Our top ten news from 06 April 2017 to 13 April 2017 (ranked according to popularity).
Tag Archives: Weekly Reports
Australian Listed Real Estate Tables
PDF file attached.
Investors looking to diversify away from straight equity can invest in property as an alternative via direct investment, or by investing in units of listed or unlisted real estate investment trusts (REIT) or the shares of property developers.
Typically a REIT will purchase a number of similar properties, maintain those properties and collect rent from tenants, and pay a distribution (dividend) to the unit holder net of maintenance costs and management fees. REITs are primarily attractive to investors for their dividend yield but also offer capital upside on property value appreciation. The bulk of listed REITs fall into three property categories: office, being office blocks usually in a CBD; retail, being shops and shopping centres; and industrial, being warehouses, logistics centres and so forth. Other variations exist.
Property developers typically purchase land, build office, retail, industrial or residential complexes, and sell those properties. Developers offer a higher risk/reward investment than REITs given the lag time between construction and sale, and the capital committed to a project. Dividend yields are typically lower but capital up/downside typically greater.
The tables in the attached PDF list Australian REITs and developers and and calculations for dividend yield and valuation, including share price to earnings, price to net asset value (market value of property) and price to book value (property valuation on the company's/trust's books) for the purpose of investor assessment.
This service is provided for informative purposes only. It is not, and should not be treated as, a solicitation or recommendation to buy corporate bonds. Investors should always consult their financial adviser before acting on any information gleaned from this service. FNArena does not guarantee the accuracy of information provided. Note that while FNArena publishes this table weekly, prices are fluid and potentially changing throughout each trading day. Hence prices tabled may not reflect actual market prices at the time of reading.
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Weekly Ratings, Targets, Forecast Changes
By Rudi Filapek-Vandyck, Editor FNArena
Guide:
The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS.
For the purpose of broker rating correlation, Outperform and Overweight ratings are grouped as Buy, Neutral is grouped with Hold and Underperform and Underweight are grouped as Sell to provide a Buy/Hold/Sell (B/H/S) ratio.
Ratings, consensus target price and forecast earnings tables are published at the bottom of this report.
Summary
Period: Monday February 13 to Friday February 17, 2017
Total Upgrades: 8
Total Downgrades: 15
Net Ratings Breakdown: Buy 43.54%; Hold 42.36%; Sell 14.10%
The local reporting season is heating up and so are the number of downgrades issued by stockbroking analysts. The latter is less a reflection of disappointing results as it is a reflection of the fact share prices are a lot higher than where they were in 2016, and this means companies have to do better than projected to justify further upside.
For the week ending Friday, 17th February 2017, FNArena registered 15 downgrades for individual ASX-listed stocks against eight upgrades. Magellan Financial was the only one receiving two upgrades during the week. Aurizon Holdings was downgraded three times. JB Hi-Fi and IOOF Holdings each received two downgrades.
CSL tops the week's list for positive adjustments to price targets, followed by OZ Minerals, Sims Metal and AMP. On the flipside, IPH Ltd (-16%) takes the wooden spoon, followed by IOOF, Telstra and Tatts.
The week's table for upgrades to earnings estimates shows some gigantic increases, with Alacer Gold in pole position with a gain of +302%. AMP, with a gain of +159% comes second, followed by Mt Gibson (+101%). The negative side looks a lot more benign with Boral leading the week's losers (so to speak), seeing market expectations retreating by -16%. Next up are Ten Network (-11.5%), Sydney Airport (-9%) and Domino's Pizza (-7%).
The February reporting season will really get into swing this week.
Upgrade
AINSWORTH GAME TECHNOLOGY LIMITED ((AGI)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 1/1/0
Macquarie upgrades to Outperform from Neutral. Target is raised to $2.10 from $1.80.
The broker notes Australian ship-share shows positive trends and, while not the largest contributor to earnings, will be positive for sentiment and should be a lead indicator for the US market.
BLUE SKY ALTERNATIVE INVESTMENTS LIMITED ((BLA)) Upgrade to Buy from Hold by Ord Minnett .B/H/S: 2/0/0
First net profit was supported by an uptick in the contribution from the New York-based Cove and higher investments income. Ord Minnett notes the institutional investor base continues to expand.
After upgrading growth expectations and factoring in a lower revenue margin, option issue and higher costs, the broker's forecasts for earnings per share are downgraded -6% and -7% for FY17 and FY18 respectively.
Rating is upgraded to Buy from Hold. Target is raised to $7.87 from $7.60.
