Stockwatch

Information current as at 31 May 2009

This month's stocks

1. Bunnings Warehouse Property Trust (BWP) – HOLD – Is a passive aggressive trust that owns warehouse style retailing properties. The trust posted a healthy earnings result underpinned by the stability of the major tenant and fixed annual rental increases.

2. Diversified United Investment Ltd (DUI) – HOLD – Is an investment company that structures its portfolio to provide a mixture of income and longer term capital gain within an acceptable level of risk. The portfolio is mostly invested in Australian equities with a minor investment in fixed interest securities. The manager has outperformed the benchmark index on short and medium term basis.

3. Computershare Ltd (CPU) – HOLD – Performing well despite tough market conditions. The company looks set to continue its strategy of making acquisitions and diversifying revenues due to a strong balance sheet.

Profile: Lihir Gold (LGL)

Lihir Gold Limited (LGL) is a gold mining, development and exploration company, focused on the Lihir gold mine and processing facilities located in Papua New Guinea.

Another strong quarterly production result, with the key again being elevated gold grades processed at Lihir Island. However, we don’t see current grades processed at Lihir Island (c.5.76g/t Au) as being sustainable throughout Calendar Year 09. Therefore your take on full year results will depend on your reading of LGL CEO's comments that grade will be "down a little bit" in the coming quarters and "up a little bit" in the final quarter. We interpret this as an average feed grade of 4.65g/t gold processed over the remainder of 2009, forecasting 806koz of gold from Lihir Island for CY09. LGL’s major mine Lihir island is yielding higher production volumes and cash costs are staying below forecasts.

The expansion project at Lihir Island is expected to materially expand the mine capacity.

Significant resource - Lihir has a resource estimate of 40 million ounces.

Upgrade to BUY as part of expansion of the BUY list for clients who wish to have exposure to gold.  Under our gold price forecast LGL’s two-year average forward Price Earnings multiple is 21x, which is at a marginal discount to historic PE multiples of large-cap Australian gold producer peers.  Lihir Island, the major asset, is charting better production volumes and maintaining cash costs below forecast.  Key risks include movement in the gold price, operational disruptions, and commissioning difficulties.

You should always consult your Bridges financial planner before taking action on any recommendation given.