AGL Energy Limited (AGL):
Energy company AGL, whose shares were ‘‘priced for perfection’’, disappointed investors this month. There’s a joke in the research world that analysts have predicted seven of the last three market corrections. Reporting season is often considered the kiss of death for many stocks as a significant amount of volatility can accompany a freshly published report, causing concern for investors. What amplifies the worry is, despite the fact that the result itself looks quite good, there are the dreaded cries that ‘‘it failed to meet expectations’’. Stocks that experienced this phenomenon in August include AGL Energy and Computershare. The one common denominator in all the above is that the expectations of the company were not met. Despite the analyst fraternity’s best efforts to predict the future, the reality is they can’t do it with great accuracy, especially when assigning a target price to a company.
APP Securities:
Stockbroking and advisory firm APP Securities is said to have formed a digital and robo advice partnership with Ignition Wealth. The partnership won’t replace APP’s advisers but provide additional mobile and digital investment access. It comes amid fierce debate about how widespread the take-up of robo advice will become. Macquarie Group’s move to make computer-generated financial advice directly available to the average Australian came to an end earlier this year when the platform’s founder John O’Connell passed away suddenly.
Atlas Iron Limited (AGO):
Atlas Iron is examining opportunities to pump more volume through its Utah Point port capacity as it forecasts lower iron-ore production and higher costs in 2018. After shipping 14.4 million tonnes in 2017, Atlas expects to ship between 9 million and 10 million tonnes this year. One example Atlas is already working on is increasing the rate of production at its Mt Webber mine from 7 million tonnes to 9 million tonnes a year and processing the extra tonnes at its recommissioned Mt Dove plant, for a capital cost of just $1 million. Increasing volumes through the port would help Atlas lower its costs during a year in which analysts largely expect the iron-ore price to soften from current levels of about $US77 a tonne. Atlas has guided for its ‘‘full cash costs’’ to increase to between $54 and $58 a tonne this year from $53 in 2017.
Blackmores Limited (BKL):
The new chief executive of Blackmores says there’s little prospect of a quick return of the flood of Chinese tourists and entrepreneurs, known as daigou, buying up vast amounts of vitamins in Australia, that 18 months ago sent the share price soaring beyond $220. Blackmores had notched a stellar $100 million bottom-line profit in 2015-16 and Mr Henfrey acknowledged it would be some time before that might be repeated. Blackmores pruned its final dividend back to $1.40 per share from $2.10 a year earlier. In response, Blackmores built a new Chinese export team and boosted its direct sales efforts; these rose 71 per cent during the year. Still, the changes to the Australian retail environment took a toll, with domestic sales flat across the year. The big dip in profit means that Mr Henfrey faces a much harder road as he takes over from long-serving boss Christine Holgate. Sales revenue slipped by 3 per cent to $692.8 million. Chinese tourists and exporters changed their buying patterns and the Australian market became much more competitive, with high levels of stock left in the market. Blackmores was forced to increase inventory provisions from $2 million to $14 million because of the excess stock.
Cabcharge Australia Limited (CAB):
Cabcharge is spending an extra $8 million on marketing and technology to try to make its 13CABS brand more hip and trendy for Millennials entranced by ride-sharing services such as Uber. The challenge is convincing passengers the taxi industry is lifting its game. Cabcharge has also been disadvantaged by regulatory hurdles such as high credit card surcharges and an expensive licensing system. Earnings before interest and tax for 2016-17 dropped 22.4 per cent to $34.7 million, while revenue slipped 10 per cent to $152 million. Cabcharge was using digital avenues to ensure its message reached the younger brigade. He said there was a presence on digital music service Spotify and a range of social media as part of the push. Cabcharge aims to emphasise the benefits of its 13CABS app, and that it does not have a surge pricing system like Uber. Uber has appointed a new global chief executive, Dara Khosrowshahi, who was CEO of Expedia. Cabcharge outlined on Tuesday that total taxi fares processed in 2016-17 reached $950 million, compared with $1.09 billion a year earlier. The comparable figure in 2013-14 was $1.03 billion.