CSL LIMITED ((CSL)) Upgrade to Buy from Neutral by Citi .B/H/S: 6/1/0
Post the formal release of CSL's interim financials, Citi analysts have become a lot more comfortable with the growth outlook. Their projections now imply 21% EPS CAGR for FY16-FY19.
Citi believes this outlook, in combination with the reliability that continues to be on display, warrants a premium valuation. The analysts have increased their price target to $136.40 (was $113.75). Upgrade to Buy from Neutral.
MAGELLAN FINANCIAL GROUP LIMITED ((MFG)) Upgrade to Add from Hold by Morgans and Upgrade to Equal-weight from Underweight by Morgan Stanley .B/H/S: 5/1/0
Magellan's -20% drop in first half profit on lower performance fees was in line with Morgans. The broker expects strong net inflows into both retail and institutional to taper in the second half but to remain solid.
Morgans sees a long term opportunity in the announcement of three new US low carbon funds, but doesn't expect meaningful inflows for two-three years. Target falls to $26.80 from $27.47 but that suggests a 15% total shareholder return. Hence an upgrade to Add.
Magellan's retail inflows slowed in the first half but Morgan Stanley is expecting a modest recovery, while institutional flows bounced back. Magellan pays out 75-80% of earnings to dividends but given peers pay 85-90% and Magellan's balance sheet has been strengthened, the broker expects a stronger dividend.
Morgan Stanley upgrades to Equal-weight. The broker might be more positive but for pressure on retail fees and Magellan's limited product mix compared to peers. Target rises to $25.00 from $21.50. Industry view: In-Line.
SOUTH32 LIMITED ((S32)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 5/2/0
First half results were slightly better than the broker's estimates, FY17 guidance for D&A has been revised upward by $40m to $$760m.
FY17 production guidance remains unchanged, but cost guidance has been increased across most divisions, reflecting FX moves and price linked royalty payments. The broker forecasts cash of $1.6bn at the end of FY17 and assumes $800m of buy-backs in each of FY18 and FY19.
The broker upgrades the stock to Outperform from Neutral and raises the target price to $2.95 from $2.80.
SIMS METAL MANAGEMENT LIMITED ((SGM)) Upgrade to Outperform from Underperform by Macquarie .B/H/S: 4/2/1
First half results were in the middle of the guidance range. Macquarie finds the market environment far from clear but believes the company has done well to mitigate downside risks.
The company believes further self-help could add more than 50% to EBIT. On the strength of such potential, Macquarie upgrades to Outperform from Underperform. Target is raised to $13.60 from $11.20.
VICINITY CENTRES ((VCX)) Upgrade to Buy from Neutral by Citi .B/H/S: 3/0/2
At face value, the H1 financial performance was in-line, but Citi analysts highlight the result also put the limelight on the broader benefits of capital recycling.
Upgrade to Buy from Neutral. Target price loses 2c to $3.22. The analysts point out the shares are now offering circa 6% yield plus 10% upside to the price target for the year ahead.
Estimates have changed little. Citi analysts encourage investors to look through the earnings impact of asset sales. They expect growth to accelerate from FY18.
Downgrade
AURIZON HOLDINGS LIMITED ((AZJ)) Downgrade to Underperform from Neutral by Credit Suisse and Downgrade to Neutral from Outperform by Macquarie and Downgrade to Hold from Buy by Deutsche Bank .B/H/S: 0/5/3
One-off items boosted the first half result. Credit Suisse notes the focus of the company is on cost control and more rigorous capital allocation.
The intermodal freight review will be completed mid year and, while the company could achieve its targets by retaining the challenged division, the broker believes it would take until FY19 to achieve.
Credit Suisse believes the shares are fully valued and downgrades to Underperform from Neutral. Target is raised to $5.00 from $4.75.
First half results were better than Macquarie expected. Nevertheless, there were numerous favourable and non-sustainable items above the line.
The broker notes no clarity around any fundamental change in strategy will be heard until mid-year but the company will start executing on items such as reducing capital expenditure and re-pricing bulk contracts.
Macquarie downgrades to Neutral from Outperform. Target is reduced to $4.98 from $5.16.
The first half was stronger than Deutsche Bank forecast. However, a large proportion of the variance was one off items which are unlikely to be repeated.
The company continues to generate cash flow which enabled it to maintain its dividend pay-out ratio. Capital expenditure is expected to fall further, given the limited growth projects.
The broker makes minor changes to earnings forecasts but downgrades to Hold from Buy, given the shares are trading at a premium to its price target. Target is raised to $5.10 from $4.95.
