Australia | Oct 20 2014
By Henry Jennings, Private Client Advisor, BBY Ltd
A very firm start to the week following on from positive leads from Europe and the US on Friday night. Straight out of the starting gate to hit 5342 before some profit taking and caution emerged. Volume was light but promising. In the final countdown we closed up 48 points at 5320 with the financials as usual leading the charge.
My big four banking index traded at nearly 177 having bottomed around 167.All the usual suspects were in the frame as Telstra Corporation Limited (A$5.40, +0.4%),Wesfarmers Limited (A$41.35, +0.8%) and Brambles Limited (A$9.28, +1.0%) rose strongly. Tough to find a stock in the red, well except Newcrest Mining Limited (A$9.81, -1.9%) and some of the gas stocks like Drillsearch Energy Limited (A$1.105, -5.6%) and Senex Energy Limited (A$0.495, -1.0%). In the big end of town BHP Billiton Limited (A$33.84, +1.3%),RIO Tinto Limited (A$59.73, +0.6%) and Fortescue Metals Group Ltd (A$3.46, +0.6%) all to the good, as were energy stocks with Woodside Petroleum Limited (A$39.97, +1.0%) leading the pack.
Heading into the winners enclosure today were Transfield Services Limited (A$1.90, +26.7%)(takeover announced),Ten Network Holdings Limited (A$0.22, +7.3%)(takeover rumours),Western Areas Limited (A$4.61, +6.2%),Syrah Resources Limited (A$3.88, +8.7%),#PYM#,REA Group Ltd (A$43.40, +4.2%) and Downer EDI Limited (A$4.19, +3.5%) with Panorama Synergy Limited, Adslot Ltd and Carnarvon Petroleum Limited deserving a good rub down in the smalls. Heading back into the horse float were Drillsearch Energy Limited (A$1.105, -5.6%), Xero Limited ,Peet Limited (A$1.20, unch),Senex Energy Limited (A$0.495, -1.0%),#SNZ#,Newcrest Mining Limited (A$9.81, -1.9%) and Ausdrill Limited (A$0.765, -12.1%),#GID# and Maverick Drilling and Exploration Limited (A$0.21, -6.7%) in the ponies. The Aussie dollar was 87.73 with Bitcons at $437 and Aussie Gold at $1408.
Asian markets were very firm with Tokyo up 4% as PM Abe suggested that he may hold back on sales tax price rises as the economy is still struggling.HK was up 0.35% despite continuing trouble and China was up 0.22%
Stocks and Stories
Transfield Services Limited (A$1.90, +26.7%) Today received a takeover bid from Ferrovial at $1.95 in cash. The company has recommended to sit tight and see what happens.
Ausdrill Limited (A$0.765, -12.1%) An update today as mining services continues to be a tough field to plough. Now expecting EBITDA of between 4150 and $160m.usual suspects to blame ,continuing weakness in key commodities plus heavier rains than forecast in West Africa disrupting production.
Downer EDI Limited (A$4.19, +3.5%) announced that they had paid $300m for Tenix, a privately owned provider of long term operations and maintenance services to owners of electricity, gas, water, wastewater, industrial and resources assets in Australia and New Zealand.
Ten Network Holdings Limited (A$0.22, +7.3%) reports today in the paper that Fairfax Media Limited (A$0.805, +3.2%) have had some high level talks about merging the two business as Gina announces that she will relinquish her board seat
Wednesday ABS lottery with the CPI figures should prove fun. One big bank is now going for no inflation.
The $5.5bn float of Medibank Private is off and running with the government releasing the prospectus. The dividend yield is 3.5 to 4.5 per cent, or 5 to 6.4 per cent after the 30 per cent franking credit. Medibank wil be priced at about 17 times its earnings. This compares with, say, a bank stock of about 13 times, with a bigger dividend to boot, so it’s hardly a cheap giveaway .Good to see the CEO of what is a regulated insurance business being paid 10 times more than the President of the US. The executive gravy train for ASX companies continues. A $750,000 bonus for bringing the company to the market. Seriously? Will they change the name, seems that as a tax payer owned company they were called Medibank Private and now that they will be listed perhaps they should be Medibank Public. They even paid the government one last final special dividend of close to $200m.Now the taxpayer gets a chance to buy something that was owned by the tax payer.
Arrium Limited (A$0.34, +1.5%) reported record iron ore shipments for the September quarter, but a collapse in iron ore prices and market sentiment hammered the group’s margin per tonne of ore. Arrium said on Monday that it shipped 3.45 million tonnes of iron ore from its Whyalla port in South Australia, up almost 300,000 tonnes on the prior quarter.
Joko Widodo sworn in today.
Tomorrow’s News Today
Apple is set to announce a record-breaking $180bn in revenues from sales. Expectations of selling 38m iPhones in the three months to the end of September, a 12% rise on the 34m mobiles sold by Apple in the same period last year. Think these guys may be on to something. Samsung hurting!
Russia’s credit rating is almost junk as S&P cuts it to Baa2.Negative outlook too as sanctions and an erosion of reserves mount.
RBA releases its minutes tomorrow. Should make uninteresting reading.
Apparently QATAR has $15bn to spend in Asia. Buys a lot of fake Gucci bags!
Tuesday China releases quarterly GDP numbers as well as industrial production figures.
Pilots at Germany’s Lufthansa airline are set to walk out again on Monday just as train drivers end their weekend of strike action. The airline has cancelled 1,450 flights
Pilots want the airline to reconsider plans to alter their pension provisions upping the retirement age from 55!
Here’s a fun fact from the Bank for International Settlements (BIS). Investors owned $100 trillion of debt globally in the middle of 2013, up from $70 trillion six years earlier.
And on this day in 1973 ,The Queen formally opened the Opera House.
That is all.
Henry Jennings
Private Client Advisor
BBY Limited
Participant of the Australian Securities Exchange
Authorised and Regulated by the Financial Services Authority
Level 17, 60 Margaret St
Sydney NSW 2000
D +61 2 9226 0067
M +61 414 345 137
E hcj@bby.com.au
W www.bby.com.au
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