Caltex Australia Limited (CTX):
Woolworths dumped Caltex in favour of BP which is paying about $1 billion to replace Caltex. But the deal has been held up by an investigation by the Australian Competition and Consumer Commission. Caltex has paved the way for a potential spin-off, unveiling a new ‘‘Quantum Leap’’ restructuring initiative that divides its activities between the traditional fuels and infrastructure business and the growing convenience retailing activities. It came as Caltex posted a 21 per cent increase in benchmark profit for the first half to $307 million and reassured investors that it was well on the way to replacing an expected $150 million hit to earnings from the looming loss of a large supply contract with Woolworths. Caltex is also replacing some of its more expensive debt, saving $15 million to $20 million. Caltex is looking at further opportunities to grow and is looking at some of the Woolworths service stations that may need to be sold for BP to get regulatory approval for the $1.8 billion transaction. Meanwhile, Caltex plans to roll out a further 10 of its new ‘‘The Foodary’’ outlets this half, after opening 10 so far since February.
Commonwealth Bank of Australia (CBA):
Commonwealth Bank of Australia must find a new chief executive quickly if it is to stem the declines in its share price that have already helped BHP surpass it as the nation’s most valuable stock, analysts say. The bank, which is facing an unprecedented Australian Prudential Regulation Authority inquiry into its culture and governance after a string of scandals has had its share price slide by 9.5 per cent since the start of August, eroding the long-standing premium valuation the bank has held over its peers. The analysts agreed with widely held sentiment that CBA would have to ‘‘move away from recent practice and choose a CEO from outside the bank’’ given the ‘‘seriousness of cultural issues’’. CBA fell a further 1.2 per cent on Monday to $75.73, taking the total decline in its market capitalisation in August to more than $13 billion. Its ASX market capitalisation is now $131.2 billion, below the $135.5 billion market capitalisation of BHP.
Cooper Energy Limited (COE):
Eastern Australia is to get its first new source of conventional gas for several years after junior producer Cooper Energy locked in a $400 million funding package for its Sole project off the south-east coast, including a $135 million underwritten equity raising. Managing director David Maxwell said the goahead ‘‘sets the company on a growth trajectory offering a five-fold increase in production in the years to 2020.’’ It also triggered a jump in Cooper’s petroleum reserves, which will more than quadruple to 54 million barrels of oil equivalent. Cooper shares were halted from trading on Monday and Tuesday for the institutional part of the raising, which is being managed by Canaccord and Euroz and was flagged by Street Talk in March. Cooper also announced a loss of $12.3 million for 2016-17, narrowing the deficit from the previous year’s $34.8 million. The underlying loss widened to $8.7 million from $2.8 million in 2015-16.
Countplus Limited (CUP):
The chief executive of CountPlus, Matthew Rowe, has warned shareholders there is a long road ahead as he attempts to rebuild the troubled listed accounting and financial planning firm. Shares in the firm have collapsed over the past four years, falling from a peak of $1.94 in March 2013, to reach an all-time low of 48¢ at the start of August. ‘‘The result is reflective of the task ahead to turn around Countplus,’’ Mr Rowe said.
Crown Resorts Limited (CWN), Tatts Group Limited (TTS):
Crown Resorts and CrownBet will launch an online lottery as soon as later this week, seeking to cut into the market share of the foreign-owned Lottoland and possibly eventually compete with Tatts Group’s existing digital lottery ticket sales. The lottery, to be called CrownLotto, will be run by corporate bookmaker CrownBet, which is 62 per cent owned by James Packer’s Crown Resorts. CrownLotto will be pitched as an alternative to the Gibraltarbased gaming operator Lottoland, which is said to be making at least $1 million revenue a week and will be run in a similar manner, with customers betting on the outcome of a lottery rather than buying a ticket in the lottery itself. But Tatts Group chief executive Robbie Cooke recently revealed about 14 per cent of its lottery ticket sales were now made via digital channels, and while those are for actual lottery draws there is a chance Lottoland and now CrownBet could be taking market share from Tatts. Yet the CrownBet spokesman said: ‘‘Lottery wagering attracts a different demographic and will grow overall interest in lotteries, rather than competing with traditional physical lotteries’.
