Australia | Feb 20 2014
By Henry Jennings, Private Client Advisor, BBY Ltd
Well, we were looking just fine and dandy until along came the bad news. After another string of earnings results surprising to the upside, China had to go and spoil it all by saying something stupid like the PMI is only 48.3, lowest reading in seven months, tightening as well at the moment so more problems than just the PMI.
We chose to ignore Wall Street after both Fairfax Media Limited (A$0.88, +23.1%) and AMP Limited (A$4.92, +9.3%) jumped out of the blocks as the index rose to 5441.5.Now is it just me or is this a conspiracy but our recent high was 5441.4!! However after the Chinese we fell away to close at 5412 up 4 points. The big banking blob fell away with Australia and New Zealand Banking Group Limited (A$31.60, -0.8%) and Westpac Banking Corporation (A$33.10, -0.4%) leading the falls. Going against the trend were the insurers like AMP Limited (A$4.92, +9.3%) (figures surprised),Suncorp Group Limited (A$12.70, +3.7%),Insurance Australia Group Limited (A$5.52, +1.1%) and QBE Insurance Group Limited (A$11.40, +2.2%).Macquarie Group Limited (A$55.26, -1.3%) also suffered as did Magellan Financial Group Limited (A$12.69, -0.1%),HFA Holdings Limited (A$1.13, -1.7%) and Platinum Asset Management Limited (A$7.37, +1.8%).
After a great start iron ore stocks gave it all back and more with RIO Tinto Limited (A$69.59, -0.9%),BHP Billiton Limited (A$38.70, -0.1%),Fortescue Metals Group Ltd (A$5.87, +0.5%),Atlas Iron Limited (A$1.055, -2.3%) and Mount Gibson Iron Limited (A$0.97, -4.4%) in the dog house. Energy stocks also dipped with Origin Energy Limited (A$14.55, -2.0%) announcing, Drillsearch Energy Limited (A$1.61, -1.8%) slipping post numbers but Woodside Petroleum Limited (A$38.60, +0.6%) bucked the trend.
Gold shares took it hard too as Newcrest Mining Limited (A$10.68, -4.2%) fell in a heap as rumours continue about a capital raising and others followed. Suspect a few downgrades around too. Gold price falls didn’t help either .Silver Lake Resources Limited (A$0.665, -2.9%),Kingsgate Consolidated Limited (A$1.195, -7.4%),St Barbara Limited (A$0.37, -5.1%) and Beadell Resources Limited (A$0.785, -3.1%) all down and out
In the industrial landscape news that Bernie Brookes was remaining at Myer Holdings Limited (A$2.56, +4.1%) helped and rumours of a David Jones Limited (A$3.25, +1.6%) and Myer Holdings Limited (A$2.56, +4.1%) tie continue. Wesfarmers Limited (A$43.05, -0.3%) and Woolworths Limited (A$36.19, +0.5%) went in opposite directions just for a change and healthcare stocks were better with Sonic Healthcare Limited (A$17.13, +2.9%) in front with Cochlear Limited (A$57.40, +3.0%)
Big winners are grinners today included Fairfax Media Limited (A$0.88, +23.1%),Breville Group Limited (A$9.00, +13.1%),AMP Limited (A$4.92, +9.3%),iiNet Limited (A$7.95, +6.0%),Leighton Holdings Limited (A$17.21, +4.9%),Myer Holdings Limited (A$2.56, +4.1%) and Suncorp Group Limited (A$12.70, +3.7%) whilst facing eviction from the big brother house were Mount Gibson Iron Limited (A$0.97, -4.4%),Panaust Limited (A$1.895, -4.8%),#FLN#,Oz Minerals Limited (A$3.70, -4.9%),Newcrest Mining Limited (A$10.68, -4.2%),Bluescope Steel Limited (A$5.82, -2.3%) and Southern Cross Media Group Limited (A$1.42, -4.4%). Mid-caps to suffer included Nexus Energy Limited (A$0.059, -23.4%) ,#PBT# and CTI Logistics Limited (A$2.19, -10.2%). Volume was again fairly decent at nearly $6bn. News today too that Bell Potter has teamed up with Citi after the UBS partnership expired in December 13.
Aussie dollar fell below 90cents at 89.40 ,the big jumper was the digital tulip at $700 a piece, was $310 a day ago. Must be something wrong with that! Gold fell to $1311.
Asian markets were weaker following the PMI, the MSCI Asia Pacific Index fell 1.1.Japan down 1.5% and HK down 1%.Declines in the Japanese yen are driving import costs through the roof and the trade deficit widened to a record in January as surging import costs weigh. The 2.79 trillion yen ($27.3 billion) shortfall reported by the Ministry of Finance in Tokyo today exceeded the 2.49 trillion yen median estimate by analysts.
