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​AUSTRALIA MARKETS(2017-08-25)

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2017-08-25 13:41

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APN Property Group Limited (APD): 
Fund manager APN Property Group has booked a 2017 statutory net profit of $10.7 million, compared with $49.7 million in the previous year which was boosted by its now discontinued healthcare business. Final dividend increased 0.25¢ to 0.75¢, ahead of guidance and taking full-year dividends to 2¢ in total. For 2018, operating earnings after tax guidance of 2.35-2.65¢ is forecast. Dividend guidance is 2¢. 

Ardent Leisure Group (AAD); Ariadne Australia Limited (ARA): 
Proxy firm CGI Glass Lewis has advised Ardent Leisure’s institutional shareholders to vote against proposals to elect Ariadne nominees Gary Weiss and Brad Richmond to the board at a shareholder meeting next month, saying both lacked relevant Gary Weiss experience or perspective. Other proxy firms ISS and Ownership Matters also opposed Dr Weiss’ candidacy. 

Arena REIT No 1 (ARF): 
Childcare centre owner Arena REIT expects to deliver 6.7 per growth in its distributions this year as it cranks up its development pipeline to deliver further growth. Arena’s operating profit rose 12 per cent to $28.7 million over the 2017 year. Statutory profit was $96.8 million, up 33 per cent, boosted by property revaluations. That return was driven off a net asset base of $357.5 million at the start of the 2017 year. The property trust expects to complete 17 developments in the 2018 year, the most it has ever done. 

Astro Japan Property Group (AJA): 
The Astro Japan Property Trust reported a 10 per cent rise in underlying full-year profit to June 30 of $34.6 million in what is likely to be its last annual results announcement before a $440 million takeover of the trust and its $1.1 billion Japanese property portfolio by private equity giant Blackstone. Unitholders received a full-year payout of 42¢, up 17 per cent. Unitholders are expected to receive $7.18 a share from the sale and a 14¢-per-unit distribution post-wind-up of the trust. 

BHP Billiton Limited (BHP): 
Investors voiced their displeasure over Grant King’s appointment. Elliott confident new chairman Mackenzie will unlock true value of BHP. Activist US hedge fund Elliott Associates will not nominate directors for the BHP Billiton board at this year’s annual general meeting, giving chairman-elect Ken MacKenzie clear air for further board renewal after Grant King’s decision not to stand for election. Elliott had until Wednesday night to nominate directors for election at BHP’s AGMs, which are held in London and Australia. However, the US fund now has a stake of 5 per cent in BHP’s British stock, giving it the power to call a meeting of shareholders at any time. An Elliott spokesman declined to comment on the departure of Mr King, the former Origin boss and current Business Council of Australia president. The hedge fund, which joined BHP’s register in April, had been pushing for Mr MacKenzie to renew the board. Mr King is not the only departure from the BHP board. Malcolm Brinded, who joined the board in April 2014, will depart due to his involvement in ongoing legal proceedings in Italy, relating to time at oil giant Shell. 

Carindale Property Trust (CDP): 
Carindale Property Trust, which owns a half stake in Westfield Carindale in Brisbane, booked a 2.5 percent increase initsfundsfromoperationsfor2017to $28.1million.Profitwas$44.3 million, after booking are valuation gain. Distributions for full year were 40.20¢ per unit. ‘‘We are now planning for the next phase of Carindale’s evolution, which will improve the retail mix incorporating new retailers, casual dining and experiences,’’ the trust said. It has forecast an increase in funds from operations and distributions for the 2018 year of around 1 percent.

Cromwell Group (CMW); Investa Office Fund (IOF): 
Sydney’s strong rental growth and mushrooming property values have propelled Investa Office Fund’s full year net profit to $471.6 million. Cromwell Property Group has received eligibility status from the Singapore Exchange Securities Trading for its proposed initial public offering of the $1.4 billion Cromwell European Real Estate Investment Trust (CEREIT). CEREIT is a Singapore real estate investment trust (REIT) established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of income producing real estate assets in Europe. The SGX-ST issued its Eligibility-To-List and the manager of the new REIT received a Capital Markets Services Licence from the Monetary Authority of Singapore. Cromwell, which has been looking to take over the ASXlisted Investa Office Fund said the IPO reflected the group’s strategy of ‘‘diversifying capital sources and achieving recurring revenues from its funds management business’’. The $2.9 billion fund, which is still a potential takeover target for suitor and major shareholder Cromwell Property Group, enjoyed an increase in like-for-like net property income of 4.7 per cent compared with 3.1 per cent in the previous year. Its average incentives to lure tenants also decreased to 18 per cent, down from 30 per cent in the previous corresponding period.

