BusinessNow: Live coverage of financial markets and companies, plus analysis and opinion
Fortescue rips higher yet again, while Blackmores dives as much as 18 per cent in a horror session.
- Masters to shut as Woolies exits
- Metcash buys Woolies’ hardware business
- Di Pilla consortium in play for Masters
- Are the banks back in value?
- Wesfarmers profit plunges 83%
- Evolution launches offer for Glencore mine
- Qantas posts record profit
Welcome to the BusinessNow blog for Wednesday, August 24. Qantas has delivered a record profit and is rewarding shareholders with their first dividend since 2009, Blackmores is in the dog house, and Metcash is buying Woolworths’ Home Timber and Hardware business.
7.23: Arrium workers spurn pay cut
The future of troubled steelmaker Arrium has been plunged into further uncertainty after workers at the company’s Whyalla operations rejected a proposed pay deal.
A slim majority of Whyalla steelworkers on Wednesday voted down a new enterprise bargaining agreement which included a 10 per cent pay cut and changes to superannuation. Read more.
6.59pm:World Bank says Kim’s hat in the ring
World Bank chief Jim Yong Kim will seek a second term of office, the global development lender said Tuesday as it announced the start of a selection process for the presidency.
Mr Kim’s bid to remain as president comes in the face a rare public rebuke from the Bank’s rank-and-file, who earlier this month declared that the institution faced a “crisis of leadership.” “The executive directors expressed unanimous support for an open, merit-based and transparent selection, with nominations open to all member countries,” the executive board said in a statement. AFP
6.24pm:Glencore flags worst over
The mining giant has tipped commodity prices are past their bottom, as it posted narrower first-half losses and cut debt further. Read more.
6.20pm: End of Woolworths’ Masters disaster
It’s a messy finish, but Woolworths has finally shut the door on one of its worst ever strategic decisions, writes Stephen Bartholomeusz.
The disastrous saga of Woolworths’ foray into the home improvement sector is almost over, six years and several billion dollars after its launch.
While it has taken seven months since Woolworths and its one-third partner, Lowe’s, decided to pull the plug on the loss-making Masters chain after years of mounting damage, about $600 million worth attributable to Woolworths’ — and another $1.9 billion of Woolworths’ impairments and write-offs at the half-year — the series of deals announced today will see them exit the sector, almost. Read more.
5.31pm: Aussie dollar dips
The Australian dollar was a little lower in late trade on Wednesday, with the focus of traders remaining squarely on a speech by US Federal Reserve Chair Janet Yellen at the end of the week.
At 5.30pm (AEST), the Australian dollar was changing hands at US76.03 cents, down from US76.16c at the same time on Tuesday. Read more.
5.07pm: Australian Vintage numbers sour
The winemaker has swung to a full-year loss, flagging challenging conditions ahead after taking a steep hit from Britain’s decision to exit the European Union.
The owner of the McGuigan, Tempus Two and Nepenthe brands recorded a net loss of $2 million owing to costs associated with the termination of a vineyard lease, while underlying profit edged up 1.4 per cent to $7.2m. Read more.
4.35pm:Masters to shut as Woolies exits
The disastrous push into hardware by Woolworths, which began six years ago with the opening of its first Masters store in Melbourne, will come to an ignominious end on December 11 after the retailer decided to sell up the loss-making chain for $1.5 billion, writes Eli Greenblat.
Properties sold off, hardware inventory sold to vulture funds, the Masters business will be picked apart asset by asset and stripped for as much value as possible after costing Woolworths more than $3 billion in losses and impairments.
Woolworths announced this afternoon it had signed three separate contracts to facilitate its exit from its Masters business and will work hard to find thousands of new jobs for current Masters employees within the Woolworths group, or will pay full redundancies where suitable roles cannot be found. Read more.
4.24pm:ASX closes in the black
The Australian sharemarket has ended marginally in the black as strength in the big banks and miners offset disappointment in Wesfarmers’ earnings result and the impact of Telstra trading ex-dividend.
At the closing bell, the benchmark S&P/ASX 200 index rose 7.9 points, or 0.14 per cent, to 5,561.7, while the broader All Ordinaries index added 6.5 points, or 0.12 per cent, to 5,653.6.
Read more.
4.15pm:A bright outlook for Qantas
Qantas has given back some of its early gains, with its shares closing up 1.47 per cent to $3.45 following its record profit result, but CLSA says comments the airline made today on its outlook are somewhat encouraging for Qantas, Sydney Airports and Flight Centre.