BENDIGO AND ADELAIDE BANK LIMITED ((BEN)) Downgrade to Underperform from Neutral by Credit Suisse .B/H/S: 0/0/6
First-half results disappointed Credit Suisse and earnings estimates are downgraded by -2-4%.The broker liked the cost control and improvement in asset quality but did not like the softer net interest margin.
The result highlights the heightened earnings risks from dilution and bad debts. Credit Suisse downgrades to Underperform from Neutral. Target is reduced to $11.90 from $12.50.
COMPUTERSHARE LIMITED ((CPU)) Downgrade to Neutral from Buy by Citi .B/H/S: 4/3/1
Computershare's growth outlook has changed dramatically, and for the better, comment analysts at Citi. They have made only small positive adjustments to estimates.
However, the analysts also note the share price has rallied hard. On this basis, they downgrade to Neutral from Buy. Target jumps to $13.80 from $11.
DWS LIMITED ((DWS)) Downgrade to Hold from Buy by Ord Minnett .B/H/S: 0/1/0
DWS reported first half results that were better than expected by Ord Minnett. The broker was a little surprised at the reduction in contractor headcount and sees DWS as having to try harder in the second half to deliver organic revenue growth.
The broker has downgraded the stock to Hold from Buy and reduces price target to $1.60 from $1.63.
HENDERSON GROUP PLC. ((HGG)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 0/5/0
2016 results beat Credit Suisse forecasts. The short-term operating outlook is expected to remain challenging for longer than previously expected.
The broker continues to envisage value in the merger and medium-term story but finds further negative catalysts on the horizon for the short term.
Rating is downgraded to Neutral from Outperform. Target falls to $3.80 from $4.30.
IOOF HOLDINGS LIMITED ((IFL)) Downgrade to Neutral from Outperform by Macquarie and Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 0/4/1
First half underlying profit missed Macquarie's expectations. Gross margin pressure flowed through to net margins. The dividend pay-out of 98% was ahead of forecasts, backed by strong cash flow, but the broker expects this to return to 90%.
Macquarie downgrades to Neutral from Outperform as operating headwinds are expected to remain despite the prospect of some moderation in the second half. Target is reduced to $8.50 from $9.60.
First half earnings were disappointing for the broker, despite a small increase in net profit. Credit Suisse has downgraded FY17 forecasts by -6%, primarily driven by business divestments.
The broker notes cost savings have largely come through, but the unexpected divestments raise questions around the earnings outlook. The broker has downgraded the stock to Neutral from Outperform and reduced the target price to $8.60 from $9.50.
IPH LIMITED ((IPH)) Downgrade to Hold from Buy by Deutsche Bank .B/H/S: 1/2/0
Adjusting for unrealised FX gains, first half results were broadly in line with Deutsche Bank forecasts. The broker downgrades to Hold from Buy on valuation grounds.
Medium-term earnings estimates are reduced to better capture the risks around national phase entries being conducted electronically and potential margin compression from increasing competition.
Target is reduced to $5.40 from $6.60.
JB HI-FI LIMITED ((JBH)) Downgrade to Hold from Add by Morgans and Downgrade to Underperform from Neutral by Credit Suisse .B/H/S: 3/4/1
JB Hi-Fi's first half results were better than Morgans had expected. The strong sales growth has continued into the second half and management has guided to full year earnings of $5.58bn.
The broker believes sales growth may moderate as the group cycles the exit of Dick Smith from the market. The broker downgrades the stock to Hold from Add and target price rises to $31.80 from $30.94.
JB HiFi's first half results were better than the broker had expected. The impact of Dick Smith's exit from the market should be finished in the second half and management has guided to slowing sales growth in the period.
Credit Suisse has downgraded the stock to Underperform from Neutral and raised the target price to $26.49 from $26.43.
OZ MINERALS LIMITED ((OZL)) Downgrade to Underweight from Equal-weight by Morgan Stanley .B/H/S: 2/2/4
OZ Minerals' share price has risen 130% in 12 months, compared to 55% for the ASX200 resources index. Copper price strength, and expectation for more strength, as well as updated mine plans for Prominent Hill and Carrapateena have driven the move, Morgan Stanley concludes.
The broker has revised forecasts to account for these factors but cannot arrive at a valuation to match market enthusiasm. Downgrade to Underweight. Target rises to $8.50 from $5.80. Industry view: Attractive.
