Cashing in your chips. There was James Packer on the Seven Network last night (and other media outlets, such as Fairfax Media this morning) in Sydney lecturing us about problems his Sydney casino is having as the state government and builder Lend Lease argue and brawl. Packer reckons Manila is the city of his dreams. That’s where he has opened his latest fleecing palace, and he took Australia’s media north to boast about the $400 million-plus development. The Seven story contained this gem of wisdom: “Australia could learn a lesson in efficiency from Asian governments”. But presumably not from the new government of Sri Lanka, which has canned his casino project — and told Packer he is no longer welcome in that country.
But would our James be extolling the virtues of efficiency, Chinese government-style? The Communist Party’s campaign against corruption in China has had a stunning impact on the gambling enclave of Macau, where James Packer has a stake in the Melco Crown casino company along with the powerful Ho family through son Lawrence Ho (Melco Crown is the builder and operator of the new Manila casino). Lawrence’s father, Stanley Ho (the man who started Macau as a casino haven), is banned from having any association with Packer in Crown or Melco Crown. Under the corruption crackdown revenues in Macau have plunged from mid-year, and it was the same story in January.
In fact, Macau’s casino revenues dropped for an eighth consecutive month in January, falling 17.4% from a year ago to US$3.48 billion, according to Macau’s Gaming Inspection and Coordination Bureau yesterday. The 17.4% fall is something of an improvement from December, when the year-to-year decline was 30.4%. Last year gambling revenue in Macau fell for the first time since records began in 2002, thanks to the corruption crackdown.
Bloomberg data shows shares in the six big casino operators lost an average 39.6 % in 2014 — the first fall since the depths of the GFC in 2008. According to Bloomberg, the shares fell another 4.3% last month. Oddly, the Seven Network report didn’t mention that, nor did this morning’s effort across the tops of pages 2 and 3 in The Sydney Morning Herald. — Glenn Dyer
Murdoch empire awaits judgement. It’s the usual quarterly reporting week for four key companies in the Murdoch clan’s global media empire. First off the rank is the best performing part of News Corporation and one of the best in the entire Murdoch universe — REA Group, the Sydney-based property listing group. It’s due to report on Thursday, hours before News Corp does in New York. Once again REA Group will be a clear out-performer compared with its 62% owning parent.
Sky, the UK satellite group now straddling Europe, releases its latest figures on Wednesday night, our time, with its 39% shareholder, 21st Century Fox releasing its quarterly figures the next morning (Sydney time) after the US market has closed. Then on Friday, News Corp releases its figures after Wall Street closes. Both Fox and News hold teleconferences later in the morning.
Fox and Sky are both expected to announce sold improvements in revenues and profits (Fox has already reported a good quarter for its film business). News Corp, though, is more problematic. These results will feature the first impact of the Move property listing group, bought late last year for around US$900 million. REA Group owns 20% of Move.
The key points ahead of the release: will Rupert Murdoch pop up at Fox and News, or just Fox, as he did last year? Will he stay away and continue his physical finger therapy by tweeting? And will there be any progress in the growth of the “green shoots” seen by News Corp CEO Robert Thomson in Australian advertising in the September quarter, or have they withered as the economy slowed in the final quarter? And if Rupert appears, what will the old buffer say about Australian business and politics? After all his twittering, does he even have anything left to say? — Glenn Dyer
Gongs and donations. Did I see Lang Walker’s Walker Corporation in the list of donors to the Liberal Party in yesterday’s Crikey handing over $100,000 of the folding stuff? And did I also see in last week’s Australia Day honours list a gong for Lang Walker, who received an Order of Australia? And while we’re on the great and good and generous to the Libs, did I also see a donation of $75,000 to the Libs from one Sir Michael Hintze, whose hedge fund CQS employs Richard Alston, federal president of the Liberal Party? You might have seen him in the audience at the Press Club in Canberra yesterday listening to the man who put him in that job, Tony Abbott, trying to save his deck chairs. Also remember that Alston and Sir Michael hired out Stokes House in London last July — it’s the official London residence of “Lord” Alexander Downer, High Commissioner to the United Kingdom. And of course Sir Michael was one of the international advisers to David Murray’s inquiry into the Australian financial system. — Glenn Dyer
More ‘efficiencies’ bullshit from banks. Them investment analysts just don’t get it, do they? They will shill for anybody, put forward all manner of outrageous ideas and completely ignore the obvious — all to get headlines and try to grab market share for share dealings from institutions — and give their advisers an entry into the boardrooms of corporate Australia.
