Tag Archives: Banks

article 3 months old

Weekly Broker Wrap: Carbon Tax; Banks; Gaming Gambles

- Which stocks benefit from no carbon tax?
- Merrills sour on Oz economy and bad debts
- Fixed odds threaten tote operators
- Barangaroo battle tough for Echo
 

By Greg Peel

The Coalition has promised to repeal the carbon tax and it is assumed the Coalition will form the new government post the September election. Depending on the upper house result, the tax could be repealed quickly or may need to wait for a double-dissolution election in mid-2015, Citi surmises.

By all accounts, the introduction of the carbon tax has had little impact on the Australian economy to date, and the Coalition will have an even greater task in reining in the budget deficit if the tax is repealed. But, a politician’s promise is a promise.

Stop laughing.

Were the tax to be repealed, various sectors and stocks on the Australian market would benefit on a discounted cash flow basis. Citi has made some calculations and provided some indicative estimates of DCF gains.

Among the miners, copper and gold stocks won’t see much joy but Alumina ((AWC)) could see an 8% gain and 3% gains await for BHP Billiton ((BHP)), Rio Tinto ((RIO)), Atlas Iron ((AGO)), Whitehaven Coal ((WHC)) and Iluka Resources ((ILU)). Greater gains are estimated for Gindalbie Metals ((GBG)) and Yancoal ((YAL)).

Beach Energy ((BPT)) would be a 5% winner among the energy stocks with Woodside Petroleum ((WPL)) and Santos ((STO)) looking at 2%. Downstream, Origin Energy ((ORG)) will see a neutral impact while AGL Energy ((AGK)) should benefit although Loy Yang will lose its compensation.

There will be minimal benefits for developers & contractors but building materials stocks Adelaide Brighton ((ABC)), Boral ((BLD)) and CSR ((CSR)) should see 1-4% gains. Transport stocks may be the big winners, not Asciano ((AIO)) and Aurizon ((AZJ)) but Qantas ((QAN)) should see a positive profit impact of 15% and Virgin Australia ((VAH)) 27%.

There will be little impact on REITs but retailers should enjoy the benefits of consumers with more money to spend, assuming no other taxes are introduced instead.

The carbon tax may not have impacted on the Australian economy but that is not to say the Australian economy is in rude health at present. The transition from mining-driven to non-mining-driven is offering up a lag despite easy policy from the RBA. The now weaker currency will provide benefits but in the meantime BA-Merrill Lynch is expecting GDP growth to slow to below 2% in 2015-16 and unemployment to peak at 6.75% in 2016.

Credit demand has remained subdued since the GFC but the level of bad debts has been steadily falling as the immediate impact of the GFC fades. The banks made large bad debt provisions as a precaution in 2009 and since then earnings have been supplemented by being able to return provisions incrementally to the bottom line. But Merrill’s suggests bad debts will again rise in a weaker economy and more so were the economy actually to fall into recession, to which Merrills ascribes a 25% chance.

The analysts remained negative on the banking sector early last week despite share price falls. ANZ Bank ((ANZ)) remains the broker’s top pick amongst the banks given its exposure outside Australia. Bank share prices have fallen quite a deal further since.

Australian consumers may still be holding back post-GFC but they are having no trouble throwing their money away instead, as the recent Waterhousegate controversy has highlighted. The rise of highly publicised internet-based betting at fixed odds is taking its toll on the traditional bastion of wagering on the tote. CIMB estimates fixed odd betting’s share of wagering revenue will reach 24% in FY13, up from 11% in FY10.

Alongside the familiar betting shop names now prevalent, highly sophisticated UK players have now entered the market. CIMB sees fixed odds as commanding 34% market share by FY16 and 43% by FY19. Fixed odd bookies operate on win margins of around 12% while tote margins average 18-19%. Not only will the totes be losing market share on the growth of fixed odds, their win margins will be under pressure as well.

CIBM has Underperform ratings on both Tabcorp ((TAH)) and Tatts ((TTS)).

At the higher end of town, beyond the Red Hots, Dish-Lickers and Footy, is the high roller casino planned for Barangaroo in Sydney. James Packer is lobbying hard for his Crown ((CWN)) to build a hotel and VIP casino on the site and is willing to commit $1bn.

Crown’s plans put rival Echo Entertainment ((EGP)) in a difficult position, notes Citi. As operator of the existing Star Casino across the water at Darling Harbour, Echo’s earnings would be threatened by the competition of a Crown operation nearby. To block Crown, Echo would need to counterbid which means also committing at least $1bn. And if Echo were to win the bid, and build another Sydney Casino, Citi estimates up to $52m of earnings lost in the first year due to cannibalisation.

Citi believes Echo has sufficient balance sheet capacity to complete its major development in Brisbane and in Sydney if it came to that, but despite strong cashflow and a relatively attractive valuation, Sydney uncertainty means Echo only attracts a Neutral rating from Citi. Crown’s Macau exposure underpins an Outperform rating.

In late news, Echo has approached the NSW government with two options, one involving Echo winning the bid and the other conceding high rollers only to Crown.


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article 3 months old

Treasure Chest: Fed Tapering And Oz Banks

By Greg Peel

Tonight the world will, hopefully, learn once and for all whether or not the US Federal Reserve is planning to begin tapering its bond purchases anytime soon, signally the first wind-back of the central bank’s quantitative easing program.

If the Fed does not announce imminent tapering, it is assumed tapering would nevertheless not be that far off. In anticipation we have already seen an increase in the US dollar and US bond yields. QE involves the Fed purchasing, among other assets, US Treasuries and specifically, in the case of QE3, ten-year bonds. The bonds are purchased with freshly “printed” US dollars, the result of which both lowers bond yields and devalues the US dollar.

Not only has anticipation seen the US dollar rise and US bond yields rise, it has helped to send the Aussie tumbling as the interest rate differential to Aussie interest rates closes. Further falls in the Aussie are now expected ahead as the Fed moves from winding back QE to specifically raising its cash rate from the zero level established soon after the GFC. A rise in the funds rate would push up US short term yields and further close the interest rate differential.

In light of hastily revised currency forecasts, stock analysts have been busy this past fortnight adjusting earnings forecasts for those stocks in various sectors which will benefit/suffer from a lower Aussie dollar exchange rate. Resource stocks have featured heavily in forecast changes, as have other exporters, importers, and companies with large offshore revenue bases. Australia’s banks have not featured to date given operations are mostly domestic and thus unaffected by movements in exchange rates.

