarmers Ltd (ASX: WES) for $1.845 billion. It remains the Group's expectation that the transaction will be completed by 30 June 2014. The purchase significantly strengthens the company's position in its traditional markets. Earnings per share for Insurance Australia show a sustained pattern of solid growth. They were 16.3 cents per share in the year ending June 2011 and 49.9 cents per share in June last year.

For both dividend income and capital gains, Insurance Australia is a share I would purchase for the long term, especially if share prices pull back in the short term due to seasonal factors around the May/June period.

The post Is Insurance Australia Group Limited a bargain? appeared first on The Motley Fool Australia.

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Sonic Healthcare Limited (ASX: SHL) is a Sydney-based international medical diagnostics company. It is active in eight countries: Australia; New Zealand; United Kingdom; Germany; Switzerland; Belgium; Ireland; and the USA. The company specialises in pathology, diagnostic imaging and other services for over 200 eye care clinics and more than 1,600 general practitioners. Australia accounts for approximately half the revenue and half the profit but expected expansion overseas will see a change in those proportions.

Sonic Healthcare has a dominant position in the Australian medical diagnostics market and is the largest Australian pathology laboratory operator. This scale gives it a significant cost advantage. Having established market dominance locally, the company is focusing efforts on strengthening its position in the US and Europe. As in Australia, economies of scale overseas will improve margins and profitability. It is conservatively estimated that overseas earnings growth will be sustained at 10% per annum for at least the next five years due to ageing populations and innovations in pathology technology.

The interim report for the half-year ending December 31 recorded a NPAT of $177 million, which was 17.7% better than the previous corresponding period. Revenue came in at $1,898 million, which was an 11.9% increase on the previous period. CEO, Dr Goldschmidt, added: "The true strength of Sonic lies in our unique culture of medical leadership, which differentiates us from competitors both for organic growth and for acquisitions. Our culture and values bind and motivate Sonic's 26,000 staff to deliver outstanding service to customers and better health outcomes to communities."

The post Should you buy Sonic Healthcare Limited? appeared first on The Motley Fool Australia.

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Let's look at one of only two remaining regional banks in Australia, the Bank of Queensland Limited (ASX: BOQ). Its strengths are brand, customer loyalty, niche businesses and its innovative, owner managed branch franchise network. Bank of Queensland has a strong presence in Queensland and pursues interstate expansion through its owner managed branch franchise network.

Like the four major banks, Commonwealth Bank of Australia (ASX:  CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ), residential mortgages comprise the largest part of the balance sheet for the Bank of Queensland. Growth in provision of finance for residential housing is paramount for earnings growth for banking. Having recently been very subdued, the Queensland housing market is showing firm signs of recovery, suggesting sustained growth in the future. Therefore prospects for the Bank of Queensland are now looking very promising.

In addition to housing finance, Bank of Queensland has several products that will positively impact earnings growth. These include personal loans, credit cards, savings and investment accounts, phone and internet banking, insurance and international services. There are several online applications, such as Virgin Money, which offers insurance, superannuation and credit cards. Bank of Queensland purchased Virgin Money Australia twelve months ago for $40 million, which was a good price to pay for such a product. This initiative gave Bank of Queensland access into untapped, complementary customer and market segments. It gave the bank access to an iconic brand with proven capability in online acquisition and product distribution.

On April 4 this year, Bank of Queensland invested $440 million in the acquisition of Investec Bank (Australia) Limited's Professional Finance and Asset Finance & Leasing division. As a market leading provider of specialised banking solutions to medical and accounting professions this acquisition represents a major growth initiative for Bank of Queensland. Its loan portfolio will increase the size of the Bank of Queensland's commercial loan portfolio by approximately 38%, providing greater industry and geographic diversity. The $2.2 billion Professional Finance loan portfolio is a relatively high margin and high credit quality portfolio that has demonstrated relatively strong historical growth with low historical arrears. The clients that are targeted by the Professional Finance business work in industries characterised by predictable and recurring cash flows and capital requirements.

Foolish takeaway

Based on expected earnings of 88.8 cents per share for the financial year ending in August, at a current price of $12.72, the price to earnings ratio is a respectable 14.3 times. I expect that the earnings figure is conservative and, based on improving economics in Queensland, earnings will exceed expectations of 88.8 cents, 98.6 cents and 103.6 cents for the financial years, 2014, 2015 and 2016, respectively.

Total dividend this year is expected to be 64.5 cents, representing an annual rate of 5.1%. I would probably wait till June 30 to make a purchase of Bank of Queensland for growth and dividends over the long term.

The post Is Bank of Queensland Limited a buy? appeared first on The Motley Fool Australia.

