The market is down 21. So much for the Christmas Rally. The ASX 200 is down 6.09% in a week and up just 9.27% on the year. The average return from the All Ords since 1936 is about 9.3% plus dividends. The SFE Futures suggested a 22 point fall this morning.
The Dow Jones closed down 25 – Wall St. moved in a 154 point range and closed down in what was a volatile session on concerns about the credit crisis. Standard & Poor cut its credit rating on bond insurer AXA Financial Guarantee Corp. from “A” to non investment grade “CCC” saying its capital can easily be drained by increasing claims from defaults on mortgage-backed bonds. The credit agency also cut its rating on 3,000 municipal bonds, which could result in a municipal borrowing crisis. Financial sector did OKish. It was good and bad news for Morgan Stanley (up 4.3%) after they announced a $9.4bn writedown associated with bad debt. The second largest US investment bank also told investors it received a $5bn investment from a Chinese sovereign wealth fund, according to Thompson Financial, the deal represents China’s largest minority stake purchase in a US company. The NASDAQ went against the trend and closed up 0.2% – Microsoft Corp., Yahoo Inc. and Google Inc. agreed to fork over a combined $31.5m to settle allegations they took ads for illegal gambling, they also agreed to stop advertising sports wagering and other online gambling. There is also talk that Google’s $3.1bn acquisition of DoubleClick Inc. will be get the all clear from US regulators, the stock finished the session slightly higher, it is up a huge 46% this year.
Resources quiet…BHP down 2c to 4003c and RIO down 108c to 12926c. Metals mostly up overnight – Copper up 2%, Nickel up 3% and Aluminium up 0.8%. Zinc down 0.4%. Zinifex up 10c to 1245c. Oil price closed higher for the first time in a week – up $1.18 to $91.11 – a government report announced a fall in inventories. Woodside up 18c to 4658c. Gold down $2. Newcrest down 28c to 3028c.
Today is the last day to buy any property trusts or infrastructure stocks before they go ex distribution tomorrow. About 50 of them. Property trust sector mixed today….GPT down 5.1%, they have been mentioned along with Westfield and CFS Retail trust as a potential buyer of Centro assets. Not much movement in the market but plenty of news.
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- BlueScope Steel (BSL) have bought IMSA Steel Corp. from Ternium for US$730m – Good bolt on acquisition for BSL. IMSA Steel achieved sales of US$1.2bn last year and BSL expects to achieve around US$40m worth of cost savings within 3 years. The deal is subject to regulatory approval and is expected to be completed in the first half of next year. BSL up 26c or 3% to 926c. BSL on a PE of 10.2x with a 5.4% yield.
- Asciano Group (AIO) announced this morning they have cut their stake in Brambles (BXB) to 3.44% from 4.09% saying they think the money will be better spent repaying debt. AIO has $258m worth of debt due to mature in May 2008, with less than 10% of its borrowing due for repayment in the 2 years. AIO has been pretty disappointing since listing back in June this year – investors have lost 23% of their capital. BXB down 22c to 1151c. It hit 1493c a couple of months ago on the bid talk. AIO up 8c to 701c. They are ex dividend 23c tomorrow.
- Dyno Nobel (DXL) announced this morning they expect their Project Imagine program to result in additional earnings and around US$52m worth of cost cutting by FY10 and an additional US$20m from FY12. DXL has been knocked around a bit since suspending its proposed ammonium nitrate plant at Moranbah in QLD due to cost blowouts. Incitec Pivot (IPL), who own a 13% stake in DXL, holds its annual investor meeting today. DXL unchanged today at 207c but down from 259c this month. DXL on a PE of 14x with a 3.4% yield.
- Tattersall’s (TTS) will buy Macquarie Group’s (MQG) 50% share in European Gaming Group, which owns Talarius, the same company that TTS bought earlier this year together with MQG for ₤123m. The deal is expected to be finalized some time next month and will be paid using existing debt. TTS share price is down 2% in the past 12 months but has still managed to outperform its rival Tabcorp (TAH) which has lost 14%. TTS still growing while TAH is restructuring and are no longer looking for acquisitions.
