The market is down 36, doing better than the 80 point fall predicted by the SFE Futures this morning and is down just 1.1% despite a 4.6% fall on Wall St post a disappointing bank rescue plan which made it clear that there is no Obama miracle cure for the financial crisis after all. It has been terribly received in the US and criticized for a lack of detail. It seems the new administration are still making it up as they go along and have no convincing strategy to stop the financial crisis.
Resources down 1.9% with metals all down. BHP down 2.7%. RIO up 1.8%. Energy stocks down on the lower oil price. Gold stocks mixed — Newcrest, Lihir and Sino Gold down, but smaller players up. One broker predicts another 3 year bull market in gold. Financials are down 1.3% – banks all down 1-2% early on with CBA up 0.7% and outperforming on the back of 1H results in-line with their profit upgrade last week. CBA will pay 113c dividend which goes ex on Monday. Property down 2.0% as Stockland Group posted a 1H NPAT loss of $726m with 1H revenue loss of $803m — SGP down 7% early on. Westfield down 1.1%.
The Dow was down 381. Down all session — negative 421 at worst. Major disappointment surrounding the lack of detail from Treasury regarding their Bank Plan. Bernanke testified — gave the markets no solace – said the central bank’s liquidity expansion was no “panacea.” The Senate passed the separate $838bn Economic Stimulus Plan in a (not completely) final vote — but the market was more interested in the short-term Bank Rescue package. Financials, which had risen over 11% the last few sessions, were the hardest hit — down 10.9%. Resources down 4%. BHP and RIO down 9.1% and 4.5% in the US. Metals all down. Oil down 5.2%. Gold up $21. Bonds up. A$ down 3.46%. December’s wholesale inventory report was worse-than-expected.
The Commonwealth Bank has reported interim results. We had a profit upgrade from the CBA last week of course and the results are in line with that (of course). NPAT down 16% on pcp to $2013m versus guidance of $2bn. “While it is always disappointing to announce a decline in earnings, this is a solid result given the difficult economic environment which prevailed over the period”. Underlying profit up 17%. Costs down 3%. Provisions up as expected to $1607m versus guidance of $1.6bn and against $33m last year. “However, given volatility and the uncertain environment, loan impairment will be a continuing focus”. Cash Earnings down 19% to 146.3c. Declared an interim dividend of $1.13 in-line with last year but state they cannot guarantee dividend payments at this level. Macquarie Group maintain OUTPERFORM recommendation with price target of 3500c. Cites better net interest margin, excellent cost performance, strong non-interest income, and very poor wealth management result. Expects further single-name impairment risks. Goldman Sachs JB Were said the result was in-line with the underlying result appearing solid with strong revenue growth and good cost control. Said earnings forecasts are unlikely to change much.
- Boral Ltd (BLD) posted 1H net profit down 44% to $75m citing US conditions as extremely difficult. No surprises — in-line with their downgrade two weeks ago. Result just below five analyst’s expectations. 1H dividend of 7.5c. Said there’s no need to raise equity like some analysts keep saying. Profit guidance for the FY to be around $120m. Said they’re well within debt covenants.
- Ansell Ltd (ANN) posted 1H NPAT up 20% compared to last year’s 1H. Above estimates mainly due a lower-than-expected tax rate. EBIT level results as expected with weak performance in Occupational and Consumer strong. ANN have dropped EPS guidance to US$0.65-$0.70 from US$0.70-US$0.74 citing occupational challenges in 2H09. Said the outlook is difficult to quantify. Overall sales flat on pcp. Cash flow weak as a result of inventory build-up in Occupational business. Declared a final dividend of 12c Aussie, up from 11c a year ago.
- Computershare (CPU) posted 1H NPAT down 15.5% to US$130.9m as revenue fell 0.8% to US$777.1m. Said they’re on-track for a FY result similar to last year in US$ which is up 30% in A$ terms. Revealed strong cash flows and balance sheet.
- Stockland Group (SGP) posted a 1H NPAT loss of $726m with 1H revenue loss of $803m. That compares to the $672m profit last year. Said EPS guidance of 35c for the FY was unlikely to be met due to the risk on super lot sales. Said 1H dividend will be 17c. Said all debt financing for FY09 is completed. FY09 final dividend guidance of 34c unchanged.
- Macquarie Infrastructure (MIG) said 1H NPAT from its 30% owned 407 ETR highway outside Toronto doubled to C$60.3m compared to a year ago. Margin improvement has been better-than-expected. EBITDA up 7.7% after stripping provisions for bad debts. Goldman Sachs JB Were keep a SELL recommendation.
- Nufarm (NUF) said the UK competition commission approved their acquisition of AH Marks.
- Telstra Corp (TLS) has bought controlling interests in two Chinese cellphone content and online music businesses.
- Macquarie Group, Merrill Lynch, Goldman Sachs JB Were and Citi keep NEUTRAL and HOLD on JB Hi-Fi after posting 1H net profit of $59m well ahead of expectations, with price targets of 1150c, 1125c, 1220c and 1100c respectively. The result was noted as outstanding.
- Cochlear was kept at NEUTRAL and HOLD by Merrill Lynch, UBS, Goldman Sachs JB Were and Citi with price targets between 5366c and 6072c. The main point was that FX moves going forward could impact earnings and that lower US sales are likely to set in.
The Marxists are having a good day: “Owners of capital will stimulate the working class to buy more expensive goods, houses and technology, pushing them to take more and more expensive credits, until debt becomes unbearable. The unpaid debt will lead to the bankruptcy of banks, which will be nationalised and the State will have to take the road, which eventually lead to communism”. Karl Marx 1867. Although if Karl Marx went short the market in 1867 he would have been a little bit ahead of the game and been carried out long ago. Timing is everything.
The Dow Jones futures suggest a 22 point rise on Wall Street tonight.
MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.
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