GIR.AX is off to the races

GIR.AX submitted their quarterly report today and the market received it very well. They have an excellent suite of projects and today's bounce above $1.30 is a good sign. I think we stay long and see if it can't consolidate above the $1.50 level. They are due to release some more results for their Weld Range resources in the December quarter.
Interesting to note the negotiations that BHP.AX is currently involved with in trying to get rid of the antiquated Iron Ore price negotiations and move it to a traded market like practically everything else. This can only be a good thing for producers and prospective producers as the market is still in under supply. They still seem to have plenty of cash in the bank so things are looking good. I recommend getting on to the ASX website (www.asx.com.au) and having a quick flick through the report.

Happy Punting.

-Rocky.

China will end in Tears

A recent report on Bloomberg highlighted the fact that of the 10 largest publicly listed companies in the world, 5 of them are Chinese.... Only 3 of them are American. This seems a little out of whack. The Chinese CSI300 Index is up 168% this year! The CSI300 is trading on a forward P/E of 43. While I believe there is a lot of growth to come out of China, a forward PE of 43 seems a little optimistic. If you want to trade the emerging markets story from the long side, I'd recommend having a look at India, whose Sensex Index is up a 'conservative' 48% this year, and only pricing in a forward P/E of 24.4. The interesting thing will be to see if a Chinese correction will cause global equity markets to slow down. It has happened twice this year that China had a decent size drop and on the first occasion (in Feb) markets dropped 3% globally, the second time it happened, no one seemed to notice.

Going for Gold - Chesser Resources

Maurice's boot-of-the-week goes to gold, which is really starting to heat up. If you like it gold, small and risky, here's what I suggest:

Chesser Resources (CHZ.AX) is an undervalued leveraged gold option for investors who believe in the gold story and want to benefit from an uplift in the gold price.
Chesser's flagship asset is the Sisorta gold project in Turkey, where Chesser has the right to earn up to 70%. The project sits in the highly prospective Tethyan Porphyry-Epithermal Belt, which is host to 89 million ounces of gold. Previous drilling has been promising and all indications suggest the project may well host a multi-million ounce gold resource. Based on an average resource multiple of around A$60/oz, this values Chesser's shares at around $2.30 vs their current price of around $0.48.
Considering this, and taking into account Chesser's other exploration assets, a conservative share price target is $1. The time frame on this is likely to be in the medium term and I expect it to start moving when the drilling program starts in a few months and the company starts to promote the project much harder.
Couple with this the rising gold price, which is widely tipped by industry participant's to reach US$1000/oz (up from US$780/oz) and this is one stock that has oodles of upside.

Maurice's Rating (Do It!)

Stocks to Watch - FND.AX and ESG.AX

Whack these guys on a watchlist. I haven't looked into them fully, but I'm hearing plenty of talk about them and the price action seems to indicate a bit of interest. Finders seems to have run out of sellers, which is never a bad sign. Only issue with this one is finding some stock. Easter Star is another one of those Coal Seam Methane guys that have been so good lately. On a cursory glance they appear to have a good amount of gas and ready market access.

The Week Ahead

Well it should prove to be an interesting week, with the market already fully pricing in a drop in rates from the FOMC on Wednesday. It will be interesting to see what happens, remembering that the market spiked 300 pts North when 'Bad News' Bernanke pulled the trigger on the Fed Put.
What we need to ask ourselves is; "is the US economy really that bad?" I know I've been rubbishing it in recent posts, (mostly as justification for my long AUDUSD position), but should the Fed really be rushing to stimulate the American Economy? The fundamental driver of the big American Machine is consumer spending, which seems to be continuing with the same reckless abandon as always. If I was Bad News, I'd be more worried about inflation as Oil cracks the ton than whether or not a few property flippers in Florida will be able to service their loans. ANyway, it should provide a bit of interesting volatility, which will give traders and investors alike some good entry and exit points in the coming days.

PXS.AX - 10 Bagger

PXS.AX is cheap. It's a punt, but it's cheap and the numbers make a lot of sense. It's currently trading around $4, and we think it could be $15 by 2010 as it transitions to a mature Pharma company with a suite of products being sold in a range of markets.

here’s why:
- A suite of products with multiple uses in markets where there is a huge need but there are no (or very
few) substitutes
- Importantly these products are either already being marketed and sold or in late stage clinical trials,
significantly de-risking the company
- A strong financial position with ~$125 million in cash
- Scale – PXS has a market cap now close to $800 million which means it will begin to get the attention
of funds and big investors, allowing the company to source the necessary financing needed to bring
its products to market… and has a NASDAQ listing
- A very strong, dedicated and proven management team
- A vision to develop an independent and fully integrated pharmaceutical company meaning
shareholders will reap the long term benefits of PXS success, not an international company
- Potential for a big re-rating as the company moves from a research and development company to a
fully integrated and profitable pharmaceutical company
- Tight share register with a number of substantial institutional shareholders on board

Don't bet the farm, but have some exposure to this stock, it's not often you find an Australian Company that has this much blue Sky Potential, particularly one that isn't leveraged to the commodity bull.

-Rocket.

