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SMSF share portfolio Construct your ideal with confidence and control

Exclusiv

e Report

© 2012 Lincoln Indicators Pty Ltd. All rights reserved.

Exclusive webinar: Construct your ideal SMSF share portfolio with confidence and control

We invite you to attend this very special webinar where Lincoln Managing Director, Tim Lincoln and CEO Elio D'Amato will show you just how easy it is to construct and manage your ideal SMSF share portfolio relative to your phase of life with absolute confidence, control and peace of mind.

Register nowRegister nowWebinar: 12 December 2012Webinar: 12 December 2012

Dear Reader.

Congratulations on taking the time to learn how to construct your ideal SMSF share portfolio with confidence and control.

This special report aims to show you exactly how long-term success can be achieved and how your pre-determined investment objectives will play an significant role in providing towards your lifestyle requirements.

Share portfolio's are an essential asset class for most individuals in particular self directed investors and retirees. This report's objective is to clearly explain the steps required in constructing the ideal portfolio whether you are in:

Accumulation phase and seeking growth orientated stocks, orIncome phase and seeking yield orientated stocks to help fund your retirement lifestyle requirements, ora combination of the above

Before we get into the specifics of stock selection, please allow me to provide you with some detail around our methodology and approach.

Fundamental analysisFundamental analysis identifies the true quality of your shareholdings which is essential in order to run your SMSF successfully. We believe it should form the foundation of all investment decisions. It allows you to measure a company's Financial Health - the most important of our investment criteria. Without knowing the Financial Health of a business, you are purely speculating and gambling and within your SMSF this is a risk you should avoid at all costs. Financial Health creates a high degree of confidence and peace of mind in your investment decision making.

Whether you are in the growth or income stream phase of your SMSF, Stock Doctor provides an ideal solution to help you maximise your portfolio returns. Long term SMSF investment success requires a proven fundamental stock selection strategy, comprehensive and timely information and a simple approach that puts you in total control.

The stocks in your complimentary report have been selected using Stock Doctor and our proprietary Nine Golden Rules investment framework to highlight examples of a top growth and income stock, as well as comparative stocks to avoid in the same sectors. Stock Doctor helps you to quickly and easily identify the best companies on the ASX relative to your investment objectives and phase of life.

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http://www.lincolnindicators.com.au/event/construct-your-ideal-smsf-share-portfolio?utm_source=smsf-report&utm_medium=pdf&utm_campaign=eureka


Financial HealthDeveloped by esteemed academic and former Olympian, Dr Merv Lincoln, our Financial Health model has been academically proven and forms the basis of Stock Doctor.

The Lincoln Financial Health score allows us to quickly and easily identify the true health of a business through the analysis of 12 key accounting ratios including assessing a company’s:

balance sheetprofit and loss statementcash flow statement

Stock Doctor quickly and accurately screens every ASX listed stock for Financial Health and highlights companies showing signs of financial distress. This way you can quickly assess which stocks warrant further investigation and exclude those that don't, as identified in the sample stocks provided in this report.

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Nine Golden RulesTo build a successful share portfolio in every phase of your SMSF, you need to ensure you remain dedicated and focused with a disciplined investment framework. It is important to note that despite the power of the Financial Health score this alone is not enough to warrant an investment in a stock.

To help our investors identify investment grade opportunities we have developed our own investment framework - the Lincoln Nine Golden Rules of successful investing. This disciplined framework combines fundamental and qualitative factors to help you isolate quality, undervalued stocks from potential disasters before you invest.

Stock Doctor Star StocksStar Stocks are our shortlist of fundamentally superior companies who exceed the benchmark of our three most important Golden Rules. Shortlisted for their consistent Financial Health, strong management and future growth prospects, these stocks offer outstanding long-term growth potential.

During the accumulation phase of your SMSF, it is ideal to select financially healthy stocks with good growth trajectories, as recognised by our Star Stocks with over 15 years of proven performance of 12.7% p.a.^

Lincoln preferred income stocksLincoln preferred income stocks highlight a group of companies which may be ideal for selection during the income stream phase of your SMSF.

This select group allows the income orientated investor to focus on stocks in a position of Strong Financial Health with strong profitability and cash flow ratios to ensure the sustainability of dividends.

Stock Doctor Star Stock

12.7%OVER 15 YEARS^

performance – 31 October 2012

3 year 10 years 15 years Star Stocks All Ordinaries Index

9.6%

-0.8%

11.7%12.7%

4.3%4.2%

© 2012 Lincoln Indicators Pty Ltd. All rights reserved. Information current as at 21 November 2012

I hope this report highlights how easy it can be to construct your ideal SMSF share portfolio with confidence and control.

For more information please contact our Membership Services Team on 1300 676 333.

Yours sincerely

Tim LincolnManaging Director

LincolnIntelligent sharemarket solutionsTM

Call 1300 676 333Visit www.lincolnindicators.com.auEmail [email protected]

We all like to be the masters of our own universe and control our destiny, SMSFs are a vehicle to have complete control over your retirement destiny through your own tailored investment strategy, made easy by Stock Doctor, Australia’s premier share investment solution. Benefit from Lincoln’s 28 years of experience in Australian equities and company analysis, our academically proven Financial Health model as well as our rigorous framework of Lincoln’s Nine Golden Rules, to create long-term portfolio wealth by picking the best stocks on the exchange with confidence and peace of mind.

The overall objective of your SMSF is determined by the stage of life you are at which, impacts your asset allocation and your individual investment selection significantly. The accumulation phase of your SMSF is when you’re amassing a superannuation investment portfolio in the anticipation of funding your retirement at some point in the future. For example, the objective for a person with 30 years until retirement might be to grow their capital as much as possible over those years with no specific cashflow requirements other than to pay for the expenses of the fund.

