BHP Billiton Limited (BHP):
BHP has reportedly received first round bids for its entire US shale oil and gas business valuing it at $US7 to $US9bn ($9.17bn-$11.8bn), which is substantially less than the assets’ book value. The report, by Bloomberg, said BP and Chevron had made bids, while Shell had teamed up with private equity giant Blackstone in an earlier bid. Bloomberg did not say where it got the information. BHP (BHP) would not confirm or deny the reports. BHP is targeting binding agreements on the sale of its US shale assets — bought for $US20bn in 2011 and having had as much again spent on them again for little free cash flow generation — by the end of the calendar year. It has previously said bids were due by the end of June. Multiple parties, including Apollo Global Management, had bid for individual assets, the report said. Citing people familiar with the matter (often code for investment bankers with an interest in a certain outcome), Bloomberg said BHP expects to receive at least $US10bn for the entire asset or as much as $US13bn if the oil and gas assets in Texas, Arkansas and Louisiana are sold separately. BHP is investigating a demerger of the asset and assets swaps in tandem with the sales process. The onshore assets are valued at $US11bn on BHP’s books, not including $US3bn of goodwill.
Commonwealth Bank of Australia (CBA):
A foreign regulator swooping on Commonwealth Bank remains one of the biggest threats to the nation’s largest lender, after it struck a deal to pay the biggest corporate penalty in Australian history for its breaches of anti-money-laundering rules. Although investors and analysts largely welcomed the news that CBA had settled its Federal Court case with financial intelligence agency Austrac for $700 million, many raised concerns that the penalty was not the end of the matter. CBA said it was “not aware” of any threatened enforcement action by any offshore regulator regarding its compliance with anti-money-laundering and counter-terrorism financing legislation. “We have been working closely with regulators across all jurisdictions in which we operate and have kept relevant offshore regulators informed of our work in this area,” a CBA spokesman said. The settlement with Austrac saw the bank admit to breaching the law 53,750 times. CBA’s raft of intelligent deposit machines, which were rolled out in 2012, failed to send Austrac thousands of legally required reports while money was being washed through the smart ATMs by criminal syndicates and terrorist financiers. The fine was almost double the bank’s provision of $375m for a civil penalty, and is equivalent to 7 per cent of its near-$10 billion profit in 2017.
Harvey Norman Holdings Limited (HVN):
Gerry Harvey says there is "not a lot of validity" that Harvey Norman will be the most vulnerable of retailers to a housing downturn, arguing there are other more significant drivers of sales including population growth and technology improvements. Citi analysts Bryan Raymond and Craig Woolford on Tuesday published a 38-page report ranking the retailers the broker considers most exposed to a fall in house prices. The analysts point out that the housing cycle has already turned, driven by a contraction in lending, but this is yet to be reflected in retailer share prices. According to the broker, Harvey Norman and Wesfarmers are most exposed, with 39 per cent of Harvey Norman's group earnings driven by furniture and appliances and 40 per cent of Wesfarmers' earnings from hardware chain Bunnings.
Financial Review Kogan.com Ltd (KGN):
It was the sort of promotional script you would expect from a hot stock like Kogan.com. Ruslan Kogan’s expansive online empire announced its long-awaited move into whitegoods on Monday, sending its share price sharply higher. "We would have loved to have been in this industry 12 years ago," Kogan told The Australian Financial Review as the company’s shares rose on the news it was competing more directly with rivals like Harvey Norman. Missing from the script was the even hotter news that Kogan and his offsider, David Shafer, were preparing to unload more stock - as much as $100 million worth, according to reports - which sent the share price plunging on Tuesday morning by as much as 12 per cent to a low of $8.56. This news did not warrant a press release - not until the stock had already plunged. And the irony was, no sale occured because buyers wanted too big a discount from Kogan and Shafer. As the compay explained in an update to the ASX at midday, the dynamic duo “did not receive any bid that was acceptable to them and, as such, no transactions have occurred”. It also noted that Ruslan and Shafer “are not currently in discussions to sell any shares”. The market interpreted this as a clear signal that there is now a big overhang on the stock - hence its failure to recover from the dive - and the founders will soon be seeking another opportunity to offload shares.