Downer EDI Limited (QAN):
Spotless’s remaining shareholders are not expected to cause Downer EDI ‘‘any dramas’’ after the contractor ended its $1.2 billion takeover of the services group just shy of the critical 90 per cent level, chief executive Grant Fenn said. Downer controls 87.8 per cent of Spotless after its takeover offer closed on Monday night, with New York hedge fund Coltrane Asset Management – which owns 10.6 per cent – and about 1000 retail shareholders refusing to accept its bid of $1.15 per share in cash. Downer is reviewing Spotless’s capital structure and may potentially raise equity to reduce the company’s leverage ratio, which is running at 2.9 times earnings, but did not believe it was in a position to be paying dividends, Mr Fenn said. Spotless is carrying $782 million in net debt.
Lendlease Group (LLC):
Lendlease is investigating opportunities to create another infrastructure fund that it will manage with stakes in public-private partnership assets such as the $6 billion Melbourne Metro. Lendlease chief executive Steve McCann told The Australian Financial Review after the announcement of full year financial results, that Lendlease had form in infrastructure funds management and was actively looking for funds management opportunities in the this space. Lendlease’s renewed interest comes after listed funds management and investment group Charter Hall dropped a deal to takeover Hastings Funds Management and its $14.3 billion infrastructure portfolio. ‘‘While we are attracted to Lendlease’s business model and outlook, its forecast total shareholder return is no longer high enough to maintain a ‘buy’, hence we downgrade our recommendation to ‘hold’ purely due to pricing” said Shaw and Partners Peter Zuk on Monday.
Magellan Financial Group Ltd (MFG):
Over the past decade, Chris Mackay and Hamish Douglass have proved investment bankers can make great investors. But as Magellan Financial Group, the $4.8 billion company the pair cofounded, prepares to raise funds for a multibillion-dollar listed global investment trust, it has become clear how separately the co-founders now choose to work. Investors in Mr Mackay’s MFF Capital Investments, originally called the Magellan Flagship Fund, are not being offered the loyalty bonus available to investors in Magellan funds, despite it being the first fund the company raised back in 2006. The decision to exclude MFF from the bonus offer is seen by some in the share market as the most public step yet in the separation of roles in the once-close partnership between Mr Douglass and Mr Mackay, which began when Mr Mackay stepped down as MFG’s executive chairman in 2013.
Mantra Group Ltd (MTR) :
The Dreamworld theme park tragedy on the Gold Coast in October hurt the bottom line of Mantra Group, with Australia’s biggest listed hotel and resort operator delivering full-year operating earnings at the bottom end of its market guidance. Mantra reported underlying pre-tax earnings of $101.2 million, up 12.7 per cent on the same period last year, having forecast an earnings range of $101 million to $107 million in February. Underlying net profits after tax rose 14 per cent to $47.2 million, but came in below February guidance of $48.5 million to $52.5 million for the Surfers Paradise-based operator of the Mantra, Peppers and Breakfree brands.
Platinum Asset Management Limited (PTM):
Platinum’s results were an opportunity for the company to take aim at short-sellers who have targeted the stock for being vulnerable to fee compression stemming from the assault on active managers by passive strategies, as well as outflows linked to performance. Investment performance tends to pre-empt fund flows, which were $266 million since July 1, but Platinum shares have already rallied by almost 40 per cent. Morningstar forecasts indicate Platinum will see earnings shrink by 9 per cent in 2017-18 and return to growth in 2018-19. Asset managers run at a low capital intensity and investors can rely on high dividend payout ratios being maintained even though dividends can be volatile. The near term risk is if Platinum cannot sustain its outperformance, or if investment wins fail to translate to net inflows, short sellers will return.
Retail Food Group Limited (RFG):
Retail Food Group is facing its weakest profit growth in five years as intense competition in fast food and coffee retailing in Australia counters international growth. Managing director Andre Nell expects underlying net profit to rise about 6 per cent in 2018 as solid growth from global and commercial businesses augments ‘‘modest’’ gains from domestic brands such as Michel’s Patisserie, Brumby’s, Pizza Capers, Crust Pizza, Donut King and Gloria Jeans. The guidance implies an underlying net profit of $80 million, slightly below consensus of about $82 million, prompting analysts and investors to trim 2018 forecasts.