The income stream phase of your SMSF is when your super fund is paying you an income stream (known as a pension), on your retirement or reaching a certain age. For example, the objective for a retiree may be to preserve capital as much as possible whilst providing enough income to sustain their pension payments for the next 20 years, within a low risk tolerance.

Strategies and ideal stocks for a successful SMSF share portfolio


Accumulation phaseAppropriate strategies to adopt for your SMSFDuring the accumulation phase, the investment objective is typically to maximise the total return from investments whilst staying within personal risk and volatility tolerance levels. Given the nature of the SMSF and its objective to provide income during retirement, it is best to take a prudent approach with asset allocation and stock selections.

In the initial stage of the accumulation phase, growth companies are attractive due to the preference for capital appreciation. The longer time frame for the ‘lock-up’ period allows investors to recover from shorter term volatility and hence facilitates greater appetite for risk/reward. Income received (e.g. dividends and interests) are taxable, whereas capital gains can be deferred to the pension phase and hence tax exempt. Whilst capital gains and income are both taxed at 15%, stocks held for at least 12 months are entitled to a one third discount, reducing the effective CGT rate to 10%.

Stock Doctor Star Stocks, with over 15 years of proven performance of 12.7% p.a.^ and Borderline Star Stocks, which include those companies that we believe, following detailed analysis, are likely to be Star Stocks within the next 12 months, are well suited for investing during the accumulation phase as they offer superior fundamentals and sustainable earnings growth potential in the future which typically translates to share price appreciation and low stock turnover (reducing capital gains tax).

Click here to see our detailed company report for growth stocks you should include and avoid in your SMSF portfolio.

Income Stream phaseAppropriate strategies to adopt for your SMSFAs the SMSF transitions from accumulation to income stream phase, the preference will gradually shift from growth to capital preservation as the appetite for risk and volatility decreases with the shorter time frame to retirement. During this phase, it becomes increasingly important to select stocks with consistently Strong or Satisfactory Financial Health to avoid exposure to companies with insolvency risks.

During the pension phase, where one has satisfied the ‘condition of release’, income companies become more important to the SMSF. Investors in this phase are tax exempt, benefiting from the full benefits of franking credits, realising capital gains, whilst paying no Capital Gains Tax. As investors typically drawing down on and not contributing to their superannuation funds during this phase to fund their retirement, the investment objective is focused on capital preservation and income.

A focus on Strong Financial Health and a long term track record of sustainable earnings is the key to capital preservation. From an income perspective, the Australian imputation tax system provides eligible Australian investors with a substantial tax advantage in the form of franking credits to SMSFs in the pension phase. Unlike most other investors, they are able to recoup the full 30% tax paid by companies to enhance their earnings.

Franking credits are receivable in the form of franked dividends and off market share buybacks.

Dividends: A fully franked dividend of $0.70 comes with imputation credit of $0.30, which equates to a total income of $1.

Off market share buybacks: For example, if ABC shares are currently trading at $10 and conduct a share buyback at $9, a 10% discount to the market price. Of the $9, capital comprises $2 and the remaining $7 is a fully franked dividend. Accommodating for the imputation credits, the dividend component equals $10 on a pre-tax basis resulting in a total return of $12.

Lincoln preferred income stocks fit the above criteria extremely well, and highlight a group of companies that are backed by Lincoln’s classification of Strong Financial Health. These stocks are typically mature businesses with strong track records, fitting capital preservation requirements. They have high dividend payout ratios relative to earnings, focusing on returning profits to shareholders, high franking credit balance, facilitating sustainable above-market gross dividends yields and more likely to conduct off-market share buybacks. They are also known for their strong profitability and cash flow generating abilities for liquidity to pay sustainable dividends.

Whilst the core focus of Lincoln preferred income stocks is income and capital preservation, some capital growth will be needed to keep up with inflation, as such investors should consider a small allocation of growth investments in their portfolio as well. Given the large benefit of franking credits, it is important to remember the ’45-day’ rule when investing in dividend paying stocks. This rule was created to eliminate franking credit trading, where franking benefits are received by someone other than the true economic owner of the underlying shares.

Whether you are in the growth or income stream phase of your SMSF, Stock Doctor provides an ideal solution to help you maximise your portfolio returns. Long term SMSF investment success requires a proven fundamental stock selection strategy, comprehensive and timely information and a simple approach that offers you confidence and peace of mind.

© 2012 Lincoln Indicators Pty Ltd. All rights reserved. Information current as at 21 November 2012

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Click here to see our detailed company report for income stocks you should include and avoid in your SMSF portfolio.

and avoid in Stocks to include

your SMSF portfolioTable of contentsGrowth Stocks

Miclyn Express Offshore Limited (MIO)Matrix Composites & Engineering Limited (MCE)

Income Stocks

Wesfarmers Limited (WES)Elders Limited (ELD)

Page 2Page 6

Page 9Page 14


MIO Miclyn Express Offshore LimitedCurrent Share Price

$2.19 Undervalued

Share Price Value

Lincoln's Nine Golden Rules 11 22 33 44 55 66 77 88 99

STAR STOCK CRITERIA

Analysis Published: 18 Oct 2012Research Analyst: Jason Yin

Three contract wins and fleet rebalancing

Please note the date of this analysis as it may not align with our current company data.Refer to Stock Doctor and/or your adviser for the latest analysis.

Vessel operator Miclyn Express Offshore Limited (MIO) was today awarded three contracts,worth a total of US$26 million, for the provision of three Crew/Utility Vessels. The contracts are 5years in duration and carry an option to extend for a further 2 years. Commencement dates forthe contracts are expected to be between December 2012 and January 2013. In addition to the contract win, the company also announced a number of changes to its fleetcomposition, which is in line with its renewal strategy. Firstly, it intends to purchase two newCrew/Utility Vessels to be delivered in the first quarter of FY14. The purchase is a result ofexercising an option under an existing agreement, though there was no mention how muchadditional capital expenditure would be incurred. Secondly, the company intends to sell two of itssmaller Barges with gains on disposal expected to be approximately US$0.3 million; which willlikely be realised in FY13. Whilst the gain on disposal is a positive, the amount is not material toaffect our assumptions. Lastly, we are advised of the commencement of construction of twoBallastable Barges which are expected to be delivered in the first quarter of FY14; no dollarvalue was disclosed.

