BHP Billiton Limited (BHP):
BHP Billiton should divest its best US shale assets if offered $US9 billion ($12.2 billion) for them, according to Deutsche Bank analyst Paul Young. BHP Billiton should divest its best US shale assets if offered $US9 billion ($12.2 billion) for them, according to Deutsche Bank analyst Paul Young. However, the highly respected resources sector watcher says the company may get a better price if it waits a few years. Mr Young said the US shale assets were small by industry standards and non-core for BHP, largely because they will struggle to generate free cash flow in most probable oil price scenarios. ‘‘The key challenge for the US onshore portfolio in our view remains the lack of near-term free cash flow even under an upside-case scenario,’’ he said in a note to clients. ‘‘Divesting these assets could reduce debt and provide additional capital to invest in higher returning conventional oil and mining.’’ Mr Young values BHP’s US shale assets at $US6.3 billion and its conventional oil assets at $US16.2 billion, but he noted that recent acquisitions in the US shale sector were implying an oil price of about $US70 per barrel rather than current prices around $US50. BHP has argued its diversified portfolio makes it unusually advantaged, and collapsing the dual-listed structure would cost about $US1.3 billion in fees. The company has argued it is not the right time to be divesting petroleum assets, and has flagged plans to sell two of its smaller, non-core assets in the US shale portfolio. BHP chief executive Andrew Mackenzie will speak to investors in Barcelona next week. The stock rose 1.4 per cent to $22.94.
Australia and New Zealand Banking Group (ANZ); Commonwealth Bank of Australia (CBA):
The federal government’s decision to conduct a comprehensive Productivity Commission inquiry into the state of competition in the banking sector has failed to quell demands by Labor and the minor parties for a royal commission or something similar. A day after Treasurer Scott Morrison told The Australian Financial Review the inquiry would be announced on budget night, alongside some immediate measures to boost competition in the financial services sector, Labor, the Greens and the Nick Xenophon Team were unmoved. ‘‘There is nothing this government won’t do to avoid establishing a royal commission into the financial services sector,’’ said shadow treasurer Chris Bowen. ‘‘This is another case of too little, too late.’’ Senator Xenophon cited the thousands of people left bereft by collapsed managed investment schemes, something the commission would not be looking at and something which needed a compensation scheme of last resort. The banking sector was alive with speculation on Monday that there would be a levy in the budget to fund such a scheme. Mr Morrison said the new measures to be announced on Tuesday night, along with the Productivity Commission review, added to a long list of measures the government has implemented against the banks over the past 12 months and further negated the need for a royal commission. ‘‘It’s important that we deal with these things now. The alternative proposals are to have inquiries which take years and years and years,’’ the Treasurer said. Mr Bowen said, ‘‘It’s actually embarrassing how many so-called ‘packages’ and new inquiries the government has announced into bank activities.’’ The government has boosted the resources and powers of the regulators, compelled bank executives to appear at least once a year before a parliamentary committee and on budget night, will formally announce a new super ombudsman to replace the three existing bodies which handle complaints in the insurance, superannuation and banking sectors.
Ten Network Holdings Limited (TEN):
Media companies found favour yesterday as investors were buoyed by the prospect of the Turnbull government abolishing broadcasting licence fees and relaxing media ownership rules in the budget. Ten Network Holdings closed up 20.5 per cent at 26.5¢ while Southern Cross, Nine Entertainment and APN & News Media all performed strongly. The benchmark S&P/ASX 200 Index closed up 0.5 per cent to 5870.9 points. A cacophony of news in the media sector saw key stocks burst out of the blocks on Monday, with Ten Network Holdings soaring as much as 48 per cent and Southern Cross Group and Nine Entertainment jumping more than 5 per cent apiece. Investors are buoyed by the possibility the government will abolish broadcasting licence fees and relax media ownership rules in Tuesday’s budget. Ten Network closed up 20.5 per cent at 26.5¢ after touching 28.5¢, Southern Cross closed up 2.3 per cent at $1.39 and Nine Entertainment enjoyed a 5.4 per cent lift to close at $1.38. Shares in APN & News Media rose 5 per cent to $2.48. Channel Ten, whose market valuation dipped below $100 million after its disastrous result last month, is seen as most likely to benefit from relaxed media ownership rules, which if passed could pave the way for a takeover of the embattled third-placed network.
Telstra Corporation Ltd (TLS):
Telstra could fast forward the results of its capital management review, now that the spectre of regulated domestic roaming on its networks has been removed by the competition regulator, according to analysts. The Australian Competition & Consumer Commission last week decided against allowing Telstra’s rivals to roam on its regional network, clearing the way for Telstra to keep leveraging network reach and coverage as a key competitive advantage. A mandated wholesale roaming regime would have been a significant negative for Telstra as it would have hurt the premium Telstra charged its customers to underpin its mobile margins. Ord Minnett analysts said the roaming decision was a “key piece of news” that Telstra management was waiting for in consideration of its capital management review. “We believe the results of the capital management review could be announced as early as Telstra’s FY17 results in August,” the analysts say in a client note. Ord Minnett also expects Telstra to sustain its dividend payments and initiate a large buyback program over the next few years as the bulk of the non-recurring NBN payments flow into its coffers. However, Telstra’s margins are going to get squeezed one way or another, according to Citi analyst David Kaynes, especially with TPG entering the ring. “We expect Telstra’s mobile margins to compress from 41 per cent today down to 36 per cent over the next five years.”
