Stop celebrating, the worst is still to come. The Reserve Bank reckons the economy needs another hit from the interest rate whackers because it is being stubborn and refusing to show any reaction to 18 months of record low rates set by the bank’s cash rate of 2.5%. So another whack of 0.25 percentage points was added to the mix, and punters reckon a further 0.25 percentage points lies ahead of us for good measure. While the rest of the economy snores, only home construction and house prices have responded to the 2.5% stimulator rate, which is why the bank cut and will cut again unless there’s a surge in retail sales and exports (even though the December trade data showed clear evidence of the favourable impact of the slide in the dollar with the deficit halving).
But generally there’s a belief the economy is sliding — so then why does it feel like the end of the great noughties boom in 2007 (the peak of all peaks and one we, unlike United States markets, have yet to rescale). The market is up 9%, or $135 billion in value in the past 19 days as it enjoys its biggest run for 18 months. Why, you can almost imagine Bondy shouting the bar at Rockpool, and Babcock and Green or Allco announcing another great deal to fatten their bottom lines and stun investors into submission with their complexity. It’s got that feel, but profit downgrades and other gloom abounds. Gold is down, oil is up, up, up. Spoke too soon — after last night, it’s back down. China has eased again, so copper is also up, after everyone called gloom when it fell last month under the weight of some judicious dealings by Chinese hedge funds. Either it’s a load of cobblers and there’s another slide coming, or the market, true to form, is telling us that all it took to turn things around was an interest rate cut of 0.25 percenage points — and do you really believe that? — Glenn Dyer
Eat your chips, Packer. A couple of years ago, as he was bulldozing the NSW government and anyone else who opposed his plan for a casino at Bangaroo in Sydney, James Packer had some nasty things to say about Echo Entertainment and its Star Casino in Sydney. He bought shares in Echo (which operated the monopoly full-service casino at Star City, now The Star), and then sold them after he got his way. He criticised Echo’s management and board and generally threw his weight around. Echo didn’t help, with an unstable management and boardroom and other PR problems at the casino that helped play into Packer’s hands. Packer has also attacked Echo in its Brisbane market, offering to build a shiny new casino in Brisbane. But as James Packer this week expressed frustration to the media on his junket to Manila about delays at Bangaroo, Echo has had the last laugh with a very strong rebound in profit in the six months to December 31. And that was thanks to a sharp improvement at The Star. Echo made a net profit of $97.1 million for the six months to December 31, up from $46.1 million a year ago, after lifting revenue 25% to $1.09 billion. “Normalised” earnings before interest, tax, depreciation and amortisation were up 31.5% to $261.4 million and The Star lifted revenue 39% compared to a year ago.
Now Packer’s Crown is a bigger player with operations in Melbourne, Perth, a third of Melco Crown in Macau and the newly opened Manila operation. Macau is the key, and while it has been a growth business, it suddenly turned midway through last year (as we pointed out on Monday), and gambling revenues there are now down sharply — monthly revenues have been falling now for seven months and are damaging the operators. Up until now it has been just the share prices, but this week one of the big players in Macau, Wynn Resorts, revealed the extent of the damage, and it’s not pretty. For the December quarter, Wynn reported revenue from its Macau operations fell 32% to US$761.2 million, with table games turnover in its VIP segment declining 39.9%. In the US, Wynn’s Las Vegas operations posted a smaller 5.8% drop in revenue to US$376.8 million. And Wynn reported a profit of US$109.3 million, more than half the US$213.9 million earned in the fourth quarter of 2013. This suggests that when Crown reveals its first half results later this month, James Packer might have a similar story to moan about. Wanna bet? — Glenn Dyer
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Break point, love all that streaming. I’m willing to be contradicted because data is so sparse, but Seven’s experiment of making the Australian Open tennis available on multi-platforms has paid off big time. Seven says that across the 14 days of the Australian Open there were a total of 4.1 million streams generating more than 22.1 million minutes of viewing across tablet, mobile and desktop devices. That’s an extra 4.1 million viewers, or around 341,000 a day, or 1.5 million minutes a day. The 4.1 million streams (80% of which were live streams of games in play) compares to the total viewing audience of just over 13 million people Seven’s Australian Open coverage reached more than 13 million people, representing an increase of 2% on 2014, so the live streaming boosted the total viewing audience by just under 25%.
A statement from Seven said tablets and mobile devices delivered more than 70% of all streams viewed across the Open. iPads and iPhone usage was well-ahead of Android devices.
“There have now been almost a quarter of a million downloads of the 7SPORT app. Both the iPad and iPhone versions of the 7SPORT app topped the Sports (free) chart in the final days of the Australian Open, with the iPad version in the no. 1 spot for 15 consecutive days.”
There was a bit of life in the Seven West Media share price yesterday — up 6.4% to $1.42 in the very strong market. It is now up from lows of around $1.215, a rise of roughly 16% in the space of a month — or almost double the 8.5% jump in the wider market. Positively booming. At Seven Group Holdings, which owns 35% of Seven West and is now Australia’s newest oil company, Kerry Stokes will be beaming. Perhaps that rise in the Seven West Media share price might just be enough to avoid any nasty impairment decision. — Glenn Dyer
New start for Nufarm. Why did Nufarm need a trading suspension to allow it to handle the departure of long-time CEO Doug Rathbone? Rathbone’s decision to leave the company ends 15 years as CEO and 41 years working for Nufarm. There are strong hints that an argument between board and CEO about surprise new cost cutting efforts appears to have been resolved by Rathbone quitting. “Doug and the board have agreed that now is the right time to make a change to new leadership,” chairman Donald McGauchie (the Don) said in the second of two statements from the company yesterday. In fact it took two statements to announce the CEO’s departure — the first asked for the shares to be suspended pending “a significant announcement regarding the management of the company”. The second statement, announcing that he was going, then emerged after rumours of the CEO’s departure spread through the market. Trading resumed after the second statement’s release, and the shares lost 4% by the close, or around $64 million (making Rathbone the $64 million man).
Efficiencies and cost cuts are longtime favourites of the Don in his various roles over the years, from Australian Agricultural Co to Telstra to the National Farmers Federation to commenting on the Australian politics and the economy — especially to The Australian Financial Review and The Australian. He’s from the hard, industrial relations-obsessed Right of politics. In 2013 McGauchie, as chair of the Australian Agricultural Company, oversaw the messy departure of AACo chief executive David Farley. Nufarm is enjoying a 30% rise in its share price to more than $6 in the past two months, the highest they have been for years, thanks to widespread rain in December and January in eastern Australia, South Australia and the Northern Territory. So why yesterday’s blow-up? In fact you’d be entitled to ask a) why the ASX granted the suspension request when other companies have announced the departure of CEOs without them and b) given the sharp rise in the share price in the past two months, what is the chairman and the board not telling the market about the sudden need for $100 million of cost cuts — and why they had to start now? An added point is that the fall in the value of the Aussie dollar should be helping Nufarm boost revenues and earnings from offshore markets such as Brazil and Europe. Chanticleer in the AFR this morning reckons Donald isn’t a big bear with a big axe but a champion procrastinator who allows CEOs to stay in their posts too long. — Glenn Dyer