AGL boss Brett Redman said he was not surprised by the reaction of investors after its shares sunk by more than six per cent on disappointing 2020 earnings guidance.“I’m not surprised because you get a sense of what people are saying shortly before you release your results, so we expect there is a little bit of disappointment in the outlook,” Mr Redman said. “It is clearly beneath consensus so that is not a surprise.” AGL signalled a steep profit fall of up to 25 per cent in the 2020 financial year to a range between $780 million and $860m, with the $820m midpoint some 10 per cent below consensus of $908m. The power giant is facing lower wholesale power prices and also needs to reprice new gas deals at higher costs than its legacy contracts.
AMP Limited (AMP):
Citigroup’s equity sales desk told clients AMP was announcing a “big shake up” but said the strategy change, capital raising and revised life insurance deal would lead analysts to further cut their future earnings estimates Their note also said AMP’s expectations around the new life insurance deal and its timetable looked “a bit too good to be true”. Macquarie Group analyst Brendan Carrig said: “In our view, at current levels the investment thesis is dependent upon the completion of the sale of AMP Life.”
BHP Group Ltd (BHP):
BHP has approved $US283 million ($418m) in funding to develop its oil and gas project in Trinidad and Tobago. The Ruby project has estimated recoverable resources of 13.2 million barrels of oil, and 274 cubic feet of natural gas, with first production expected in 2021. At its peak, BHP says the project will increase production by 16,000 barrels of oil per day, and 80 million standard cubic feet per day. BHP is the operator, and holds a 68.46 per cent interest alongside Heritage Petroleum (20.13pc) and the National Gas Company of Trinidad and Tobago (11.41pc).
Breville Group Ltd (BRG):
Home appliance maker Breville is unlikely to disappoint in its upcoming results, even as the retail sector fights consumption weakness, according to Credit Suisse. The broker raised the stock to Neutral, and lifted its target price to $16.44 per share from $12.59 previously noting the European rollout of the Sage brand as a key driver.“We have upgraded our forecasts to assume that Sage is launched in another five countries over the next three years, and that when launched each country adds an incremental EUR$10m p.a. of sales,” analysts write.“We forecast 10pc growth in our long-term forecasts for Europe. We have also upgraded our medium- term revenue growth assumptions for North America given Breville’s position as a premium brand in this market.”
Commonwealth Bank of Australia (CBA):
Commonwealth Bank core earnings were disappointing, but yesterday’s share price reaction was surprisingly mild especially accounting for its valuation, so says Citi’s Brendan Sproules. In a note to clients, he says the bank’s valuation is too high and its premium to peers is unjustified, with trade at 15x FY20.“There is a risk that the sizable premium to peers closes over the next 12 months, in our view,” Mr Sproules says, noting that the year ahead will be very different to the one past.“The muted share price reaction can be attributed to better FY20 prospects compared to the FY19 result. Lending momentum has returned, NIMs can remain flat and compliance costs will remain, but are unlikely to continue growing.” He expects a $5 billion buyback to be announced during the year as divestments complete, with pending NZ capital changes unlikely to be an impediment. Citi maintains a Sell on the stock, with a price target of $73.25.
Infratil Ltd (IFT) & AGL Energy Limited (AGL):
New Zealand infrastructure investment company Infratil has announced the conditional sale of Perth Energy to AGL. Infratil says it expects to receive cash proceeds of approximately $55.0 million for its 80 per cent stake in Perth Energy. As at March 31, Infratil’s book value for Perth Energy was $NZ89.3m, meaning the sale will produce a loss on disposal of $NZ33.0m. Infratil says it may receive further sale proceeds of up to $A14.9 million in cash within three years.
Insurance Australia Group Ltd (IAG):
Shares in Insurance Australia Group have tumbled 5 per cent after it posted a sluggish result for the 2019 financial year and disappointed on its dividend payout. For the 12 months through June, Australia’s largest general insurer posted a net profit of $1.076 billion, up 16 per cent on the prior year and above analyst expectations. But the result was propped up by the $200 million sale of its Thailand operations in August last year. Cash profit for the year fell 10 per cent to $931m, missing analyst expectations. The final divided payout of 20c per share also disappointed, coming in below expectations of 22.5c per share. The dividend will only be 70 per cent franked, unlike previous payouts, which were franked 100 per cent.