Estia Health Ltd (EHE): 
Estia Health has reported a 47 per cent increase in net profit to $40.7 million and met earnings guidance of $86.5 million. Estia will pay a fully franked dividend of 8 cents per share for the 2017 financial year, representing a payout ratio of 100 per cent of net profit after tax. 

Flight Centre Travel Group Ltd (FLT): 
Flight Centre has forecast an end to the era of deeply discounted international airfares this year and announced a program to cut costs, exit loss-making businesses and reduce consultant numbers in Australia after posting a 5.6 per cent fall in annual earnings that beat market expectations. Graham Turner’s global travel group said it expected earnings to increase in the current year as it rolls out the program, which is aimed at boosting revenues after an airfare war on international routes and political uncertainty hit profits last year. Flight Centre shares jumped 10.7 per cent to a three-year high of $49.10, making it one of the top performers in a mostly disappointing corporate earnings season. Flight Centre also announced a transformation program designed to accelerate revenue growth and cut costs.

Folkestone Limited (FLK): 
Investors in Folkestone will get a special dividend after their Sydney based fund manager booked a one-off fee gain as it sold down a rezoned residential development estate outside Melbourne into a syndicate. The Wollert performance fee helped to boost statutory net profit for 2017 to $13.4 million, up 146.1 per cent on the previous year. For the 2018 year, Folkestone expects to pay a dividend of 3¢ per share, an increase of 9.1 per cent on the 2017 ordinary distribution. 

Insurance Australia Group Ltd (IAG): 
Insurance Australia Group should act immediately and sell off it’s consistently ‘‘disappointing’’ Asian businesses according to Morningstar, which warns the operations across five regions are unlikely to provide any real returns in the short term. Despite an $807 million investment, profit for the Asian business in the 2017 financial year fell to just $10 million from $26 million a year ago. ‘‘In our view, IAG should sell the Asian businesses and use the proceeds to concentrate on more profitable markets in Australia and New Zealand. The sooner the firm bites the bullet and moves on from Asia, the better,’’ Morningstar analyst David Ellis said. IAG chief executive Peter Harmer told the market Asia’s consolidated gross written premium for 2017 dropped by 5.2 per cent. On a country basis Thailand, Malaysia, Vietnam and Indonesia all reported drops in GWP, with India being the only country to improve, hitting $553 million, up from $447 million in 2016. The Asia arm makes up 3 per cent of the group’s $11.8 billion total GWP. 

Myob Group Ltd (MYO): 
Accounting Software Company MYOB has announced a $102 million share buyback, but says it will continue looking for acquisition targets over the next 12 months and has no intention to reduce research and development spend. Accounting Software Company MYOB has announced a $102 million share buyback, but says it will continue looking for acquisition targets over the next 12 months and has no intention to reduce research and development spend. The announcement came as the group’s 2017 half-year results showed revenue jumped 14.4 per cent to $204 million and net profit rose 13 per cent to $28.3 million. MYOB chief executive Tim Reed said the buyback was reflective of the company’s strong financial position.

Mortgage Choice Limited (MOC): 
Major banks lost more share of Australia’s $33 billion-a-month home loan market and non-bank lenders expanded as tighter credit rules took hold in the year to June, Mortgage Choice said. Market share of the ‘‘four pillar’’ banks fell to 47 per cent – the lowest in a decline that started in 2010 – from 51 per cent in 2016, and non-bank lenders increased their slice of the market to 8 per cent from 6 per cent a year earlier, the listed broker said as it reported results on Thursday. Particularly in the March and June quarters, owner-occupier and fixed rate loan products continued to play to smaller banks and non-bank lenders who were able to move quickly to take up ground the traditionally dominant banks gave up, Mortgage Choice chief executive John Flavell said.

NIB Holdings Limited (NHF): 
ASX-listed health insurer Nib Holdings and TAL, one of the nation’s largest life insurers, may team up to look for ways to engage disenfranchised consumers amid falling policy take-up and negative sentiment about the value of insurance of all types. The chief executive of Nib, Mark Fitzgibbon, said the two insurers were in talks about expanding their distribution agreement. Nib has had an agreement to sell TAL’s income protection, life and funeral insurance products since 2008. ‘‘You wouldn’t be shocked if you discovered we were talking to TAL about a larger, integrated consumer offering,’’ he said. Nib said it was not yet looking at white labelling health insurance into TAL, ‘‘but wouldn’t rule out looking at it into the future’’. Such an arrangement would build on Nib’s other distribution agreements with Suncorp and Qantas, which along with other deals make up 22 per cent of the health insurer’s sales.