- Toll Holdings (TOL) is looking to make its presence felt in China – it has launched a takeover offer for Hong Kong listed freight and logistics company Baltrans Holdings. TOL will offer around $365m, paying HK$7.60 a share, increasing it to HK$7.75 if it secures 90% of the company. The founding shareholder, who owns 44%, has agreed to accept. They will pay for the acquisition using existing debt and expect it to be EPS accretive in its first financial year. TOL up 3c to 1203c. TOL on a PE of 15.9x and a 2.5% yield.
- Two brokers have upgraded Monadelphous today to OUTPERFORM and BUY on the back of recent contract wins and share price falls. MND up 31c to 1369c. They are on a PE of 17.7x and a 4.5% yield. Recent profit warnings have left Bradken down 48.8% in the last month in the same sector. BKN down 28c to 776c this morning.
- Fosters up 2.3% on the back of some Credit Suisse research saying the company pointing out the synergies companies like Diageo, Pernod Ricard or Coca-Cola Amatil would have if they bid for it. FGL is on a PE of 16.5x and a yield of 5.0%.
- Tabcorp Holdings announced they have sold their interest in the China Keno business to its joint venture partners, China Lot Synergy for $15m (pretty immaterial). CEO Elmer Funke Kupper said TAH wants to focus on its Australian operations and improve efficiency. TAH up 7c to 1462c. TAH on a PE of 16.1x and a 6.2% yield.
- Suncorp-Metway (SUN) have followed IAG’s announcement yesterday with a bit of an update on claims arising from the storms in NSW – they expect costs to be in between $150m and $180m. They say weather events in the 6 months to Dec will cost them between $230m and $270m, more than double its usual $100m provision. SUN is on a PE of 10.6x and a yield of 6.5%. SUN down 12c to 1699c.
- Centennial Coal (CEY) announced it will proceed with an 188c a share capital return to shareholding following a favourable ruling from the tax office and will consider returning the remaining 12c in the form of a special dividend early in the next financial year. The payment of the 188c capital return is due on January 29. CEY up 12c to 486c.
- Macquarie Equities upped their recommendation on Cochlear (COH) to NEUTRAL from UNDERPERFORM after its share price fell back to their target price of 7170c. They say, “COH will continue to generate strong underlying growth, particularly this and next FY”. COH down 138c to 7258c. COH on a PE of 32.5x and a yield of 2.2%. It always looks expensive….then the share price goes up again.
- IBA Health Group (IBA) doing nicely today – up 4% to 94.5c after announcing it had won a 10-year service contract with a consortium of 56 National Health Scheme bodies in the UK valued closed to $40m. It has also won a 4 year managed service contract worth $1.15m to host its Integra financial applications for Medway NHS Trust in Kent. IBA has had a shocker of a year, down nearly 20%.
- Centro Properties continuing to recover after announcing yesterday it won’t have to forcefully sell any of its assets. CNP up 24c or 19.5% to 144c.
Goldman Sachs JB Were’s say stocks that have been oversold recently include: Flexigroup (FXL), Macquarie Communications Infrastructure Group (MCG), Macquarie Airports (MAP) – currently 20% off its yearly high, ConnectEast Group (CEU), APA Group (APA), Goodman Group (GMG) Westfield Group (WDC) and Just Group (JST). Their preferred sectors for 2008 are Insurance/Wealth Management, Consumer Staples, Healthcare, Telecommunications and Utilities.
- Western Plain Resources (WPG) down 27% to 127c after OneSteel (OST) announced it might not allow it to use its infrastructure at Port Whyalla to export its iron ore despite the two companies negotiating all year. WPG said it will look at other options as well as continue to negotiate with OST. OST down 1c to 603c.
- We have the Incitec Pivot and Orica AGMs today. IPL up 21c to 10679c and Orica up 23c to 3206c.
- Companies going ex-dividend today include MPG and RRA.
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