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SEEK Limited (ASX: SEK) has performed exceptionally well recently, as has its share price. In terms of market share, Seek is number one, or two, in nine Asian countries for on-line job placements, as well as being number one in Australia. The nine Asian countries have most of their market penetration ahead of them. In other words, Seek should continue to grow, even if it just rested on its laurels. However, Seek has a virtually unblemished record of innovation, leading to strong sales and profit growth over many years. Seek's on-line educational services are an example of its ability to innovate.

Seek is in a rather special place in the stockmarket. This is a space occupied by few others, including REA Group Limited (ASX: REA) and Carsales.com Limited (ASX: CRZ). What these companies have in common is that they dominate in their respective markets in Australia; they all have first mover advantage; and are increasingly winning more business for relatively small capital outlay. Traditionally, such high fliers command a substantial premium for their price to earnings (P/E) ratios.

Some US stocks, such as Amazon.com, Inc. (NASDAQ: AMZN) command a P/E ratio of several hundred. Amazon is today selling with a P/E of 542 times. That does not mean it would take that many years to earn enough per share to equate to the price, but it attests to market expectation of colossal growth in earnings.

For comparison, BHP Billiton Limited (ASX:BHP) has a current P/E of 14.4, based on forecast earnings of 261.2 cents per share, for the year ending 30 June, 2014.   Commonwealth Bank of Australia (ASX:CBA) has a P/E of 14.7 based on forecast earnings of 525.7 cents per share for the year ending 30 June, 2014. These two mature blue-chip stocks are trading at a time when growth for them is nowhere near as pronounced as for a much younger stock, such as Seek.

Where does that put a high growth stock like Seek? My take is that Seek is and always will be expensive, because annual earnings, plus a factor for growth, does necessitate a high P/E ratio. In fact, the better the growth, the better the P/E, hence the better the share price.  So, a P/E ratio is reality plus expectation, which can vary with sentiment.

Foolish takeaway

Based on expected earnings of 53.3 cents per share for the year ending 30 June, 2014, Seek, trading at $16.28, has a P/E ratio of 30.5 times. For a financially sound company with minimum risk, in a multi-year growth phase, a P/E of 30.5 seems reasonable to me. I would buy it if the price retreated to the closest technical support level, which is $13.50. That would represent a current P/E of 25 times, assuming this financial year the earnings meet expectations of 53.3 cents per share.

The post Can SEEK Limited justify a PE of 30 plus? appeared first on The Motley Fool Australia.

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CSR Limited (ASX: CSR) and Boral Limited (ASX: BLD) have proposed a joint venture to combine their brick operations on the east coast of Australia. Operations in New South Wales, Victoria, Queensland, South Australia, Tasmania and the ACT will be united. Completion of this transaction is subject to clearance by the Australian Competition and Consumer Commission, however, it is reasonable to expect that the proposal will be given the go ahead in the near future.

The proposed joint venture will be owned 60% by CSR and 40% by Boral, reflecting the relative valuation of the two businesses. There is no cash consideration as part of the proposed joint venture.

Boral is an international building and construction materials company headquartered in Sydney. Boral's core businesses are cement and construction materials in Australia, plasterboard in Australia and Asia, and bricks and roof tiles in Australia and USA. CSR manufactures and supplies building products in Australia and New Zealand.

Brick demand in Australia has experienced a sustained structural decline, with bricks becoming an increasingly smaller component of the broader cladding market. Total brick production, measured in units of bricks, is down 46% from the peak in 1981. Lower brick demand has resulted in declining capacity utilisation, reduced profitability, plant curtailments and closures. The proposed partnership will enable both companies to access additional operational and overhead efficiencies that would otherwise be unavailable to the parties acting on their own. With combined revenue in the order of $230 million, initial overhead savings of $10 million per annum are expected following the integration of the businesses.

Rationalisation of their brick businesses will enable Boral and CSR to deliver the following efficiencies

• Consolidation of overhead costs including sales, administrative and marketing.
• Development of more efficient freight and distribution networks.
• Potential rationalisation of several land assets.

Foolish takeaway

Both CSR and Boral are well positioned to benefit from the recent, and expected, increase in housing approvals in Australia. The joint venture will lower costs for both companies. As revenues rise and costs are reduced, profits will improve. I would look to further efficiencies for either or both companies, through more partnership ventures or other means, and then consider buying shares in CSR or Boral for long-term growth.

The post CSR Limited and Boral Limited agree brick partnership appeared first on The Motley Fool Australia.

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Can a soufflé rise twice? Ex-Prime Minister Paul Keating once made that comment about a former leader of the Liberal Party, Andrew Peacock. The same sentiment can be applied to former stock market darling Lynas Corporation (ASX: LYC).