PRAEMIUM LIMITED ((PPS)) Downgrade to Hold from Add by Morgans .B/H/S: 0/1/0
Praemium's first half results were well below the broker's expectations, mainly due to rising costs associated with increased sales and IT development. Morgans has reduced FY17 forecasts by -51.5%, FY18 by -14.3% and FY19 by -9.7%
As the company trades close to the broker's revised valuation, Morgans downgrades the stock to Hold from Add. Target is reduced to 43c from 61c.
TELSTRA CORPORATION LIMITED ((TLS)) Downgrade to Hold from Accumulate by Ord Minnett .B/H/S: 0/5/3
Ord Minnett has downgraded to Hold from Accumulate upon Telstra's release of what turned out a weak interim report. The analysts highlight both top line and bottom line were well off what the market was expecting.
There's sector dominance and an attractive looking yield, but Ord Minnett is taking a medium term view and sees potential structural changes and downward pressure. Target falls to $5.35 from $5.45.
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Technical limitations
If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
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The Wrap: Health, Housing And US/China Trade
Weekly Broker Wrap: health insurance data; Morgan Stanley's lead housing indicator; global industrial recovery; and the potential for a US/China trade dispute.
-Health insurer gross margins should be achievable in the upcoming results
-Weaker fundamentals surfacing in Australian housing construction
-Global industrial recovery underpins rebound in metals markets
-Market not pricing in any risk in US/China trade of a "hard versus asymmetrical" conflict
By Eva Brocklehurst
Health Insurance
Private health insurance data and hospital statistics from APRA for the December quarter signalled growth in policy holders slowed to its lowest rate since 2004, while benefit growth is stabilising. Compositionally, benefits growth of 5.3% was driven by episodic growth of 3.3%. The proportion of the population covered by hospital private health insurance fell to 46.6%.
Goldman Sachs finds the data consistent with comments from Medibank Private ((MPL)) and suggests that insurance gross margins should be broadly in line with the second half of FY16 in the upcoming results. Thereafter, the broker expects margins will be more difficult to sustain into the second half and FY18. Goldman has Neutral ratings on both Medibank Private and nib ((NHF)).
Industry feedback suggests to Macquarie that a number of hospital groups are accelerating their invoicing process, which is pulling forward claims. As the APRA data is provided on a cash rather than accruals basis, the broker suspects that part of the rebound in claims growth is a one-off adjustment rather than an underlying shift in trends.
Claims data is materially below long-term averages, nonetheless. If both Medibank Private and nib do not recognise the change in payment patterns, and effectively over-reserve at the first half results, this will not be evident until the second half, Macquarie contends. The broker rates both stocks Outperform.
Credit Suisse observes the government has passed through another large premium rate increase and, while the current trends raise concerns for the industry, the earnings risk remains skewed in favour of insurers. The broker believes the slowing in policy-holder growth reflects the weakening economy, low wage growth and an industry that has reached its natural saturation point under the current regulatory setting.
The noteworthy feature of the statistics from a private health insurance perspective is the sixth consecutive drop in the population covered by private health insurance, UBS suggests. The price increase of 4.84%, to be implemented from April 1, is only likely to weigh further on this key metric for funding sustainability. The broker expects better execution on claims management relative to the industry should underpin FY17 net margins for Medibank Private. The broker retains a Neutral stance on the stock.
Housing
Morgan Stanley's housing lead indicator flags further weakness for Australian housing construction over 2017. The sub-components of the survey paint a weaker picture of the fundamentals such as supply/demand, rental conditions and accessibility. This is offset somewhat by looser credit conditions and stronger sentiment, particularly among investors.
While investors appear to be taking leadership of the housing market, the broker expects APRA and the Council of Financial Regulators will step up supervisory actions to manage financial stability risks. The broker believes red flags will be raised by any material increase in household leverage.
The broker notes, recently, Commonwealth Bank ((CBA)) has taken steps to slow investor loan growth, including stripping investor tax benefits out of serviceability tests, which targets stretched investors and could be more broadly applied across the industry.
The broker notes weaker trends are materialising for the apartment cycle in Sydney and Melbourne, although detached price growth remains strong. The broker expects development activities will slow earlier than consensus expects, given tighter credit for developers and investors.
Commodities
The recovery in global industry accelerated into the end of 2016 and Macquarie believes this underpins a rebound in the metals markets. While suspecting, year-on-year, the growth rate is near its peak, the broker envisages a number of downside risks further out.
Industrial output rose a modest 0.12% in December, but this followed a strong jump in November. Over the fourth quarter output grew by 0.96% quarter on quarter, the best such performance since the fourth quarter of of 2013, the broker calculates.