Jatenergy Ltd (JAT):
China-focused exporter JAT Energy is making a move into the lucrative infant milk formula sector, this morning unveiling its acquisition of a 70 per cent stake in manufacturer Australian Natural Milk Association (ANMA). The deal, worth $12 million in cash and $2 million in JAT shares, will be staged in six tranches until June 30, 2020 and gives the exporter control of the supply chain of one of its major products. ANMA already has key Chinese regulatory approvals, and gives JAT the opportunity to sell its in-house brands into the Chinese markets.
Kathmandu Holdings Ltd (KMD):
Outdoor adventurewear retailer Kathmandu has confirmed it is heading for a record profit for fiscal 2019 despite cycling a very strong winter sales period last year and difficult trading conditions in New Zealand. The retailer has also benefited from continued solid trading from its newly acquired North American footwear group Oboz. In a trading update to the market this morning the company said based on unaudited results for 2019, it was expecting total sales of $NZ545 million, up 9.6 percent on fiscal 2018 and same store sales growth of 0.6 per cent at constant exchange rates.
Lendlease Group (LLC):
Construction giant Lendlease has been hit with a second class action alleging the group misled the market and failed to adequately disclose problems with its troubled engineering division. The proceeding, filed by Phi Finney McDonald, is being prepared on behalf of security holders who acquired an interest in Lendlease’s stapled securities or American Depositary Receipts between October 17, 2017 and February 25 this year.
Mirvac Group (MGR): Mirvac Group said its annual net profit fell by 6 per cent, but residential sales held up and defaults were contained amid tough conditions for Australian property developers. The Sydney-based company, which also owns shopping malls and develops residential communities, reported a net profit of $1.02 billion for the 12 months through June, down from $1.09 billion a year earlier. Its operating earnings per share were 17.1 cents, in line with tightened guidance provided in May and extending its record of beating the midpoint of its initial annual profit guidance each year since the 2012 fiscal year. Mirvac said it sold 2,611 residential lots during the fiscal year, slightly above recent guidance. Defaults were below 2 per cent and residential pre-sales totalled $1.7 billion at the end of June. Reports the Australian Nick Scali Limited (NCK): Furniture retailer Nick Scali has warned of negative same store sales growth to start the September quarter, but said it still swung to a record profit over the full year. Handing down its results this morning, the retailer posted net profit after tax of $42.1 million, up 2.8 per cent on last year, alongside a 6.9 per cent boost to revenue. But despite that, it said operating expenses were increasing thanks to wage and property costs and same store sales were flat for most of the year, with a slip to start the new year.“As a furniture retailer, Nick Scali Limited is very dependent on housing sales and renovations which have been in decline, and trading conditions will likely only materially improve when there is an uplift in housing sales and renovations,” it said.
Rural Funds Group (RFF): Rural Funds Group, the subject of a scathing short attack earlier this week, has surged by 27 per cent on its return to trade after rejecting allegations and defending its business model. The stock had 42 per cent of its market value wiped on Tuesday, after the report was released suggesting it was in breach of loan covenants and suggsesting its equity was “worthless”. Reports the Australian Transurban Group (TCL): Transurban has completed its $500 million raise to institutional investors, paving the way for it to take full control of the M5 West toll road. Unveiling its results yesterday, Transurban said it was acquiring the remaning 35 per cent stake in the toll road it did not own for $468 million, to be funded by an institutional placement and share purchase plan. Today, it said the placement was strongly supported at a price of $14.70 apiece, at a 3.48 per cent discount to its last trading price of $15.23.
Treasury Wine Estates Ltd (TWE): Treasury Wines has trimmed its earlier 8 per cent loss on its return to trade, after a damning short sell report prompted a halt on the stock this morning. The winemaker says it will refer short seller GMT Research to the securities regulator after it filed a report alleging Treasury had manipulated its profits through accounting trickery. A 7.7 per cent drop in the stock prompted a halt in trade, and the stock is now trading just 1.24 per cent lower at $16.35. Treasury reaffirmed its earnings, to be reported next week, and said the report was “false” and “misleading”.