Current Share Price

$2.19Lincoln Valuation

$2.67Discount

-18.10%

UndervaluedUndervalued FairFair OvervaluedOvervalued

Announced Headline

18 Oct 12 12:45 Contract Award, Fleet Rebalancing

28 Sep 12 18:12 Notification from Headland Capital

26 Sep 12 18:15 Shareholder Activity

44

88

Share price value

Latest Price Sensitive Announcements

|-15% -5% +5% +15%

Share Price$2.19

11 Financial HealthFinancial Health Consistently HealthyConsistently Healthy

StrongStrong(as at 16 Nov 12)

44 Share Price Value

66 Liquidity and Size

77 Principal Activities

Dividend Information

99 Follow all the Golden Rules

22 Management Assessment

2011(A) 2012(A)EPS ¢ 16.88 23.24EPS growth % 35.94 37.66ROA % 10.58 11.63ROE % 17.39 20.09Revenue ($000) 155,672 263,965

33

FY13(F)25.9511.6615.5723.38

282,030

Company Data

Share price $ 2.19Lincoln Valuation $ 2.67Lincoln Discount % -18.10%Consensus Target $ 2.53Consensus Discount % -13.34% 2011(A) 2012(A) FY13(F)PE ratio (adj) x 9.00 8.73 8.44Ind Avg PE x 23.44 15.28PEG 0.25 0.23 0.72

Avg daily traded ($000) 630,158Market cap ($000) 610,219

Energy See page 3

Dec 11 (A) Current FY13 (F)Div yield (pa) % 2.70 2.63 3.10Gross div yield % 2.70 2.63 3.10Amount ¢ 2.85 2.91 6.78Franking % 0 0Ex date 06 Mar 12 27 Aug 12

55 Share Price Sentiment

12 mth return (inc div) 18.99% pa

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· MIO · XAO


ACCUMULATION PHASEAn ideal growth stock to include in your SMSF portfolio

of 16Page 2



$2.19 Undervalued

Share Price Value


STAR STOCK CRITERIA

The three contract wins is a positive for the company which reaffirms its standing within theindustry to take advantage of strong vessel markets. We remain comfortable with changes to thecompany’s fleet composition as it is in line with existing strategy. As mentioned in previouscommentary, we anticipate that South East Asian and Middle East markets will remain buoyant,and today’s announcement further reinforces our expectations. Our Lincoln Valuation remainsunchanged at $2.67.









2011(A) 2012(A)EPS ¢ 16.88 23.24EPS growth % 35.94 37.66ROA % 10.58 11.63ROE % 17.39 20.09Revenue ($000) 155,672 263,965

33

FY13(F)25.9511.6615.5723.38

282,030

Company Data



Energy See page 3

Dec 11 (A) Current FY13 (F)Div yield (pa) % 2.70 2.63 3.10Gross div yield % 2.70 2.63 3.10Amount ¢ 2.85 2.91 6.78Franking % 0 0Ex date 06 Mar 12 27 Aug 12



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· MIO · XAO

© 2012 Lincoln Indicators Pty Ltd. All rights reserved. of 16Page 3



$2.19 Undervalued

Share Price Value


Status: TradingListed: 26 Mar 10Website: www.miclynexpressoffshore.com

Sector: EnergyInd-Group: EnergyIndustry: Energy Equipment & ServicesSub Industry: Oil & Gas Equipment & Services

Miclyn Express Offshore (MIO) is a provider of service vessels to the offshore oil and gas industry across South-East Asia, Australia and theMiddle East. The company is headquartered in Singapore. The Group charters a diverse range of OSVs, Crew/Utility Vessels, Barges andCoastal Survey Vessels to a range of customers operating across all phases of the offshore oil and gas cycle, namely: exploration,development and production.

Vessel Chartering business:MIO offers a range of offshore chartering services for the offshore oil and gas and civil construction industries. Services provided by MIO arecategorized into four groups, including: Exploration - seismic survey, survey chase support, DP support vessels for OBC, utility supportvessels for OBC, and survey and crew boats; Development - anchor handling, offshore supply, accommodation work barges, ocean goingtowing tugs, personnel transfer and utility support; Production - terminal support, topside maintenance support, safety standby, security patrol,personnel transfer, and ROV inspection and survey; and Civil Construction Marin Support - material and pipe barges, shallow draft towingtugs, shallow water anchor handling, hydrographic survey, dredge support, material barges and personnel transfer.

Express Offshore Solutions (EOS):EOS services the pipe project transportation segment in Asia, Middle East and Australia. This segment presents an extension of MIOs existingbusiness activities, leveraging on MIOs geographic presence and experience in tug and barge operations. EOS will bid on pipe transportationprojects which are typically tendered by offshore construction companies.

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$2.19 Undervalued

Share Price Value


Status: TradingListed: 26 Mar 10Website: www.miclynexpressoffshore.com


Direct Shares: Indirect Shares: 2,097,996 Options: 1,359,086 Convertibles:

Direct Shares: Indirect Shares: 197,763 Options: Convertibles:

Chairman/ExecutivesMr Diederik Christiaan de BoerChief Executive Officer,Executive Director

Mr Boer is currently responsible for the overall execution of Miclyn Express Offshore's corporate and business strategies and plans. He has more than 30years of experience in the maritime industry. He was appointed the general manager of CW Marine Services (Singapore) and the regional director ofSvitzerWijsmuller Group, the predecessor companies of EOT. From 1979 to 1990, he worked for SMIT, in which his last position was as marketingmanager for their Far East organisation, where he was involved in the marketing and operation of offshore vessels. He subsequently joined IMS in 1991 asa business development manager, handling project marketing of equipment for the airport and timber industries.

