Australian Foundation Investment Company Limited (AFI):
Australian Foundation Investment Company has failed to beat the index over the past half year after missing out on a surge in small and mid-sized resources stocks. AFIC, which has a portfolio totalling more than $7 billion, lifted profit 15.6 per cent over the last six months of last year. The company, which invests in a portfolio of the largest stocks on the market, booked a profit of $136.4 million for the half year, compared to $118.3m a year earlier. However, the company undershot the market as its portfolio gained just 6.9 per cent over the period, compared with 8.4 per cent for the S&P/ASX 200 index. AFIC chief executive Mark Freeman attributed this to missing out on the resurgent mining sector, where small and mid-sized resource companies rallied 42 per cent and 21 per cent respectively over the period.
Commonwealth Bank of Australia (CBA):
The strength of Commonwealth Bank’s franchise is set to be sorely tested, as business challenges and escalating compliance costs reverse the momentum shown in the group’s surprisingly buoyant September quarter trading update. Emergence of the Austrac money laundering debacle in August popped the group’s longstanding premium to its local rivals, which had peaked at 30 per cent in early 2016. However, since the release of the quarterly update in November, CBA shares have bolted ahead of the sector, up 2.4 per cent compared to a 4.8 per cent decline for National Australia Bank. CBA’s supporters have found their voice. Again.
Domain Holdings Australia Limited (DHG):
Nervous investors wiped more than half a billion dollars off real estate business Domain and key shareholder Fairfax Media’s market value after the shock resignation of chief executive Antony Catalano just two months after the company listed. With no succession plan in place, Domain chairman Nick Falloon’s explanation for Mr Catalano’s sudden exit — “he had decided to put his family first” — raised more questions than it answered. Major shareholders speculated other reasons were behind the colourful character’s resignation, but Fairfax insiders stuck to the company line and downplayed the suggestion that he had an uneasy relationship with Mr Falloon, who also chairs Fairfax and will now act as executive chairman. As a domestic and international search for a new CEO begins, former REA Group chief Greg Ellis has been mooted as an external candidate in the mix to succeed Mr Catalano in the top job. Mr Ellis, who runs private equity firm Hellman & Friedman-controlled German internet portal Scout24, is an independent non-executive director of Domain. Domain’s share price plunged 17.2 per cent, or 57c, to $2.75, erasing $420 million from the company’s valuation. It was trading around $3.90 a share on its ASX debut in November last year as a $2.2 billion company.
Ecargo Holdings Limited (ECG):
Jessica Rudd’s online retail business has caught the attention of Chinese-based technology group eCargo, which has acquired a 45 per cent stake in the fledgling Jessica’s Suitcase. The move marks a key step for the daughter of former prime minister Kevin Rudd, who operates her store on Alibaba’s Tmall platform. Jessica’s Suitcase specialises in selling Australian lifestyle products into China, including Penfolds wine and Freedom Foods. It is the latest business link for Ms Rudd — an author, former lawyer, Alibaba ambassador and entrepreneur who was recently named as a director of the Australian Agricultural Company, the nation’s biggest landowner and beef exporter. Under the deal, eCargo will acquire 45 per cent of the shares in Jessica’s Suitcase for 80.2 million shares in eCargo Holdings. Ms Rudd, who will join the eCargo board, has agreed to escrow the bulk of her holdings. eCargo’s Australian-listed shares surged 20c yesterday as the deal was announced, to close at 28c.
JB Hi-Fi Limited (JBH):
Electronics retailer JB Hi-Fi has been ranked among the top 250 retailers in the world for the first time. Deloitte’s Global Powers of Retailing 2018 report says JB Hi-Fi’s consistent comparative sales growth and acquisition of whitegoods retailer The Good Guys in late 2016 have propelled it into the top 250 by revenue. JB Hi-Fi’s annual revenue of $US4.2 billion ($A5.9 billion) places it at No 218, while Australian giants Wesfarmers, the owner of Coles, and Woolworths continue to rank highly on the list at 21st and 23rd, respectively. Report author David White said only 15 per cent on the list operate in Australia and expects further competition to come from international retailers. “And with so much change and uncertainty in the Australian retail landscape, 2018 could be a pivotal year for many Australian retailers,” Mr White said.
