Markets Live: Dollar, shares fall on data
11:07am: Shareholders in BHP Billiton and Rio Tinto may be in for a windfall of almost $8 billion through share buybacks and/or special dividends, if JPMorgan analysis is on the money.
BHP, which is likely to move first as early as its full-year results in August, could support a buyback of about $3 billion, while Rio Tinto, which is more likely to wait until its full-year 2014 results next February, could support a $4.75 billion buyback in the 2015 financial year, JPMorgan’s mining analyst team has calculated.
BHP, set to reach its $US25 billion net debt target by the end of June, is likely to find an off-market buyback in Australia is a more cost effective way of returning funds to shareholders.
BHP also has the potential to improve returns through portfolio rationalisation, though just what impact that would have is difficult to say without knowing the deals, JPMorgan said. It identifies more than $US35 billion of assets that could arguably considered non-core, including $US5.8 billion of petroleum assets, $US2.9 billion of copper assets and almost $US8 billion of coal assets, as well as the sidelined aluminium, manganese and nickel divisions. Upvotes:0 Downvotes:0 Copy Link
11:02am: Residential developer Peet has forecast momentum in the new housing market to continue build this year after its interim profits rose sharply on increased lot settlements and rising margins.
Peet reported an after-tax profit of $14.5 million for the six months to December 31, compared with a $1 million profit in the corresponding period a year ago.
A full-year dividend is expected to be reinstated for fiscal 2014.
The result was driven by a 31 per cent rise in revenue to $119.4 million as a result of lot settlements rising 85 per cent to just over 1500 and with earnings margins rising from 17 per cent to 23 per cent.
Sales picked up at its wholly owned Craigieburn project in Melbourne and Baldivis development south of Perth, as well as from projects tied to CIC Australia, the property business in which Peet acquired a controlling interest in May last year.
Peet managing director and CEO Brendan Gore said the result was in line with expectations and the indications were positive for further improvement in the second half.
Peet was particularly bullish on the outlook for Western Australia and Victoria, noting that there had been increased inquiries and a positive trend in sales volumes as a result of improving market conditions and that it had responded with “significant investment in the development and construction of new lots”. Upvotes:0 Downvotes:0 Copy Link
10:55am: Optus chief executive Kevin Russell will leave the telecommunications company at the end of next month, less than two years after taking on the role.
Former chief executive Paul O’Sullivan, who is currently SingTel’s group consumer chief executive, will act as an interim head for Optus until a replacement for Mr Russell is found.
It is understood that Mr Russell resigned and was not forced out by the board. He had privately flagged to the company his intentions to leave the company some time ago. Upvotes:0 Downvotes:0 Copy Link
Capital expenditure expectations have come in lower than expected.
10:39am: Business spending expectations for the three months to December have fallen by greater-than-expected 5.2 per cent, as the mining investment boom continues to fall from its peak.
The consensus forecast was for a 1 per cent decline.
The Australian dollar slipped to its lowest level since February 10, falling more than half a cent to US89.19c.
The first estimate of 2014-15 capital expenditure expectations, which analysts said would give a sense of the recovery in the non-mining sectors of the economy, came in at $124.9 billion, according to the ABS.
The result was below consensus forecasts of $139 billion.
The fifth estimate for companies spending plans in this financial year was $167.1 billion, a 0.8 per cent increase from the fourth estimate.
There were very poor numbers across the board, JP Morgan economist Tom Kennedy said.
The key takeaway for the RBA is when you look at sectors outside mining, they were also pretty weak. So investment intentions in both the manufacturing and other selected industries - both of those were quite soft and quite weak.
So you are not really seeing that rotating and pick-up in growth outside the mining sector, and we think that is going to be a worry for the RBA. Upvotes:0 Downvotes:0 Copy Link
10:30am: Big US fund manager Wellington Management has spent $24 million buying extra shares in struggling wine group Treasury Wine Estates, to lift its stake to 6.79 per cent, from 5.73 per cent.
Wellington, which is based in Boston in the US, scooped up the extra shares late last week and early this week, buying tranches worth $10 million, $3.5 million and two lots of about $5 million each.
Treasury, the owner of brands including Penfolds, Wolf Blass, Lindemans, Rosemount, Seppelt and Saltram, announced poor first-half results on February 20 and the appointment of food executive Mike Clarke as chief executive after a six-month search for a new boss.