Mr Neil Douglas HamiltonNon-Executive Chairman

Mr Hamilton is an experienced Company Director and Chairman. He has more than 35 years in the legal profession and in business with substantialexperience in a number of industries including investment/funds management, insurance, banking and resources. Neil has broad directorship experienceacross a range of ASX-Listed companies.

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Important Information Lincoln Indicators Pty Ltd ACN 006 715 573 (Lincoln) AFSL 237740. This communication may containgeneral financial product advice. It has been prepared without taking into account your personal circumstances, and you shouldtherefore consider its appropriateness in light of your objectives, financial circumstances and needs before acting on it. If ouradvice relates to the acquisition or possible acquisition of a particular financial product, you should obtain a copy of and considerthe Financial Services Guide (FSG) before making any decision.

Disclosure of interest - A tick appearing next to the words ‘Disclosure of Interest’ indicates that Lincoln, its employees and/orassociates may hold interests in ASX listed companies. This position could change at any time without notice.

ASX-listed company data is derived from data provided by Morningstar

Disclosure of interest


MCE Matrix Composites & Engineering LimitedCurrent Share Price

$1.61 NA

Share Price Value


STAR STOCK CRITERIA

Analysis Published: 26 Oct 2012Research Analyst: James Samson

Full year results - disappointing commissioning ofHenderson facility


GR1 Financial Health Matrix Composites and Engineering Limited (MCE) has remained in a position of Early WarningFinancial Health following the release of its latest annual results. The company exhibitsweakness across all key profit, balance sheet and cash flow ratios as a result of its loss-makingactivities caused by production problems while commissioning Henderson and weaker pricing forbuoyancy products. As a result, MCE is exposed to unmanageable levels of financial risk andthus is unable to satisfy Golden Rule No.1 - Financial Health.

Current Share Price


NADiscount

NA

Announced Headline

26 Oct 12 12:35 Earnings Guidance Update

16 Aug 12 08:22 Preliminary Final Report

10 Jul 12 08:26 New Contracts Awarded

44

88

Share price value


11 Financial HealthFinancial Health

Early WarningEarly Warning(as at 19 Nov 12)







2011(A) 2012(A)EPS ¢ 44.78 -18.41EPS growth % 51.66 -141.12ROA % 22.72 -12.20ROE % 36.02 -18.78Revenue ($000) 187,271 144,934

33

FY13(F)7.30

3.285.05

166,060

Company Data

Share price $ 1.61Lincoln Valuation $ NALincoln Discount % NAConsensus Target $ 1.87Consensus Discount % -13.90% 2011(A) 2012(A) FY13(F)PE ratio (adj) x 16.02 22.05Ind Avg PE x 23.44 18.41 15.28PEG 0.31


Energy See page 2

Dec 11 (A) Current FY13 (F)Div yield (pa) % 2.30 1.23 1.24Gross div yield % 3.28 1.76 1.77Amount ¢ 1.99 2.00Franking % 100Ex date 03 Apr 12


12 mth return (inc div) -48.87% pa

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· MCE · XAO


ACCUMULATION PHASEA growth stock that should be avoided

of 16Page 6


$1.61 NA

Share Price Value


Status: TradingListed: 16 Nov 09Website: www.matrixap.com.au


Matrix Composites & Engineering Limited (MCE) is a manufacturer of specialised, engineered products and service provider to the offshore oil& gas and iron ore industry. Matrix group provides engineered products, services and product solutions to the local and global customers.MCE has two main operations, namely, advance materials and offshore services & engineering.

Advanced Materials:The division engineers product solutions, composite materials, syntactic foam technology, engineering and elastomers. The business designs,manufactures and supplies buoyancy systems, pipeline insulation, pipeline and riser protection, riser ancillaries and a range of down holeproducts to the offshore oil and gas industry. It also supplies product solutions for military and commercial applications.

Offshore Services & Engineering:The division engages in precision heavy engineering, custom heavy engineering and equipment solutions. The business manufactures andsupplies connectors, conductors and casings, offshore structures, subsea skids and manifolds, offshore cranes and winches with associatedtesting, refurbishment and maintenance to the oil and gas industry. Offshore Services & Engineering also supplies heavy material handlingequipment for iron ore, rollers and pulleys, screens and filters, winches and other processing equipment to the mining and mineral processingindustries. In addition, it provides maintenance and labour services to the oil and gas sector.

◣



$1.61 NA

Share Price Value


Status: TradingListed: 16 Nov 09Website: www.matrixap.com.au


Direct Shares: Indirect Shares: 3,517,763 Options: Convertibles:


Chairman/ExecutivesMr Aaron Paul BegleyChief Executive Officer,Managing Director

Mr Begley has 18 years' experience in manufacturing and marketing products in the field of industrial ceramics and composite materials for the offshoreenergy industry. He has held various positions within Matrix Composites & Engineering Ltd since starting with the company in 1993.

Mr Peter John HoodNon-Executive Chairman

Mr Hood has 40 years' experience in senior management and project development in the mining,oil and gas, and chemical industries. He was previouslythe CEO of Coogee Resources Ltd, a company involved in the exploration and production of oil and gas in the Timor Sea. Prior to this he was the CEO ofCoogee Chemicals Pty Ltd .He is currently the Deputy President of the Australian Chamber of Commerce and Industry (ACCI), a Non-Executive Director ofthe Chamber of Commerce and Industry of WA (CCIWA), GR Engineering Ltd and Swan Oil & Gas Ltd, and Chairman of MAK Industrial Water SystemsPty Ltd. He was also previously Chairman of Apollo Gas Ltd (merged with Dart Energy Ltd in 2010) and Vice-Chairman of APPEA.