Mcgrath Limited (MEA):
Simmering tensions over a further plunge in profit and differences in strategic direction have boiled over at troubled real estate agency McGrath as the chair, chief executive and directors resigned en mass and founder John McGrath attempted to reassert authority. The move coincided with the real estate agency warning it expected a loss in its first half, sending shares tumbling nearly 14 per cent to its lowest close of 50c, leaving the company with a market value of $71.4 million. The agency, which listed in December 2015 at $2.10, yesterday said Mr McGrath would take over as interim executive chairman and chief executive Cameron Judson would leave the company. Current chair Cass O’Connor and directors Elizabeth Crouch and Cath Rogers will leave the board, most likely after the company’s results due on February 22. Another director, Nigel Dews, has stepped down from the board. A spokeswoman said the board was in compliance with all regulatory requirements.
Oil Search Limited (OSH):
Oil Search posted record production for 2017, spurred by continuing outperformance by its Papua New Guinea liquefied natural gas project, and signalled that level could be sustained this year. While December-quarter production dipped marginally from the previous quarter, to 7.59 million barrels fo oil equivalent, full-year output edged up to an all-time-high of 30.31 million boe. Output for 2017 was towards the upper end of the company's guidance. Oil Search announced output guidance for 2018 of between 28.5 million and 30.5 million boe, including up to 25 million boe from its share of the PNG LNG venture. Sales revenues benefited from climbing oil prices, with December quarter revenue of $US389 million ($486.3 million) taking full-year sales to $US1.446 billion, up 17 per cent. Quarterly revenue, which missed estimates by some analysts, would have been higher were it not for softer sales volumes.
Qantas Airways Limited (QAN):
Credit Suisse analyst Paul Butler expects Qantas to announce a $948 million pre-tax profit for the first half — near the top end of the $900m-$950m guidance range — when it reports on Feb 22. He also expects adjusted net debt of $4.6 billion for the half, the lowest in a decade and below the $4.8bn-$6bn target range. That should see management announce another share buyback of about $370m or 4 per cent of shares on issue, according to Mr Butler. He keeps his Outperform rating, while trimming his target price to $6.90 from $7.00 due to higher fuel cost estimates.
QBE Insurance Group Limited (QBE):
ASX-listed global insurer QBE has announced yet another profit downgrade, preparing the market for a $US1.2 billion ($1.5 billion) after tax loss ahead of its full-year to December results. In an announcement to the ASX, the insurer further downgraded its combined operating ratio guidance to 104 per cent, above its target range of 100 to 102 per cent as was outlined in October. A COR over 100 indicates an underwriting business is unprofitable. The company in October said it would take a $US600 million hit to its annual earnings following the impact of Hurricanes Harvey, Irma and Maria and the earthquakes in Mexico. New QBE CEO Pat Regan said it had been a "challenging year" for the company.
Quintis Ltd (QIN):
The short-selling fund that sparked the demise of sandalwood forestry group Quintis, which collapsed into administration over the weekend, says it will target another Australian stock this year. Glaucus Research director of research Soren Aandahl told The Australian the collapse “completely vindicated” his fund’s position, which was unveiled in a scathing report released in March, and demonstrated the value of short-sellers by stopping further investors from tipping their money into the doomed Quintis.
Resmed Inc (RMD):
ResMed shares jumped after the respiratory device maker lifted second-quarter sales revenue by 13 per cent to $US601.3 million. Chief executive Mick Farrell said the strong sales were boosted by demand for the company's new range of sleep apnoea masks, while device sales were also doing well. Revenue in the Americas, excluding software business Brightree, was up 12 per cent at $US329.2 million, while Brightree was up 14 per cent at $US38.7 million. ResMed reported revenue in Europe, Asia and other markets of $US233.4 million, an increase of eight per cent on a constant currency basis. "Our masks have performed well around the world, device sales are solid, and our cloud-based software continues to grow rapidly," Mr Farrell said in a statement on Tuesday.
Resolute Mining Limited (RSG):
Mid-tier gold producer Resolute Mining has put its foot on a promising exploration portfolio in West Africa, agreeing to cornerstone an upcoming IPO. Resolute will pump $2 million into the ASX listing of Mako Gold, which has a package of gold prospects centred around Ivory Coast and Burkina Faso. The Perth-based Resolute is one of a cohort of cashed-up goldminers looking for their next growth projects and ended the 2017 financial year with $290m in cash, bullion and listed investments to its name. It will end up with between 13.4 per cent and 12.5 per cent, depending on whether Mako manages to raise $5m or $6m. The early move on to the Mako register echoes similar moves by other established gold producers, such as Evolution Mining’s decision to take a stake in last year’s IPO of exploration play Riversgold.