Treasury shares have made small gains in the past few days and are trading at $4.07. This compares with below $3.50 early this month just after Treasury revealed a $40 million profit downgrade for 2013-14 because of a poor performance in December in Australia and China.
Treasury’s first-half profits in 2013-14 halved to $25.7 million when an $80.5 million tax benefit from a ruling by authorities about de-mergers was excluded. Upvotes:0 Downvotes:0 Copy Link
10:26am: Seven Group has delivered an interim result worse than the predicted 30 per cent to 40 per cent decline in underlying profit it flagged to the market back in November.
The company has reported an underlying interim net profit of $131 million, a 44 per cent decline from the December 2012 half.
Statutory net profit rose 2.7 per cent to $263.893 million.
Revenue declined 41.7 per cent to $1.577 billion, down from $2.704 billion in the previous corresponding period.
Earnings per share rose to 81¢, up from 79¢ in the first half of the last financial year. In December the company announced a 12 million share buyback, representing 3.9 per cent of the value of the company, that will commence in March.
The company announced an interim dividend of 20¢ per share, consistent with the previous corresponding half. The interim dividend has a record date of March 28 and is payable April 11.
In November the company reiterated it expected earnings to fall between 30 per cent to 40 per cent as its WesTrac business cut a further 630 jobs on top of the 350 cut in June.
WesTrac, is the sole dealer for heavy earth moving equipment brand Caterpillar in Western Australia, New South Wales, the Australian Capital Territory and north-eastern China.
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10:23am: Moodys has downgraded the credit rating of struggling mining services business Boart Longyear.
The shares, which were up 7 per cent this morning, have sold off but are still 1.8 per cent up for the day. Upvotes:0 Downvotes:0 Copy Link
10:11am: Qantas will axe 5000 jobs, ditch unprofitable routes and retire ageing gas-guzzling planes in the biggest shake-up of its operations since it was floated almost two decades ago.
It is the biggest cull of Qantas staff since chief executive Alan Joyce took the reins in 2008, and will reduce the airlines workforce to about 27,000 over the next three years.
Before the latest retrenchments, Mr Joyce had announced almost 4200 job cuts during his tenure.
The airline also reported a $252 million underlying loss in the first half amid a bitter fight with Virgin Australia in the domestic market, and intense competition on international routes.
It is Qantas biggest first-half loss since the Keating government began cutting it free from government ownership in 1995.
Qantas shares fell sharply, down about 7.9 per cent at $1.17.
Qantas will ditch flying between Perth and Singapore later this year and retire six Boeing 747 jumbos. It has also deferred the delivery of the last eight A380 super jumbos it has on order, as well as the last three of 14 new 787 Dreamliners due for Jetstar.
It will also shelve growth plans for Singaporean budget offshoot Jetstar Asia amid intense competition with other budget airlines in the region.
Read more here and tune in to the live Qantas results blog here.
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10:01am: Online job outsourcer Freelancer.com has notched up a 53 per cent rise in underlying earnings during 2013, beating initial forecasts but performing below analyst estimates as the company continues an aggressive growth path.
In inaugural results posted after the company’s ASX debut in November, Freelancer reported underlying EBITDA of $1.2 million, below analysts estimates of $1.6 million. Its reported earnings were $700,000 after a $394,000 charge for its initial public offering.
The company’s underlying net profits reached $1.1 million – a reported $800,000 after IPO costs – after its revenues rose 77 per cent to $18.7 million.
The company, which allows users to post graphic design and programming jobs to be completed by freelancers, said it attracted 2.9 million new users to the site during the year, to reach 10.3 million new users in total.
About three out of four new users are freelancers, largely from developing countries, and the rest are those posting jobs.
The company debuted on the ASX to strong interest from shareholders. Shares grew from an IPO price of 50¢ to $2.50 on opening, briefly valuing the company at more than $1 billion.
The share price has fallen 5.4 per cent to $1.40 on the announcement, but is trading on a P/E of 700 times expected earnings for this financial year, on Bloomberg numbers.
Chief executive Matt Barrie defended the high multiples at which the stock is trading as a useless metric because the company is investing most of its profits back into operations.