Rio Tinto Ltd (RIO):
Rio Tinto chief executive Jean-Sebastien Jacques says he has ‘‘high expectations’’ the company will develop another diamond mine in Australia as its Argyle operation in remote Western Australia nears the end of its life. The limited supply of diamonds – exacerbated by the challenge of discovering viable mines – makes the precious stones a ‘‘very attractive business’’ for the mining group, Mr Jacques said as Rio opened its annual pink diamonds ‘‘tender’’ in Perth. It is also a challenge Rio is not immune to, with two existing mines due to be depleted within a decade. Argyle is scheduled to close by 2021 and Rio’s Diavik operation in Canada’s Northwest Territories is expected to be depleted by 2024.
Scentre Group (SCG):
Along with other major listed retail property landlords, including Vicinity Centres and Westfield, Scentre has been buffeted by concerns over the impact that online shopping will have on traditional bricks and mortar retail, as well as a cyclical softness in the sector. At its interim result, Scentre said it was on track to deliver full-year earnings growth of 4.25 per cent. The reconfirmation of its full-year guidance came after booking interim funds from operations (FFO) – the sector’s preferred profit measure – of $638 million, representing 12.01¢ per security, up 3.5 per cent. Statutory profit for the group in 2017 first half was $1.4 billion, including $929 million of revaluation. Forecast distributions for the year are 21.73¢, up 2 per cent. At its interim result, Scentre committed to limiting its distribution growth to less than its growth in FFO. That move allows Scentre to retain more earnings to direct into its development pipeline to better protect its portfolio from challenges in the sector. Arguably, the big listed retail landlords have been oversold – driven mostly by global investors – and now represent good buying opportunities. UBS expects Scentre to outperform with its FFO growth and, given it is trading at a slight 3 per cent premium to its net tangible assets, retains a ‘‘buy’’ on the stock. The dividend yield is 5.4 per cent. UBS forecasts the yield to rise to 5.7 per cent by 2021.
Specialty Fashion Group Ltd (SFH):
Specialty Fashion Group is pushing ahead with plans to close loss-making stores, shift customers online and rejuvenate its mature brands after all but giving up on a $135 million takeover offer from Middle Eastern suitors. Specialty Fashion Group is pushing ahead with plans to close loss-making stores, shift customers online and rejuvenate its mature brands after all but giving up on a $135 million takeover offer from Middle Eastern suitors. Chief executive Gary Perlstein said on Tuesday there had been no active discussions with Al Alfia Holdings, an investment company controlled by the Qatari royal family, since February, when the clothing retailer warned that funding for the proposed 70¢ a share offer had been caught up in a probate issue following the death of Sheikh Khalifa bin Hamad al-Thani.
Sydney Airport Holdings Pty Ltd (SYD):
Analysts were pleased with Sydney Airport’s solid interim results and unexpected boost to dividend guidance. The company delivered a 4 per cent rise in interim net profit to $167 million, and forecast a 2017 dividend of 34.5¢ per share – 1¢ above its previous guidance of 33.5¢. The number of passengers travelling through the airport rose 3.6 per cent to 21 million in the first half of the year, with international passengers up almost 8 per cent. Group revenues rose 7.9 per cent to $714.2 million, mostly driven by stronger aeronautical revenues and a 14 per cent increase in retail sales, which benefited from new shops and restaurants in the international terminal. Earnings growth will be generated by more international flights – which have higher profit margins than domestic flights – and hotel and retail developments, but will moderate. The opening of the new Western Sydney Airport in 2026 will divert some flights away from Sydney Airport, but its closeness to the Sydney CBD means it will remain the preferred destination for premium carriers.
Telstra Corporation Ltd (TLS):
There was a sharp reminder in this Australian profit reporting season that long-held beliefs about investing should be tested. A favourite of yield investors, Telstra, took a cold shower, and high-growth stock Domino’s came to earth with a thud. On the other hand, the strong performance of Treasury Wine following a tough period in 2014 and disbelief in the new (temporary?) constrained management style in the resource sector, suggest that revisiting investments without preconceived notions has its upside. Investment ideas should pass a regular, unbiased test. In global equities there are many who view the US market as the centre of the universe. It represents over 50 per cent of the MSCI benchmark, so perhaps that is unsurprising.