Treasury Wine Estates Limited (TWE):
Wine exports to mainland China by Australian producers soared 63 per cent in calendar 2017 to a record $848 million, triggering another surge in the share price of Penfolds owner Treasury Wine Estates. But the three next biggest export destinations for the estimated 2,000 wine producers of the United States, United Kingdom and Canada, all suffered a small decline in value. Official figures from industry body Wine Australia released early on Tuesday showed total Australian wine exports climbed by 15 per cent in 2017 to reach $2.56 billion by value. The impressive rise to China augurs well for ASX-listed Treasury, which has been a big driver of the jump through its Penfolds and Wolf Blass brands. China now represents one third of the value of all Australian wine exports.
Vocus Group Limited (VOC):
Vocus chairman Vaughan Bowen is confident the telco can turn things around this year, having recovered from a bout of corporate indigestion that almost sank the business last year. The telco’s stock tumbled more than 21 per cent last calendar year as it struggled with the integration of its acquisitions. Share price weakness attracted two takeover bids by private equity players. Vocus fended off the bids and Mr Bowen, who replaced former chairman David Spence last October, said the takeover threat had helped galvanise the resolve of the telco’s management. “A management shake-up announced this month, in which Vocus will split the enterprise and wholesale divisions into separate operating segments, is a result of the perspective gained during the bids and is a message to the market that Vocus has learnt from its mistakes. Getting the management mix wrong at the time of the Vocus-M2 merger, according to Mr Bowen, was a major cause of the problems.
Westfield Corporation (WFD):
Unibail-Rodamco chief executive Christophe Cuvillier will arrive in Australia next month to brief Westfield’s major domestic institutional investors and to try to convince them to back his friendly $32.8 billion bid for the shopping centre owner. The Paris-based company emerged as a surprise bidder for Westfield last month in a deal that had investment bankers joyful at the last-minute action and its impact on their bonus payments. Unibail offered a combination of cash and scrip that valued each Westfield share at $US7.55, a 17.8 per cent premium to Westfield’s share price before the French deal. However, the value of the deal has changed as Unibail’s share price has struggled in the six weeks since the deal came to light.
(Source: AIMS)
Australian Foundation Investment Company has failed to beat the index over the past half year after missing out on a surge in small and mid-sized resources stocks. AFIC, which has a portfolio totalling more than $7 billion, lifted profit 15.6 per cent over the last six months of last year. The company, which invests in a portfolio of the largest stocks on the market, booked a profit of $136.4 million for the half year, compared to $118.3m a year earlier. However, the company undershot the market as its portfolio gained just 6.9 per cent over the period, compared with 8.4 per cent for the S&P/ASX 200 index. AFIC chief executive Mark Freeman attributed this to missing out on the resurgent mining sector, where small and mid-sized resource companies rallied 42 per cent and 21 per cent respectively over the period.
Commonwealth Bank of Australia (CBA):
The strength of Commonwealth Bank’s franchise is set to be sorely tested, as business challenges and escalating compliance costs reverse the momentum shown in the group’s surprisingly buoyant September quarter trading update. Emergence of the Austrac money laundering debacle in August popped the group’s longstanding premium to its local rivals, which had peaked at 30 per cent in early 2016. However, since the release of the quarterly update in November, CBA shares have bolted ahead of the sector, up 2.4 per cent compared to a 4.8 per cent decline for National Australia Bank. CBA’s supporters have found their voice. Again.
Domain Holdings Australia Limited (DHG):
Nervous investors wiped more than half a billion dollars off real estate business Domain and key shareholder Fairfax Media’s market value after the shock resignation of chief executive Antony Catalano just two months after the company listed. With no succession plan in place, Domain chairman Nick Falloon’s explanation for Mr Catalano’s sudden exit — “he had decided to put his family first” — raised more questions than it answered. Major shareholders speculated other reasons were behind the colourful character’s resignation, but Fairfax insiders stuck to the company line and downplayed the suggestion that he had an uneasy relationship with Mr Falloon, who also chairs Fairfax and will now act as executive chairman. As a domestic and international search for a new CEO begins, former REA Group chief Greg Ellis has been mooted as an external candidate in the mix to succeed Mr Catalano in the top job. Mr Ellis, who runs private equity firm Hellman & Friedman-controlled German internet portal Scout24, is an independent non-executive director of Domain. Domain’s share price plunged 17.2 per cent, or 57c, to $2.75, erasing $420 million from the company’s valuation. It was trading around $3.90 a share on its ASX debut in November last year as a $2.2 billion company.