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Stock Doctor Borderline Star Stock | Lincoln preferred income stock

WES Wesfarmers LimitedCurrent Share Price

$34.01 Undervalued

Share Price Value


STAR STOCK CRITERIA

Analysis Published: 25 Oct 2012Research Analyst: Loago Madigele

First quarter retail sales and coal production


Wesfarmers Limited (WES) has released first quarter sales update for its retail divisions,reporting total sales growth of 4% to $12.4 billion. WES also reported coal production of 3.5million tonnes in the September quarter - a 27% improvement over the same period last year.Whilst metallurgical coal prices for the December quarter will be substantially lower than theSeptember quarter, our Lincoln Valuation remains unchanged at $37.18 as we had assumedmodest decline in coal earnings.

Retail segmentsThe Coles Food and Liquor business delivered sales of $6.6 billion - up 4.9% on the priorcorresponding quarter. Sales uplift was driven by improvements in the quality of fresh producecoupled with ongoing focus on value pricing through promotional activities such as the 'DownDown’ campaign, resulting in strong volume growth. WES supermarkets once again trumpedWoolworths on underlying sales trends, with like-for-like (LFL) store sales growth of 3.7%compared to Woolworths' 2.3%. Wesfarmers’ Liquor operations were once again a drag on salegrowth. Overall, the prices of food and liquor decreased by 3.2% over the quarter, though this isexpected to slow through the course of the year as prices of fresh produce once again rise.

Current Share Price


$37.18Discount

-8.52%

UndervaluedUndervalued FairFair OvervaluedOvervalued

Announced Headline

25 Oct 12 08:39 October to December 2012 Quarter Coal Price...

25 Oct 12 08:33 Quarterly Statement of Production, Development &...

25 Oct 12 08:32 2013 First Quarter Retail Sales Results

44

88

Share price value


|-15% -5% +5% +15%

Share Price$34.01






Income Data



2011(A) 2012(A)EPS ¢ 166.30 193.17EPS growth % 22.73 16.16ROA % 6.63 7.46ROE % 10.68 12.32Revenue ($mil) 54,989 58,169

33

FY13(F)216.81

12.248.12

13.5161,002

Company Data


Avg daily traded ($000) 65,408,643Market cap ($000) 34,234,045

Consumer Staples See page 4

Dec 11 (A) Current FY13 (F)Div yield (pa) % 5.25 4.85 5.44Gross div yield % 7.51 6.93 7.77Amount ¢ 70.00 95.00 185.00Franking % 100 100Ex date 21 Feb 12 21 Aug 12



◣

· WES · XAO


INCOME STREAM PHASEAn ideal high yielding income stock to include in your SMSF portfolio

of 16Page 9



$34.01 Undervalued

Share Price Value


STAR STOCK CRITERIA

Petrol and Convenience sales rose to $1.9 billion, up 1.9% driven by an increase in the volumeof fuel sold. Sales of non-petrol merchandise declined 2.9% on a LFL basis as customerprudence prevailed. Total Home Improvement sales for the quarter were $1.8 billion, up 4.7% compared to the sameperiod last year driven by new store openings. In comparison, LFL sales were only 2.5% aheadof last year, impacted by price deflation from competitive pricing pressure. Sales uplift wasachieved in both consumer and commercial areas across most key trading regions. Despiteopening five new Officeworks stores during the quarter, sales of Office Supplies grew only $1million to $362 million as growth in online sales were offset by decline in store sales (-0.2%).Wesfarmers is aiming to combat the lackluster performance of Office Supplies throughinvestment in its online offering and by expanding its presence in the B2B segment of themarket. Kmart stores sales of $956 million were 3.1% ahead of the previous corresponding quarter asnew stores were opened and some stores underwent refurbishment. Underlying growth was alsopresent with LFL sales increasing 2.2%. Sales uplift was attributable to improvements in productranging and availability, as well as positive customer response to ongoing investment in loweringprices on everyday items. Target sales for the quarter were $853 million, an increase of 2.2%.Sales gains were driven by higher volumes as three new stores were added to the network andcustomers responded to promotional activities. LFL sales however declined 4.1%, reflecting thedecision to hold the mid-year toy sale in June 2012 as well as price discounting.






Income Data




33

FY13(F)216.81

12.248.12

13.5161,002

Company Data







◣

· WES · XAO




$34.01 Undervalued

Share Price Value


STAR STOCK CRITERIA

Coal segmentCurragh metallurgical coal production was 2.1 million tonnes (mt) for the quarter, up 35.1%compared to the September 2011 quarter and consistent with the expanded annual capacity of8.0-8.5 million tonnes. Mettallurgical coal production was however lower than the 2.3 mt minedin the June 2012 quarter due to mine sequencing and above-target production in the Junequarter. Steaming coal production from Curragh was also higher, up 10.8% from the samequarter last year to 0.8 mt. WES's share of output from Bengalla increased 27.1% to 0.7 mt.WES has concluded price negotiations for Curragh metallurgical coal output for the December2012 quarter, reporting it has secured a weighted price of US$160 per metric tonne FOBQueensland, representing a 27% decline on the September 2012 quarter price of US$220 FOB.

Earnings risksThe profitability of WES' retail businesses will depend on the company's ability to offset theimpacts of price deflation with costs savings from initiatives aimed at improving operatingefficiencies as well as improvements in product sourcing. Also, as mentioned in our previouscommentary, earnings from the coal division will be impacted by global economic uncertaintyand rising labour costs. In fact, our earnings forecasts for FY2013 and the Lincoln Valuationassume a modest decline in EBIT from the coal division. Hence our Lincoln Valuation remainsunchanged at $37.18.






