SUN is Australia´s largest domestic general insurer and has a large regional banking franchise in Queensland. It also operates a life insurance business. 

The main drivers are the domestic insurance and banking cycles, efficiencies and performance improvements.

General insurance is a high-risk business and investors should limit their exposure. Large insured events occur without warning and SUN lacks geographic diversification.

Reinsurance protection mitigates the risk to some extent and management has reduced earnings volatility further by selecting better risks and pricing more profitably.

The capital position is very strong.

Other key risks relate to the effects of competition on revenue growth and margins in risk underwriting, levels of reserve releases from long-tail lines, life insurance lapses and claims experience, bank bad debts, the rate of runoff of the non-core bank, and the ability of the core bank to grow.

Like all insurance companies they were looking for a half-year when natural hazard claims were less than the allowances and then Melbourne suffered a hailstorm on Christmas Day.

This will cost around $170 million above re-insurance, which will result in a downgrade from the forecast margins for the full year 2012 from 12.4% to 9.9%.

We also expect to see a drop in the net result, which reduces our value on this stock to $8.40.

The stock is currently trading at $8.15 but I suspect that we will see further price weakness as results are announced in the coming months.

I continue to hold SUN for long-term investors with the view to add on weakness.

The yield is still around 7% and a special dividend to distribute surplus capital and franking credits can be expected once the markets calm down.

For investors who are concerned about volatility the current strength in the price up from its lows of April 2011 may provide an opportunity to exit the stock.

For more information on Suncorp (SUN) please contact us on 07 4771 4577. 

SPN invests in regulated utility infrastructure assets.

Singapore Power retains 51% and manages the assets, businesses and finances of SPN through wholly owned subsidiary SP Management.

Approximately 89% of SPN´s revenues are regulated. Distributions are covered by operating cash flow, part in the form of capital return.

The level of growth in distributions is dependent on the outcome of regulatory resets.

The majority of investor returns should come from distributions making SPN an income stock.

Their first half 2012 result was in line to expectations and we expect to see the second half also meet projections.

Revenue increased 5.7% and dividends were paid in line with expectations. The forecast dividend is 8.1% for the 2012 year.

We have a fair value on this company of $1.15; it is currently trading at $0.96 making this a good long-term purchase for those investors who are looking for income and long-term growth.

The next regulatory review occurs in 2012 and the changes will take affect at the start of 2013. It is expected that the Gas tariffs will increase at the next regulatory review.

The regulated assets continue to perform well with revenue up 6.1% and a 1.9% increase in customer connections for electricity and a 3% increase in connections for gas. 

This is a good low risk long-term stock for those investors chasing income and longer term growth. 

For more information on SP AusNet (SPN) please contact us on 07 4771 4577. 

QBE announced on Thursday that exposure to a number of catastrophes during the second half of 2011 and the adverse impact from challenging investments markets will weaken its insurance margin to 7.0%-7.5% for 2011, compared with its expectation disclosed in August 2011 of 11%. 

As a result, its profit after tax for 2011 will be 40%-50% lower than the prior year.

The price dropped 22% and traded below $10 before rebounding at the end of the day to finish at $11.35.

The major brokers came out on Friday with price down grades into a range of $11-$14.50, a little late I would think.

Standard & Poor's believes the strength of QBE's diverse business and financial profile allows its rating to withstand some negative cyclicality in its underwriting performance such as what has occurred in 2011.

We note that QBE expects to make an underwriting profit in 2011 in what has been a record year for natural weather events globally and that premiums for many of its product lines are increasing.

While regulatory capital adequacy has softened since June 2011, the company's decision to materially cut its dividend should assist in maintaining a minimum capital ratio requirement above the 1.5x minimum target set by the company.

If you already hold this stock I would continue to hold, a cut to its dividend is disappointing but I still expect to see a good dividend above cash rates.

If you do not hold QBE now is a good time to start to add it to your portfolio. Make sure you have a median term view of 2-3 years. 

For more information on QBE Insurance please contact us on 07 4771 4577. 

SMX is a well established IT services and business management company.

It provides a range of consulting services to a diversified portfolio of government and private sector clients.

The balance sheet is strong with no debt so the company is well placed to make acquisitions.

The company services around 85% of the top 20 companies listed on the ASX it also derives around 30% of it income from Federal and State government bodies.

The company has a diversified client base and solid income stream. They have a program of growth through bolt on acquisitions and intend to continue acquiring businesses.

The 2012 year is currently behind on budget mainly due to a reduced spending by the government clients and a slowdown in the decision making process by big business regards spending on IT.

They have a strong pipeline of opportunities but these are taking longer to get across the line at present.

The company has a forecast gross yield of 8.75%. It is currently trading around $4.90 and has a fair value of 7%.

I expect that this sector may slow down over the coming 12months as government spending slows in wake of an election in 2013.

I am comfortable to buy the company with a long term view for the yield and long term growth.  

For more information on (SMX) please contact us on 07 4771 4577. 

The past 4 years have been a hard road for long-term Telstra investors.

I continue to hold for the dividends and on the back of the Governments desire to bring in the NBN Co. We are now in the final stages of ACCC approval for the transition of Telstra’s copper wire to NBN Co.

I expect that we will see the approval come in February 2012, this will clear the way for the $9 billion payment to start flowing along with another $2 billion from the Commonwealth Government package. 