ANZ Bank ((ANZ)) is nevertheless an exception. National Bank ((NAB)) has its UK business but this is being wound down, while ANZ is in the process of building an Asian revenue base. Outside of New Zealand exposures, the other banks remain largely parochial.

ANZ should stand to benefit from QE tapering relative to banking peers, suggests CIMB, from higher spreads on its institutional lending, Treasury earnings on its US dollar capital base in Asia and from the translation of US dollar earnings into Aussie dollars.

Later down the track when the Fed raises its cash rate, which CIMB suggests is unlikely before 2016, short term rates such as Libor (London interbank offered rate) will rise and a higher Libor rate would lift deposit spreads in ANZ’s transaction banking and retail CASA accounts (current account, savings account). ANZ has also built up US$26bn of excess central bank reserves.

CIMB has slightly upgraded its FY14-15 earnings forecasts for ANZ, lifted its 12-month share price target to $26.93 from $25.84 and upgraded its rating to Outperform from Neutral. ANZ is CIMB’s top pick among the Big Four.
 

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article 3 months old

Weekly Broker Wrap: Bank Bubble, Cautious Consumer, Tested Telecoms

-Has the bank bubble evaporated?
-Discretionary spending still weak
-Deutsche Bank prefers logistics, some AREITs
-Telecoms mature, mobile margin focus
-Plasma market is robust
 

By Eva Brocklehurst

Australian banks were in bubble territory at the start of the year but are they there now? Bank shares, having been buoyed by the chase for yield, have fallen sharply since the beginning of May and the sector returns are down 14%. UBS finds bank stocks are still not cheap, but valuations are less stretched. The case for an aggressive underweight stance may have run its course. The banks are now much closer to their global peers in terms of return on equity versus the price to book ratio, with the exception of Commonwealth Bank ((CBA)).

From here, catalysts will be centred around the macro view, with one of the key risks being a slowdown in the Australian economy and weak employment. Ongoing Australian dollar weakness and the ratcheting back of the US Federal Reserve's quantitative easing will also play a part. Support, in UBS' view, will come from further cuts to the cash rate from the Reserve Bank, a sustained pick up in the housing market and domestic investor rotation back to the sector as a "least worst" alternative.

In retracing the bank territory, UBS has decided to upgrade ANZ Bank ((ANZ)) to Buy from Sell. Bendigo & Adelaide Bank ((BEN)) and Bank of Queensland ((BOQ)) are upgraded to Buy from Neutral. ANZ's operations are performing well while the regional banks offer more upside now. ANZ is viewed now trading at a more appropriate 11.2 times price earnings and 1.6 times book value. The upcoming appointment of a new head of international and institutional banking could be critical to the stocks rating as well. UBS believes this appointment, most likely from a large Asian bank, must satisfy the market by further developing the super regional strategy and the person be seen as a potential successor to the CEO.

Bendigo and Adelaide Bank offers upside in UBS' view as the network matures while there is leverage to improved equity and debt markets. The risk centres on the very thin provision coverage. Bank of Queensland, on the other hand, offers a more classical bank turnaround opportunity as it works through legacy issues. The risk here is exposure via its mining leasing book.

Australia's bank stocks have typically been a safe haven in times of currency volatility. The unwinding of the yield trade and the renewed search for growth has signalled the flight-to-safety is less prevalent now. Macquarie notes the banks outperformed the market up to April 2013, driven by the yield trade and their safe haven status. Since then the banks have underperformed, driven by short selling and a turn away from yield to seeking growth. Macquarie thinks further de-rating may occur as the yield trade unwinds, but the banks are expected to restore their safe haven status in the ASX200 universe in the medium term.

Consumers are not co-operating. Spending growth has dropped below trend and the response to lower interest rates has been muted. Largely, in Deutsche Bank's view, because of how slow the rate cutting cycle has been. Discretionary spending growth in value terms has dropped below 2%. FY14 could be better as unemployment expectations look to have stabilised and an upward trend in wealth may encourage consumers to lower their savings rate.

Deutsche Bank believes growth in discretionary spending is close to recessionary levels, with a softening in both goods and services. Cars and gambling are the two items that have held up well. Early evidence is pointing to a resumption of spending on services such as travel and eating out, rather than on retail items. If this continues, it is likely to be a replay of 2010-12 where spending held up but retailers saw little benefit.

Spending on essentials, meanwhile, is growing around trend. What stands out is the large rise in the price of utilities. This relates to a large price increase in September 2012 at the time of the carbon tax introduction. When this cycles through, Deutsche Bank expects spending on utilities will track lower, allowing growth to pick up elsewhere. It will likely be food. Food inflation has been at historically low levels and an uptrend is now in place.

From all of this Deutsche Bank maintains a gaming exposure in stocks, and with firming air travel continues to hold Sydney Airport ((SYD)). Without an improvement in retail spending, the broker sees better options in logistics and those retail AREITs that have exposure to services spending. Consumer staples are viewed as expensive. The broker remains of the view that monetary policy is yet to have its maximum impact. The quantum of official rate cuts has been small and gradual relative to history. A further cut of 25 basis points to the cash rate is expected by September, which should buoy sentiment.

Australia's telecommunications industry is mature by various measures, one such being total telecom revenue as a percentage of GDP, which is 2% according to Morgan Stanley. The broker is not expecting a significant increase in total telecom revenue as a percentage of GDP but thinks the mix will change, with mobile increasing share as PSTN revenue moves to zero and the NBN builds. This sector has had one of the highest earnings revisions in the last three months. Positive revisions for the smaller names have been driven by consolidation of the broadband sector and resulting synergies.

The sector currently offers an average 5.3% dividend yield and a 1.9% spread to 10-year Australian government bonds, which should be sustainable over the medium term. Morgan Stanley highlights Telstra's ((TLS)) metrics in this regard, being 2.7% spread to the 10-year bond with a 6.1% dividend yield. Hence, for Morgan Stanley the sector offers investors an alternative to investing in bonds and the broker has a constructive view on Telstra because of these metrics, plus the exposure to mobiles.