China remains, by far, the largest contributor to global growth but the actual acceleration has been due to an improvement in other developing economies as well as developed economies. The broker notes in some cases, especially Brazil and Russia but also in the US, it is the simple fact that these industrial sectors have stopped contracting. In the EU growth accelerated at while Japan swung from contraction to solid growth.
The wild card in industrial production is the new US administration. President Trump has been vocal in supporting US-based manufacturing and energy production. Macquarie observes, so far, he has concentrated on persuading manufacturing firms to keep production in the US and more recently talked down the US dollar. Trade and tax policy is also likely to have an impact as the year progresses, especially if a border-adjusted cash flow tax is enacted.
Over the long term, the broker expects these factors will move the locale of global industrial production rather than the extent of it.
In China industrial production growth has been "eerily smooth" at around 6%, Macquarie observes. Mining output continues to shrink modestly. Manufacturing growth in December was higher, at 6.3% year-on-year, but has been falling slowly, offset by much-improved utility output.
With mixed features and variables in China, the broker, on balance, expects manufacturing growth to slowly decelerate over the coming year. One key sector is expected to be much weaker this year, automotive manufacturing. The broker forecasts production growth of just 2-3% versus nearly 5% last year.
US/China Trade
it is likely to be only a matter of time before US/China trade relations appear at the top of President Trump's agenda, Citi believes. The broker defines a "soft" approach is one governed by World Trade Organisation rules and which aims to achieve a re-negotiation of the trading relationship. A "hard" approach is one that would not hesitate to seek a re-balancing of the trade outside a WTO framework.
The central question about China's response to a more hostile US approach to trade is whether Beijing will respond in a tit-for-tat (symmetrical) way or whether its reaction might range across the whole spectrum of the US/China bilateral relationship (asymmetrical).
Hence, Citi believes a trade dispute would be less disruptive globally if the conflict is characterised by a soft US administration approach and a symmetric Chinese response. The broker finds reason to be cautious, given the effects that such a conflict might have on risk appetite and expectations for growth in the largest and second largest economies. Citi does not believe the market is currently pricing in any risk of a hard versus asymmetrical conflict.
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Weekly Top Ten News Stories
Our top ten news from 09 February 2017 to 16 February 2017 (ranked according to popularity).
Tuesday 14 February 2017 - 10:46 AM
Monday 13 February 2017 - 09:12 AM
Friday 10 February 2017 - 10:00 AM
Monday 13 February 2017 - 10:36 AM
Thursday 09 February 2017 - 10:00 AM
Friday 10 February 2017 - 12:53 PM
Monday 13 February 2017 - 12:44 PM
Wednesday 15 February 2017 - 01:02 PM
Thursday 09 February 2017 - 12:53 PM
Friday 10 February 2017 - 02:36 PM
Next Week At A Glance
For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.
By Greg Peel
The number of Australian companies covered by FNArena database brokers having reported so far has now passed the hundred mark after three weeks of the result season. Given there are in excess of 300 covered companies reporting on the standard six month cycle (over 400 including off-cycle), almost all of the remaining 200 plus companies will report next week.
It will be a very busy week.
As the local market tries to make sense of the deluge, US markets will continue to try to make sense of the president. Any new week can offer up new surprises.
Wall Street will be closed on Monday night for Washington’s birthday.
US data releases thereafter include flash estimates of February manufacturing and services PMIs, new and existing home sales, house prices, consumer sentiment and the Chicago Fed index. The minutes of the last Fed meeting will also be released.
Japan and the eurozone will also provide flash manufacturing PMIs.
The minutes of the February RBA meeting will be released locally in a week that sees the countdown begin ahead of the following week’s GDP result release. Next week we’ll see December quarter construction work done and private sector capex. Philip Lowe will speak on Wednesday.
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The Short Report
Guide:
The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX). Short positions in exchange-traded funds (ETF) and non-ordinary shares are not included. Short positions below 5% are not included in the table below but may be noted in the accompanying text if deemed significant.
Please take note of the Important Information provided at the end of this report. Percentage amounts in this report refer to percentage of ordinary shares on issue.
Stock codes highlighted in green have seen their short positions reduce in the week by an amount sufficient to move them into a lower percentage bracket. Stocks highlighted in red have seen their short positions increase in the week by an amount sufficient to move them into a higher percentage bracket. Moves in excess of one percentage point or more are discussed in the Movers & Shakers report below.
Summary:
Week ending February 9, 2017
Last week saw the ASX200 take off from the 5600 level on its way to 5800, fuelled by Trump fairy dust, solid Chinese trade data and some positive local earnings reports. Earnings season only began to ramp up.