Income Data




33

FY13(F)216.81

12.248.12

13.5161,002

Company Data







◣

· WES · XAO




$34.01 Undervalued

Share Price Value


Status: TradingListed: 15 Nov 84Website: www.wesfarmers.com.au

Sector: Consumer StaplesInd-Group: Food & Staples RetailingIndustry: Food & Staples RetailingSub Industry: Hypermarkets & Super Centers

Wesfarmers Limited (WES) is a diversified business operation including supermarkets, department stores, home improvement and officesupplies, insurance, resources, chemicals, energy and fertilizers, and industrials and safety.

Coles:Coles is a food, liquor and convenience retailer. The business operates more than 2,200 retail outlets across Coles, BiLo, 1st Choice LiquorSuperstore, Liquorland, Vintage Cellars, Coles Express and Spirit Hotels.

Home Improvement & Office Supplies:Bunnings is a retailer of home improvement and outdoor living products and a major supplier to project builders, commercial trades peopleand the housing industry.

Target:Target is a mid-market retailer. Product ranges include ladieswear, intimate apparel, menswear, childrenswear and nursery, accessories andfootwear, soft homewares, electrical, toys and other general merchandise.

Kmart:Kmart is a discount department store retailer with 187 stores. Key categories for Kmart include menswear, womenswear, childrenswear,beauty, footwear, toys and sporting, events and food, entertainment, newsagency and home. Kmart division also includes Kmart Tyre & AutoService which is a retail automotive service, repair and tyre business.

Insurance:WES operates in insurance broking business, focusing on insurance and financial services for small and medium-sized enterprises.

Resources:WES operates spanning three coal mines. The divisions operations comprise the Curragh mine, the Premier Coal mine, and Bengalla mine(40%).

Chemicals, Energy & Fertilisers:WES is involved in manufacture and marketing of chemicals for mining, minerals processing and industrial sectors. The division also producesmarkets and distributes liquefied petroleum gas (LPG) and liquefied natural gas (LNG), broadacre and horticultural fertilizers, medical andspecialty gases, and Electricity supply to mining operations and regional centres.

Industrial & Safety:WES provides industrial and safety products and services. It services customers across mining, oil and gas, construction and infrastructure,retail, manufacturing, health and government.

Other:WES invests in Gresham Partners (50%), Wespine Industries (50%), and BWP Trust (23%).

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$34.01 Undervalued

Share Price Value


Status: TradingListed: 15 Nov 84Website: www.wesfarmers.com.au

Sector: Consumer StaplesInd-Group: Food & Staples RetailingIndustry: Food & Staples RetailingSub Industry: Hypermarkets & Super Centers


Direct Shares: 324,092 Indirect Shares: 699,304 Options: Convertibles:


Chairman/ExecutivesDr Robert (Bob) Lindsay EveryNon-Executive Chairman

Mr Every was the Chairman of the New Zealand-based listed company Steel and Tube Holdings Limited and a director of OneSteel Limited. Otherexecutive positions previously held include Managing Director of Tubemakers of Australia Limited, President of BHP Steel, and Managing Director andChief Executive Officer of OneSteel Limited, a position from which he retired in May 2005. He is also a Chairman of Boral Limited.

Mr Richard GoyderManaging Director, Chief Executive Officer

Mr Goyder has worked in several commercial roles at Tubemakers of Australia Limited. He has held a number of commercial positions in Wesfarmers'Business Development Department including General Manager.

Mr Terence (Terry) James BowenFinance Director

Mr Bowen has held a number of finance positions with Tubemakers of Australia Limited, culminating in his appointment as General Manager Finance. Terryjoined Wesfarmers in 1996 and undertook various roles with Wesfarmers Landmark Limited, where he was appointed Chief Financial Officer, until itsacquisition by AWB Limited in 2003. He was then appointed the inaugural Chief Financial Officer for Jetstar Airways, prior to rejoining Wesfarmers asManaging Director, Wesfarmers Industrial and Safety in November 2005. Terry became Finance Director, Coles in 2007 and Wesfarmers Finance Directorin May 2009 with responsibility for the Group's Finance, Treasury, Risk & Assurance, Investor Relations and Business Development departments.

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ELD Elders LimitedCurrent Share Price

$0.145 NA

Share Price Value


STAR STOCK CRITERIA

Analysis Published: 19 Nov 2012Research Analyst: Loago Madigele

Full year results – rural services business up for sale


GR1 Financial Health Elders Limited (ELD) has remained in a position of Distressed Financial Health following therelease of its latest interim results. Poor cashflows and loss-making activities continue toexacerbate a weak balance sheet. Flood conditions and the company’s exit from its forestrybusiness affected performance this period and the company’s rural services business is now upfor sale. As a result, ELD is exposed to unmanageable levels of financial risk and thus is unableto satisfy Golden Rule No.1 - Financial Health.

Current Share Price


NADiscount

NA

Announced Headline

19 Nov 12 08:39 Elders Full-Year Appendix 4E and Annual Report

09 Nov 12 10:38 Market Update

29 Oct 12 15:34 Market Update

44

88

Share price value


11 Financial HealthFinancial Health

DistressDistress(as at 19 Nov 12)







2010(A) 2011(A)EPS ¢ 0.70 -0.01EPS growth % NA -101.43ROA % 0.59 17.41ROE % 1.22 48.66Revenue ($mil) 2,108 2,284

33

FY12(F)2.60

0.671.88

2,209

Company Data

Share price $ 0.145Lincoln Valuation $ NALincoln Discount % NAConsensus Target $ 0.24Consensus Discount % -39.58% 2010(A) 2011(A) FY12(F)PE ratio (adj) x 82.86 5.58Ind Avg PE x 10.84 11.01 17.64PEG



Sep 11 (A) Current FY12 (F)Div yield (pa) % 0.00 0.00 0.00Gross div yield %Amount ¢ 0.00Franking %Ex date


12 mth return (inc div) -30.27% pa

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· ELD · XAO


INCOME STREAM PHASEA stock to avoid when seeking high yielding income stocks for your SMSF portfolio

of 16Page 14


$0.145 NA

Share Price Value


Status: TradingListed: 08 Apr 83Website: www.futuris.com.au

Sector: Consumer StaplesInd-Group: Food Beverage & TobaccoIndustry: Food ProductsSub Industry: Agricultural Products

Elders Limited (ELD, formerly Futuris Corporation) is an Australian company with businesses in rural services and automotive componentssupply.