Australia appears to be around one year behind the US in Smartphone penetration and Morgan Stanley expects earnings margin expansion through the Australian mobile sector for scaled players. There is increasing focus on mobile profitability in the US industry, and Australia appears to be following suit, a factor that the broker suspects is not well appreciated by the Australian market.

Plasma prices have risen again and this industry is upbeat on a global basis, with demand continuing unabated. UBS hasn't seen two price increases in the same year since 2007 and this is being read as underscoring a robust industry. US albumin prices have firmed to US$37-38 per vial and prices are expected to head towards US$40/vial in 2014. The past high point was US$50/vial but this is considered unlikely to be reached this time around. CSL's ((CSL)) collections are growing around 12%. The major risk facing CSL, in UBS' view, is changes to the plasma market dynamics and weakness in the prices that CSL is able to set for it products.
 

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article 3 months old

NIB Holdings On The Waiting List

- Stock held hostage by uncertain PHI market
- Broker sentiment mixed
- Growth to slow near term on uncertainty
- Longer term prospects strong


By Andrew Nelson

At first look, private health insurer NIB Holdings ((NHF)) is a real head-scratcher. Broker recommendations run the gamut between Buy, Sell and Hold, with analysts wary about the currently uncertain regulatory direction of the Australian Private Health Insurance industry.

A new broker has joined the fray and this one has a pretty clear rationale about the stock and the Reduce call it has initiated coverage with. In a report out yesterday from Japanese investment house Nomura, analysts go so far as to point out that their views are contrary to consensus. The divergence is put down to taking a more cautious stance on earnings, the broker admitting its FY14-15 earnings per share and dividend per share forecasts average 5% and 8% below consensus.

For a company that the broker says is well positioned in an industry that it likes the look of, one wonders why a Reduce call? The answer, in short, is the upside and value that most brokers admit to is seen as being longer term, with a bumpy road to ride before it is fully realised. So really, the divergence amongst brokers and their calls is not one of value, but more of timing.

Nomura expects the Australian private health insurance (PHI) market to deliver long-term growth in the neighbourhood of 8%. This is expected to be delivered on the back of population growth, economic progress and the ongoing shift in the healthcare business away from the public to the private sector.

The broker also sees NIB as being in a unique position, as it is the only listed direct exposure to this market. But that’s the longer-term again.

In the near to mid-term, the broker is not quite so upbeat about the industry. We are in the midst of a PHI public policy wrangle that will likely take years to sort though and for the dust to settle. In the meantime, the PHI industry has a number of obstacles to overcome. The biggest of the obstacles is falling government subsidies.

Adverse policy changes to subsidisation and taxation of PHI have already started to hit the higher earners, which account for around 25% of insured people. Then there are the mooted changes yet to come that the broker thinks could reduce demand amongst lower income earners as well. Together, these issues have the broker expecting to see increased lapse rates and a downgrade to coverage, which will in turn disrupt industry premium growth through FY14-15.

In the past, potential policyholders getting out there and shopping around the PHI market for better cover and lower prices has been a good things for NIB. However, the broker now expects the competition to heat up, with increasingly price-sensitive customers making conditions more difficult.

The broker thinks this environment plays better into the hands of Medibank Private and BUPA given a more seasoned and stickier customer base. iSelect, the largest online broker of PHI in Australia, will also benefit from the increased customer activity and shopping around for better deals.

Nomura believes current consensus estimates are underestimating the near-term growth interruption, with current forecasts for growth in NIB group premiums of 10% over the next two years simply too high. The broker’s own numbers point to under 5% over the next couple of years.

Analysts at Macquarie pointed out mid-May that over the 12-months to March 2013, premium growth in the PHI industry had already come back to 7.5%, although this was offset somewhat by a lift in margins to 5.0%. The broker, at Outperform, was ok with the news, noting core business growth was still steady and will remain supported by regulation and some new business opportunities.

That might be the short to mid-term picture out to FY15, but what does Nomura see after that? The broker sees four main drivers not just for long-term growth, but attractive long-term growth in the Australian PHI industry.

First, you have the prospect of increasing personal wealth levels, thus the macro economic cycle will eventually create a larger, more affluent customer base. Next, Australia has an aging population base, one increasingly reliant on healthcare. Also, as general healthcare costs rise, so will premiums. And the icing on the cake is that Australia is still growing its population base, bringing in new prospective customers every day.

Thus while near-term policy environment is not constructive, Nomura is completely of the view that long-term government strategy seems to favour the continued shift of patients and costs away from the public system and into the private. So even the Federal Government, when it comes down to it, has an interest in supporting the sector.

NIB's continuing expansion outside of its home NSW market should provide an increasing tailwind. Although, Nomura points out that while on paper the group’s new units seem to offer some attractive growth, the broker remains cautious given they are also higher risk strategies when you compare them to core business given a greater reliance on the health of the economic backdrop.

The FNArena Database shows two Buys, one Hold and one Sell aside from the Reduce put out by Nomura. This makes for a positive sentiment read. The consensus price target of $2.27 is close to the current trading price. Nomura is less optimistic, as we have already established, and has a more cautious target of $1.95.

Consensus FY14 EPS growth is pegged at 14%, DPS growth is forecast to run at 7.2%, paying a 4.9% yield and 13.5x FY14 earnings. The multiples are just too much given the tough and somewhat unpredictable couple of years ahead, concludes Nomura, the broker suggesting investors consider waiting for a more attractive entry point.
 

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article 3 months old

Weekly Broker Wrap: Insurers, Banks And ASX Shape Up For More Business

-More competition coming in insurance?
-Pressure on insurer investment income
-Banks getting back into construction lending
-Which engineering stocks are best placed?
-ASX eyes the funds management business
 

By Eva Brocklehurst

As the financial year-end draws closer so too do the deadlines for insurance renewals, particularly for the commercial segment. Commercial business represents 25% of Insurance Australia Group's ((IAG)) and Suncorp's ((SUN)) gross written premium (GWP) and 70% for QBE Insurance ((QBE)). IAG and Suncorp have both indicated they would like to grow their share of commercial. In UBS' view this must involve some margin trade-off, given the flattening prices and increased competition in this market segment.