AUDUSD

The AUD popped above 9100, peaking around 9118. Time to take profits and wait for a little consolidation. Another nice 100bps+ profit on a long AUDUSD trade. Also, happy not to hold a position over the weekend. No point paying funding for 2 Days when you can't trade on anything. The trend continues to provide good opportunities on the long side and I'll next be looking at getting long around the 9080 level for a trade to 9150.

AUDUSD if you're not long you're wrong.

The outlook for the USD remains negative, with the market pricing in fully the probability of a 25bps cut to to the Fed funds rate on the 31st of October, and some economists pricing in a 50 bps cut and all of us (in Oz) are aware of the probability of the Reserve bank slapping us in the face on that most sacred of days, (Melbourne Cup Day) with another rate rise.
The reduction in yields is a reflection of the lower economic growth predicted for the US and it's not really hard to see why the market is predicting that. Merrill Lynch's announcement of more than $8bn of credit market write downs was a stinker, pure and simple, and we're already seen big losses at other banks, (Citi, GS et al). The housing data remains terrible, the only thing underpinning the economy is consumer spending, which sooner or later will have to abate.
On the plus side for the AUD, continued Chinese growth and demand for our natural resources seems set to underpin a strong, high yielding Aussie dollar.
I'm playing this long by purchasing AUD at low 9000s, with a stop about 50 points below. Keep rolling that stop up and take profits the other side of 9100 in the short term.
*The trend is your friend*

Where do we go from here?

The AUD powered up against the USD and made the 9000 level quite easily in the end with not a lot of volatility along the way, personally I’m out at 9004, having decided that once the price got to 9000 it would punch through quite quickly, I didn’t expect it to run so hard once it got there. Can’t say I’m unhappy with the trade though, up almost 200 points in a few days. I am bearish the USD on a long term fundamental basis and believe that there will be excellent opportunities shorting the North American Peso in the coming weeks. I think there is potentially a trade of going long some low inflation, low yielding JPY against the USD and waiting for the carry trade to blow up in a big way, but I don’t think the market is signalling an attractive entry point at present. I will be keeping an eye on the EURUSD, the GBPUSD, the USDJPY and the AUDUSD and I’ll let you know when I think it’s time to pounce.

Iron Ore - UBS

Broking Heavy Weight, UBS has just initiated coverage on 3 Mid-West Iron Ore companies, MMX, MIS and MGX. (Buy, Buy, Sell) This should focus more investor attention in this area and bodes well for GIR.

Long AUD-USD

The overnight strengthening of the USD seems a little overdone and as a result, today provides a good opportunity for AUD longs to add to their positions.

· The global economy remains strong, with the IMF predicting global growth of 4.8%, keeping industrial production strong, keeping commodity prices strong and should keep resource driven currencies well bid.
· The US economy is weak, housing, low growth….recession?
· Carry trade should continue to drive high yielding currencies upwards and with the market now pricing in a 25bps rate cut at the next FOMC meeting, this should further the appeal of borrowing USD to buy AUD.

We may not be going to parity in the near term, but I’m expecting the 0.9000 level to act as a focus for the market and I expect it to get back up there with a week.

Non-Renounceable Entitlement Offer - CAV

Lately there have been a slew of aussie exploration companies issuing entitlement options to shareholders as a sort of loyalty enticement. The latest is Carnavale Resources (CAV.AX). If you own the shares on or before the 7th of November this year, you'll be entitled to purchase 1 option with a strike of 20c and expiry in June 09 for 1c each. Carnavale jumped 6% today on the news, but it's my opinion that this run will continue up until the ex-date which is the 31st of October. This has happened a few times in recent memory with NTU.AX being a good example. In my opinion the best way to play this is buy the CAVs now and sell out the day before they go ex as traders rush to cash in on the $1.40 per share intrinsic value you are getting for 1c. Given that CAV is in the Iron Ore space, which has been running really well lately, this trade makes sense to me.

-Rocky

Why Giralia Resources (GIR.AX) is the cheapest Iron Ore play in the market.

Giralia owns tenements in the Weld Range. This is the same part of town as MidWest (MIS.AX) and Murchison Metals (MMX.AX) and not too far from that other little Iron Ore stock, Fortescue (FMG.AX). Initial drilling has outlined grades in excess of 65%, this compares with the other's who have prospective grades in the region of 60%. The big advantage here is that the more pure the iron ore, the less you have to do it before you ship it. For GIR it's just a case of dig it up and ship it out. At $1 a share, GIR has a market cap of around $200m, and on a resource base of more than 100m tonnes (estimate), this is undervalued by about 4 times. The ongoing consolidation and interest from offshore investors (Russia, China, etc) means that this is one stock that is cheap at twice the price. This stock will be dragged along by the pedigree of it's neighbours.

A New Start

Welcome to the House of Trade. A blog design for Traders of all descriptions. This is a place to discuss, speculate and above all to make money. Stand by for what should be a series of posts regarding what's hot in the Australian and international markets. It is my intention to have several contributors with specialties ranging across markets including Equities, Resources, FX, Futures and anything else that rises and falls.

-Rocky