“I could have made it zero [profits],” Barrie told the AFR. “We were just trying to run it as close to break even as possible. Upvotes:0 Downvotes:0 Copy Link
9:51am: Mining service company Maca is in a trading halt pending an announcement in relation to a proposed financial transaction.
The stock will return to trading either at the time of the announcement or by Monday at the latest. Upvotes:0 Downvotes:1 Copy Link
9:47am: Australians still believe now is a good time to buy a residential property but concerns remain about a housing market correction, according to the latest RP Data/Nine Rewards survey of housing market sentiment.
Three quarters of those surveyed in January said now was a good time to buy a property, slightly down on the 80 per cent who said it was a good time to buy when surveyed a year ago.
By comparison, vendor confidence surged strongly in line with rising house prices, with 52 per cent of respondents saying now was a good time to sell, compared with just a third of respondents a year ago.
This suggests listings could rise over the next six months at the same time as appetite for property might be falling slightly.
House-buying sentiment is strongest in the more affordable markets of Adelaide, Brisbane and Tasmania and weakest in the most expensive markets of the Northern Territory, the ACT, Sydney and Melbourne.
Confidence about buying property is generally high in the regional areas, where property is more affordable and prices have either risen modestly or not at all.
One in two of those surveyed expect property values to rise over the next six months, with most of these tipping gains of 5 per cent or less.
A tiny proportion (5 per cent) expect house prices to fall over the next six months with the balance of 45 per cent expecting no change in values. Upvotes:0 Downvotes:1 Copy Link
9:39am: Mining services company Bradken has withdrawn its offer to buy peer Austin Engineering, the company said in a statement to the ASX.
The offer – of 0.75 Bradken shares for one Austin share – was lobbed on 18 December, but “is no longer accretive for shareholders,” said the company, although Bradken “currently intends to continue to maintain a strategic holding” in Austin.
Shares in Austin have plunged almost 10 per cent on the news, while Bradken stock is trading 1.6 per cent higher. Upvotes:0 Downvotes:0 Copy Link
9:34am: Oil Search has suspended its shares from trading as it seeks to finalise a sale of shares to institutions to fund what is expected to be an investment into the large Elk and Antelope gas fields held by InterOil.
The company, Papua New Guinea’s flagship oil and gas producer, is understood to have been caught up in a bid by the PNG government to regain a foothold on the share register, potentially through a strategic placement of shares.
But the announcement Thursday refers to “an institutional placement” to fund a “proposed material acquisition.”
Oil Search signalled an announcement on the raising could come by the start of trading on Friday.
Analysts have suggested Oil Search may raise several hundred million dollars through the equity raising.
Oil Search halted its shares from trading on Tuesday pending an announcement on the deal, but has now had to suspend the stock as the details are wrapped up. Upvotes:0 Downvotes:0 Copy Link
9:20am: Here are the ASX 200 stocks trading ex-dividend today:AurizonFairfax MediaFortescueIAGSantosSpark InfrastructureToll Holdings Upvotes:0 Downvotes:0 Copy Link
9:18am: Shares have opened weaker, with the ASX 200 down 21 points in early trading to 5416.2, and the All Ords 19 points lower to 5427.8.
All sectors are lower aside from telcos, which are marginally higher as a group.
Utilities are the worst performers, with the sector down 1.1 per cent.
BHP is the biggest drag on the market, down 0.5 per cent, while Fortescue is 1.9 per cent lower. Rio is down 0.4 per cent.
IAG is 2.4 per cent lower as its shares trade ex-dividend. Upvotes:1 Downvotes:0 Copy Link
8:57am: Nine Entertainment Co has posted its maiden interim results as a listed entity with earnings slightly above its underlying forecasts in its flotation prospectus.
The television, events and digital group reported net profits of $31.7 million after tax in the six months to December 31, versus losses of $93.8 million in the same period a year earlier.
Revenues rose from $657 million to $803 million as Nine Network, the television business, reported its fifth consecutive year of ratings improvement.
On a pro-forma basis, revenue increased 9 per cent to $846 million and EBITDA by 17 per cent to $189 million.
Chief executive David Gyngell said he was “pleased’ with the performance and the company was “making good progress” integrating its newly acquired Adelaide and Perth television operations and its now fully-controlled Mi9 operations.
The group said it was confident of delivering pro forma EBITDA of $305 million as forecast in its prospectus.
