Weekly Reports | Nov 06 2015
This story features OOH!MEDIA LIMITED, and other companies. For more info SHARE ANALYSIS: OML
-Digital driving outdoor media growth
-Macquarie more negative on retail
-Chinese interest in Oz property wanes
-Sydney nears "bubble risk" in UBS' view
-New real estate listings volume turns negative
By Eva Brocklehurst
Revenue in outdoor advertising continues to surge with UBS noting October was the tenth consecutive month of growth. Digital revenue is the main driver and now comprises 25.3% of industry revenue in the year to date.
Going forward, the broker highlights the tougher comparables being cycled but remains positive on the industry's growth prospects.
Ord Minnett also upgrades expectations for the sector, taking the view that momentum is set to extend for the next few years. The broker is increasingly confident that this is only the beginning of a sustained period of strong growth.
While growth rates may ease from the highs of the last 18 months the broker still expects low double digit growth per annum and both APN Outdoor ((APO)) and oOh!media ((OML)) should meet or exceed this.
Macquarie suspects Australian retailers face a more challenging Christmas period, given there is no offset from the Reserve Bank, as yet, to the mortgage rate hikes from the major lenders.
The broker acknowledges a cut to the cash rate is possible in December and may be enough to provide a supportive backdrop to the key Christmas/New Year trading but suspects February is the more likely timing.
The broker is becoming increasingly negative on the outlook for retailers with the deteriorating housing cycle, the evidence of margin pressure in consumer electronics in the Dick Smith ((DSH)) downgrade and the de-facto tightening of monetary policy with mortgage rate hikes.
Wesfarmers ((WES)) is the broker's only Outperform rated stock in the large cap consumer sector.
China & Oz Property
Credit Suisse observes purchases by Chinese bidders of Australian property have lost momentum, despite official data suggesting capital outflow from China has accelerated. This outflow, in turn, has tightened credit conditions in China and dampened the purchasing power of Chinese residents.
Meanwhile, local demand for housing is seen being held back by macro-prudential regulation and poor affordability. Hence, in this environment, Credit Suisse believes the Reserve Bank needs to lower the cash rate further and fiscal policy needs to provide an alternative growth path to housing and mining.
UBS observes real estate prices in many global cities have doubled since 1998 in real terms on the back of favourable fundamentals and capital inflows from abroad. Loose monetary policy has also prevented a normalisation of housing markets and encouraged the risks of a bubble forming
Cities near the “bubble zone” face a higher risk of a large price correction. The most at risk, in the broker's analysis, are London and Hong Kong. Significantly overvalued markets include Sydney, Vancouver, Amsterdam and San Francisco.
Valuations are also considered stretched in Geneva, Zurich, Paris, Frankfurt and, to a lesser degree, Tokyo and Singapore.
New listings volume growth in the Australian property market turned negative in October, Deutsche Bank observe. This is not altogether unsurprising, given the cycling of tough comparables.
Still, the broker expects this will impact on online classified earnings over the December quarter. That said, volumes are expected to return to growth after December and the broker remains comfortable with full year growth forecasts.
Canaccord Genuity makes modest increases to earnings growth estimates for Mint Payments ((MNW)), after the company's quarterly update provided quantitative evidence that the platform is accelerating.
This reflects the product launch by key distribution partners. The broker believes the scalability of the company's payments platform is yet to be widely acknowledged by investors.
While remaining positive regarding Blackmores ((BKL)) growth opportunities in China, Goldman Sachs suspects new draft proposals from authorities to increase oversight of the cross-border channel may have an impact.
As it is difficult to quantify the risks the broker removes Blackmores from its Australasian conviction list but retains a Buy rating. The broker's target is raised to $195 from $150.
Bell Potter suspects shares in SeaLink Travel ((SLK)) will take a breather after a strong performance, having increased 50% since the placement in mid September. The broker believes the upward move was justified but finds no obvious near-term catalysts. Rating is downgraded to Hold from Buy and the target is $3.61.
Bell Potter also downgrades its recommendation for data security solutions firm Senetas ((SEN)) to Hold from Buy following a strong rise in the share price and now envisages it is fair value. The price target is raised to 17c from 15c. The broker does not expect specific guidance to emanate from the upcoming AGM but rather expects a confirmation of profit growth and cash flow.
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