Ecargo Holdings Limited (ECG):
Jessica Rudd’s online retail business has caught the attention of Chinese-based technology group eCargo, which has acquired a 45 per cent stake in the fledgling Jessica’s Suitcase. The move marks a key step for the daughter of former prime minister Kevin Rudd, who operates her store on Alibaba’s Tmall platform. Jessica’s Suitcase specialises in selling Australian lifestyle products into China, including Penfolds wine and Freedom Foods. It is the latest business link for Ms Rudd — an author, former lawyer, Alibaba ambassador and entrepreneur who was recently named as a director of the Australian Agricultural Company, the nation’s biggest landowner and beef exporter. Under the deal, eCargo will acquire 45 per cent of the shares in Jessica’s Suitcase for 80.2 million shares in eCargo Holdings. Ms Rudd, who will join the eCargo board, has agreed to escrow the bulk of her holdings. eCargo’s Australian-listed shares surged 20c yesterday as the deal was announced, to close at 28c.
JB Hi-Fi Limited (JBH):
Electronics retailer JB Hi-Fi has been ranked among the top 250 retailers in the world for the first time. Deloitte’s Global Powers of Retailing 2018 report says JB Hi-Fi’s consistent comparative sales growth and acquisition of whitegoods retailer The Good Guys in late 2016 have propelled it into the top 250 by revenue. JB Hi-Fi’s annual revenue of $US4.2 billion ($A5.9 billion) places it at No 218, while Australian giants Wesfarmers, the owner of Coles, and Woolworths continue to rank highly on the list at 21st and 23rd, respectively. Report author David White said only 15 per cent on the list operate in Australia and expects further competition to come from international retailers. “And with so much change and uncertainty in the Australian retail landscape, 2018 could be a pivotal year for many Australian retailers,” Mr White said.
Mcgrath Limited (MEA):
Simmering tensions over a further plunge in profit and differences in strategic direction have boiled over at troubled real estate agency McGrath as the chair, chief executive and directors resigned en mass and founder John McGrath attempted to reassert authority. The move coincided with the real estate agency warning it expected a loss in its first half, sending shares tumbling nearly 14 per cent to its lowest close of 50c, leaving the company with a market value of $71.4 million. The agency, which listed in December 2015 at $2.10, yesterday said Mr McGrath would take over as interim executive chairman and chief executive Cameron Judson would leave the company. Current chair Cass O’Connor and directors Elizabeth Crouch and Cath Rogers will leave the board, most likely after the company’s results due on February 22. Another director, Nigel Dews, has stepped down from the board. A spokeswoman said the board was in compliance with all regulatory requirements.
Oil Search Limited (OSH):
Oil Search posted record production for 2017, spurred by continuing outperformance by its Papua New Guinea liquefied natural gas project, and signalled that level could be sustained this year. While December-quarter production dipped marginally from the previous quarter, to 7.59 million barrels fo oil equivalent, full-year output edged up to an all-time-high of 30.31 million boe. Output for 2017 was towards the upper end of the company's guidance. Oil Search announced output guidance for 2018 of between 28.5 million and 30.5 million boe, including up to 25 million boe from its share of the PNG LNG venture. Sales revenues benefited from climbing oil prices, with December quarter revenue of $US389 million ($486.3 million) taking full-year sales to $US1.446 billion, up 17 per cent. Quarterly revenue, which missed estimates by some analysts, would have been higher were it not for softer sales volumes.
Qantas Airways Limited (QAN):
Credit Suisse analyst Paul Butler expects Qantas to announce a $948 million pre-tax profit for the first half — near the top end of the $900m-$950m guidance range — when it reports on Feb 22. He also expects adjusted net debt of $4.6 billion for the half, the lowest in a decade and below the $4.8bn-$6bn target range. That should see management announce another share buyback of about $370m or 4 per cent of shares on issue, according to Mr Butler. He keeps his Outperform rating, while trimming his target price to $6.90 from $7.00 due to higher fuel cost estimates.