Beyond these payments Telstra is still expected to be able to maintain its current dividend level, which is now a gross yield of 12%.

The real kicker is that the ACCC will not limit the promotion of wireless networks in competition with NBN Co. 

At present momentum is strongly with wireless, around 12% of households are currently wireless only. We expect that this will jump to 20% over the coming 5 years, with both the 3G and 4G networks providing good download speeds.  We expect to see this market expand as consumers demand for internet access while on the move increases. 

As Telstra remodels itself into a sale operation away from the monopoly it was, wireless will be the main product.

The question is do customers want really high speed or a combination of speed and mobility.

I think speed will be important to large business while a combination of speed and mobility will be important to small business and retail buyers. 

I will continue to hold Telstra for the dividend and have a price target of $3.60.

For more information on Telstra please contact us on 07 4771 4577. 

For more information on Cochlear Limited (COH) please contact us on 07 4771 4577.

BSL has struggled to compete with overseas steel manufacturing companies. 

They have recently been looking to raise equity to reduce the overall debt burden of the company. 

This week the retail end of the right issue closed, the company was looking to raise $600 million through a right issue. The rights issue was in two parts, first to institutional investors and the second to the retail investors. The rights were offered at a discount to the then market price.  

The take-up on by retail investors fell short with about only 48% of share holders taking up the rights. Given that the price of the stock fell back to the rights price as soon as the rights issued was announced it is no wonder that the retails investor avoided the offer.  

The institutional offer was completed late last month, with 87% take-up by eligible shareholders to raise gross proceeds of $338m. The retail offer had sought to raise a further $262m. 

Credit Suisse as underwriter will now look to offer the remaining new shares to their investors. The company in August launched a major restructuring effort to improve profitability; including shutting down a blast furnace and mill and exiting its Australian export business. 

Earlier this month, it said it would apply for a $100m advance from the government under a scheme to provide industry assistance to address higher input costs and the strong Australian dollar.  

We continue to avoid this stock; there are plenty of better investments in the markets at present. 

BSL is now for the speculators. 

For more information on BlueScope Steel (BSL) please contact us on 07 4771 4577.  

If you are looking for exposure to the gold sector Newcrest at the right price is the preferred gold exposure.

But it is more than just a short-term play on the gold price. The company has built itself into a long-term growth business.

The yield on the stock is only 1.5%, as such it is not an income play. To invest in NCM is to chase the long-term growth on a well run business coupled with the stability and growth in the gold price. 

Nearly half of the assets in NCM are held in Australia reducing the sovereign risk of the company.

In 2010 NCM merger with Lihir to increase its exposure to PNG and West Africa. This will provide better exploration opportunities for the business.

With production for both gold and copper down over the last quarter we have seen the price come off. Although the numbers were disappointing there were some factors for the company not hitting target. 

We expect that full year production will be back on track and meet forecast projections.

Recently, we have seen the price pull back into buying territory around $33.50.

We have a price target of $42 which provides a 25% return for the traders.

However, given the stability of the company and the long-term expectation that the gold price will remain high, I see this as a long-term holding in those portfolios which are not heavily geared towards income. 

For more information on Newcrest Mining (NCM) please contact us on 07 4771 4577.  

We first started to look at Oroton at the start of the year.

Back in early July this year I had a buy recommendation on the stock. The price was around $7.50.

Since then the price has moved up to $8.35 and the stock has paid a $0.28 fully franked dividend giving investors a gain of 16.5% over a six month period. 

This little retail stock has outperformed the market and bucked the retail sales trend with sales growth of 7% at a time when most retails are experience negative sales growth.

It has achieved this through improving the in-store experience and having a good online presence.

ORL product line is aimed at the aspirational buyer. As such they have a very loyal following.

Although we are expecting and have already experienced a slowdown in consumption this has not translated across to a slow down at ORL.

The company is currently paying an 8.5% gross yield at the current price; they are proposing to continue a steady and conservative roll out of stores in Asia, which should underpin growth.

At $8.44 the price is a little above our valuation of $7.70. However, if you are a long-term investor with a focus on income, I would look to add ORL to your portfolio at these level or on any price weakness.

For more information on Oroton Group Limited (ORL) please contact us on 07 4771 4577. 

WPL is the operator of oil and gas production in Australia.

WPL has operations encompassing the production of liquefied natural gas, domestic gas, condensate, crude oil and liquefied petroleum gas. WPL has six business units including international, Australia, North West Shelf, Pluto, Browse and Sunrise.

Woodside Chief Executive Peter Coleman said that demand for liquefied natural gas in China and India may rise six-fold by 2025. The consumption jump, stemming from Asia increasing its reliance on cleaner energy sources, is driving a boom in Australian LNG production, Coleman said at a Business Forum in Perth.

However, to maximize the benefits from rising Asian demand for the fuel, Australia needs to improve its export infrastructure and increase migration of skilled labour, Coleman said. Woodside is transforming itself into a major regional energy player by building three giant LNG terminals: Pluto, Browse and Sunrise.

WPL has had steady production for the third quarter with sales volumes up 2%. This has flowed through to revenue which was up 5% to $1.3 billion US which is well ahead of expectations.  Improved liquids output reflects two new infill wells. 

With the current price dip this stock looks like good value for the higher risk investor.

This is more of a trading stock and should only be held in higher risk portfolios.

For more information on Woodside Petroleum (WPL) please contact us on 07 4771 4577.