Modest increases could still be achieved in small-medium enterprises but corporate and middle market rates are at risk of being flat, in UBS' view. Both local and international insurers, notably AIG, have a healthy appetite for larger commercial risks in the growth-constrained Australian economy. Berkshire Hathaway is setting up a new division to target US commercial lines and UBS notes this is being staffed with AIG defectors. The most direct implication is for QBE's Program segment, which has GWP of $1.5 billion, as this competes in similar specialised US markets. Program has been a problem for QBE in recent years and, as the big US players start competing aggressively, QBE will have its work cut out to stabilise and grow North American GWP.

After attending to recouping higher reinsurance costs and restoring margins, Suncorp and IAG are keen to get growing. UBS suspects they may have a challenge on their hands and high single digit GWP growth looks hard to achieve. The broker, from discussions with various industry contacts, believes the corporate end of the market is tough, particularly in mining and related services, and this will filter down to increase the competitor activity in the smaller corporates. In the case of property rates, indicators are that these are likely to be flat to slightly lower at the June 30 renewals. UBS has observed a "new mood" at AIG, since it re-branded from Chartis Australia in February. Globally, AIG has restructured its reinsurance programs, enabling greater levels of exposure to individual risks. Hence, it can become more aggressive in the Australian marketplace.

Investment income contributes 35-40% to IAG's and Suncorp's insurance profit and 25% for QBE. A reduction in Australian bond yields has been one of the key downside risks to earnings in 2013, in Credit Suisse's view, only to be pushed out as the Reserve Bank stays on hold and bond yields factor in a lesser likelihood of cuts to the cash rate. Moreover, rising yields in the US are having little impact on QBE's earnings. QBE's US dollar investments account for around 33% of the portfolio but contribute far less to investment earnings. QBE's investment income is primarily driven by Australian yields. The pressure for QBE is higher, as opposed to Suncorp and IAG, because of the large exposure to floating rate notes, pressured by the fall in the bank bill swap rate and a narrowing of corporate credit spreads.

The insurers, having differing investment strategies, are hard to compare. Suncorp invests in inflation-linked bonds and has offsetting hedges from life insurance. QBE has the most exposure to changes in bond yields. Overall, based on movements in the yield curve and credit spreads, IAG should be seen benefitting most from the conditions at year-end when the next set of results is published. Suncorp will get a similar benefit in general insurance but this will be partially offset by a hit to life insurance. QBE's investment income will be under pressure but the benefits from US long-dated yields should assist. Credit Suisse's preferences, in order, are QBE, IAG and SUN.

Historically, Australian banks' loan growth has tended to outstrip deposit growth, leaving a so-called funding gap that has been filled through wholesale funding. Credit Suisse notes a funding surplus in the latter half of 2010 was driven from strong deposit growth, rather than weak lending growth. This contrasts with two years earlier when there was a slowing in lending growth and subsequent funding surplus. Both these periods were followed by a substantial decline in mortgage price dispersion among the brands in banking, potentially to reduce the funding surplus. As the recent decrease in the funding gap has occurred, driven by weakening of lending growth, Credit Suisse expects the major banks might turn to pricing loans more competitively.

Citi observes that major banks are getting back into construction lending. New construction lending in the December quarter rose 160%, albeit from a low base. The March quarter is also expected to show continuation of this strength. In this new cycle, outside of listed property companies and private equity, only the four major banks are significant lenders for construction. Regionals appear unwilling and foreign banks are largely absent in this arena. Loan demand form the listed property trusts is expected to be muted as the sector is now better capitalised, after being too reliant on bank sources back in 2008. Low absolute rates available from US private placements are also constraining property trusts' demand on the banks.

This leaves the banks chasing less-qualified borrowers, in Citi's view. Those that are less able to re-capitalise if circumstances change. Citi also notes spreads between prime yields and borrowing costs are now more favourable, indicating a new cycle is developing. This suggests construction loans with a reasonable level of rental commitment are becoming more bankable. The major banks have the field to themselves but the contraction in mining capex could leave them exposed to projects that look good because of low borrowing costs, rather than because of prospective business demand.

Looking more closely at the engineering & construction (E&C) sector, Citi has assessed the impact of the resources downturn for earnings and valuation across the stocks covered in the sector. Miners are deferring projects and cutting operation costs and for E&Cs this results in increasing pressure on volumes, price and margins. Stress testing earnings forecasts under a bear case scenario leaves Leighton Holdings ((LEI)), Boart Longyear ((BLY)) and Monadelphous ((MND)) most at downside risk, in Citi's opinion. The broker has trimmed FY13 earnings estimates by up to 2% and FY14-15 by up to 16% across the sector. Downer EDI ((DOW)) is the most preferred exposure and Leighton the least.

LNG business is the longer-dated hope for the construction sector. Australia has 18 LNG projects that are in construction or proposed, representing total capex of US$368 billion and annual production of 120m tonnes. While iron ore's civil, mechanical and electrical capex is seen peaking in FY12-13 and coal likewise in FY13-14, LNG is not seen peaking until FY15.

ASIC has released a consultation paper on ASX's ((ASX)) managed funds services, AMFS. This is ASX's proposition to process retail investor applications and redemptions for managed funds via the CHESS system as it seeks to compete for funds under management with the more traditional "platforms", such as those of AMP ((AMP)), IOOF ((IFL)) and BT Investment ((BTT)). The value proposition for ASX, according to JP Morgan, is lower transaction costs, ability for fund manager to access investors directly and for advisers to take clients "off-platform". It also provides a new revenue source for ASX. AMFS will be limited to simple managed investment schemes and exclude schemes with illiquid assets or hedge funds. Of note, self managed super funds (SMSF) are heavy users of online brokers, the primary distribution channel for AMFS.

There are hurdles. Brokers may not sign as it could cannibalise their business, moving clients from direct share into managed funds. Also fund managers that are owned by major platform providers may not want to undermine their distribution channels. JP Morgan does not think this proposition will be a game changer for ASX but does suspect certain platforms will have more to lose, particularly those wishing to consolidate the SMSF space or those that have a large exposure to SMSF assets under management, on which they would be collecting administration fees up to 0.5-1.0% per annum.
 

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article 3 months old

Banks To Bounce?

By Michael Gable 

In the last few days the talk has been of the switch from banks to resources, yet yesterday we saw the opposite price action occur. It does appear as though from a medium to longer term point of view, banks will slow down here and resources will potentially produce more upside. Over the next few weeks though, I think we will see the opposite occur where the banks can stage a short term rally and resources will remain under pressure. While everyone is seemingly focusing on the banks, the safer sector that should do well over the next 6 months are industrials with US dollar revenues. The US economy is looking more promising now compared to Australia and with a favourable currency translation, companies with that sort of exposure should continue to outperform here.