Nine Entertainment Co Holdings Ltd (NEC): 
Nine Entertainment chief executive Hugh Marks wants to wrap up the next cricket broadcast rights deal by the end of October and is looking to build its rights by making a run at the Twenty20 Big Bash League. Mr Marks confirmed he was in talks with Cricket Australia, which has not begun the formal tender process, and wanted to lock down the rights before the company entered negotiations with media agencies to book advertising for next year. Mr Marks said Nine expected less competition for the international rights, which the free-to-air broadcaster holds, and more around the Big Bash, held by Network Ten, which is in receivership. 

Orica Ltd (ORI): 
Australian gas producers ‘‘hide behind sophisms’’ to defend an outdated contract-based market for liquid natural gas because they can rely on the security blanket of domestic market shortage to buttress their earnings through the long dark days of oil price recession. ‘‘They hide behind sophisms,’’ Orica chief executive Alberto Calderon said on Thursday after delivering a withering appraisal of the antediluvian state of Australian gas marketing. ‘‘That is why I have tried to get the story back to the other traded commodities Australia exports, there is just no other commodity that works like that’’. 

OZ Minerals limited (OZL): 
OZ Minerals chief executive Andrew Cole says the green light for the $916 million development of its Carrapateena copper and gold mine in South Australia won’t restrain the company from pursuing acquisitions overseas and in Australia. Mr Cole said the long-term fundamentals for copper were strong because of its importance as a vital component in the digital age in electronics, appliances and electric cars, and high-quality copper projects were hard to find. ‘‘The barrier to entry on copper is very high,’’ Mr Cole told The Australian Financial Review. ‘‘We’re confident in the long-term fundamentals of copper, both from a supply and demand view.’’ OZ announced on Thursday a final go-ahead for the Carrapateena project, about 600 kilometres north of Adelaide. It will be the first greenfields mine to be built in Australia for about five years. It expects to reach payback by 2024 after it lifted ore reserve estimates by 13 per cent. The company delivered a feasibility study update which outlined the first cash flow from the project would be generated in the fourth quarter of 2019, after a phased work program begins next month. It is Australia’s largest undeveloped copper project. About 1000 new jobs will be created during the construction phase, and up to 500 when the mine is operating. 

Peet Limited (PPC): 
Western Australia-based residential developer and fund manager Peet has posted a 5 per cent increase in net profit after tax to $44.8 million for the year to June. The company, which has housing communities nationwide, also achieved a 10 per cent increase in property sales, to $311 million driven mainly by its east coast housing projects. The group declared a final dividend of 3¢ a share. It achieved a gross margin of 29 per cent across its portfolio, less than 2016’s 32 per cent. 

Perpetual Limited (PPT): 
Intensified competition in the global equities space has not discouraged Perpetual from its target of becoming as big in international shares as it is in Australian shares in 10 years. The fund manager increased net profit by 4 per cent to $137.3 million in 2016-17 and the stock rose more than 5 per cent on Thursday to $52.74. More than 5 per cent of the stock is in the hands of short sellers, according to ASIC’s data. Chief executive Geoff Lloyd, who took home $3.6 million, or $3.1 million on a statutory basis, said Perpetual delivered ‘‘a solid result in challenging conditions, particularly for an active value manager’’ when markets favoured growth-oriented styles. Hinting at capacity issues in Australian equities, Mr Lloyd appeared to emphasise that Perpetual’s growth would come from international funds. ‘‘I think Perpetual, as I’ve said before, over the next decade can be as big in global as it is in Aussie’’.

Platinum Asset Management Limited (PTM): 
Platinum Asset Management has outlined the four reasons why short sellers swooped on the stock and argues they are either redundant, overstated or industry issues not specific to Platinum. Managing director and founder Kerr Neilson went even further, saying that performance was the main attribute that generated funds under management, and he had no interest in ‘‘imagepromoting jamborees’’. In its annual results released after the market closed on Thursday, Platinum summarised the short thesis against it as being based on a combination of investment underperformance, momentum for passive funds, fee pressure on active managers, and an arguably ineffective product distribution strategy. Its key funds have turned around ‘‘significantly’’ over 2016-17. The Platinum International Fund, its flagship portfolio, beat the index by 6 per cent last year after lagging it by 5.7 per cent in 2015-16. The Platinum Unhedged Fund returned almost 32 per cent after fees, beating its index by 16.4 per cent. ‘‘These investment returns, if sustained, may pave the way for increased profits and dividends but only after a period of time has elapsed as investors tend to take time to recognise and reward performance with increased funds,’’ chairman Michael Cole said in his commentary.