(Source: AIMS)
Energy company AGL, whose shares were ‘‘priced for perfection’’, disappointed investors this month. There’s a joke in the research world that analysts have predicted seven of the last three market corrections. Reporting season is often considered the kiss of death for many stocks as a significant amount of volatility can accompany a freshly published report, causing concern for investors. What amplifies the worry is, despite the fact that the result itself looks quite good, there are the dreaded cries that ‘‘it failed to meet expectations’’. Stocks that experienced this phenomenon in August include AGL Energy and Computershare. The one common denominator in all the above is that the expectations of the company were not met. Despite the analyst fraternity’s best efforts to predict the future, the reality is they can’t do it with great accuracy, especially when assigning a target price to a company.
APP Securities:
Stockbroking and advisory firm APP Securities is said to have formed a digital and robo advice partnership with Ignition Wealth. The partnership won’t replace APP’s advisers but provide additional mobile and digital investment access. It comes amid fierce debate about how widespread the take-up of robo advice will become. Macquarie Group’s move to make computer-generated financial advice directly available to the average Australian came to an end earlier this year when the platform’s founder John O’Connell passed away suddenly.
Atlas Iron Limited (AGO):
Atlas Iron is examining opportunities to pump more volume through its Utah Point port capacity as it forecasts lower iron-ore production and higher costs in 2018. After shipping 14.4 million tonnes in 2017, Atlas expects to ship between 9 million and 10 million tonnes this year. One example Atlas is already working on is increasing the rate of production at its Mt Webber mine from 7 million tonnes to 9 million tonnes a year and processing the extra tonnes at its recommissioned Mt Dove plant, for a capital cost of just $1 million. Increasing volumes through the port would help Atlas lower its costs during a year in which analysts largely expect the iron-ore price to soften from current levels of about $US77 a tonne. Atlas has guided for its ‘‘full cash costs’’ to increase to between $54 and $58 a tonne this year from $53 in 2017.
Blackmores Limited (BKL):
The new chief executive of Blackmores says there’s little prospect of a quick return of the flood of Chinese tourists and entrepreneurs, known as daigou, buying up vast amounts of vitamins in Australia, that 18 months ago sent the share price soaring beyond $220. Blackmores had notched a stellar $100 million bottom-line profit in 2015-16 and Mr Henfrey acknowledged it would be some time before that might be repeated. Blackmores pruned its final dividend back to $1.40 per share from $2.10 a year earlier. In response, Blackmores built a new Chinese export team and boosted its direct sales efforts; these rose 71 per cent during the year. Still, the changes to the Australian retail environment took a toll, with domestic sales flat across the year. The big dip in profit means that Mr Henfrey faces a much harder road as he takes over from long-serving boss Christine Holgate. Sales revenue slipped by 3 per cent to $692.8 million. Chinese tourists and exporters changed their buying patterns and the Australian market became much more competitive, with high levels of stock left in the market. Blackmores was forced to increase inventory provisions from $2 million to $14 million because of the excess stock.
Cabcharge Australia Limited (CAB):
Cabcharge is spending an extra $8 million on marketing and technology to try to make its 13CABS brand more hip and trendy for Millennials entranced by ride-sharing services such as Uber. The challenge is convincing passengers the taxi industry is lifting its game. Cabcharge has also been disadvantaged by regulatory hurdles such as high credit card surcharges and an expensive licensing system. Earnings before interest and tax for 2016-17 dropped 22.4 per cent to $34.7 million, while revenue slipped 10 per cent to $152 million. Cabcharge was using digital avenues to ensure its message reached the younger brigade. He said there was a presence on digital music service Spotify and a range of social media as part of the push. Cabcharge aims to emphasise the benefits of its 13CABS app, and that it does not have a surge pricing system like Uber. Uber has appointed a new global chief executive, Dara Khosrowshahi, who was CEO of Expedia. Cabcharge outlined on Tuesday that total taxi fares processed in 2016-17 reached $950 million, compared with $1.09 billion a year earlier. The comparable figure in 2013-14 was $1.03 billion.