I was at a seminar yesterday hosted by the large US fund manager BlackRock. Some key points that I was able to take away include:

- On a time frame of at least 18 months, equities are at fair value while bonds and fixed interest are overvalued.
- If QE were to cease, 10 year bonds should be about 1% higher.
- Profitability of US corporations is at a 45 year high.
- Japanese equities, despite the recent rally, are still very attractive and they have a government in place with enough power to get things done.
- When QE slows down and eventually stops, bond yields will rise and the most vulnerable assets are those which investors have used as a substitute for bonds.

Given the last point, investors may be wondering what to do with their banking shares. I’ve covered Westpac ((WBC)) as an example with some options on what can be done to protect the downside.


Westpac


The banks, including WBC, have been sold off very heavily since peaking last month. The major cause is the falling $A where overseas investors are looking to bank profits before they become eroded by the currency translation. With the heavily oversold condition on the daily chart, and the yield support, I would expect the banks to stage a small rally here, retracing approximately 50% of the recent falls. For WBC that takes it up towards $32. From there I would expect it to remain under pressure. It could either then drift back towards $29 or a worst case scenario for me would see the stock down near $26.

Potential Strategy*

If you are looking to lighten off on banks, then the upcoming bounce could be your opportunity. However, if we want to hang on but protect the downside, then the bounce will give investors an opportunity to write a covered call to protect the downside. Alternatively, if you are underweight banks, you can use these levels as a buying opportunity and then write a call options against the shares once they have rallied.


*This strategy contains unsolicited general information only, without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you must consider the appropriateness of the information in this document, having regard to your objectives, financial situation and needs and consult your adviser.

Content included in this article is not by association necessarily the view of FNArena (see our disclaimer).
 
Visit Michael Gable's website at  www.michaelgable.com.au/.

After leaving Macquarie Bank's Securities Group in 2008 after many years of service, Michael has gained a highly regarded reputation in the financial services industry. As a Private Client Adviser with Novus Capital, Michael has become a popular live commentator and analyst for Sky News Business Channel’s “Your Money, Your Call” program. He is also the author of the weekly stock market report “The Dynamic Investor”.

Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management.

Michael deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.

Michael is RG146 Accredited and holds the following formal qualifications:

• Bachelor of Engineering, Hons. (University of Sydney) 
• Bachelor of Commerce (University of Sydney) 
• Diploma of Mortgage Lending (Finsia) 
• Diploma of Financial Services [Financial Planning] (Finsia) 
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2

Disclaimer

Michael Gable is an Authorised Representative (Rep. No. 376892) of Novus Capital Limited AFSL 238168 ACN 006 711 995. Michael Gable and Novus Capital Limited, their associates and respective Directors and staff each declare that they, from time to time, may hold interests in securities and/or earn brokerage, fees, interest, or other benefits from products and services mentioned in this website. This website may contain unsolicited general information, without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you must consider the appropriateness of the information in this website or the Product Disclosure Statement (PDS) or Financial Services Guide (FSG), having regard to your objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance. Michael Gable and Novus Capital Limited believes that any information or advice (including any securities recommendation) contained in this website is accurate when issued but does not warrant its accuracy or reliability. Michael Gable and Novus Capital Limited are not obliged to update you if the information or its advice changes. Michael Gable and Novus Capital Limited and each of their respective officers, agents and employees exclude to the full extent permitted by law, all liability of any kind, in negligence, contract, under fiduciary duties or otherwise, for any loss or damage, whether direct, indirect, consequential or otherwise, whether foreseeable or not, to the extent arising from or in connection with this website.

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article 3 months old

Weekly Broker Wrap: Overvalued Aussie Banks; Small Engineers Reviewed; Resi Building Pick-Up

-Major banks overvalued?
-Bank asset quality improving
-Small cap engineers hold up
-Small cap retailers affected by discounting
 

By Eva Brocklehurst

Australia's major banks are overvalued by about 20%. This is CIMB's view. The bank registry data suggests foreign investors were the marginal buyers of these stocks in recent months and valuations for foreign investors may have been lifted by very low global risk-free rates. Rising global bond rates and the weaker Australian dollar would, therefore, be a threat to foreign demand for bank shares. This scenario underpins CIMB's Underweight call on the major Aussie banks.

CIMB is not impressed with the return on equity figures for the banks and has attempted to get a handle on what is driving the excessive valuations. The required returns for most offshore investors, especially those investors using the yen as a base currency, are much lower than for Australian investors. Foreign investor valuations are tied to low bond yields and many do not hedge currency risk. As US Federal Reserve chairman, Ben Bernanke, starts to jawbone the market into accepting a reduction in US central bank asset purchases, the US dollar has rallied and bond yields have risen. Australian interest rates, meanwhile, are expected to stabilise, or perhaps even fall. Lower rates may reduce the risk-free rate for foreign investors even more but, in the most likely scenario, the reduced yield gap between Australian and US rates should cut demand for Australian investments and in doing so reduce the demand for major bank stocks.

Looking inside the Australian banks, Goldman Sachs finds asset quality trends are improving. The sector's ratio of non-performing loans to exposure at default in the first half of 2013 fell to 95 basis points, from 103 bps in the second half of 2012. The decline was predominantly driven by lower numbers of impaired assets. Most industry exposures saw a fall in the ratio. Goldman has updated bank exposures to the mining services sector, given the pressures in this business as a result of a reduction in resources business. The analysis found mining services exposures represented less than 0.5% of exposure at default, with National Australia Bank ((NAB)) having the highest exposure at $2.8 billion and Commonwealth Bank ((CBA)) and Westpac ((WBC)) the least at less than $2 billion.

Goldman expects ANZ Bank ((ANZ)), CBA and Westpac will have combined bad debt charges at 10% below mid cycle levels in FY13. Despite this, the market is currently paying an 11% premium to the 15-year average price to underlying earnings multiple for these three banks. This is not sufficiently discounting the ongoing weakness in the non-mining side of the economy, in Goldman's view. Valuations for NAB are seen as more supportive, suggesting NAB should trade at an 11% discount to peers, versus the current 19% discount. This is why Goldman maintains a Buy rating on the stock.

