Commonwealth Bank of Australia (CBA):
The chief executive of Australia’s largest bank has warned that sovereign risk is rising ‘‘exponentially’’ because of unpredictable government policy, as he lashed the South Australian government’s bank levy as an ‘‘unprincipled and reckless tax grab’’. Commonwealth Bank of Australia’s Ian Narev said global investors were now pointing to ‘‘significantly elevated levels of sovereign risk’’ when asked about investing in Australia. ‘‘It is in this context that we should view the South Australian government’s unprincipled and reckless tax grab as it walked through the gate the federal government left open,’’ he said. The chief executive of Australia’s largest bank has warned that sovereign risk is rising ‘‘exponentially’’ because of unpredictable government policy, as he lashed the South Australian government’s bank levy as an ‘‘unprincipled and reckless tax grab’. But South Australian Treasurer Tom Koutsantonis remained defiant on Sunday afternoon, saying there would be no backdown and the state government had obtained outside legal advice from experts as well as its own Crown Law solicitors on its proposed state-based bank levy on the big four banks plus Macquarie.
Lendlease Group (LLC):
The Construction, Forestry, Mining and Energy Union is taking Lendlease to court over its building codecompliant enterprise agreement, threatening the builder’s ability to win billion-dollar projects from the NSW infrastructure boom. The union has alleged Lendlease’s engineering arm in NSW knowingly or recklessly made ‘‘false or misleading misrepresentations’’ about workplace rights to its unionised workforce during a ballot for the agreement, giving the impression that unions backed the deal. Lendlease Engineering’s successful ballot in April and the Fair Work Commission’s approval of the agreement in June represented one of the first cracks in the CFMEU’s strident opposition to the building code and has emboldened other construction employers.
Link Group (LNK):
JPMorgan and Citi are expected to launch an equity raising for Link Group on Monday morning to help fund its $1.5 billion acquisition in the United Kingdom. It is understood Link’s board met on Sunday to finalise the details, however, fund managers expect the offer to be worth up to $1 billion. It will be the second-biggest equity capital markets transaction this year, behind Downer’s $1.15 a share takeover bid for Spotless and associated $1.01 billion equity raising. The deal comes after Link, a superannuation outsourcing and corporate markets business, agreed to buy London-listed Capita’s asset management services unit for £888 million on Friday. Fund managers noted Capita Asset Services is in line with the scale strategy outlined by Link when it came to market two years ago and is also in its strategic sweet spot. It is expected to provide a platform for growth in the United Kingdom and Europe across fund solutions, registry services as well as services to banks and institutional investors.
Macquarie Group Limited (MQG):
Market furore over incoming bank taxes has temporarily overshadowed debate on Macquarie Group’s broader earnings momentum. The fierce debate has already spurred those at the top of Macquarie into action – alongside the major four banks – as they now seek to galvanise support to challenge South Australia’s proposed $370 million levy. That is in addition to a federal bank tax on liabilities forecast to raise $6.2 billion nationally over four years. While some research analysts see the new bank taxes as yet another challenge for the sector, Cadence Asset Management’s Karl Siegling shrugs off any concerns around the levies on Macquarie’s bottom line. ‘‘The bank levies affect a small percentage of Macquarie’s earnings,’’he said.‘‘It affects a very large percentage of the major four banks earnings.In market share terms in Australia, Macquarie is not a major bank.’’ Macquarie’s chief executive Nicholas Moore has said the federal levy will impact profits by $50 million to $60 million and revisited the idea – or what some investors saw as a thinly veiled threat – to redomicile the local financial services group to Singapore.
Origin Energy Limited (ORG):
Investors maintain it is impossible to assess the value of Origin Energy’s planned $1 billion-plus IPO of its conventional oil and gas business and are questioning the utility’s internal conflict over the pricing of long-term gas contracts. The gas sales deals due to be signed between Origin and its oil and gas arm Lattice Energy will be fundamental to the valuation of the spin-off, but they have yet to be finalised. Some investors say they don’t really expect the IPO to eventuate, and a trade sale will preempt a float. ‘‘Realistically, Origin could make the value of Lattice almost whatever they want based on where they strike that GSA [gas sales agreement], so there is clearly an internal priority they need to determine, whether they want to maximise the sale price or maximise the profits that Origin will accrue from buying the gas,’’ said Julian Babarczy, head of Australian equities at Regal Funds Management. Agreeing a higher price for the gas sales contracts would support a higher valuation and sale price for Lattice, and so make a bigger contribution to Origin’s efforts to slash its near-$9 billion debt pile. But it would leave Origin paying a higher price for its gas.
Tabcorp Holdings Limited (TAB); TattsGroup Limited (TTS):
Tabcorp chief executive David Attenborough is confident its British joint venture Sun Bets is a sustainable business despite heavy losses in its first year and recent management changes. While Tabcorp celebrated the approval of its merger with Tatts Group last week by the Australian Competition Tribunal, it revealed in a trading update that Sun Bets would lose a bigger than expected $46 million in 2017. Mr Attenborough said Tabcorp was still committed to Sun Bets and was confident it would perform better in the near future despite its rocky start and operating in an intensively competitive UK wagering market. ‘‘We’ve got a range of initiatives planned or under way that will give the business a boost, including the next English Premier League [soccer] season, racing and the 2018 soccer World Cup. It is core to Tabcorp.’’ Mr Attenborough said the business needed to capture only a small slice of the market to be profitable and has previously said it was ‘‘scalable and transferable’’ to different markets in conjunction with a joint venture partner.
