Information and Advice on the Australian and NZ Sharemarket from Securities Research Company's . Market Analysis Issue No. 391 www.stockmarket.co.nz January 11, 2005 Inside Market Analysis Austral Coal notes offer attractive buying opportunity: ACCEPT Health Communications Network takeover . 10 high income, high capital growth and low risk ............ 4 SELL OAMPS.................................................... 10, 11 BUY Longreach Group ...................................... 6, 7, 8 Insider Trades in NZ and Australian Shares ....... 13-15 BUY The Reject Shop ........................................... 8, 9 Insider Buying identifies two growth shares ........ 15-16 Editor and Research Director: James R Cornell (B.Com.) Summary and Recommended Investment Strategy. The stockmarkets have performed well over the last two years, but shares still offer good value and a buoyant market can yield higher rates of returns. Remain fully invested in the recommended shares. Investment Outlook. Over the last 52 weeks the NZX50 Index rose +25.2%, Stockmarket Forecasts an improvement on the previous year's gain of +23.6%. One-Month One-Year The Australian All Ordinaries index rose +22.9%, also Australia: 69% (Bullish ) 67% (Bullish) beating its previous year's gain of just +9.0%. Note 1. New Zealand: 74% (Bullish) 51% (Neutral) Our own performance has deteriorated . with the Recommended Portfolio's gain of +36.7% over the last year failing to beat our previous year's gain of +38.0%. Perhaps we will do better this year! As we pointed out last month, the stockmarket is fairly buoyant - and this a favourable environment in which to make good investment gains. But it is not so buoyant New Zealand that we risk being at a market peak. One recent NZX 50 Index newspaper article reported a prediction that the Australian stockmarket would decline 25% during 2005. Another article talked of downgrading profit forecasts for NZ companies owing to slow economic growth, higher interest rates and the higher exchange rate. At a market peak there will only be optimism and certainty that share prices are going higher! Pessimistic reports show there is the potential for further gains. Our One-Year Forecast for the Australian stock- market is Bullish at 67%, but our Forecast is only Neutral at 51% for NZ. New Zealand This outlook is confirmed by our Insider Trades For All Shares reports (see Pages 13-15). Australian insiders are net Total Return Index buyers, with 64.9% buy trades over the last 13 weeks and only 35.1% sells. NZ insiders are net sellers, with just 34.1% buys and 65.9% sells. Private investors will usually do well to follow the example of these knowledgeable investors - and today that message is “Sell New Zealand, Buy Australia”. Certainly investors cannot afford to be under-weighted in Australian shares or to ignore investment opportunities on the Australian market. In practical terms investors should be directing cash towards new purchases of Australian equities. Australia Note 1: Annual returns are to 7/1/05 (and 9/1/04 the previous All Ords Index year). The NZX50 overstates returns by including tax credits, while the All Ords understates returns by ignoring dividends. Page 2 Market Analysis Performance Forecasts "Performance Forecasts" are computer generated predictions of the relative future price performance of a company's shares over the next three to six months. Performance Forecasts are calculated for every listed NZ share (except Investment Trusts) on a rating scale using the letters "A" (Highest potential for capital appreciation over the next 3-6 months ), "B" (Above Average), "C" (Average), "D" (Below Average) and "E" (Lowest). These predictions are NOT buy or sell recommendations, but can be useful to help