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AUSTRALIA MARKETS(2018-11-08)

AIMS
2018-11-08 15:37

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Bega Cheese Ltd (BGA): Bega said on Wednesday it would take the cash on offer from Albert Tse's Wattle Hill and Roc Partners Investment Fund for its 15.59 per cent stake in Australia's biggest honey supplier. Bega Cheese says it plans to vote in favour of selling its stake in Capilano Honey to a Chinafocused consortium, putting to rest any speculation the company was making a tilt for the honey-maker itself. Bega Cheese, which is the second largest shareholder in Capilano, says in a statement it plans to sell its 15.6 per cent stake to the Bravo BidCo consortium. A consortium of Wattle Hill RHC Fund and ROC Capital Pty Ltd, namely Bravo BidCo, this month sweetened its bid for Capilano to $21 per share from $20.06, raising its proposal to $198.6 million. 

BHP Billiton Limited (BHP): 
BHP estimates it could take about a week to get its Pilbara rail system restored and clean up the damage from the derailment of one of its iron ore trains after travelling almost 100km without a driver. The out-of-control train reached speeds of more than 110km/h before BHP operators derailed it about 120km south of Port Hedland on Monday. The driver of the 280-car train, which was fully laden with iron ore, had stopped about 200km from Port Hedland to inspect one of the wagons. Footage from the crash scene posted on social media shows the ruins of the train, with many of the carriages buried in iron ore. BHP said 1.5km of the track had been destroyed during the incident.

Commonwealth Bank of Australia (CBA): 
The bank posted a decline in first quarter cash profit to $2.5 billion, as it was hit by lower interest income and ongoing regulatory costs. Excluding one off items, such as regulatory costs and penalties, the quarterly profit is up 3 per cent on the average quarterly results of CBA’s second half. In a speech to shareholders, CBA chairman Catherine Livingstone said the board believed the Austrac fine would best allow the bank to focus on strengthening its regulatory compliance capabilities. She noted, though, that CBA would fight two class actions on the matter saying the board was confident it had complied with continuous disclosure obligations. Ms. Livingstone also acknowledged the damning observations in the Hayne royal commission’s interim report and said it was “rightly critical” of the financial services industry. “We also acknowledge the royal commission’s criticism that, too often, a focus on profitability disadvantaged some of our customers. We agree that this imbalance is not acceptable.” 

Fortescue Metals Group(FMG): 
WA iron ore giant Fortescue Metals Group will shore up trade relationships with China's biggest steel companies by signing eight memorandums of understanding with steel mills on the sidelines of the China International Import Expo. In a statement Fortescue announced it would sign MOUs with both public and private steel mills across the country, including China's largest steel group Baowu, which received the company's first cargo of ore 10 years ago. It will also sign an MOU with Hebei Iron and Steel Group, China’s second-largest steel company. While the MOUs don't have an immediate commercial impact, FMG chief executive Elizabeth Gaines said it reaffirmed the company's commitment to its customers and demonstrated its presence in China. Ms. Gaines reiterated the importance of Australia's trade relationship with China. "As the One Belt, One Road initiative continues to grow, the openness and mutual understanding established by our bilateral trade relationships will be critical to its success," she said. "Australia’s significant strategic partnership with China is built on the importance of trade and is a fundamental pillar in our relationships across the Asian region."

Freedom Foods Group Ltd (FNP): 
Health food manufacturer Freedom Foods has joined with Alibaba Group-owned food brand Theland to develop a range of cereals and snacks in China. In a deal signed during the China International Import Expo in Shanghai, the two will work together on Freedom’s Arnold’s Farm brand to grow its range for the Chinese market. The cereal is already one of the top three oat cereals on Alibaba’s Tmall International, and Freedom said it hoped the joint venture would leverage Alibaba’s online and retail strategy. “The JV will own the Chinese language trade mark for Arnold’s Farm and be responsible for all sales marketing and distribution of the Arnold’s Farm range of products in China,” it told the market. Alongside that, Freedom has commenced supply of an A2 protein milk product to Theland under its own brand with expectation of additional milk products to be launched into 2019. 