Metcash Limited (MTS):
Grocery wholesaler Metcash has flagged a $352 million impairment for the full year in its supermarkets business. The company (MTS) said $318m of goodwill and other intangibles and $34m of other net assets will be recognised in its supermarkets and convenience business when it reports its full-year results for the 12 months through April later this month. “These impairments are non-cash in nature, have no impact on the company’s debt facilities, compliance with banking covenants, or its ability to undertake capital management initiatives,” the company said in a statement this morning. It follows a year-end review of the carrying value of its assets, which took into account the sales hit resulting from Drakes Supermarkets saying it would not commit to using a proposed new South Australian distribution centre as-well-as weakness in the Western Australian economy. The announcement that Drakes, which has 50 stores across South Australia, would not commit to Metcash beyond the end of its current agreement when it ends in June next year, could have a $270m negative impact on sales, Metcash told the market in May.
Mirvac Group (MGR):
The Mirvac Group is firming as favourite to take a half stake in Sydney’s Westpac Place tower in a play that would give it back control of the building that is worth about $1.7 billion and show the depth of support for rising commercial property values. The group is locking down the support of one of its major unlisted investors to back the purchase of the half interest in the tower from US private equity firm Blackstone. Rival property heavyweight Charter Hall has been under-taking due diligence on the tower stake after bidding about $850 million. However, Mirvac holds last rights over the interest as co-owner and The Australian has learnt that superannuation fund-backed property manager ISPT is positioned to support Mirvac’s move on the landmark complex at 275 Kent Street. The Blackstone interest in the property is being sold by JLL’s Rob Sewell and Paul Noonan and Savills’ Simon Fenn, Ian Hetherington and Ben Azar. The parties have refused to comment on the transaction, which is likely to take several weeks to be finalised, despite Mirvac today hitting the deadline to indicate whether it will -exercise its rights. Mirvac and ISPT already have close ties.
Mortgage Choice Limited (MOC):
Mortgage Choice has released a statement regarding the reports in the media yesterday that saw it shed almost a quarter of its value on the ASX on Tuesday. Here's a section of the statement: Mortgage Choice strongly refutes allegations in the media that its current model encourages poor behaviour or practices. The company has robust compliance processes and credit policy controls in place that franchisees are required to adhere to. Susan Mitchell, CEO of Mortgage Choice said: "Our franchisees are very diligent and want to do the right thing for their customers. We take any allegation of fraudulent behaviour extremely seriously and we have a very thorough and structured compliance regime in place. "The wellbeing of our franchisees is our number one concern. We provide any business owner experiencing hardship with personalised support, including from our field‐based teams. We are well progressed in consulting with franchisees on a new remuneration model that will help them to succeed and invest in growing their businesses." While Mortgage Choice believes brokers in the network still highly value the services the company provides, it acknowledges that the balance between services offered and remuneration provided needs adjusting.
Origin Energy Ltd (ORG):
Origin Energy has sent a strong challenge to its big retail power rivals, cutting prices in Queensland and South Australia and taking a $60 million hit to 2018-19 earnings to keep household prices steady in NSW. Origin’s 2018-19 tariff announcements for National Electricity states apart from Victoria (which prices on a calendar year) marked the first cuts since 2014 and came with a declaration that price hikes had ended. “It’s a turning point for tariffs,” Mr Calabria told The Australian. “We see lots of renewables coming into the system, more supply.” The base-rate tariff for Origin residential customers in southeast Queensland will drop by 1.3 per cent next financial year, and by 4 per cent for small business customers. In South Australia, the base-rate tariff will drop by 1 per cent for residences and 1.4 per cent for small businesses. The cuts are small compared to recent hikes and come after wholesale prices and futures prices across the National Electricity Market have eased. The decision to keep NSW prices steady reflects increased green scheme and network costs that would have otherwise resulted in a 3 per cent increase rise in household tariffs. Mr Calabria said all of Origin’s electricity cost reductions in South Australia and Queensland had been passed on to customers and that keeping NSW tariffs steady would mean a $56m net profit hit. Macquarie analyst Ian Myles said bigger businesses were still facing price hikes as older, cheaper power contracts wound down.
(Source: AIMS)
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