Caltex Australia Limited (CTX):
Woolworths dumped Caltex in favour of BP which is paying about $1 billion to replace Caltex. But the deal has been held up by an investigation by the Australian Competition and Consumer Commission. Caltex has paved the way for a potential spin-off, unveiling a new ‘‘Quantum Leap’’ restructuring initiative that divides its activities between the traditional fuels and infrastructure business and the growing convenience retailing activities. It came as Caltex posted a 21 per cent increase in benchmark profit for the first half to $307 million and reassured investors that it was well on the way to replacing an expected $150 million hit to earnings from the looming loss of a large supply contract with Woolworths. Caltex is also replacing some of its more expensive debt, saving $15 million to $20 million. Caltex is looking at further opportunities to grow and is looking at some of the Woolworths service stations that may need to be sold for BP to get regulatory approval for the $1.8 billion transaction. Meanwhile, Caltex plans to roll out a further 10 of its new ‘‘The Foodary’’ outlets this half, after opening 10 so far since February.
Commonwealth Bank of Australia (CBA):
Commonwealth Bank of Australia must find a new chief executive quickly if it is to stem the declines in its share price that have already helped BHP surpass it as the nation’s most valuable stock, analysts say. The bank, which is facing an unprecedented Australian Prudential Regulation Authority inquiry into its culture and governance after a string of scandals has had its share price slide by 9.5 per cent since the start of August, eroding the long-standing premium valuation the bank has held over its peers. The analysts agreed with widely held sentiment that CBA would have to ‘‘move away from recent practice and choose a CEO from outside the bank’’ given the ‘‘seriousness of cultural issues’’. CBA fell a further 1.2 per cent on Monday to $75.73, taking the total decline in its market capitalisation in August to more than $13 billion. Its ASX market capitalisation is now $131.2 billion, below the $135.5 billion market capitalisation of BHP.
Cooper Energy Limited (COE):
Eastern Australia is to get its first new source of conventional gas for several years after junior producer Cooper Energy locked in a $400 million funding package for its Sole project off the south-east coast, including a $135 million underwritten equity raising. Managing director David Maxwell said the goahead ‘‘sets the company on a growth trajectory offering a five-fold increase in production in the years to 2020.’’ It also triggered a jump in Cooper’s petroleum reserves, which will more than quadruple to 54 million barrels of oil equivalent. Cooper shares were halted from trading on Monday and Tuesday for the institutional part of the raising, which is being managed by Canaccord and Euroz and was flagged by Street Talk in March. Cooper also announced a loss of $12.3 million for 2016-17, narrowing the deficit from the previous year’s $34.8 million. The underlying loss widened to $8.7 million from $2.8 million in 2015-16.
Countplus Limited (CUP):
The chief executive of CountPlus, Matthew Rowe, has warned shareholders there is a long road ahead as he attempts to rebuild the troubled listed accounting and financial planning firm. Shares in the firm have collapsed over the past four years, falling from a peak of $1.94 in March 2013, to reach an all-time low of 48¢ at the start of August. ‘‘The result is reflective of the task ahead to turn around Countplus,’’ Mr Rowe said.
Crown Resorts Limited (CWN), Tatts Group Limited (TTS):
Crown Resorts and CrownBet will launch an online lottery as soon as later this week, seeking to cut into the market share of the foreign-owned Lottoland and possibly eventually compete with Tatts Group’s existing digital lottery ticket sales. The lottery, to be called CrownLotto, will be run by corporate bookmaker CrownBet, which is 62 per cent owned by James Packer’s Crown Resorts. CrownLotto will be pitched as an alternative to the Gibraltarbased gaming operator Lottoland, which is said to be making at least $1 million revenue a week and will be run in a similar manner, with customers betting on the outcome of a lottery rather than buying a ticket in the lottery itself. But Tatts Group chief executive Robbie Cooke recently revealed about 14 per cent of its lottery ticket sales were now made via digital channels, and while those are for actual lottery draws there is a chance Lottoland and now CrownBet could be taking market share from Tatts. Yet the CrownBet spokesman said: ‘‘Lottery wagering attracts a different demographic and will grow overall interest in lotteries, rather than competing with traditional physical lotteries’.