Nine said the events business had posted a record half, but for the Nine Digital business – which includes Mi9, of which Nine took full control from its former joint venture partner Microsoft – EBITDA fell 35 per cent to $13.7 million on revenues 1 per cent higher at $79.4 million.
There is no dividend.
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8:50am: Transfield Services plans to sell its Indian operations and a minority stake in power producer Ratch-Australia as it swung to a $4.8 million net profit in the first half and outlined changes to its business model.
Transfield, which reported a $247 million interim loss a year ago, will abandon its regional operating structure and run its business through three sectors from 2015: defence and social services; infrastructure and property; and resources and industrial.
Group revenues fell 2.6 per cent to $1.8 billion.
Transfield did not pay an interim dividend.
Underlying EBIT in the company’s Australia and New Zealand business, which contributes 61 percent or group revenues, dropped 14 per cent to $31.2 million as contacts ended.
Underlying EBIT also fell in the group’s resources and energy division, down 13 per cent to $15.6 million as Transfield received less work from the mining industry, and dropped 90 per cent in the group’s Americas division to $700,000 as the company’s US oil and gas business was scaled back.
Transfield took $7.9 million of restructuring costs in the first half, $1.6 million higher than forecast, and said more restructuring costs would be incurred in the second half.
The company reiterated its previous full year profits guidance for net profits after tax pre amortisation of between $65 million and $70 million. Upvotes:0 Downvotes:0 Copy Link
8:47am: There’s speculation that medical services company Primary Health Care is considering a move into the $500 million-plus fertility services market and potentially offer a lower cost IVF product than existing operators.
The Australian reports that the strategy had been flagged by Primary managing director Edmund Bateman at several investor briefings following the company’s recent interim results.
While the company is not commenting on the idea, it is understood that Primary believes it has the existing scale and infrastructure to launch into fertility treatments, including IVF, in the near future, the newspaper said.
Such a move would see Primary challenge more established operators in the space, including the market leader and recently listed Virtus Health, which saw its share price slump more than 8 per cent to a five-month low yesterday on concerns over future growth. Upvotes:0 Downvotes:0 Copy Link
8:44am: Newly-listed comparison website iSelect has reported that “strong growth” in its health and car insurance divisions underpinned interim revenue growth of 18 per cent to $55.8 million.
The company increased EBITDA to $6.8 million, from $3.9 million, in the six months ended December 31.
Net profit rose a very large 1,698 per cent to $3.7 million, up from just $205,000 in the previous corresponding period.
Chairman Damien Waller said the company was pleased to meet EBITDA and revenue guidance for the half made in October last year, at which point the company downgraded its revenue forecasts made in its prospectus.
The downgrade followed a rough start to its time as a listed company, which included the resignation of chief executive Matt McCann just four months after its June 2013 debut.
The company is still searching for a new chief executive.
“The solid half on half growth reported today shows that the fundamentals of our business remain very strong,” Mr Waller said.
There was no dividend declared for the period.
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8:43am: Wotif.com chief executive Scott Blume says it is “too early to say” whether booking numbers in the online travel groups core hotel business will continue to fall in the second half.
This is a year of transition for us, he said after Wotif reported an 18 per cent fall in first-half profit to $22.6 million due to increased spending on marketing amid intense competition in the online travel market. The figure was at the high end of guidance provided in December.
Wotifs first-half revenues rose to a record $75.8 million in the half, up 3.5 per cent from the same period last year, but that was driven primarily by an increase in commissions. Hotel booking transaction numbers in Australia and New Zealand fell 7 per cent to 2.7 million. But revenue in the smaller flights and packaging business grew by 20 per cent amid a 27 per cent increase in the number of flight bookings to 110,000.
Wotifs interim dividend fell 13 per cent to 10¢ a share.
The falling earnings and relatively tough outlook for the business has led the Wotif share price to fall by 51 per cent over the past 12 months, compared with an 8.7 per cent rise in the benchmark ASX 200 during that period.
That has led to speculation that overseas rivals could make a bid for the company. Upvotes:0 Downvotes:0 Copy Link
8:35am: Early news on Qantas and as expected it’s pretty grim.
The airline is cutting 5000 jobs.
Its also posted an underlying first-half loss of $252 million, its biggest since the float in 1995.
First-half revenue was $7.9 billion.
No surprise, the airline is not paying a dividend.