This company's stock soared from 7.5 cents in February 2009 to $2.70 in April 2011, only to flounder at approximately 20 cents today. The company has had its share of problems but has shown tremendous tenacity in overcoming them.

Only a few economic rare earth deposits are scattered through the world. China has most of the known reserves and a virtual monopoly on supply. However, the relatively rich deposit at Mt Weld, 35 km south of Laverton, Western Australia, held by Lynas, could possibly change all that.

There are several Australian companies striving to build reserves but Lynas is the only one already in production. In 2012, Atlas Iron (ASX: AGO) purchased the Trigg Hill prospect in the Pilbara from Gondwana Resources (ASX: GDA). The two local companies closest to production are Alkane Resources (ASX: ALK) at Dubbo, New South Wales, and Arafura Resources (ASX: ARU) at Nolan's Bore, Northern Territory. Greenland Minerals and Energy (ASX: GGG) has a potentially very large rare earth deposit in Greenland but production seems many years away.

Branding

Lynas Corporation is intent on becoming a global rare earths producer and supplier through its focus on RED (Rare Earths Direct) branding. Lynas' RED brand presents three key value propositions: building a fully integrated supply system from mine to customer, producing rare earths that meet the world's environmental standards, and marketing an international brand of guaranteed quality. All the company's production will be sold through this brand and the aim is to make it the global benchmark.

Advanced Materials Plant (LAMP)

Lynas operates a processing plant called the Lynas Advanced Materials Plant (LAMP) near Kuantan in Pahang, Malaysia, under a temporary operating licence. The ore from Mt Weld is sent to Malaysia for processing at the LAMP. The plant's initial capacity is designed at 916 tonnes Rare Earths Oxide (REO) per month, with subsequent expansion to double that amount.

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Over recent years, the Australian stock market has clearly not done as well as its American counterparts. Financial and telecommunication stocks have performed well but others, including miners and retailers, have underperformed.

Retail stocks may now be worth reconsidering for two reasons. Recent reports indicate that consumer confidence in this country is rising. Accordingly, increasing discretionary spending will favour retailers. In addition, a relatively higher Australian dollar benefits importers and, as most manufacturing occurs overseas, retailers are again advantaged.

Here are three worth adding to your watch list:

1. Kathmandu Holdings (ASX: KMD) is engaged in the design, marketing and retailing of clothing and equipment for travel and adventure. Katmandu sells outdoor clothing and recreational goods imported from overseas, labelled with its own brand. It has 87 stores in Australia, 44 stores in New Zealand and five stores in United Kingdom. It also makes its merchandise available through its online store.

2. The Reject Shop (ASX: TRS) is a discount variety retailer of general merchandise products. The company has around 276 stores, increasing to 320 by end of calendar year 2014. Stores offer a variety of general consumer merchandise, with particular focus on everyday needs, as well as lifestyle and seasonal products. The Reject Shop works on a low price, low margin structure but has high volume. It does not have an online facility, as the average basket size of approximately $11 is well beneath what would suit an online purchasing and distribution system.

3. JB Hi-Fi (ASX:JBH) operates more than 182 stores across Australia and New Zealand. It is rapidly growing via an aggressive roll-out program that aims to have 214 stores by the end of this calendar year. Constant development of new hardware gadgets and products are driving organic growth. New stores will continue to increase earnings growth during the next few years. Like Katmandu, JB Hi-Fi complements its physical stores with its own online shop.

Foolish takeaway

JB Hi-Fi continues to impress with return on equity averaging 58% for each of the last four years. The Reject Shop has returned 31%. Kathmandu has had an average of 13.3% return on equity for the last four years.

All three companies are dominant in their respective markets and are steadily increasing shopping outlets. They share a common goal of attracting the discretionary dollar. Expecting an Australian dollar above 90c, I would be looking for capital growth and continued dividend appreciation in all of these highly innovative companies. JB Hi-Fi pays a slightly higher dividend at 4.0%, and all have a comparable dividend growth expectation looking towards the next two years.

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Classified advertising is the major product offering of the company and encompasses both private sellers and dealer customers. Carsales also provides display advertising for corporate customers in areas of automotive retail, finance and insurance. Carsales offers a tailored group of interested vehicle owners, or potential owners, to advertisers. Thus vehicle vendors can target their potential customers much more effectively than through traditional print and TV media. It is now exploiting this strength by adding more services to deliver greater functionality, to increase its reach and appeal to the market. It also provides data and research services.