The chief executive of Australia’s largest bank has warned that sovereign risk is rising ‘‘exponentially’’ because of unpredictable government policy, as he lashed the South Australian government’s bank levy as an ‘‘unprincipled and reckless tax grab’’. Commonwealth Bank of Australia’s Ian Narev said global investors were now pointing to ‘‘significantly elevated levels of sovereign risk’’ when asked about investing in Australia. ‘‘It is in this context that we should view the South Australian government’s unprincipled and reckless tax grab as it walked through the gate the federal government left open,’’ he said. The chief executive of Australia’s largest bank has warned that sovereign risk is rising ‘‘exponentially’’ because of unpredictable government policy, as he lashed the South Australian government’s bank levy as an ‘‘unprincipled and reckless tax grab’. But South Australian Treasurer Tom Koutsantonis remained defiant on Sunday afternoon, saying there would be no backdown and the state government had obtained outside legal advice from experts as well as its own Crown Law solicitors on its proposed state-based bank levy on the big four banks plus Macquarie.
Lendlease Group (LLC):
The Construction, Forestry, Mining and Energy Union is taking Lendlease to court over its building codecompliant enterprise agreement, threatening the builder’s ability to win billion-dollar projects from the NSW infrastructure boom. The union has alleged Lendlease’s engineering arm in NSW knowingly or recklessly made ‘‘false or misleading misrepresentations’’ about workplace rights to its unionised workforce during a ballot for the agreement, giving the impression that unions backed the deal. Lendlease Engineering’s successful ballot in April and the Fair Work Commission’s approval of the agreement in June represented one of the first cracks in the CFMEU’s strident opposition to the building code and has emboldened other construction employers.
Link Group (LNK):
JPMorgan and Citi are expected to launch an equity raising for Link Group on Monday morning to help fund its $1.5 billion acquisition in the United Kingdom. It is understood Link’s board met on Sunday to finalise the details, however, fund managers expect the offer to be worth up to $1 billion. It will be the second-biggest equity capital markets transaction this year, behind Downer’s $1.15 a share takeover bid for Spotless and associated $1.01 billion equity raising. The deal comes after Link, a superannuation outsourcing and corporate markets business, agreed to buy London-listed Capita’s asset management services unit for £888 million on Friday. Fund managers noted Capita Asset Services is in line with the scale strategy outlined by Link when it came to market two years ago and is also in its strategic sweet spot. It is expected to provide a platform for growth in the United Kingdom and Europe across fund solutions, registry services as well as services to banks and institutional investors.
Macquarie Group Limited (MQG):
Market furore over incoming bank taxes has temporarily overshadowed debate on Macquarie Group’s broader earnings momentum. The fierce debate has already spurred those at the top of Macquarie into action – alongside the major four banks – as they now seek to galvanise support to challenge South Australia’s proposed $370 million levy. That is in addition to a federal bank tax on liabilities forecast to raise $6.2 billion nationally over four years. While some research analysts see the new bank taxes as yet another challenge for the sector, Cadence Asset Management’s Karl Siegling shrugs off any concerns around the levies on Macquarie’s bottom line. ‘‘The bank levies affect a small percentage of Macquarie’s earnings,’’he said.‘‘It affects a very large percentage of the major four banks earnings.In market share terms in Australia, Macquarie is not a major bank.’’ Macquarie’s chief executive Nicholas Moore has said the federal levy will impact profits by $50 million to $60 million and revisited the idea – or what some investors saw as a thinly veiled threat – to redomicile the local financial services group to Singapore.
Origin Energy Limited (ORG):
Investors maintain it is impossible to assess the value of Origin Energy’s planned $1 billion-plus IPO of its conventional oil and gas business and are questioning the utility’s internal conflict over the pricing of long-term gas contracts. The gas sales deals due to be signed between Origin and its oil and gas arm Lattice Energy will be fundamental to the valuation of the spin-off, but they have yet to be finalised. Some investors say they don’t really expect the IPO to eventuate, and a trade sale will preempt a float. ‘‘Realistically, Origin could make the value of Lattice almost whatever they want based on where they strike that GSA [gas sales agreement], so there is clearly an internal priority they need to determine, whether they want to maximise the sale price or maximise the profits that Origin will accrue from buying the gas,’’ said Julian Babarczy, head of Australian equities at Regal Funds Management. Agreeing a higher price for the gas sales contracts would support a higher valuation and sale price for Lattice, and so make a bigger contribution to Origin’s efforts to slash its near-$9 billion debt pile. But it would leave Origin paying a higher price for its gas.
Tabcorp Holdings Limited (TAB); TattsGroup Limited (TTS):
Tabcorp chief executive David Attenborough is confident its British joint venture Sun Bets is a sustainable business despite heavy losses in its first year and recent management changes. While Tabcorp celebrated the approval of its merger with Tatts Group last week by the Australian Competition Tribunal, it revealed in a trading update that Sun Bets would lose a bigger than expected $46 million in 2017. Mr Attenborough said Tabcorp was still committed to Sun Bets and was confident it would perform better in the near future despite its rocky start and operating in an intensively competitive UK wagering market. ‘‘We’ve got a range of initiatives planned or under way that will give the business a boost, including the next English Premier League [soccer] season, racing and the 2018 soccer World Cup. It is core to Tabcorp.’’ Mr Attenborough said the business needed to capture only a small slice of the market to be profitable and has previously said it was ‘‘scalable and transferable’’ to different markets in conjunction with a joint venture partner.
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