Downer EDI Limited (QAN):
Spotless’s remaining shareholders are not expected to cause Downer EDI ‘‘any dramas’’ after the contractor ended its $1.2 billion takeover of the services group just shy of the critical 90 per cent level, chief executive Grant Fenn said. Downer controls 87.8 per cent of Spotless after its takeover offer closed on Monday night, with New York hedge fund Coltrane Asset Management – which owns 10.6 per cent – and about 1000 retail shareholders refusing to accept its bid of $1.15 per share in cash. Downer is reviewing Spotless’s capital structure and may potentially raise equity to reduce the company’s leverage ratio, which is running at 2.9 times earnings, but did not believe it was in a position to be paying dividends, Mr Fenn said. Spotless is carrying $782 million in net debt.
Lendlease Group (LLC):
Lendlease is investigating opportunities to create another infrastructure fund that it will manage with stakes in public-private partnership assets such as the $6 billion Melbourne Metro. Lendlease chief executive Steve McCann told The Australian Financial Review after the announcement of full year financial results, that Lendlease had form in infrastructure funds management and was actively looking for funds management opportunities in the this space. Lendlease’s renewed interest comes after listed funds management and investment group Charter Hall dropped a deal to takeover Hastings Funds Management and its $14.3 billion infrastructure portfolio. ‘‘While we are attracted to Lendlease’s business model and outlook, its forecast total shareholder return is no longer high enough to maintain a ‘buy’, hence we downgrade our recommendation to ‘hold’ purely due to pricing” said Shaw and Partners Peter Zuk on Monday.
Magellan Financial Group Ltd (MFG):
Over the past decade, Chris Mackay and Hamish Douglass have proved investment bankers can make great investors. But as Magellan Financial Group, the $4.8 billion company the pair cofounded, prepares to raise funds for a multibillion-dollar listed global investment trust, it has become clear how separately the co-founders now choose to work. Investors in Mr Mackay’s MFF Capital Investments, originally called the Magellan Flagship Fund, are not being offered the loyalty bonus available to investors in Magellan funds, despite it being the first fund the company raised back in 2006. The decision to exclude MFF from the bonus offer is seen by some in the share market as the most public step yet in the separation of roles in the once-close partnership between Mr Douglass and Mr Mackay, which began when Mr Mackay stepped down as MFG’s executive chairman in 2013.
Mantra Group Ltd (MTR) :
The Dreamworld theme park tragedy on the Gold Coast in October hurt the bottom line of Mantra Group, with Australia’s biggest listed hotel and resort operator delivering full-year operating earnings at the bottom end of its market guidance. Mantra reported underlying pre-tax earnings of $101.2 million, up 12.7 per cent on the same period last year, having forecast an earnings range of $101 million to $107 million in February. Underlying net profits after tax rose 14 per cent to $47.2 million, but came in below February guidance of $48.5 million to $52.5 million for the Surfers Paradise-based operator of the Mantra, Peppers and Breakfree brands.
Platinum Asset Management Limited (PTM):
Platinum’s results were an opportunity for the company to take aim at short-sellers who have targeted the stock for being vulnerable to fee compression stemming from the assault on active managers by passive strategies, as well as outflows linked to performance. Investment performance tends to pre-empt fund flows, which were $266 million since July 1, but Platinum shares have already rallied by almost 40 per cent. Morningstar forecasts indicate Platinum will see earnings shrink by 9 per cent in 2017-18 and return to growth in 2018-19. Asset managers run at a low capital intensity and investors can rely on high dividend payout ratios being maintained even though dividends can be volatile. The near term risk is if Platinum cannot sustain its outperformance, or if investment wins fail to translate to net inflows, short sellers will return.
Retail Food Group Limited (RFG):
Retail Food Group is facing its weakest profit growth in five years as intense competition in fast food and coffee retailing in Australia counters international growth. Managing director Andre Nell expects underlying net profit to rise about 6 per cent in 2018 as solid growth from global and commercial businesses augments ‘‘modest’’ gains from domestic brands such as Michel’s Patisserie, Brumby’s, Pizza Capers, Crust Pizza, Donut King and Gloria Jeans. The guidance implies an underlying net profit of $80 million, slightly below consensus of about $82 million, prompting analysts and investors to trim 2018 forecasts.