Kogan.com Ltd (KGN): 
Kogan.com is set to launch its own superannuation in partnership with Mercer, offering promising no frills and ultra-low fees. In a note to the market today, Kogan said the fund would “leverage its digital efficiency to be one of Australia’s cheapest superannuation options”. “Mercer has been operating in Australia for more than 40 years; they have a strong history of innovation, and they are a clear leader in the provision of costeffective and efficient Superannuation services,” Kogan director David Shafer said. “This partnership will deliver a no frills superannuation offering with ultra-low fees that will enable Aussies to retain and preserve more of their personal wealth.”

Moelis Australia Ltd (MOE): 
Investment bank Moelis is looking to defy gloomy sentiment about the prospects for shopping centers by launching a trust seeded with almost $200 million worth of retail assets that could grow and then list in just three years. The Moelis Armada Retail Fund is pitched to wholesale investors as an opportunity to invest in two sub regional shopping centers — Ingle Farm Shopping Centre in Adelaide and Gateway Plaza in Warrnambool. 

RESMED INC (RMD): 
ResMed yesterday announced its acquisition of US health software company MatrixCare to boost its position as a leading provider of out-of-hospital-care, but analyst at Ord Minnet have raised concerns as to the purchase. In a client note this morning, Ord Minnet said it was cautious that ResMed had paid a high price at US$750 ($1.04 billion). “The $750m price equates to 25x current year operating earnings and about 6x revenue, compared to the 19x EBITDA ResMed paid for Brightree, excluding tax benefits,” they said. “This appears to be a rich price despite few good comparators.”

Suncorp Group Ltd (SUN): 
Suncorp says pressure from price competition and higher funding costs are expected to result in a full-year net interest margin at the low end of its target range. Still, in its quarterly update on Wednesday, the Brisbane-based banking and insurance provider said total lending grew 0.5 per cent over the three months to September 30, while its home lending portfolio grew 0.8 per cent during the period despite a slowing mortgage market. “We expect the focus on additional verification requirements for home lending customers will contribute to an ongoing moderation of growth in home lending over fiscal year 2019,” chief executive David Carter said. “We are targeting new business, across all sectors, in line with our risk appetite. “While parts of the agricultural sector continue to face challenges, we are optimistic about the economy, which continues to benefit from a relatively weaker Australian dollar, a strengthening resources sector and historically low interest rates. “Credit quality remains strong with a net positive movement in impairment losses, driven by a small number of one-off customer recoveries. Gross impaired assets of $140 million remained broadly stable over the quarter.” 

Westpac Banking Corp (WBC): 
Westpac chief executive Brian Hartzer received a $6.6 million pay package for the year to September 30, down slightly from nearly $6.7m last year, after the bank reduced short term bonus payments for its executive team. Mr. Hartzer’s bonus dropped to $1m, down from nearly $1.5m last year, while his fixed salary lifted slightly to $2.7m. Westpac said that short term bonuses for its executives in Australia were on average 25 per cent lower, partly due to discretionary downward adjustments for customer and service related areas. Targeted downwards adjustments were applied to three executives, to reflect a range of matters for which they were responsible, including risk and remediation issues, Westpac said.

Worleyparsons Limited (WOR): 
Dar Group is understood to have secured funding to buy a $490 million stake in WorleyParsons. Sources said the Dubaibased construction company had locked in a margin loan via investment bank JPMorgan to take up its entitlement in WorleyParson's $1.1 billion retail rights issue. UBS and Macquarie Capital are advising WorleyParsons which told the market on Wednesday that Dar would take up its entitlement. Observers noted this was another recent example of joint lead manager keeping the market fully informed of potentially sensitive information during the capital raising process.
(Source: AIMS)
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