The greatest exposure the major banks have is to the retail & consumer industry, some 49% of their total exposure. Here, CBA has the biggest slice with 60% of total exposure. Next is business & property services, a 10% combined exposure with NAB having the greater part, 11% of the total. This industry remains the worst performing for the major banks, but non-performing loans did fall to 2.4% of exposure at default in the first half of FY13, versus 2.7% in the prior half.

NAB's UK exposure has meant it has not experienced the same level of improvement in business & property as have the others whereas Goldman believes Westpac has done an excellent job of managing property exposure, which dramatically expanded as a result of the St.George acquisition. Westpac's non-performing loan ratio has fallen to 2.9% from a peak of 4.8% in March 2011. Mining, agriculture, forestry & fishing comes in at a distant third, at 4% of total exposure. Here too, NAB has the larger share, with 6% of total exposure. ANZ is the one of the four with the highest non-performing loan ratio, at 3.3%, and Goldman suspects it has a higher impaired exposure to this industry segment.

JP Morgan has reviewed earnings estimates for the small cap engineering, mining and energy sector stocks. This is to reflect what the broker believes is the "new normal", as major Australian projects are completed over time. Key Overweight stocks include Cardno ((CDD)) and Ausenco ((AAX)). Fleetwood ((FWD)) is Underweight.

Cardno is preferred because it is leveraged to a broad-based US recovery with around 50% of sales generated in the US. Consulting is inherently more defensive and Cardno is the only engineering player that does not build, so has limited project construction risk. Also, the company is well placed to benefit from increased regulatory codes and environmental compliance. Environmental services form a large part of Cardno's sales. The other Overweight stock, Ausenco, is preferred on a relative basis as it operates in lower cost countries, with 80% of sales generated overseas. It is also one of the better capitalised small cap stocks with hardly any debt. It is highly diversified across commodities yet has no Australian iron ore exposure. As for Fleetwood, the share price is under pressure and JP Morgan thinks there is more pain to come near term.

The broker is Neutral on most of the others in the group, namely Miclyn Express ((MIO)), Matrix Composites & Engineering ((MCE)), Programmed Maintenance Services ((PRG)), WDS ((WDS)) and Norfolk Group ((NFK)). In the case of Miclyn and Norfolk, these are in the midst of corporate action and there is no material upside to the current price. Programmed has an uncertain FY14 outlook while the broker is cautious about WDS' exposure to demand for coal work. Value may be emerging for Matrix but the risks are too much at present for the broker to be confident.

Small cap retailers were under Deutsche Bank's microscope recently. Kathmandu ((KMD)) outperformed peers in the third quarter of FY13 and does not face the near term headwinds that other small cap apparel retailers face. There are multiple earnings growth drivers and like-for-like sales upside. The company is also structurally better positioned compared with peers and, hence, Deutsche Bank comes out with a Buy rating on this company.

The inventory discounting that's largely expected to follow from Target's ((WES)) announcement of an inventory overhang this winter will filter through to the smaller caps. Myer's ((MYR)) stocktake sale will concern Premier Investments ((PMV)) and Pacific Brands ((PBG)), whereas Target's inventory is a concern for Specialty Fashion ((SFH)) and Pacific Brands, in the broker's view. The lower Australian dollar should help vertically integrated retailers as it reduces consumer purchasing power globally, but hedging policies create a lagged impact on the cost of goods sold for US dollar purchases. Deutsche Bank does not expect the full impact for Kathmandu, Premier Investments, Pacific Brands and Specialty Fashion until 2015 and the quantum is impossible to estimate.

Citi's May survey of Australian residential home builders has shown more than three quarters of the 39 respondents intend to build more homes in FY13 against FY12 while 62% reported an improvement in orders compared with six months ago. The analysts emphasise the sample size was small, and confined to the four states Victoria, NSW, Queensland and Western Australia, but more than half were confident about activity levels in the next 12 months and only 11% had a negative view. The biggest challenge facing the residential housing sector is economic conditions, both domestic and international.

Citi found that owning a strong brand portfolio is strategically important in getting solid market share in various products. It's a case of... leading brands lead. The so-called category killers dominate market share. GWA Group's ((GWA)) door brand, Gainsborough, is an example, enjoying market share of around 76%.  The number of brands are increasing, suggesting more imports. Overall, GWA's broad brand portfolio appears to have weakened. Caroma - bathroom fittings - is perhaps the most resilient. DuluxGroup ((DLX)) brands were stronger than expected. Perhaps because of the company's greater focus on renovations against new building.
 

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article 3 months old

Austbrokers’ Growth Fueled By Further Acquisitions

-Acquires two more agencies
-GWP now set to be over $210m annualised
-Hardening of premiums most positive aspect
 

By Eva Brocklehurst

Austbrokers ((AUB)) has added another bunch of acquisitions to its stable of insurance broking businesses, contributing to the scale of the company's Austagencies division. Total gross written premium for the insurance underwriting agency business is now expected to be over $210 million on an annualised basis.

Austagencies has acquired 90% of Lawsons Underwriting Australasia and Guardian Underwriting Services for an aggregate purchase price of around $10 million. An initial 75% will be paid up front from cash and the remainder will be paid in May 2014, from cash and debt. After financing costs, the transactions are expected to be 2-3% accretive to earnings in FY14 and add around $30 million to gross written premium. These agencies operate in the specialist areas of complex contract and labour hire (Lawsons) and hospitality industry property and liability (Guardian). The agencies take on no underwriting risk. Austagencies acts an umbrella management company, providing processing and claims management and back office support. Employees will hold the residual 10% of each agency, consistent with Austbrokers' model.

UBS maintains Austbrokers has a healthy balance sheet, with gearing at 17% versus a target range of 30%. The current debt facility is locked to August 2013 but management has agreed terms for a new facility of $40 million over three years, which should be closed soon. UBS likes the growth outlook and, as the stock continues to trade above the long term median 1-year forward price earnings of 13.5 times, rates the stock a Buy. This is underpinned by the quality of management and the stable industry structure.