To that end, we note some interesting activity at the low end of the 5% plus table last week.
Domino’s Pizza ((DMP)) has been jumping in and out of the bottom end of the table for weeks, and last week reappeared ahead of posting a miss this week and a 14% share price drop.
Genworth Mortgage Insurance ((GMA)) copped a share price sell-off the week before after posting a miss, and has appeared in the 5% bracket for the first time.
Other new debutants into the 5% bracket, all with results pending and thus worth keeping an eye on, are Automotive Holdings ((AHG)), Impedimed ((IPD)) and Collection House ((CLH)).
Further up the table there were couple of clear movers & shakers last week. OxForex jumped to 8.2% shorted from 6.5% and Mayne Pharma ((MYX)) to 10.1% from 8.3%, to debut in the elite 10% plus shorted club.
We might also note that despite Aconex' ((ACX)) spectacular share price plunge the week before, shorts have increased to 15.4% from 14.9%.
Weekly short positions as a percentage of market cap:
10%+
MYR 16.8
ACX 15.4
WSA 13.2
TFC 11.8
VOC 11.2
NEC 10.9
WOR 10.1
MYX 10.1
In: MYX
9.0-9.9%
SYR, MTS, NWS
In: NWS
8.0-8.9%
FLT, ISD, OFX, MND, DOW
In: OFX, DOW Out: MYX, NWS, HSO, NXT, BAL
7.0-7.9%
ORE, RWC, BAL, HSO, NXT, EHE, BEN, GTY
In: BAL, HSO, NXT, GTY Out: DOW, MTR
6.0-6.9%
MTR, SGH, SRX, IVC, AAD, MYO, BGA, TGR, CSR, CSV, PRU, SEK, AWC, IFL
In: MTR, CSR, IFL Out: OFX, GTY, JHC
5.0-5.9%
GXL, PDN, IGO, MSB, GEM, GMA, JHC, A2M, OSH, DMP, IPH, WOW, IPD, AAC, KAR, CLH, CTD, ILU, RIO, AHG
In: JHC, GMA, DMP, IPD, CLH, ILU, AHG Out: CSR, IFL, VRT, BKL, AWE, CAB
Movers and Shakers
Forex and money transfer facilitator Ozforex ((OFX)) suffered a dive in share price earlier this month after posting its third guidance downgrade in 18 months. A new CEO was announced.
If that CEO can’t turn the ship around, given brokers see longer term upside potential, then the company will be in trouble. Ozforex doesn’t report earnings until May. Last week Ozforex shorts rose to 8.2% from 6.5%.
Mayne Pharma ((MYX)) shares shot up last week as pressure eased over allegations of drug price fixing in the US, into which Mayne has been swept. But a regulatory cloud continues to hang over the US drug sector given if there was one thing both Trump and Clinton agreed upon pre-election (other than the TPP), it was that US drug prices are way too high.
On that share price recovery Mayne also saw a big jump in short positions, to 10.1% from 8.3%.
ASX20 Short Positions (%)
To see the full Short Report, please go to this link
IMPORTANT INFORMATION ABOUT THIS REPORT
The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.
It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position "naked" given offsetting positions held elsewhere. Whatever balance of percentages truly is a "short" position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, "short covering" may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.
Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to "strip out" the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.
Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option ("buy-write") position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a "long" position in that stock.
Another popular trading strategy is that of "pairs trading" in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a "net neutral" market position.
Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are "short". Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.
Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.
FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.
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Australian Corporate Bond Price Tables
PDF file attached.
Corporate bonds offer an alternative to equity investment in providing a fixed “coupon”, or interest payment, unlike equities which pay (or not) non-fixed dividend payments, and a maturity date, unlike equities which are open-ended.
Listed corporate bonds can be traded just as listed shares can be traded. Bonds bought at issue and held to maturity do not offer capital appreciation as an equity can, but assuming no default do not offer downside capital risk either. Pricing is based on market perception of default risk, or “credit risk”, throughout the life of the bond.
Bonds do offer capital risk/reward if traded on the secondary market within the bounds of issue and maturity. Coupon rates are fixed but bond prices fluctuate on perceived changes in credit risk and on changes in prevailing market interest rates.
Note that the attached tables offer three “yield” figures for each issue, being “coupon”, “yield” and “running yield”.
If a bond is purchased at $100 face value and a 5% coupon, and face value is returned at maturity, the running yield is 5% and the yield, or “yield to maturity” is 5%.