time planned purchases or sales, or to identify shares worthy of further study and analysis. Performance Price/Sales P/E Gross Performance Price/Sales P/E Gross Performance Price/Sales P/E Gross Forecast Price Ratio Ratio Yield Forecast Price Ratio Ratio Yield Forecast Price Ratio Ratio Yield A2 Corporation C 8.0 N/A NE Nil Hirequip NZ Ltd C 120 1.76 8 2.5 Pyne Gould G. A 220 0.76 12 6.1 ABS Canterbury C 394 N/A NE Nil Horizon Energy B 425 4.28 17 7.7 Pyne Gould Corp A 415 0.97 12 5.0 AMP Limited C 775 1.18 NE 2.3 ING Property C 118 N/A 26 9.4 Renaissance B 103 0.39 28 10.1 AMP NZ Office C 92 5.93 11 7.6 Ind Newspapers B 575 4.29 44 2.4 Restaurant Brds D 128 0.40 15 11.7 AXA Asia Pac. B 445 1.59 21 2.7 Infratil NZ B 345 5.18 32 5.2 RetailX Limited D 6.0 0.44 NE Nil Abano Health. D 112 0.34 NE Nil Just Water Int. E 80 4.01 24 Nil Richina Pacific C 79 0.26 30 Nil Affco Holdings C 44 0.25 4 Nil KidiCorp E 25 1.80 NE Nil Rubicon Limited D 105 N/A NE Nil Air New Zealand C 163 0.28 6 Nil Kingfish Ltd * N/R 107 N/A NE Nil Ryman Health. B 370 3.38 20 2.4 Akd Int Airport B 810 9.42 26 5.1 Kirkcaldie & St C 226 0.54 21 4.9 Sanford Limited D 460 1.23 8 7.1 Allied Farmers A 260 0.55 14 6.0 Kiwi Property C 115 N/A 15 7.5 Satara Co-op E 130 N/A NE Nil Apple Fields C 4.5 N/A NE Nil Lion Nathan Ltd A 942 2.25 28 3.4 Savoy Equities E 1.5 N/A NE Nil Beauty Direct C 10 N/A NE Nil Livestock Imp. B 114 0.34 7 14.3 Scott Tech. Ltd C 310 2.16 21 6.3 Blis Technology C 25 N/A NE Nil Loan & Building B 440 1.64 17 4.9 Sealegs Corp D 39 N/A NE Nil Blue Chip NZ D 120 0.45 NE Nil Lyttelton Port C 175 2.89 15 9.4 Seeka Kiwifruit B 480 0.75 12 5.6 Botry-Zen Ltd D 9.0 N/A NE Nil MG Property Trt B 115 7.90 21 8.2 Shotover Jet D 105 1.85 13 1.8 Brierley Invest C 84 2.25 13 2.6 Mainfreight Grp B 238 0.34 41 4.1 Skellmax Indust C 125 1.18 11 8.4 Briscoe Group C 114 0.75 10 9.2 Media Tech. D 11 1.93 NE Nil Sky City Ltd C 545 3.79 23 7.3 Broadway Ind B 115 0.55 8 1.7 Methven Limited D 165 N/A NE Nil Sky Network TV D 620 5.48 69 Nil CACI Group Ltd D 36 0.51 NE Nil Metro. LifeCare A 345 2.71 21 1.4 Slavus Strat. * N/R 90 N/A NE Nil CDL Hotel NZ C 60 1.25 12 3.5 Michael Hill A 814 1.20 21 3.9 Smiths City C 84 0.22 10 6.2 CDL Investments D 32 2.34 10 7.5 Mid-Cap Index * N/R 248 N/A NE Nil Software of Exc E 140 1.79 NE Nil Cabletalk Group C 57 0.33 10 Nil Mike Pero Mort. C 70 0.89 14 12.8 Sol. Dynamics D 160 1.08 NE Nil Cadmus Tech Ltd C 26 4.39 NE Nil Mooring Systems D 412 N/A NE Nil South Port NZ C 126 2.23 16 7.7 Calan Hlthcare C 100 9.15 15 8.0 Mowbray Collect D 162 3.55 NE 4.1 Spectrum Res. E 1.6 1.74 NE Nil CanWest Media. C 221 N/A NE Nil Mr Chips Hold D 100 0.69 12 7.5 Speirs Group D 120 N/A NE Nil Cap Properties B 119 4.86 18 7.6 NGC Holdings C 307 2.98 17 9.2 Steel & Tube B 485 1.10 15 8.3 Carter Holt C 205 0.79 12 2.9 NZ Exchange Ltd C 938 8.58 40 Nil Sthn Travel E 126 N/A NE Nil Cavalier Corp B 460 1.50 14 8.8 NZ Experience D 40 1.89 18 7.5 Summit Gold Ltd* N/R 20 N/A NE Nil Cert Organics D 7.0 5.47 NE Nil NZ Finance Hold E 41 N/A NE Nil Tag Pacific Ltd C 31 0.61 NE Nil Col Motor Co B 299 0.21 10 10.0 NZ Invest Trust* N/R 755 N/A NE 1.1 Taylors Grp Ltd A 262 1.04 15 6.3 Commsoft Group E 0.3 N/A NE Nil NZ Oil and Gas * N/R 113 N/A 19 Nil TeanTalk Ltd B 263 2.64 20 9.4 Comvita C 210 0.85 15 3.0 NZ Refining Co A 3095 3.92 20 5.8 Telecom Corp B 623 2.24 16 6.5 Connexion E 66 N/A NE Nil NZ Wine Company B 200 2.22 23 4.2 Tenon Ltd D 219 0.37 NE Nil Contact Energy C 652 2.94 26 5.7 NZ Wool Service D 54 N/A NE Nil Tol NZ Ltd C 275 0.83 5 Nil Cube Capital D 7.8 0.26 NE Nil NZSX 50 Port. D 147 N/A NE Nil Tourism Hold. B 209 1.20 18 6.4 Cue Energy Ltd * N/R 33 N/A NE Nil NZSX 10 Fund * N/R 120 N/A NE Nil Tower Limited C 211 0.83 16 Nil Cynotech Hold.