Stocks and Stories
Fairfax Media Limited (A$0.88, +23.1%) A big surprise as cost cutting and digital income started to kick in. Good news and the shorts got punished. Had a 48.5 per cent growth in underlying net profit to $86.4 million for the half year ended.Big winner was Domain. I have always said the digital business had huge potential if they could only emulate REA Group Ltd (A$48.45, +3.6%),Carsales.Com Limited (A$10.66, +1.0%) and Seek Limited (A$16.02, +2.0%), well the sky is the limit.
AMP Limited (A$4.92, +9.3%) Profit up 2%.They reported an underlying profit of $849 million for the year, down from the $950 million posted in 2012.Dividend unchanged.
Mirvac Group (A$1.75, -0.3%) has narrowed its full year operating earnings guidance to 11.8¢-12¢ per security after a first half that delivered solid returns in the investment portfolio and boosted the residential contracts on hand to a record $1.5 billion.
XRO added 39,000 customers to its online platform in the past four months, surpassing the 250,000 customer mark for the first time as the New Zealand company prepares to ramp up activity in the United States.
Origin Energy Limited (A$14.55, -2.0%) reported a 39 per cent drop in first-half profit to $322 million, while underlying profit edged up 5 per cent to $381 million, just short of some forecasts. Origin declared an interim dividend of 25¢ per share
Myer Holdings Limited (A$2.56, +4.1%)/David Jones Limited (A$3.25, +1.6%) It is back on again as Myer Boss Bernie Brookes has found a second wind. Or unfinished business or a better contract. Seemed strange that Brookes was going and Zahra too!
Leighton Holdings Limited (A$17.21, +4.9%) Dividend up with underlying net profits after tax of $584 million for the 12 months to December, having previously guided investors to expect profits of between $520 million and $600 million.
Tatts Group Limited (A$2.96, -2.3%) Tatts Group has reported a 12.2 per cent rise in net profit from continuing operations to $122 million, as lotto customers turned their back on smaller jackpots and wagering customers were spoilt for choice from online-only operators. The Brisbane-based company reported a 3.5 per cent fall in revenue to $1.5 billion. Interim dividend of 8¢ and slight miss on expectations.
Treasury Wine Estates Limited (A$3.81, +3.0%) also reported that its pre-tax earnings had dived 37.6 per cent to $45.8 million, while revenue remained flat, up only 1.6 per cent to $864.2 million. They also announced that they had gone outside the biz for their new MD. Michael Clarke. Not sure how he is going to fit it in given his role as Captain of Australian Criocket. Probably a good move. Time to buy!
And in house stocks Nexus Energy Limited (A$0.059, -23.4%) crashed back to earth following another strategic review and no decent bids received for their Crux. Doh! Acrux Limited (A$2.07, +3.5%) up a bit following their numbers and importantly a 12 special cent dividend .and talking biotechs Mesoblast Limited (A$5.79, -1.2%) made a positive announcement regarding its patents in Europe for cardiac and vascular stem cell therapy and Regeneus Ltd (A$0.515, +4.0%) also improved.
Tomorrow’s Stories Today
Truce in the Ukraine. Must have been scared of Obama’s threat to do something. Not sure what. Didn’t seem to help in Syria.
New Elections in WA after volte ruled void.
Sorry Mark Zuckerberg, I think you should be called Suckerberg..why did you pay $16bn for a free app!!!Are you mad!!He paid 50 bucks a subscriber for an app that has no ads and costs nothing for the first year..and even in the high paying second year it only costs 99 cents for the year…so even if Facebook get 1bn people on the app it will only make revenues of $1bn over two years! And let’s face it things are changing so fast in a year there will be something better, wait a minute there already is, VIBER!!
Still if Apple sees value in Tesla? Maybe the Zuck knows what he is doing. Stock dropped 5% after hours though! Should have just bought snapchat for $3bn!
G20 Finance ministers meeting in Sydney this weekend. Should be a barrel of laughs. Wonder what they will make of Joe?
Record spending by tourists has helped Greece post its first current account surplus since official data began. Figures from the Bank of Greece showed the difference between the money going into and coming out of the country was 1.24bn euros.
The International Monetary Fund has urged the European Central Bank to consider cutting interest rates to below zero as it warned that deflation in the eurozone was a key new risk facing the world economy.
Bayern Munich wallops Arsenal. Shame!
Henry Jennings
Private Client Advisor
BBY Limited
Participant of the Australian Securities Exchange
Authorised and Regulated by the Financial Services Authority
Level 17, 60 Margaret St
Sydney NSW 2000
D +61 2 9226 0067
M +61 414 345 137
E hcj@bby.com.au
W www.bby.com.au
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