Rio Tinto Ltd (RIO):
Rio Tinto chief executive Jean-Sebastien Jacques says he has ‘‘high expectations’’ the company will develop another diamond mine in Australia as its Argyle operation in remote Western Australia nears the end of its life. The limited supply of diamonds – exacerbated by the challenge of discovering viable mines – makes the precious stones a ‘‘very attractive business’’ for the mining group, Mr Jacques said as Rio opened its annual pink diamonds ‘‘tender’’ in Perth. It is also a challenge Rio is not immune to, with two existing mines due to be depleted within a decade. Argyle is scheduled to close by 2021 and Rio’s Diavik operation in Canada’s Northwest Territories is expected to be depleted by 2024.
Scentre Group (SCG):
Along with other major listed retail property landlords, including Vicinity Centres and Westfield, Scentre has been buffeted by concerns over the impact that online shopping will have on traditional bricks and mortar retail, as well as a cyclical softness in the sector. At its interim result, Scentre said it was on track to deliver full-year earnings growth of 4.25 per cent. The reconfirmation of its full-year guidance came after booking interim funds from operations (FFO) – the sector’s preferred profit measure – of $638 million, representing 12.01¢ per security, up 3.5 per cent. Statutory profit for the group in 2017 first half was $1.4 billion, including $929 million of revaluation. Forecast distributions for the year are 21.73¢, up 2 per cent. At its interim result, Scentre committed to limiting its distribution growth to less than its growth in FFO. That move allows Scentre to retain more earnings to direct into its development pipeline to better protect its portfolio from challenges in the sector. Arguably, the big listed retail landlords have been oversold – driven mostly by global investors – and now represent good buying opportunities. UBS expects Scentre to outperform with its FFO growth and, given it is trading at a slight 3 per cent premium to its net tangible assets, retains a ‘‘buy’’ on the stock. The dividend yield is 5.4 per cent. UBS forecasts the yield to rise to 5.7 per cent by 2021.
Specialty Fashion Group Ltd (SFH):
Specialty Fashion Group is pushing ahead with plans to close loss-making stores, shift customers online and rejuvenate its mature brands after all but giving up on a $135 million takeover offer from Middle Eastern suitors. Specialty Fashion Group is pushing ahead with plans to close loss-making stores, shift customers online and rejuvenate its mature brands after all but giving up on a $135 million takeover offer from Middle Eastern suitors. Chief executive Gary Perlstein said on Tuesday there had been no active discussions with Al Alfia Holdings, an investment company controlled by the Qatari royal family, since February, when the clothing retailer warned that funding for the proposed 70¢ a share offer had been caught up in a probate issue following the death of Sheikh Khalifa bin Hamad al-Thani.
Sydney Airport Holdings Pty Ltd (SYD):
Analysts were pleased with Sydney Airport’s solid interim results and unexpected boost to dividend guidance. The company delivered a 4 per cent rise in interim net profit to $167 million, and forecast a 2017 dividend of 34.5¢ per share – 1¢ above its previous guidance of 33.5¢. The number of passengers travelling through the airport rose 3.6 per cent to 21 million in the first half of the year, with international passengers up almost 8 per cent. Group revenues rose 7.9 per cent to $714.2 million, mostly driven by stronger aeronautical revenues and a 14 per cent increase in retail sales, which benefited from new shops and restaurants in the international terminal. Earnings growth will be generated by more international flights – which have higher profit margins than domestic flights – and hotel and retail developments, but will moderate. The opening of the new Western Sydney Airport in 2026 will divert some flights away from Sydney Airport, but its closeness to the Sydney CBD means it will remain the preferred destination for premium carriers.
Telstra Corporation Ltd (TLS):
There was a sharp reminder in this Australian profit reporting season that long-held beliefs about investing should be tested. A favourite of yield investors, Telstra, took a cold shower, and high-growth stock Domino’s came to earth with a thud. On the other hand, the strong performance of Treasury Wine following a tough period in 2014 and disbelief in the new (temporary?) constrained management style in the resource sector, suggest that revisiting investments without preconceived notions has its upside. Investment ideas should pass a regular, unbiased test. In global equities there are many who view the US market as the centre of the universe. It represents over 50 per cent of the MSCI benchmark, so perhaps that is unsurprising.
(Source: AIMS)
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