Australian Stock Market Floats For August

There is a real theme to the upcoming Australian Stock Market Floats for August 2008. You guessed it - small resources stocks. Although there are only a handful of stocks due to list on the ASX next month, I thought it would still be worth running my eye over them.

Below is the meager list of upcoming Australian Stock Market IPO's.

RVE - Riviera Resources Limited (August 1)
EMG - Emergent Resources Limited (August 7)
IVA - Ivanhoe Australia Limited (August 7)
AGN - Australian Gemstone House Limited (August 14)
OHZ - Opal Horizon Limited (August 15)
MET - Mt Isa Metals Limited (August 22)

Riviera Resources Limited is trying to raise $2,500,000 through the issue of twelve and a half million shares at twenty cents each. The company plans to extend on the exploration work already done on the Three Sisters Project in Queensland with a view to eventually mining any gold or other base metals discovered.

Emergent Resources Limited want to raise $4,000,000 at twenty cents per share. Emergent Resources are looking for iron, copper, lead, zinc, gold, nickel and uranium as part of the Beyondie Iron Project in Western Australia.

Ivanhoe Australia Limited is much more ambitious. It's looking for $125 million at $2.00 per share. Ivanhoe is seeking to explore and develop copper, gold and uranium deposits starting with its "highly prospective" Cloncurry Project.

Here's something a little different. Australian Gemstone House Limited is looking for opals and sapphires. To undertake this task Australian Gemstone House will need $30 million at $1.00 per share.

Not to be outdone, Opal Horizon Limited is also looking for opals. Opal Horizon not only wants to look for opals, it also wants to be involved in the "mining, purchasing, processing, wholesaling and marketing" of opals. To that end, it is raising $6 million at $0.25 per share.

And the last cab of the rank is Mt Isa Metals Limited. They'll be looking for mineral deposits to develop in central and North-West Queensland. For this task, they're seeking $7 million at twenty cents per share.

I haven't looked at any of these companies in detail yet so if you're interested make sure you do your own homework - as you should with any Australian Stock Market float. You should not consider any of the above to be recommendations.

ABC Learning To Face Class Action From IMF?

I've written about ABC Learning (ASX Code: ABS) a number of times recently, and it seems there may be more bad news on the way. I read in the Business Section of The Age yesterday that IMF will be funding a class action against the Australian Stock Market's largest childcare provider.

According to the article, the lawsuit hinges upon an alleged lack of disclosure by ABC. In February of this year $73 million of develper fees was disclosed for the first time. This $73 million along with a couple of other one-off items was enough to allow ABC to report a profit, but without these one-off items, there would have been a rather nasty loss. Apparently any litigation would relate to the material nature of these developer fees.

In an announcement to the Australian Stock Exchange a couple of days ago, ABC Learning were at pains to point out that it "has not received any claim or any notice of claim" with regard to the action from IMF. It said that IMF's announcement is simply stating it's intention to fund any possible claim - depending on the level of participation.

IMF is a provider of funding and support in litigation similar to the one mentioned above. It seems to have had some success recently including a settlement with Aristocrat (ALL) for which I'm sure IMF will earn a hefty fee.

ABC Learning Shares closed at 83 cents today, down half of one cent.

Walker Thompson Australian Stock Market Investment Software

*** Important Update ***

Please read the comments at the bottom of this post if you have been approached be Walker Thompson or are considering one of their products. Take particular note of loving mum's experience.



What do you know about automated stock picking software? The reason I ask is that I've noticed a number of visitors arriving at my blog having searched for "walker thompson trading software" (or some variation thereof). I've never used any products like this but I'm curious about how they work and how many people use this sort of stock picking software.

So I'd be interested to find out how many people have used this type of software, particularly to invest in the Australian stock market, and what their experience has been. Do these packages use fundamental analysis to pick stocks or do they use some sort of technical analysis (ie. charting/momentum/trends, etc) to spit out the recommendations of what shares to buy?

To be honest, I have my doubts about how well something like this would work over the long term. Any time I buy shares, it is only once I've not only had a close look at all of the important financial ratios but also read a couple of company's annual reports as well as any other important announcements which have been released to the ASX.

Incidentally, I've since tried to find out more about walker thompson sharemarket software but none of my searches have turned up anything interesting.

Australian Stock Market Worst Return In 26 Years

The Australian Stock Market experienced its worst return for 26 years for the 12 months ending June 30. Australia's All Ordinaries Index lost more than 15% for the 2007/2008 year.

The chart below shows the movement of the All Ordinaries Index during the year.

Australian Stock Market Performance for 2007/2008

As you can see, the market tried valiantly to recover from the low point in March and was looking good until mid May when the wheels fell off again. But what does all of this mean for the average Australian investor?

Less Than Super Returns...

Perhaps the broadest impact will be to everybody's superannuation balances. As we all start to receive our superannuation statements in the mail for the past year, there will be a fair amount of disappointment. We aren't used to getting negative returns. Depending on the investment option chosen, you may experience anything from low single digit negative returns right up to double digit percentage losses.