If a bond is purchased in the secondary market at greater than $100, the running yield, which is the per annum yield for each year the bond is held, is less than 5% because the coupon is paid on face value. The yield to maturity is also less than the coupon as more than $100 is paid to receive $100 back at maturity.
If a bond is purchased in the secondary market at less than $100, the running yield, which is the per annum yield for each year the bond is held, is more than 5% because the coupon is paid on face value. The yield to maturity is also more than the coupon as less than $100 is paid to receive $100 back at maturity.
Note that if a bond is trading on the secondary market at a price greater than face value the implication is the market believes the bond is less risky than at issue, and if at a lesser price it has become more risky. Bonds trading on yields substantially higher than their coupons thus do not offer a bargain per se, just a higher risk/reward investment. In all cases, bond supply and demand balances will also impact on secondary pricing.
Note also that while most coupons are fixed, the attached table also provides prices for capital indexed bonds (CIB) and indexed annuity bonds (IAB).
This service is provided for informative purposes only. It is not, and should not be treated as, a solicitation or recommendation to buy corporate bonds. Investors should always consult their financial adviser before acting on any information gleaned from this service. FNArena does not guarantee the accuracy of information provided. Note that while FNArena publishes this table weekly, prices are fluid and potentially changing throughout each trading day. Hence prices tabled may not reflect actual market prices at the time of reading.
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Share Buybacks – Who’s Doing It?
International research suggests shares in companies that buy in their own equities are more likely to respond positively through share price appreciation. Investors should note, however, buying back own stock is not a guarantee for significant share price gains ahead.
For local research about investor benefits from capital management, including companies buying in their own shares, FNArena subscribers can read "Buy Capital Management"
Below is an incomplete overview of companies buying in their own shares this year. We very much appreciate all feedback, contributions and suggestions at [email protected]
See attached excel file for more details (paying subscribers only)
8IH | 8I Holdings | 21/09/2016 |
ACQ | Acorn Capital Inv Fund | 10/10/2016 |
AFA | ASF Group | 26/04/2016 |
AFI | Australian Foundation Investment Co | 17/02/2017 |
AGL | AGL Energy | 13/10/2016 |
AHY | Asaleo Care | 01/10/2015 |
AIV | ActivEX Ltd | 01/11/2016 |
ALR | Aberdeen Leaders Ltd | 27/02/2015 |
AMH | Amcil Ltd | 17/02/2017 |
APW | AIMS Property Securities Fund | 07/09/2016 |
AQF | Australian Governance Masters | 29/11/2016 |
ARA | Ariadne Australia | 21/08/2014 |
ARG | Argo Investments | 01/01/2016 |
AUF | Asian Masters Fund | 23/11/2016 |
AUI | Australian United Investments | 14/05/2015 |
BWF | Blackwall Property Fund | 15/03/2016 |
BWR | Blackwall Property Trust | 07/07/715 |
CAM | Clime Capital | 06/01/2017 |
CAMPA | Clime Capital Preference | 15/08/2016 |
CGO | CPT Global | 27/08/2015 |
CHN | Chalice Gold Mines | 30/06/2016 |
CIM | Cimic Group | 29/12/2016 |
CIN | Carlton Investments | 29/11/2015 |
CIW | Clime Investment Management | 28/12/2016 |
CLT | Cellnet Group | 09/09/2015 |
CMC | China Magnesium Corp | 28/10/2014 |
CNI | Centuria Capital | 24/12/2015 |
CSL | CSL Ltd | 27/10/2016 |
CSR | CSR Ltd | 21/03/2016 |
CSV | CSG Ltd | 12/03/2016 |
CVC | CVC Ltd | 12/12/2015 |
CVW | ClearView Wealth | 19/12/2013 |
CYG | Coventry Group | 23/11/2015 |
DJW | Djerriwarrh Investments | 17/02/2017 |
DUI | Diversified United Investments | 01/06/2016 |
EAI | Ellerston Asia Investments | 27/09/2016 |
EMF | Emerging Markets Masters Fund | 21/12/2016 |
EZL | Euroz Ltd | 01/01/2017 |
FID | Fiducian Group | 03/03/2015 |
FRI | Finbar Group | 08/12/2014 |
GOW | Gowing Bros | 20/06/2012 |
GPT | General Property Group | 06/05/2016 |
HML | Henry Morgan Ltd | 27/12/2016 |
HOT | HotCopper Holdings | 02/11/2016 |
ICN | Icon Energy | 26/02/2015 |
IPE | IPE Ltd | 12/11/2016 |