Primary Opinion Ltd (POP): 
The Maggie Beer Products gourmet food business has sunk into the red by up to $600,000 and the ASX company, which bought 48 per cent of it, is facing a big write-down of up to $10 million as the value of its investment sinks. The Maggie Beer Products business was built up over decades by Maggie Beer, who has a national profile through a string of cookbooks, television shows and as a frequent guest judge of the Ten Network’s MasterChef series. Primary Opinion, the ASX company that paid $15 million for its stake last year, revealed on Thursday it was reviewing the carrying value of the business after scrutinising draft financial reports. They showed that it was estimated Maggie Beer Products would suffer a net loss before tax of $500,000 to $600,000 for 2016-17, and that an impairment of goodwill was being considered by Maggie Beer Products, which would add a further $1.8 million to $2 million to the losses. 

Qantas Airways Limited (QAN): 
Qantas chief Alan Joyce will announce plans on Friday to launch non-stop flights between Sydney and London. The only problem is a fully loaded aircraft capable of flying that distance does not exist. Aviation experts say this should not be a problem. The world’s two biggest planemakers, Boeing and Airbus, have already developed aircraft that can get close and Joyce’s vision will be possible by his aspirational 2022 launch date. Instead of waiting for the right aircraft to come onto the market, Qantas has laid down the gauntlet to Boeing and Airbus and challenged them to develop the aircraft it needs. Airbus’s A350-900ULR aircraft, which can already fly 9700 nautical miles (17,960km) and the Boeing 777-8 are in the airline’s sights. Joyce has been talking about the possibility of direct links between Australia’s east coast and the finance and culture hubs of London and New York for some time. 

Santos Ltd (STO): 
Santos chief executive Kevin Gallagher has pledged the weakened oil and gas producer will not repeat the mistakes of the past after making significant progress to cut costs and restore its balance sheet. Speaking after underlying first-half profit rebounded into the black, Mr Gallagher said ‘‘a good, strong foundation’’ had been laid for a turnaround at Santos, which was hit hard by the collapse in oil prices in 2014-15. Santos chief executive Kevin Gallagher has pledged the weakened oil and gas producer will not repeat the mistakes of the past after making significant progress to cut costs and restore its balance sheet. Speaking after underlying first-half profit rebounded into the black, Mr Gallagher said ‘‘a good, strong foundation’’ had been laid for a turnaround at Santos, which was hit hard by the collapse in oil prices in 2014- 15. But he promised not to fall into the trap of complacency, thinking the hard work has been done, reports AFR. 

Southern Cross Media Group Ltd (SXL): 
Southern Cross Austereo chief executive Grant Blackley says two years of shoring up the radio and regional television broadcaster’s balance sheet and selling non-core assets is paying off for shareholders. On Thursday, Southern Cross posted a 40.5 per cent lift in profit to $108.6 million. Underlying profit was up 21.5 per cent to $93.8 million. In the year, Southern Cross sold its northern NSW TV business to WIN Corporation for $55 million – $45 million upfront and $10 million in the 2017-18 year, and received broadcast licence fee relief from the government. Southern Cross also continued its push to reduce debt under chief executive Grant Blackley. The company reduced debt by 18 per cent to $321 million, which helped reduce financing costs by 24 per cent. ‘‘We’ve got much better gearing than we’ve had in the past, we’ve got top line growth, we have transitioned very successfully to the Nine network for our new affiliation,’’ Mr Blackley told The Australian Financial Review. Southern Cross also announced it is expanding into the out-of-home market via a partnership with shopping centre owner QIC to provide content across digital screens in shopping malls. Southern Cross’ partnership with QIC will see it provide the audio visual content for digital screens across a range of shopping centres in Canberra, Toowoomba, Robina, Logan and Melton. The responsibility for capital expenditure remains with QIC.

South32 Ltd (S32): 
South32 is expected to continue shovelling more cash to shareholders after the diversified miner lifted its final dividend for 2017 and added more funds to its share buy-back program. The miner’s free cashflow more than tripled to $US1.9 billion in the 2017 financial year thanks to higher commodity prices and lower costs, helping increase its net cash position to $US1.6 billion at the end of June, up from $US312 million a year earlier. Given South32’s limited near-term internal development projects and a cautious approach to inorganic growth, analysts are tipping shareholders could continue to collect strong returns from the Perth-based company if commodity prices remain strong. South32 chief executive Graham Kerr the company had already demonstrated shareholders would ‘‘reap the benefits’’ of its commitment to return excess cash. 