Take the revamp of the management structure at the top of Westpac revealed yesterday by new CEO Brian Hartzer on his first day in the top job. He abolished his old job (saving $7 million or more) and changed the reporting lines so the important executives told him what was going on. There must have been no one quite so good as he was in the job and it proved impossible to fill.
But Fairfax Media reported:
“With credit growth soft, analysts have suggested Mr Hartzer review the ‘multi-brand’ strategy employed by Westpac, which owns St George, Bank of Melbourne, BankSA and RAMS, which gives it a larger branch footprint than rivals. JP Morgan analyst Scott Manning has estimated there are nearly 300 branches across Westpac’s network of more than 1200 outlets where two of its brands operate in close proximity, and the bank could save hundreds of millions by removing the duplication.”
Yes, branches are less important as more and more customers move online, but surely customers deserve more than a vague promise to create a “service revolution”, which sounds suspiciously like code for cost cutting.
All these other ideas from the new CEO and some of the analysts involve changes aimed at saving money and reducing costs. This will mean sacking people in those 300 surplus branches, a recipe for a PR disaster. A tip: the peer-to-peer lending sector is emerging in Australia. Banks, private equity and other investors are all interested and involved. But the one thing the big banks have in their favour is that they have the customers and know them — and have a lot of data on what they do with their money. So the onus is on the likes of Mr Hartzer not to piss customers off by cutting and hacking merely to keep costs low and boost profits.
The NAB releases its first quarter trading update on Thursday and is a work in process under the new CEO. The Commonwealth Bank reports its interim figures next Thursday. CBA shares hit a record $90 late last week, and investors clearly think the financial planning scandal is well behind it. Judging by the recent comments from the bank’s leadership, so do they. — Glenn Dyer
Spend, spend, save. If the RBA cuts rates this afternoon, don’t believe the tosh coming from some economists that this will result in more money being spent by consumers. The sharemarket has now risen eight days in a row on growing hopes that Terry McCrann is right and the RBA will cut the cash rate this afternoon.
What economists and the media continually ignore about the impact on consumers of interest rate movements is that they always forget two other groups of people — non-mortgage-holding property owners and savers, people on fixed income and/or people with self-managed super funds.
Just under 50% of the mortgagees are repaying more than the minimum payment on their mortgages — around 2% above the average home loan rate, and they have nearly two years of equity that could be run down in the event of a recession or spike in interest rates. Will a cut in the cash rate cause home loan rates to drop, offering mortgagees the ability to go into the shops and spend, spend, spend, or will it allow them to continue repaying their home loans faster than they have to?
Surprise figures from the US overnight provide a tantalising clue on this question — consumer spending fell 0.3% in December as Americans saved the lower petrol price bonus and the American savings rate edged up to 4.8% (our’s is just under 10%). The fall came despite a 0.3% rise in personal income in December for Americans — so they had extra in their pockets, but chose to save, not spend it. A message here for retailers: the interim profit from JB Hi-Fi yesterday told a story of no real spending surge by consumers and rising discounting to move stuff. It would seem the iPhone boom and the record sales of more than 72 million phones worldwide missed JB Hi-Fi. But outdoor group Kathmandu will lose money in its first half after sales growth slowed during a mild summer and the company is being forced to sell excess stock at a loss and cut back on orders as well. — Glenn Dyer