Value Investor's Paradice?

For those investors among us with a value bias, the Australian stockmarket hasn't looked this attractive in years. After a prolonged period of strong sharemarket price growth, the past 6 months has thrown up plenty of bargains. And not just the minnows - blue chip stocks as well. The financial sector with banks in particular are presenting some good value but price weakness is not limited to this sector.

The pain has continued since the close of the financial year as well. The following chart shows the performance of the All Ordinaries over the past week.

All Ordinaries This Week

As you can see, after the close of the financial year on Monday, the index continued to fall throughout the week with the exception of today.

ABC Learning Share Price Recovery

Shares in ABC Learning were one of the better performing issues on the Australian stock market today. After reaching new lows this week, they finished up 30% today still a far cry from the $8.00 plus all time high, but much improved from their low of 65 cents this week. Only yesterday I wrote about this week's share price weakness in ABC Learning Shares Plumb New Lows.

The recovery appears to be in response to an announcement released to ASX today which said that ABS had completed the sale of 60% of its US Business to Morgan Stanley Private Equity. The announcement also stated that ABC Learning has received the cash proceeds of the sale. As far as I can tell, some of the proceeds will be used to reduce debt levels at the company.

The transaction values the US Business at US$700 million. ABS still retains ownership of 40%. One of the interesting parts of this deal is a call option for ABC Learning to buy back the 60% from MSPE in 3 years. It seems they really want to keep pushing into the US.

Today's share price recovery is impressive. While the Australian stock market is up overall today, the ABS gains put it way ahead of the index. The investing public are obviously happy with the deal.

ABC Learning Shares Plumb New Lows

ABC Learning (ASX Code ABS) is the largest listed childcare provider on the Australian Stock Market. As I wrote in a previous ABC Learning post, it has traded at over $8.00 at its peak about 18 months ago. Since then, it's share price have been on steady (and at times alarming) decline. It reached a new low of 65 cents yesterday.

Earlier this month, a placement of 71.5 million shares at $1.15 to MSPE and Lazard raised $82 million dollars. This represents 15% of the company's issued shares (the most that can be raised without shareholder approval). Since then general market weakness and some poor ABS publicity has left MPSE and Lazard sitting on a reasonable sized paper loss (although ABC Learning shares have recovered a little to close at 73 cents today.

Some of the cash raised along with some of the proceeds of the sale of its US operations are apparently going to be used to pay down debt. Hopefully more reasonable debt levels will reassure investors as to the long term viability of the company.

Surely the underlying business of ABC Learning is strong and profitable. Government childcare subsidies are on the rise again. And ironically, yesterday with its shares plumbing new lows, ABS had announced that it was raising child care fees by 10%. Although such a fee increase generates a lot of negative publicity, it demonstrates the strength of ABC's business.

While I find this to be a very interesting investment opportunity, there are 3 things which hold me back. First off, I find it hard to get a handle on what's happening inside the company. I read the announcements but they don't seem to contain quite enough information for me to be comfortable with the financial position of the company.

Secondly, I suspect the main risk the company faces (apart from its high debt levels) is weakness in the Australian job market. Predicting such things is well beyond my capability but with rising interest rates and declining consumer confidence, the unemployment rate may well continue to rise.

And last, but certainly not least, the Australian Stock Market currently presents a number of other lower risk investment opportunities. The current share price weakness sees many blue chip companies trading at the most reasonable valuations in years. Every time I look at ABC Learning, I can't help thinking about what better opportunities there may be.

Australian Stock Market Weakness A Buying Opportunity?

The Australian Stock Market is approaching a three month low this week. After a brief rally it's all doom and gloom once more - just in time for the end of the financial year. So does this mean it's a good time to buy Australian shares?

I guess it depends on your time frame and your outlook. If you're a long-term investor or a fan of value investing, then these sorts of conditions are right up your alley. But if you're a speculator looking to make a quick buck, it might be a little risky.

I suspect that one of the reasons for the recent share price weakness, apart from the obvious ongoing turmoil in the debt markets, is the fast approaching end of the financial (tax) year. At this time of year some investor like to look back on the profits they've taken during the year then look at their portfolio to find any losses they might be sitting on. By selling out of any losing positions, they can crystallize their loss for tax purposes and offset this loss against other gains.

If you're thinking of engaging in the above strategy you'll need to be careful. There are situations where the Australian Taxation Office take a dim view of this sort of activity. I think the problem arises when you sell the buy back in straight away and the only purpose of the transaction is to generate a tax loss. Make sure you talk to a tax professional if you're considering doing this.

Apparently one of the other reasons for volatility at this time of year is because the fund managers are re-balancing or 'window dressing' their portfolios. I dare say the the Superannuation Funds are very busy right now trying to salvage some sort respectable result.

Another way of looking at the current state of the markets is as a second chance. For those of us who hadn't bought everything we wanted to before the recent recovery, it means we get another bite at the cherry. I certainly thought that prices were recovering and that I'd missed the low point. Now we all get a second chance to top up our portfolios with good quality Australian stocks.