Rural Service:the Companys Rural Services comprises Network operations supplying inputs, advice and marketing options to the Australian and NewZealand farm sectors and Trading operations supplying cattle, wool and other produce to customer in Australia and internationally.

Automotive:Automotive operations are conducted through Futuris. Futuris designs and manufactures automotive seating and interior solutions foremerging markets along with niche, high value-add products for developed markets. Futuris also provides cost competitive and localmanufacturing solutions for the cleantech, transport and infrastructure sectors.

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$0.145 NA

Share Price Value


Status: TradingListed: 08 Apr 83Website: www.futuris.com.au

Sector: Consumer StaplesInd-Group: Food Beverage & TobaccoIndustry: Food ProductsSub Industry: Agricultural Products

Direct Shares: Indirect Shares: 1,000,000 Options: Convertibles:

Direct Shares: Indirect Shares: 190,220 Options: Convertibles: 1,000

Direct Shares: 20,000 Indirect Shares: Options: Convertibles:

Chairman/ExecutivesMr John Charles BallardNon-Executive Chairman

Mr Ballard has experience across a wide range of industries as both a senior executive and a non-executive Director. He was a Managing Director andChief Executive Officer of Southcorp Limited, Managing Director Asia Pacific, United Biscuits Limited and Managing Director Snack Foods, Coco-ColaAmatil Limited, a Director of Woolworths Limited and Email Limited, Chairman of Wattyl Limited and Trustee of the Sydney Opera House. He is a Directorof Fonterra Co-operative Group Limited, a Director of Magellan Flagship Fund Limited, a Director of International Ferro Metals Limited, Chairman of theAdvisory Boards at Pacific Equity Partners and a Director of the Sydney Neuro-Oncology Group. He is a resident of New South Wales.

Mr Malcolm Geoffrey JackmanChief Executive Officer, Managing Director

Mr Jackman was Chief Executive Officer and Managing Director of Coates Hire Limited, an ASX 200 company, from 2003 until its sale in January 2008.Prior to Coates, He was Chief Executive Officer of Manpower Australia/New Zealand from 1996 until 2003. He was a non-executive director of RubicorGroup Ltd from 2005 until 2008. Prior to entering commerce he served as an Officer in the Royal New Zealand Navy. He is a resident of South Australia.

Ms Josephine RozmanNon-Executive Director,Non-Executive Chairman

Ms Rozman has experience in the wine industry and in marketing. She is presently a Board Member of Wine Australia Corporation previously known as theAustralian Wine and Brandy Corporation and has performed senior management roles for organisations including Blue Pyrenees Estates Pty Ltd (as theCEO), Nutrasweet Pty Ltd (Regional Director, Asia Pacific), Mildara Wines USA Limited, Synergy Marketing Pty Ltd and PriceWaterhouse (Australia &USA).

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of 5© 2012 Lincoln Indicators Pty Ltd. All rights reserved.

Stock Doctor Star StockStar Stocks are Lincoln’s shortlist of fundamentally superior companies that meet ourbenchmark criteria for Golden Rules 1, 2 and 3. Shortlisted for their consistent FinancialHealth, strong management and earnings growth these stocks offer outstanding long-term growth potential.

Stock Doctor Borderline Star StockBorderline Star Stocks are selected at the Lincoln Analysts’ discretion, however are notselected at random. A Lincoln Valuation will be provided for these companies if it ispossible that the company will be a Star Stock within the next 12 months. In all cases,Lincoln have undertaken detailed analysis of the company and are comfortable that theunderlying fundamentals remain healthy.

Lincoln preferred income stockLincoln preferred income stocks are selected for their strong Financial Health andare stocks that currently pay an annual dividend yield above the market average.These stocks are analysed by the Lincoln Analysts’ for their Financial Health, highdividend yield, earnings stability, and the company’s ability to maintain dividendpayments into the future.

Criteria

Industry & Size Return onAssets (ROA)

Return onEquity (ROE)

Earnings perShare Growth(EPSG)

RevenueGrowth

Small Caps(market capbelow $200m)

More than 14%and on positivetrend


More than 8%over the last 12months andpositive over 18months

Must bepositive overthe year

Resources &Energy(market capover $200m)


More than 8%over the pastyear

FinancialsexcludingREITS (marketcap over$200m)


More than 14%over the pastyear

Industrials &Materialsexcludingresources andincludingREITS (marketcap over$200m)


More than 8%over the last 12months andpositive over 18months

Must bepositive overthe year

Golden Rule 1: Financial Health Financial Health is our most important rule and should form the basis of all investmentdecisions. Lincoln’s unique Financial Health model assesses key accounting ratios foreach company’s profitability, cashflow, liabilities and assets and determines the FinancialHealth rating commensurate with the business risk of the company. To meet this criteriaa stock must exhibit consistently Strong or Satisfactory Financial Health ratings for twoconsecutive periods or more.Golden Rule 2: Management Assessment Management quality and leadership capabilities are important factors when assessingthe ability of a company to fulfil its financial and strategic objectives. Lincoln uses fourmeasurements to determine this: Return on Assets (ROA), Return on Equity (ROE),Earnings per Share (EPS) growth and revenue growth and measures these criteriabased on a company’s market capitalisation and the industry it is in. Refer to the tablebelow.

