The market is down 51 underperforming the 37 point fall predicted by the SFE Futures this morning. All sectors are down. Resources fairing the worst. BHP down 3.2%. RIO is the sole hero holding the market up a few index points. Banks down — only WBC up 0.7%.
The Dow was down 147. Down all session — down 189 at worst. No major news or announcements Friday. Stocks up 6.2% for the week. Widespread weakness. Financials up 12.2% for the week. Financials down the most Friday. IBM posts a gain. February personal income and spending in-line. Real personal consumption down. BHP and RIO mixed Friday in ADR form — BHP down 5.15% and RIO up 1.38%. Metals mostly down. Oil price down 2.7% to $52.41. Gold down. Bonds unchanged. A$/US$ down to 68.96c.
OZ Minerals bid from China Minmetals blocked — Wayne Swan announced he would not allow the Minmetals bid through in its current form because the main asset, Prominent Hill is in a weapons testing area. The FIRB are still evaluating the implications of the other asset sales and OZL say they are in constructive talks with bankers about their loan facilities and in talks with China Minmetals about possible changes to the takeover proposal. Doesn’t matter how you dress it, its not good news for Oz Minerals. They have until tomorrow night to extend their loan covenants. Broker reactions this morning:
- Citi cut to HOLD from Buy — cut their price target to 60c from 83c — said the rejection could be a deal breaker.
- Macquarie Equities keep Outperform with 83c target price — they say the possible outcomes from now are “revised bids minus Prominent Hill”, a buyer for Prominent Hill (BHP the most logical), Receivership (not likely).
- Merrill Lynch — no rating — believe if Minmetals walks away they will have to resort to a rights issue so it doesn’t go under.
- GSJB Were — no rating — says OZL will have to look at other alternatives, including asset sales and partnerships, in order to satisfy debt covenants.
BHP in the news — the press is suggesting BHP Billiton might make an offer for Oz Mineral’s Prominent Hill project considering its Olympic Dam copper and gold mine is next door. There are also rumours of BHP having another crack at Rio Tinto after BHP CEO Marius Kloppers held talks with key institutional investors in the UK over the weekend. With BHP raising around $9bn through bond markets in the past week, it is believed institutions have given BHP Billiton the green light to “explore strategic acquisitions”.
- Incitec Pivot (IPL) has set up a facility with its core banks to fund working capital for the year ending Sept. 30 2009 and for the following year. Reiterated earnings guidance — said performance remains strong and FY09 forecast earnings are in-line with guidance for NPAT of $450m.
- Commonwealth Bank of Australia (CBA) notes Bank West will reduce its workforce by 400 employees due to the deteriorating economy.
- Equinox Minerals (EQN) in their annual financial statement rescheduled Lumwana Debt and released their 2008 year end results.
- Alesco Corp (ALS) is thinking about selling its scientific and medical division, known as Biolab. Alesco has received approaches in recent years from potential purchasers to acquire a number of its businesses, including Biolab.
- Challenger Infrastructure (CIF) issue their Southern Water update.
- Babcock and Brown Infrastructure’s (BBI) wholly owned subsidiary IEG sell Gascon for EUR13m to Fundo Explorer 11.
- Neptune Marine (NMS) won a new contract for a pipeline worth $45m.
- Macquarie Equities move BHP Billiton to Neutral with 3313c target price — they say they’re not surprised to see BHP underperforming its global peers in this environment as it has been afforded a significant premium.
- GSJB Were cut Sims Group (SGM) to Sell from Hold with a 1732c target price after downgrading their earnings estimates to reflect lower scrap price and volume assumptions.
- JP Morgan cut Cochlear (COH) to neutral from overweight and drop price target to 5466c from 6912c. Drop their FY10 earnings guidance to about 1% growth from forecast FY09 due to FX rate changes.
The Dow Futures suggest a 35 point fall on Wall Street tonight.
MARCUS PADLEY is the Author of the MARCUS TODAY Daily Stockmarket Newsletter.
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