ISU | iSelect | 30/03/2016 |
ITD | ITL Ltd | 28/11/2016 |
JBH | JB Hi-Fi | 12/09/2016 |
KAT | Katana Capital | 03/01/2017 |
KBC | Keybridge Capital | 18/01/2017 |
KBCCPA | Keybridge Capital | 18/01/2017 |
KKT | Konekt | 15/11/2016 |
LLC | Lend Lease Corp | 28/08/2015 |
MEL | Metgasco | 04/02/2016 |
MFF | Magellan Flagship Fund | 13/08/2015 |
MGP | Managed Accounts Holdings | 14/08/2015 |
MHM | MHM Metals | 17/02/16 |
NEN | Neon Capital | 17/05/16 |
NGE | New Guinea Energy | 18/08/16 |
NVT | Navitas | 16/02/2016 |
OCL | Objective Corp | 26/02/2016 |
OPG | OPUS Group | 09/12/2016 |
ORL | Oroton Group | 26/04/2016 |
OZG | Ozgrowth Ltd | 30/12/2015 |
OZL | OZ Minerals | 14/03/2016 |
PME | Pro Medicus | 01/04/2016 |
PTM | Platinum Asset Management | 04/10/2016 |
QAN | Qantas | 08/09/2016 |
REY | Rey Resources | 24/05/2016 |
RIO | Rio Tinto | 01/03/2017 |
RND | Rand Mining | 12/12/2015 |
SDG | Sunland Group | 27/12/2016 |
SGM | Sims Metal Management | 16/12/2016 |
SIP | Sigma Pharmaceuticals | 13/10/2014 |
SMX | SMS Management & Tech | 15/06/2015 |
SVW | Seven Group Holdings | 12/03/2016 |
SVW | Seven Group Holdings | 17/08/2016 |
SWK | Swick Mining Services | 21/12/2016 |
TBR | Tribune Resources | 28/09/2015 |
TGG | Templeton Global Growth Fund | 26/02/2016 |
TOT | 360 Capital Total Return | 28/03/2016 |
VSC | Vita Life Sciences | 13/05/2016 |
WAT | Waterco | 07/04/2016 |
WIC | Westoz Investment Co | 30/12/2015 |
XPD | XPD Soccer Gear Group | 20/09/2016 |
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Uranium Week: Steadily Upward
By Greg Peel
The US Energy Information Agency reported last week total US-based production was 2.2mlbs in 2016, down -13% on 2015 and the lowest level since 2005. Currently there are six facilities operating in the US, with three on standby. Seven are in the planning/development stage as owners assess future conditions.
North of the border, Cameco reported a -US$47m loss for 2016, impacted by impairments from the shutdown of its Rabbit Lake mill and the full write-off its Kintyre project in Australia. Cameco also curtailed its ongoing production last year.
The global uranium industry is now at an interesting point.
In what industry consultant TradeTech describes as a “routine” week last week, six spot transactions were concluded totalling 800,000lbs U3O8 equivalent. Trade Tech’s weekly spot price indicator rose US$1.00 to US$26.50/lb.
While that price is still some -60% below pre-Fukushima levels, it is 49% above the December low. While production curtailments from the likes of Cameco and Australia’s Paladin Energy ((PDN)), operating in Africa, have helped to tighten the supply side, it is Kazakhstan’s decision to cut 2017 production by -10% that is providing ongoing price support, TradeTech suggests.
Which begs the obvious question. While a level of global production has been shut down for good and planned developments have been abandoned, most of the incumbent players, including Kazakhstan’s state-owned miner, have simply put operations into care and maintenance or reduced output levels, pending a return to economically viable prices. If the uranium price continues to rise, each project will pass its trigger point at which management will consider production restarts or increases.
And then the price will fall again, if there is no corresponding increase in demand. It is the perennial commodity market dilemma – higher prices eventually lead to increased production which leads to lower prices which leads to reduced production…
Aside from the possibility of legacy US reactors being saved from shutting down thanks to supportive legislation changes, China has now passed its peak in stockpiling (at low prices) for its reactor building program, Japanese reactor restarts will be held up in court from here to eternity, and programs in the likes of India and South Africa while supportive, are a long way off. Meanwhile, governments in Europe are moving away from nuclear energy.
In other words, the uranium price will most likely be supply-side dominated in 2017, and price-wise that implies a negative feedback loop.
There were no transactions reported in term markets last week. TradeTech’s term price indicators remain unchanged at US$27.75/lb (mid) and US$35.00/lb (long).
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