QBE Insurance Group Limited (QBE):
ASX-listed global insurer QBE has announced yet another profit downgrade, preparing the market for a $US1.2 billion ($1.5 billion) after tax loss ahead of its full-year to December results. In an announcement to the ASX, the insurer further downgraded its combined operating ratio guidance to 104 per cent, above its target range of 100 to 102 per cent as was outlined in October. A COR over 100 indicates an underwriting business is unprofitable. The company in October said it would take a $US600 million hit to its annual earnings following the impact of Hurricanes Harvey, Irma and Maria and the earthquakes in Mexico. New QBE CEO Pat Regan said it had been a "challenging year" for the company.
Quintis Ltd (QIN):
The short-selling fund that sparked the demise of sandalwood forestry group Quintis, which collapsed into administration over the weekend, says it will target another Australian stock this year. Glaucus Research director of research Soren Aandahl told The Australian the collapse “completely vindicated” his fund’s position, which was unveiled in a scathing report released in March, and demonstrated the value of short-sellers by stopping further investors from tipping their money into the doomed Quintis.
Resmed Inc (RMD):
ResMed shares jumped after the respiratory device maker lifted second-quarter sales revenue by 13 per cent to $US601.3 million. Chief executive Mick Farrell said the strong sales were boosted by demand for the company's new range of sleep apnoea masks, while device sales were also doing well. Revenue in the Americas, excluding software business Brightree, was up 12 per cent at $US329.2 million, while Brightree was up 14 per cent at $US38.7 million. ResMed reported revenue in Europe, Asia and other markets of $US233.4 million, an increase of eight per cent on a constant currency basis. "Our masks have performed well around the world, device sales are solid, and our cloud-based software continues to grow rapidly," Mr Farrell said in a statement on Tuesday.
Resolute Mining Limited (RSG):
Mid-tier gold producer Resolute Mining has put its foot on a promising exploration portfolio in West Africa, agreeing to cornerstone an upcoming IPO. Resolute will pump $2 million into the ASX listing of Mako Gold, which has a package of gold prospects centred around Ivory Coast and Burkina Faso. The Perth-based Resolute is one of a cohort of cashed-up goldminers looking for their next growth projects and ended the 2017 financial year with $290m in cash, bullion and listed investments to its name. It will end up with between 13.4 per cent and 12.5 per cent, depending on whether Mako manages to raise $5m or $6m. The early move on to the Mako register echoes similar moves by other established gold producers, such as Evolution Mining’s decision to take a stake in last year’s IPO of exploration play Riversgold.
Treasury Wine Estates Limited (TWE):
Wine exports to mainland China by Australian producers soared 63 per cent in calendar 2017 to a record $848 million, triggering another surge in the share price of Penfolds owner Treasury Wine Estates. But the three next biggest export destinations for the estimated 2,000 wine producers of the United States, United Kingdom and Canada, all suffered a small decline in value. Official figures from industry body Wine Australia released early on Tuesday showed total Australian wine exports climbed by 15 per cent in 2017 to reach $2.56 billion by value. The impressive rise to China augurs well for ASX-listed Treasury, which has been a big driver of the jump through its Penfolds and Wolf Blass brands. China now represents one third of the value of all Australian wine exports.
Vocus Group Limited (VOC):
Vocus chairman Vaughan Bowen is confident the telco can turn things around this year, having recovered from a bout of corporate indigestion that almost sank the business last year. The telco’s stock tumbled more than 21 per cent last calendar year as it struggled with the integration of its acquisitions. Share price weakness attracted two takeover bids by private equity players. Vocus fended off the bids and Mr Bowen, who replaced former chairman David Spence last October, said the takeover threat had helped galvanise the resolve of the telco’s management. “A management shake-up announced this month, in which Vocus will split the enterprise and wholesale divisions into separate operating segments, is a result of the perspective gained during the bids and is a message to the market that Vocus has learnt from its mistakes. Getting the management mix wrong at the time of the Vocus-M2 merger, according to Mr Bowen, was a major cause of the problems.
Westfield Corporation (WFD):
Unibail-Rodamco chief executive Christophe Cuvillier will arrive in Australia next month to brief Westfield’s major domestic institutional investors and to try to convince them to back his friendly $32.8 billion bid for the shopping centre owner. The Paris-based company emerged as a surprise bidder for Westfield last month in a deal that had investment bankers joyful at the last-minute action and its impact on their bonus payments. Unibail offered a combination of cash and scrip that valued each Westfield share at $US7.55, a 17.8 per cent premium to Westfield’s share price before the French deal. However, the value of the deal has changed as Unibail’s share price has struggled in the six weeks since the deal came to light.
(Source: AIMS)
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