Goldman Sachs likes the focus on niche industries in the underwriting sector. Earnings forecasts have been upgraded on the back of the acquisitions by 2% for FY14 and 1% for FY15. This may be lower than the company's accretion guidance but the broker offsets it with dilution from recent option issues. There have been 14 acquisitions thus far in FY13 and these latest ones confirm the importance of acquisitions to the company's growth projections. Goldman estimates Austbrokers has now spent more than $27 million on acquisitions in FY13, the largest single year of such activity since the company listed in 2005.

BA-Merrill Lynch likes the business and finds evidence of strong earnings momentum with relatively low risks. Austbrokers has withstood competition, economic cycles and commoditisation over the years. Merrills is curious about the upcoming IPO of Steadfast. According to reports, that company intends to lodge a prospectus on June 28. Listing is likely in late July, early August. Steadfast expects about $30 million in earnings and to pay out 65-85% of net profit as fully franked dividends. The introduction of Steadfast to the ASX should keep Austbrokers on the radar for investors, in the broker's opinion.

The most positive aspect of the near term environment for Austbrokers is a hardening of premiums, in Merrills' view, despite a subdued small-medium enterprise sector. Premium rates are one of the key risks for the stock, along with increased failure rates of SMEs and lower interest rates.

There are three Buy and one Hold ratings on the FNArena database, but two out of the four stockbrokers have yet to update their view (Goldman Sachs is not part of FNArena's daily monitoring). The consensus target price is $10.25, level pegging with the last share price. The dividend yield on consensus earnings forecasts for FY13 is 3.3% and for FY14 it's 3.6%.

See also, Austbrokers Pleases With Another Upgrade on February 26 2013

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article 3 months old

Oz Banks Remain Vulnerable

ASX 200 Financial Sector ex Property Trusts (XXJ)


Bottom Line 28/05/13

Daily Trend: Down
Weekly Trend: Up
Monthly Trend: Up

Technical Analysis

We’re going to do something slightly different this evening and concentrate on the weekly time frame which shows some interesting patterns [for the Australian bank index].  The severity of the recent downturn, albeit only over the short term does suggest an interim top is in position with wave-(C) likely being locked in.  If that pivot high is overcome then we’ll have to reassess though for the moment sellers have certainly taken the upper hand.  From an Elliott point of view the most noticeable pattern is the 3-wave movement that commenced way back in early 2009.  Indeed, it would be difficult to get clearer patterns with a 5-leg movement completing wave-(A) which was corrected by a 3-wave retracement into wave-(B) which also terminated very close to the 61.8% retracement level. 

The price action from that juncture has undoubtedly been clean and strong in nature for the most part although the initial stages of the trend was anything but impulsive.  It was choppy and messy which means we can’t label it as a much more bullish wave-3.  One thing’s definite, a probe into the price territory of wave-(A) means overlap will have occurred which cements our count as being correct.  As can be seen those levels aren’t too far below making it likely that a larger corrective pattern has been the way forward.  Also note that the wave equality projection of that larger pattern was tagged very nicely indeed before the recent reversal started to unfold.  So right here and now there are several reasons suggesting that further weakness is going to be required before the longer term trend resumes.

The wave structures here don’t really align with those of the XJO [ASX 200] which still offer upside potential - unless our make or break point put forward on Friday is penetrated.  One would assume that the broader market is going to need the help of the Banking Sector if it’s to head into new high territory, especially considering its been the catalyst behind the strength of late.  That’s not to say that the Materials Sector can’t step up to the mark though it has to be said there’s little sign of strength within the XMJ at the present time.  And with China data still being reason for concern I’m not sure what the catalyst is going to be to get the likes of BHP Billiton ((BHP)) and Rio Tinto ((RIO)) heading north.  Anything’s possible though it’s difficult to see a substantial flip from financials into resources right here and now.  The other pattern of interest is Type-A bearish divergence which is evident on the weekly chart shown here; our oscillator is already more than halfway down into the oversold position.  In fact bearish divergence has been a common theme of late which just emphasises the fact that price, as well as trends got a little ahead of themselves.

Trading Strategy

If you’re holding stocks within the sector it may be prudent to tighten trailing stops, especially as the patterns portend to a deeper retracement unfolding over the coming months.  I’m not a great advocate of closing positions just for the sake of it so there is certainly no reason to stand on the sidelines watching and waiting.  And who knows, the patterns could deviate from those expected which would result in lost opportunity should this trend continue.  Just keep risk small and keep on top of the money management side of things.  Should the patterns evolve as anticipated we could be looking at some shorting opportunities a little later down the track though first of all we’d need to see a low volume counter trend move higher as this would be a confirming factor in the recent pivot high being significant.


Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not FNArena's (see our disclaimer).

Risk Disclosure Statement

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Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

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article 3 months old

Weekly Broker Wrap: Australian Banks And Other Bubbles

-Impact from Ford closure
-Aust dollar to go lower
-Bank yield rally could be ending
-Where are the asset bubbles?
-Election boosting ad spending
 

By Eva Brocklehurst

Whenever major employers close up shop there's repercussions for other businesses and sectors, which may not be obvious at first glance. Ford Australia's decision to de-camp from manufacturing in Australia by 2016 is a case in point. Ford will shut down its Victorian car building plants at Geelong and Broadmeadows. These facilities employ 1200 people. The decision has thrown the spotlight on the durability of the other car manufacturers in Australia - Toyota, with its factory at Altona, Victoria, and General Motors Holden with a plant at Elizabeth, South Australia.

The Australian real estate investment vehicle, CFS Retail Property ((CFX)), is the most exposed to the shopping centres that are near these plants. UBS estimates CFS has 10% of net operating income from centres exposed to these locations while Westfield Retail ((WRT)) has 1% of assets that are exposed, at Westfield Geelong. UBS is Underweight on domestic discretionary anchored malls, which includes CFS, Westfield Retail and GPT Group ((GPT)). The March quarter updates from retailers underlines the deteriorating operating metrics for shopping centres as a whole and increased unemployment in the above locations will make that worse. Westfield Group ((WDC)) is more immune, given exposure to improving US markets and an appreciating US dollar.

The economics team at UBS has reduced Australian dollar forecasts, revising the currency to US95c, from US$1.00, for end of 2013 and US90c, from US95c, by mid 2014. Westfield has increased exposure to US dollar earnings, to 30-40% in 2014 from 15% in 2011. UBS estimates a 10% movement in the AUD/USD exchange rate alters earnings by 3-4%. Admittedly, some of this growth may be offset by dilutive asset sales.