Spotless group Holdings Ltd (SPO): 
Shareholders in Spotless Group who are refusing to accept the $1.15 per share cash takeover offer from predator Downer EDI won’t be paid any final dividend, as the Downercontrolled Spotless board puts the squeeze on the outliers. Spotless on Thursday announced it had tumbled to a bottomline loss of $348 million for 2016-17, after big oneoff costs of $464 million from restructuring, asset writedowns and impairments, along with the extra costs of defending the $1.2 billion takeover, triggered a dive into the red. Revenues were 5.3 per cent lower at $3.01 billion. Spotless also revealed that its chairman, Garry Hounsell, would be stepping down on August 31, strengthening the Downer hold on the board. Downer on Thursday put extra pressure on those who hadn’t accepted by announcing it would close its takeover offer on August 28, and it wouldn’t be extended. It has previously extended its offer nine times. The troubled laundries business operated by Spotless, which the company looked at selling last year, suffered a 12.3 per cent slide in profits in 2016-17 which the company blamed on lower yields and margin pressure. Underlying earnings before interest, tax, depreciation and amortisation from the laundries business slipped to $62.6 million from $71.4 million. Spotless, which had four Downer representatives on its board compared with just two Spotless representatives prior to Mr Hounsell’s departure next week, won’t pay a final dividend. Professor John Humphrey will become the new Spotless chairman. 

Surfstitch Group Limited (SRF): 
SurfStitch appoints administrators while it considers recapitalisation. Chairman says appointments due to two shareholder class actions. Embattled surf and skate wear retailer SurfStitch Group has bought itself breathing space from legal foes and creditors by appointing administrators while it considers a recapitalisation or restructure. SurfStitch directors appointed John Park, Quentin Olde and Joseph Hansell of FTI Consulting as administrators on Thursday, just days before the beleaguered online retailer was due to release its full-year results. SurfStitch chairman Sam Weiss said the appointments were necessary due to two shareholder class actions brought by Quinn Emmanuel and Gadens, protracted litigation with major shareholder, Crown Financial Group, and an ASIC investigation, all of which have significantly increased costs and hurt the company’s ability to trade. ‘‘The administrators have been appointed with the intention of preserving value for stakeholders in the business whilst recapitalisation options are pursued,’’ said Mr Weiss. 

Telstra Corporation Ltd (TLS): 
Telstra has taken a high-profile step in its bid to establish itself as a significant player in the booming global cyber security market, with the official opening of the first of a string of new security operations centres, aimed at increasing the work it wins with government and corporate clients. The multimilliondollar Sydney centre was unveiled by chief executive Andy Penn alongside federal cyber security minister Dan Tehan on Thursday afternoon, as the company continues its mission to prove to investors it has a solid post-NBN plan. Telstra shares were hit hard after its annual results, led largely by Mr Penn announcing the company’s much loved dividend would be slashed 30 per cent. Investors are now looking to the CEO to demonstrate the company is on the front foot in establishing business lines in growing sectors. 

Wesfarmers Ltd (WES); Woolworths Limited (WOW): 
Woolworths’ 11-month share price rally appears to be running out of steam as investors question the pace of the retailer’s turnaround in Australian supermarkets and digest the dire outlook for Big W. Woolworths shares fell 3.4 per cent or 92¢ to $26.02 yesterday, their lowest for four weeks, even though several analysts upgraded 2018 and 2019 profit forecasts to take into account the rebound in food earnings in the June half 2017. Woolworths shares had risen 21 per cent since September, when the stock slumped as low as $22.32 in the wake of the retailer’s $1.2 billion 2016 bottom line loss. Until Thursday, Woolworths was trading at a multiple of 22 times forecast 2018 earnings, a hefty premium to Wesfarmers, which was trading on a multiple of 16 times forward earnings, even though the outlook for profit growth over the next three years is similar for both companies. ‘‘With Woolworths trading on a 2018 PER of 22 times versus Wesfarmers on 18 times ... we feel the market may be overestimating the likelihood of a sustained turnaround,’’ Goldman Sachs analyst Adam Alexander said in a report. Goldman Sachs increased its 2018 earnings per share forecast by 4.8 per cent and its 2019 forecast by 4.2 per cent to take into account stronger than expected earnings growth in Australian food in the June half.
(Source: AIMS)
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