You can read the live blog on the Qantas results here. Upvotes:3 Downvotes:1 Copy Link
8:27am: Expect another weak start from the miners this morning, as the iron ore price slipped another 1.3 per cent overnight to $US117.8 a tonne.
The price of the key bulk commodity has now slumped 16 per cent since early December, when the metal reached its most recent peak of close to $US140/tonne.
London-listed shares in BHP and Rio fell overnight.
Iron ore prices have fallen 15 per cent since early December. Upvotes:1 Downvotes:0 Copy Link
8:22am: Perpetual will pay an interim dividend of 80¢ per share – a 60 per cent improvement from the first half of fiscal 2013.
The group’s funds under management also enjoyed healthy gains after rising 20 per cent since June 30 to $30.4 billion. Revenue rose 16 per cent to $203.51 million, the company said in a statement to the ASX.
Chief executive Geoff Lloyd said the group was on track to deliver $50 million of annual pretax savings through its Transformation 2015 program.
“Importantly, our growth agenda has been accelerated by the exciting acquisition of The Trust Company in December, which has added significant scale and capability to our business,” Mr Lloyd said in the statement.
“There is a strong sense of achievement and momentum across the organisation as we see the benefits of disciplined execution.” Upvotes:0 Downvotes:0 Copy Link
8:19am: Air New Zealand has reported a 29 per cent rise in interim profit before tax to a record $NZ180 million in a result that will outshine both major Australian airlines.
Air NZ chairman Tony Carter said that based on stable fuel prices and a traditional seasonal earnings pattern of a stronger first half, the airline expected full-year earnings to rise to more than $NZ300 million.
That compares with Qantas, which on Thursday is expected to report a first-half pretax loss of up to $300 million.
Virgin is due to report a pretax loss of $49 million, excluding additional losses from Tigerair Australia on Friday.
The Kiwi carrier is the largest shareholder in Virgin Australia.
Air NZ chief executive Christopher Luxon said the company’s improved results were enabling his airline to improve the customer experience, explore new markets and invest in its people and culture.
Mr Luxon said conditions in the Australian domestic market remained tough.
Air NZ declared a $NZ4.5c a share interim dividend, up 50 per cent from last year.
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8:13am: Heres a list of companies due to report earnings today:Air New ZealandHendersoniSelectMacquarie AtlasNine EntertainmentNRW HoldingsPanoramic ResourcesPerpetualQantasSedgmanSeven GroupTransfield ServicesUGL Upvotes:0 Downvotes:0 Copy Link
8:09am: The key economic data release today is the much anticipated fourth quarter capital expenditure survey, released at 11:30.
The market will focus on both the extent of weaker mining investment but more importantly on potential recovery in non-mining investment, says ANZ.
The key figure to look for is the first reading of non-mining investment for 2014-15. ANZ’s economists reckon a number greater than $53 billion is strong, while below $47 billion would be considered weak.
In terms of Q4 actual capex, they expect the figure to have declined by 1.7 per cent quarter-on-quarter (consensus: -1.3% q/q). Upvotes:1 Downvotes:0 Copy Link
8:08am: Were separately live blogging the Qantas results (due any minute) and related conference with CEO Alan Joyce, as the country braces for thousands of job losses.
You can read the live blog here. Upvotes:0 Downvotes:0 Copy Link
8:02am: Local stocks are set to open weaker as iron ore falls again overnight and ahead of earnings from Qantas and Seven Group.
Here’s what you need2know:SPI futures down 15 points at 5422 at 8:20am AESTAUD at 89.7 US cents at 8:20am AESTOn Wall St, S&P500 flat, Dow Jones +0.12%, Nasdaq +0.1%In Europe, Euro Stoxx 50 -0.29%, FTSE100 -0.46%, CAC -0.4%, DAX -0.39%Spot gold down $US12.25 to $US1328.25 an ounceBrent oil up 19 US cents to $US109.70 per barrelIron ore down again, dropping 1.3 per cent to $US117.80 per tonne.
What’s on today in economics releases:Australia: capital expenditure at 11:30New Zealand: trade balance at 8:45
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8:02am: Good morning and welcome to the Markets Live blog for <today>
Your editors today are Jens Meyer and Patrick Commins.
This blog is not intended as investment advice.
BusinessDay with wires. Upvotes:0 Downvotes:0 Copy Link