UBS notes the Australian dollar has suffered more than most during the US dollar's recent advance, which has occurred along with expectations the US Federal Reserve may reduce quantitative easing (QE). This has coupled with the Reserve Bank's recent lowering of the cash rate, eroding the Australian currency's yield advantage. Commodity price weakness is a factor. The risk of another seasonal drop in the iron ore price could be just the catalyst for the Australian dollar to go lower. This time capital inflows are not enough to balance this out and there is a likelihood the Australian dollar will "re-discover" its commodity currency roots.

One final cut to the cash rate is expected over the next few months. UBS suspects, even if the RBA does not move, the easing bias will be maintained until 2014. If the rate cut eventuates then this could further undermine the Australian dollar's yield advantage and lower the cost of carry for fresh short positions in the currency. Moreover, the bond market is already heavily bought by foreign investors and UBS suspects that, after three years of accumulation, FX reserve managers have hit their benchmark exposure levels to the Australian dollar. As the mining boom peaks, investment flows will be smaller on that front.

This doesn't mean there will be a complete exit. Reserve managers have a very long term investment horizon and the country's AAA status and strong fiscal position are still major attractions. There are also structural factors at play, with the shift into Australian dollar denominated assets part of a long-term transition to a multiple reserve currency system, in the analysts' view. Nevertheless, UBS notes with interest the sudden absence of bids from private wealth managers since the downside break with parity  to the US dollar. Support for the Australian dollar will come from improved GDP growth both locally and globally. Moreover, commodity prices are still expected to remain around double their historical averages, not consistent with a sharp correction in the currency below US90c.

Lower interest rates, the increasing rarity of Australia's AAA rating and favourable economic conditions have supported investment in Australian banks. Conditions should stay supportive but Citi suspects the yield rally could be at an end. The broker still has a Buy call on Westpac ((WBC)), ANZ Bank ((ANZ)) and Commonwealth Bank ((CBA)). It's just there's some risks to the rally looming. Rising interest rates are not an issue at present but any whiff of inflation would change that. Offshore, Citi expects interest rates/liquidity would tighten more so because of improved economic conditions and in this case monitoring the situation is paramount. All else being equal, a depreciation in the Australian dollar could result in higher interest rates and the sharp reversal in rates would pressure bank valuations.

Usually the market is sold off on global shocks. Beyond the direct influence on bank earnings, these shocks can lead to higher interest rates regardless of the level of the Reserve Bank's cash rate and a falling Australian dollar. Things to look out for on this score are further EU instability, sovereign debt problems, pandemics and adverse political or economic developments in  key trading partners. Shifting asset allocations are also a risk. To that end Citi flags the risk of infrastructure bonds in Australia, which may be seen as a substitute for bank shares and cash, particularly by retail/self-managed superannuation investors.

Macquarie thinks there may be an old fashioned "mortgage war" afoot. In a low growth environment competition returns to businesses that are generating higher than the group average return on equity. Of the majors, CBA and Westpac have stated they intend to target growth at system rates to stem market share loss. Here Macquarie thinks Westpac will have to do the most work, either dropping its standard variable rate, adjusting broker commissions and/or discounting more. A combination of these could cost 2-5% of earnings in FY14. The motgage broker channel may be the place to start. It is currently growing strongly in Macquarie's analysis and ANZ writes the most business this way.

Some advice on how NOT to invest from UBS. The broker defines an asset bubble as a valuation beyond the reasonable bounds of the fundamentals which could correct rapidly. On this basis there are five markets that fit this criteria. The main driver of bubbles is ultra-loose monetary policy. By pushing risk free rates to an unprecedented low level, central banks run the risk of creating a disorderly return to normal. The danger zone is when the central banks start to try and normalise policy. There are five candidates in the current circumstances for the bubble territory. These are: risk free rates - US treasuries, German bunds, UK gilts and Japanese bonds; credit; Asian real estate; emerging stock markets such as Indonesia, Philippines and Thailand; and Australian banks.

UBS finds Australian bank valuations are very stretched and the favouring of yield and good fundamentals should support them in the future. The trigger to a correction lies, as it does with most of the other four candidates, with any clumsy exit from the US Fed's QE policy. UBS' economics team in the US believes a scaling down of QE will happen in the first quarter of 2014. Despite this, other than a sell-off in risk-free rates after any QE exit, UBS does not think the Australian bank bubble will burst any time soon. Other potential risks are a downgrade to the sovereign rating, a housing market correction, trading book or funding issues, but these are unlikely.

US treasury yields are too low, as are German bunds. In UBS' opinion they should be closer to nominal GDP growth. Will the bubble burst there? Depends how well the Fed controls the long end of the curve. UK gilts are not as far from fair value and so may not be as problematic. In Japan, any sharp policy change after the elections in July may wield the big correction stick. For credit growth in both Europe and the US the analysts have been concerned for long time about the fact that liquidity vanishes in volatile periods. Therefore, here too the QE exit strategy is important. Asian real estate will suffer repercussions when QE is reduced as this will limit asset purchases and raise the cost of funding, notably Hong Kong real estate. UBS suspects the bubble may not burst with a QE exit in regards to emerging stock markets but many are expensive and relatively illiquid so there could be problems.

The federal election is on September 14. This will boost advertising spending in 2013, particularly on TV. Goldman Sachs estimate an extra $70 million boost to ad market spending in the second half of 2013. In fact, the longer lead up to this election has already produced more politically related advertising. The government has been increasing spending in digital areas at the expense of other media types. As digital spending tends to be less expensive this may mean lower political advertising spending overall. Goldman Sachs notes the key area of downside risk is mainly in print media. Ad market advertising is currently tracking 2-3% below the first half of 2012.

There are some differences this time. The early announcement of the election may mean some spending falls into the first half of 2013. More time to plan spending may produce cost effective campaigns too, as fewer ad spots are booked at high rates. Thus far, Goldman finds government advertising spending grew considerably in April and looks like lifting in May and June. Should total political advertising spending end up being weaker against previous years, it probably would be the result of more cost effective campaigning. Elections don't stop others advertising. Conventional wisdom has it that electioneering - elections usually happen in the third quarter - pushes other advertisers out to the fourth quarter, or pulls them forward to the second quarter. Goldman has found no basis for this and expects the extended election campaign will have no discernible effect on advertiser spending.
 

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