Golden Rule 3: Outlook/Forecast To determine whether a company’s growth and fundamental quality are sustainable,investors must analyse the company’s outlook and forecast earnings. At Lincoln we wantto gauge whether a company is likely to remain as a Star Stock in the future. For StarStocks and Borderline Star Stocks we provide our estimates as to what we expect thecompany to do in the coming year.

Denotes criteria for Star Stock status

Golden Rule 4: Share Price ValueStar Stocks, Borderline Star Stocks and Lincoln preferred income stocks: Anyof these stocks are undervalued if its current price is below its Lincoln Valuation.There will be times where the market attributes a premium to a company,particularly Star Stocks, due to its strong corporate history, stability of earningsand/or its future growth prospects with the market attributing a value tomanagement’s ability to keep the earnings momentum going. A track record ofquality results may provide comfort that the company will surprise on the upsideonce more.Non-Star Stocks: For Lincoln covered companies such as the ASX20 you can useour Lincoln Valuation. For all others the consensus target, where available,provides an indication of the market’s view on the company. In addition, traditionalprice earnings (PE) and price earnings growth (PEG) ratios can be used. A PE ratioless than the industry average indicates the potential for share price appreciation.Where the PE is greater than the industry average, the PEG ratio (PE/EPS Growth)is used to determine whether earnings growth justifies the premium price. Lincoln’sbenchmark is a PEG ratio of less than one.Golden Rule 5: Share Price SentimentFocus on stocks with a positive trend in share price. Be wary of stocks that arehistorically volatile, underperforming its peers, sector or indices, or trendingdownwards. As a rule of thumb, compare a share’s 12 month share priceperformance versus the All Ordinaries index. Where the stock underperforms theindex it will fail Golden Rule 5.Sometimes the market will fail to acknowledge a company’s fundamental qualities,and a disconnect between the value on the company and the price investors arecurrently willing to pay will occur. This may represent an opportunity for an investorseeking deep value and looking to prosper from this disconnect. If the companyretains its fundamental quality, investors may consider the stock or even acquiremore if they currently hold it.Golden Rule 6: Liquidity and SizeTo ensure an investor can at any time buy or sell a stock at a fair price, we suggestthat the average ‘daily volume traded’ figure is at least five times their exposurelevel. When assessing for Star Stock eligibility, a different set criteria is imposed forcompanies with a market capitalisation of less than $200 million to companieslarger than $200 million (see Golden Rule 2 for more information on these criteria).Golden Rule 7: Principal ActivitiesBefore investing in a company, an investor should have a basic understanding ofthat company’s principal activities, as well as the potential opportunities and threatsthat may impact future earnings of the company or its industry.Golden Rule 8: Price Sensitive AnnouncementsCompany news and announcements, in particular price sensitive announcements,can immediately impact stock prices positively and negatively. Our Analysts willprovide commentary on any Star Stock or Borderline Star Stock. Investors shouldbe wary about investing in companies that have had recent negative news orannouncements.

Golden Rule 9: Follow all of the above rules

Nine Golden Rules for successful sharemarket investing

Call 1300 676 333Visit www.lincolnindicators.com.auEmail [email protected]

LincolnIntelligent sharemarket solutions™

Important information: Lincoln Indicators Pty Ltd ACN 006 715 573. AFSL 237740. This communication has been prepared without taking into account your personal circumstances. You should therefore consider its appropriateness in light of your objectives, financial situation and needs, before acting on it. Investments can go up and down. Past performance is not a reliable indicator of future performance. © 2012 Lincoln Indicators Pty Ltd. All rights reserved.

http://www.lincolnindicators.com.au/

mailto:[email protected]

All information current as at 21 November 2012. ^Stock Doctor Star Stocks returned 12.7% over the 15 years to 31 October 2012. This return was calculated by Lincoln as a measure of the historical performance of the strategy and does not represent an actual investment. The return includes a brokerage fee of $30 for each Star Stock bought or sold and incorporates the change in each stock's price while it is held, but makes no allowance for dividends or other distributions, government charges or tax, or annual subscription fees payable to Lincoln. The return is annualised and is calculated assuming a Standard Investment Amount (SIA) of $5,000 was invested in each Star Stock at any given time (up to 69). The strategy identified Star Stocks based on new Star Stock criteria introduced 11/08/04, refined on 21/10/04, and applied to historical market data. Therefore the return does not represent actual performance. Past performance is not a reliable indicator of future performance. Important InformationLincoln Indicators Pty Ltd ACN 006 715 573 (Lincoln) AFSL 237740. This communication may contain general financial productadvice. It has been prepared without taking into account your personal circumstances, and you should therefore consider itsappropriateness in light of your objectives, financial circumstances and needs before acting on it. If our advice relates to theacquisition or possible acquisition of a particular financial product, you should obtain a copy of and consider the FinancialServices Guide (FSG) before making any decision. Lincoln, its employees and/or associates may hold interests in ASX listed companies. This position is disclosed within the StockDoctor program and may change at any time without notice. Investments go up and down. Past performance is not a reliable indicator of future performance. All calculation are of an historic nature and your personal tax profile may vary from examples shown. Please consult your tax adviser regarding the relevance of this information to your personal situation. The information contained herein is confidential and is intended solely for the addressee(s). Lincoln, its director, employees andagents, makes no representation and gives no warranty as to the accuracy of this communication and does not accept anyresponsibility for any errors or inaccuracies in or omissions from this communication (whether negligent or otherwise) and shallnot be liable for any loss or damage howsoever arising as a result of any person acting or refraining from acting in reliance on anyinformation contained herein. No reader should rely on this communication as it does not purport to be comprehensive. Thisdisclaimer does not purport to exclude any warranties implied by law which may not be lawfully excluded. We have takenprecautions to minimise the risk of transmitting software viruses, but we advise you to carry out your own virus checks on anyattachment to this e-mail. We cannot accept liability for any loss or damage caused by software viruses.


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