Domestic market in positive territory

THE solid support for Australian equity market continued this week, with the ASX 200 closing Monday at 3400 points. With Wall Street retreating from its optimistic tone recently, the ASX has assumed the baton of leading 2002 with strong buying.

Wall Street ended a volatile week in the red, after technology heavyweights Microsoft and IBM provided little encouragement about their outlooks. Analysts are expecting more of the same in the coming weeks, with earnings reports due from Boeing, McDonald’s, Eastman Kodak, Johnson & Johnson, Motorola, Lucent and Nokia.

Markets also will focus on a speech by the Federal Reserve chairman Dr Alan Greenspan to the Senate Budget Committee on Thursday. The Reserve is expected to keep rates steady when it meets on January 29, and our Reserve Bank is expected to follow suit the week after.

The fourth quarter CPI figures are expected to increase 0.5 per cent, which will push annual inflation up to 2.7 per cent from 2.5 per cent. These figures, due out this week, will breach the top of the Reserve Bank’s 2-3 per cent target range. Rates are certainly at an interesting stage of the cycle.

Burswood Limited

Burswood Limited advised the ASX by way of a company announcement recently that it would not meet the previous corresponding period’s profit figure. A decline of 20 per cent is expected by the company, which would realise a figure of $12.4 million.

The company blamed the events of September 11 and the Ansett Airlines collapse. Disruption from the extensive capital works program undertaken throughout the entire period also significantly affected operational performance across the Resort.

Predictably, the share price suffered a sudden plunge, from a strong 82 cents per share to an opportunist’s 75 cents. This 9.3 per cent fall represents a rare opportunity for investors, with a 5.2 per cent fully franked dividend. The share price has recovered somewhat to 77 cents per share, but this level still represents excellent value for the purchaser over a 12-18 month time frame.

The next dividend is due to be announced on February 21st, with an ex-dividend date around the first week of March expected. At current levels, purchasers lock in a very reasonable entry price with a dividend coming up and good medium term growth in the share price.

The capital works program, including the Resort’s re-launch costs, which is the largest program ever undertaken by Burswood, was completed just prior to the end of the half year. All the new facilities are now fully operational for the second half of this financial year, and anecdotal evidence confirms the new development’s promise.

The 10 per cent shareholding cap also guarantees an open share register, with core shareholdings held by interests associated with Bill Wylie and numerous investment funds. The management of Burswood is re-invigorated, with a relatively new managing director in John Schaap, and is continuing negotiations with the State Government regarding Burswood’s operating agreement.

Negotiations with the government hopefully will end with a net gain position for Burswood. This could be in the form of a compromise, with any increase in taxes being offset by a possible relaxation of shareholding restrictions. Regardless, Burswood at these levels will reward the investor with a medium term outlook.

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