(Source: AIMS)
BHP Billiton should divest its best US shale assets if offered $US9 billion ($12.2 billion) for them, according to Deutsche Bank analyst Paul Young. BHP Billiton should divest its best US shale assets if offered $US9 billion ($12.2 billion) for them, according to Deutsche Bank analyst Paul Young. However, the highly respected resources sector watcher says the company may get a better price if it waits a few years. Mr Young said the US shale assets were small by industry standards and non-core for BHP, largely because they will struggle to generate free cash flow in most probable oil price scenarios. ‘‘The key challenge for the US onshore portfolio in our view remains the lack of near-term free cash flow even under an upside-case scenario,’’ he said in a note to clients. ‘‘Divesting these assets could reduce debt and provide additional capital to invest in higher returning conventional oil and mining.’’ Mr Young values BHP’s US shale assets at $US6.3 billion and its conventional oil assets at $US16.2 billion, but he noted that recent acquisitions in the US shale sector were implying an oil price of about $US70 per barrel rather than current prices around $US50. BHP has argued its diversified portfolio makes it unusually advantaged, and collapsing the dual-listed structure would cost about $US1.3 billion in fees. The company has argued it is not the right time to be divesting petroleum assets, and has flagged plans to sell two of its smaller, non-core assets in the US shale portfolio. BHP chief executive Andrew Mackenzie will speak to investors in Barcelona next week. The stock rose 1.4 per cent to $22.94.
Australia and New Zealand Banking Group (ANZ); Commonwealth Bank of Australia (CBA):
The federal government’s decision to conduct a comprehensive Productivity Commission inquiry into the state of competition in the banking sector has failed to quell demands by Labor and the minor parties for a royal commission or something similar. A day after Treasurer Scott Morrison told The Australian Financial Review the inquiry would be announced on budget night, alongside some immediate measures to boost competition in the financial services sector, Labor, the Greens and the Nick Xenophon Team were unmoved. ‘‘There is nothing this government won’t do to avoid establishing a royal commission into the financial services sector,’’ said shadow treasurer Chris Bowen. ‘‘This is another case of too little, too late.’’ Senator Xenophon cited the thousands of people left bereft by collapsed managed investment schemes, something the commission would not be looking at and something which needed a compensation scheme of last resort. The banking sector was alive with speculation on Monday that there would be a levy in the budget to fund such a scheme. Mr Morrison said the new measures to be announced on Tuesday night, along with the Productivity Commission review, added to a long list of measures the government has implemented against the banks over the past 12 months and further negated the need for a royal commission. ‘‘It’s important that we deal with these things now. The alternative proposals are to have inquiries which take years and years and years,’’ the Treasurer said. Mr Bowen said, ‘‘It’s actually embarrassing how many so-called ‘packages’ and new inquiries the government has announced into bank activities.’’ The government has boosted the resources and powers of the regulators, compelled bank executives to appear at least once a year before a parliamentary committee and on budget night, will formally announce a new super ombudsman to replace the three existing bodies which handle complaints in the insurance, superannuation and banking sectors.
Ten Network Holdings Limited (TEN):
Media companies found favour yesterday as investors were buoyed by the prospect of the Turnbull government abolishing broadcasting licence fees and relaxing media ownership rules in the budget. Ten Network Holdings closed up 20.5 per cent at 26.5¢ while Southern Cross, Nine Entertainment and APN & News Media all performed strongly. The benchmark S&P/ASX 200 Index closed up 0.5 per cent to 5870.9 points. A cacophony of news in the media sector saw key stocks burst out of the blocks on Monday, with Ten Network Holdings soaring as much as 48 per cent and Southern Cross Group and Nine Entertainment jumping more than 5 per cent apiece. Investors are buoyed by the possibility the government will abolish broadcasting licence fees and relax media ownership rules in Tuesday’s budget. Ten Network closed up 20.5 per cent at 26.5¢ after touching 28.5¢, Southern Cross closed up 2.3 per cent at $1.39 and Nine Entertainment enjoyed a 5.4 per cent lift to close at $1.38. Shares in APN & News Media rose 5 per cent to $2.48. Channel Ten, whose market valuation dipped below $100 million after its disastrous result last month, is seen as most likely to benefit from relaxed media ownership rules, which if passed could pave the way for a takeover of the embattled third-placed network.
Telstra Corporation Ltd (TLS):
Telstra could fast forward the results of its capital management review, now that the spectre of regulated domestic roaming on its networks has been removed by the competition regulator, according to analysts. The Australian Competition & Consumer Commission last week decided against allowing Telstra’s rivals to roam on its regional network, clearing the way for Telstra to keep leveraging network reach and coverage as a key competitive advantage. A mandated wholesale roaming regime would have been a significant negative for Telstra as it would have hurt the premium Telstra charged its customers to underpin its mobile margins. Ord Minnett analysts said the roaming decision was a “key piece of news” that Telstra management was waiting for in consideration of its capital management review. “We believe the results of the capital management review could be announced as early as Telstra’s FY17 results in August,” the analysts say in a client note. Ord Minnett also expects Telstra to sustain its dividend payments and initiate a large buyback program over the next few years as the bulk of the non-recurring NBN payments flow into its coffers. However, Telstra’s margins are going to get squeezed one way or another, according to Citi analyst David Kaynes, especially with TPG entering the ring. “We expect Telstra’s mobile margins to compress from 41 per cent today down to 36 per cent over the next five years.”
(Source: AIMS)
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