Just as Seek (ASX: SEK) is the market leader for job search and REA Group (ASX: REA) is the leader for house sales, Carsales dominates online vehicle sales. Similarly to Seek and REA Group, expansion via international operations is starting to materialise for Carsales. In FY2013, Carsales made investments in ICar Asia (ASX: ICQ), which operates car classified businesses in Thailand, Malaysia and Indonesia. The same year it bought a 30% shareholding in the Brazilian company Webmotors. Carsales CEO and Managing Director, Mr Greg Roebuck said this association  "represented a significant opportunity… Brazil is a highly attractive market with favourable demographics, rising disposable incomes and rapidly growing internet…." Brazil is the world's fourth largest car market.

Overall, the second half of FY2014 has commenced well with January again proving to be an attractive month for car buyers in Australia. Numerous strategies are underway to expand the new vehicle marketplace, with some positive early results. It is anticipated that a number of product developments will be released over the coming months. Emphasis is on innovation in expanding markets both locally and overseas.

This company is growing steadily. Earnings per share for the year ending June were 24.4 cents for 2011, 30.5 for 2012 cents and 35.2 cents for 2013. Expected figures are 40.2 cents for 2014 and 47.4 for 2015. It is noteworthy that return on equity for the last three reported years has been 54%, 56% and 55%, showing excellent use of shareholders' funds.

Foolish takeaway

Carsales has a great track record of steadily growing earnings per share. It has a lot further to progress as it penetrates local and overseas markets. Locally there seems no serious competitive threat, so expansion here should be plain sailing. However, overseas it will need to expand by purchasing appropriate websites or adding to purchases of partly held companies. With a price to earnings ratio of 30 times it compares favourably with Seek's ratio of 35 and REA Group at 46.

If there is a market pull-back due to current geopolitical events over the next few weeks, then it would be an opportune time to buy shares in Carsales. Although currently selling for $11.50, I recommend that the wise long-term investor be prepared to make a purchase at $9.50.

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Coca-Cola Amatil (ASX: CCL) manufactures and distributes carbonated soft drinks, bottled water, sports and energy drinks, fruit juice, flavoured milk, coffee and packaged fruit and vegetable products.

The company is the principal Coca-Cola licensee in Australia and independently manufactures its own soft drinks and mineral waters. It also sells and distributes premium spirits, such as Jim Bean. In addition to Australia, it operates throughout New Zealand, Indonesia, Fiji, Samoa and Papua New Guinea.

As well as soft drinks, the company produces the number one bottled water brand, Mount Franklin, and the number one sports beverage, Powerade Isotonic. It is the market leader in non-sugar colas with Diet Coke and Coca-Cola Zero. Low and no-sugar beverages are a high growth part of the portfolio, growing at more than three times the rate of sugar-sweetened beverages in 2012.

In December 2013, the company entered the premium wine market in Australia with a joint venture with the Casella Group. The Yellow Tail brand of wine has come a long way since Filippo and Maria Casella began growing grapes at Yenda in the Riverina region in 1969. Today, Yellow Tail is the number one imported white wine and the number one red wine in the U.S., the largest wine market in the world.

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Flight Centre Travel Group Ltd (ASX: FLT) provides a complete leisure and business travel service in Australia, New Zealand, the United States, Canada, the United Kingdom, Africa, Middle East, Asia and Europe.

It has more than 30 brands, which provide not only flight bookings but also holiday packages, accommodation, rail and cruises. There are also travel shops that sell maps, gift cards, car hire bookings and insurance.

An enviable track record

Flight Centre has consistently improved earnings and should do so. Shareholder return, measured as the average annual rate, was 63.6% last financial year. Remarkably, it has averaged 63.7% for each of the last five years. Actual earnings per share were 98 cents for the year ending June 2009; 138.8 cents for 2010; 170.8 cents for 2011; 198.6 cents for 2012; and 244.2 cents for 2013. Future estimated earnings are 269.9 cents for the 2014 financial year; 301.6 for 2015; and 338.7 cents for 2016.

Over the last 10 years the ratio of debt to equity has never been as high as 30% and ended last financial year at 4.5%. In itself, that is a remarkable achievement for a company with such high ongoing growth. Return on equity has been maintained at 20% or more for each of the last four years.

In fact the lowest it ever reached was 16% in the June 2009 year following the Global Financial Crisis (GFC). Although the price temporarily dropped from $32 to $3.39, the GFC failed to impact the long range trajectory of this company, which now trades over $50.00.

Evolution

The main reason Flight Centre is so successful is that it continuously innovates. As it evolves, its revenue and profitability grow. The current strategic plan focuses on changing the company from a leisure and corporate travel agent into a best-in-world travel retailer.

Foolish takeaway

At a price to earnings ratio of 20, this share is reasonably priced for its growth trajectory. However, looking at past price movements, I would recommend buying it if it pulls back to around $52.50.

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