Jun 23, 2014

Morning Market Report

A big week ahead on local markets, as companies look to close out the financial year with a bang.

The market is up 27 points. The Dow Jones was up 26 points at 16,947 -- The market rose during the morning session and drifted from its highs during the afternoon. Oracle fell another 3.98% after disappointing earnings. There was also disappointing earnings from Darden Restaurants. Energy, Health Care and Industrials were the best performing sectors and Consumer sectors lagged. Volume was above average in a 58 point range. There was no US economic data. US bonds markets were weaker, with the yield on the 10 year bond rising four basis points to 2.618% following a 30 year TIP auction. European shares were mixed -- The German DAX was down 0.17% and the French CAC was down 0.48% but the UK FTSE was up 0.25%. The Aussie dollar was weaker and is currently trading at US93.77c. Gold rose US$2.50 or 0.19% to US$1316.60c a tonne. Oil was up US$0.83 or 0.78% to US$107.26 a barrel. Base metals were mixed -- Nickel fell 0.80% and aluminium fell 0.12% but copper was up 1.54% and zinc was up 1.14%. Iron ore rose US$1.40 to US$92.10 a tonne. US Earnings -- Darden Restaurants - down 3.92%. There is no Australian economic data today. Company events today -- Metcash (MTS) financial year results, Wesfarmers (WES) CEO Richard Goyder speaking at the West Australian's Leadership Matters lunch. No dividends today. HGL Limited (HNG) – 2c. Chinese data -- The flash HSBC PMI is released today. Global economic data tonight -- European manufacturing and services PMI data STORIES
  • Metcash (MTS 277c) -- Has reported a 17.9% fall in full year profit to $169.2 million. It blamed a tough market, saying 1.4% deflation in grocery prices and excessive fuel discounting by supermarket giants Coles and Woolworths were contributing to a tough trading environment. Sales revenue rose 3.2% cent to $13.4 billion and underlying profit after tax (excludes strategic review costs and impairment/acquisition costs) fell 10.9% to $250.1 million. The final dividend is 9.0c fully-franked, down from last year's 16.5. 25 Franklins stores were closed and falling sales and profits in food and grocery fell was partially offset by growth in liquor, hardware and automotive and the benefits of acquisitions. Chief executive Ian Morrice said it had been a challenging year but it had been an important transition period as it undertook a strategic review and $480 million transformation plan to address structural challenges.
  • Echo Entertainment Group (EGP 319c) -- Has announced a consortium with Chow Tai Fook Enterprises Limited and Far East Consortium (Australia) to prepare a detailed proposal to develop an entertainment precinct and integrated resort at the Queen’s Wharf Brisbane site. Echo will contribute 50% of the capital for the integrated resort and act as the operator. CTF and FEC Australia will each contribute 25% of the capital and together will also undertake the residential and related component of the broader Queen’s Wharf Brisbane development.
  • GDI Property Group (GDI 92.5c) – Has purchased the Civic Tower at 66 Goulburn St for $136m.
  • Stockland (SGP 405.5c) -- Has acquired two parcels of land totalling 65.7 hectares in Perth's southern and northern growth corridors, for a combined total of $58.1 million.
  • Skilled Group (SKE 240c) -- The first phase of the previously announced $200m Saipem project has been mobilised and SKE has established an additional tranche of its senior debt facility of $90 million. The additional tranche will mature in August 2015. Net debt will peak in the first half of 2015 then reduce in second half 2015 in line with the work program for the Saipem project.
  • M2 Group (MTU 600c) -- Is said to be interested in purchasing Lumo Energy, Australia's fourth-largest electricity and gas retailer. Lumo has 500,000 customers and is estimated to cost $300 million based on AGL’s acquisition of Australian Power and Gas. M2 is a telco which owns Dodo, iPrimus and Commander but in February chief executive Geoff Horth said they would cast a wider acquisition net and boost the revenues generated by energy products by 2015-16. Dodo has an established energy business - the profits levels are lower than the internet and phone line products but the strategy is to follow the US trend towards convergence for all home services such as telecommunications, power and appliances, thereby offering a point of difference from others in the telco space.
  • Ten Network (TEN 24.5c) -- Private equity firms are said to be interested in Ten after it warned that the free-to-air advertising market was "volatile" and revenue for 2014 financial year would be 3.5-4.5% below the previous year’s $630.1 million. Costs were expected to be 8% higher 2014 with "one-off events" such as the Glasgow Commonwealth Games and Sochi Winter Olympics adding around $55 million. US media investor Providence Equity Partners met with media companies including Ten this month and other parties are also understood to be looking at the business. Shares in TEN fell 9.26% on Friday to be down 18.33% for the week.
  • Insurance Australia Group's (IAG 581c) -- IAG shares fell 1.2% after announcing the  $1.85 billion purchase of Wesfarmers' insurance underwriting business had cleared its final regulatory hurdle. Wesfarmers (WES 4125c) shares closed down 1.3%.
  • Mantra Group (178c) -- Listed on Friday at 1.80. The shares reached a high of 185c but closed 1.1% below the listing price, at 178c. Mantra is Australia's second largest hotel and resort operator, with 113 properties and over 11,600 rooms in hotels, resorts and serviced apartments across Australasia and Indonesia. They service over 2 million guests each year and operate the Peppers, Mantra and BreakFree brands.
  • Santos (STO -1415c) -- Closed down 2.4% on Friday after announcing they have scrapped plans to build a multibillion dollar floating gas plant off Darwin's coast with French partner GDF Suez
  • Westfield Group (WDC 1082c) and Westfield Trust (WRT 321c) -- Shares in both companies were little changed on Friday after WDC secured sufficient support for a $70 billion restructure of the business. WDC closed down 0.01% and WRT was unchanged.

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