Qantas says that it expects a similar operating environment in the December half of this year to the June half, and that it’s too early to make conclusions about 2017.
CLSA analyst Scott Ryan says concerns about 2017 demand have been evident, but that the fundamentals for ongoing international tourism growth in and out of Australia remain sound.
4.05pm:An ugly “un-Wesfarmers-like” result
Even though it was well-foreshadowed, the jarring effects of the impairments and losses from Target and the Curragh coal operation on Wesfarmers’ reported bottom line made for an ugly “un-Wesfarmers-like” result.
After the $1.3 billion of Target impairments, $145 million of Target restructuring costs, $850m of Curragh impairments and $310m of Curragh losses it is perhaps surprising that Wesfarmers even had a bottom line.
There was a noticeable drop-off in the rate of sales growth in the final quarter, which Coles attributed to seasonal factors and meat deflation, but there may also have been an element of increased competition as Woolworths tries to get back into the game.
Read more of Stephen Bartholomeusz’s analysis
3.40pm:From begging in Canberra to flying high
It’s the ultimate turnaround story: Two years ago Alan Joyce was on his hands and knees doing the rounds of Canberra, looking for a debt guarantee. Today he declared the best result in the company’s 95-year-old history, writes John Durie.
Thankfully Treasurer Joe Hockey rejected most of Joyce’s pleas and the Government settled by amending the Qantas Sale Act, to give it more freedom to bring in outside shareholders while maintaining the main restriction of 49 per cent on foreign ownership.
The Qantas turnaround is a textbook case study on just why Governments should think very hard before bailing out distressed companies, particularly those in cyclical industries.
Read more
3.25pm:Vodafone hunts enterprise opportunities
Vodafone Hutchison Australia is looking to steal a greater share of the enterprise market from its rivals and doesn’t see its lack of fixed assets as an impediment to its overall ambitions, writes Supratim Adhikari.
While the mobile operator has predominantly focused on the consumer market, Vodafone Australia chief executive Inaki Berroeta said that the time was right for the operator to make further inroads in the enterprise space.
Vodafone pointed to its recent partnership with Qantas as a sign of things to come with the telco’s enterprise business executive general manager Stuart Kelly saying the deal showcased Vodafone’s overall prowess as a mobile provider.
Read more
3.04pm:Fortescue is still climbing!?
There seems to be no stopping Fortescue despite the warnings from analysts this week – shares in the iron ore miner are up another 4.4 per cent today at a two-and-a-half-year high of $5.12.
A credit rating upgrade from Moody’s yesterday afternoon, along with a record dividend announced by the company on Monday has seen the shares continue to rip higher despite a recommendation cut from Credit Suisse yesterday.
The move from Credit Suisse brought them in line with other analysts, with Bloomberg data showing just three ‘buy’ ratings on the stock, including JP Morgan and Macquarie, five ‘hold’ recommendations and 12 ‘sell’ ratings.
Fortescue has surged 173 per cent so far this year, which makes it the third-best performing stock on the ASX 200 over that period, and compared with a 5 per cent gain from the ASX 200.
“We like the FMG story, just not at the current share price and heading into the period of seasonal steel production weakness,” Credit Suisse said… and the market promptly ignored them.
2.21pm:Qantas cools, but future looks bright
Qantas has cooled off in early afternoon trade as investors get over the excitement of a dividend for the first time in seven years.
After an initial 5.3 per cent surge to a four-month high $3.58 the shares have slipped back to be 2.3 per cent higher for the day at just before 2:15pm AEST. The ASX 200 is up 0.2 per cent.
But market movement aside, it’s not just that the dividend is back, it’s what is says about Qantas’ confidence about the future, writes Stephen Bartholomeusz.
It also underscores the scale and quality of the transformation Alan Joyce has overseen since the dark days of 2011.
2.17pm:Earnings outlook not so hot
Earnings season isn’t going very well, despite already modest expectations.
Today has been relatively good, with positive share price reactions outnumbering negative reactions by more than 2 to 1.
But at the halfway point, brokers have downgraded about twice as many companies as they have upgraded since earnings season began. And Bloomberg’s consensus estimate of one-year forward EPS has fallen almost 4 per cent. That’s pushed the PE ratio up to to 16.8 times, the highest since the pre-GFC peak in 2007.
Will it matter? Not so much if interest rates continue to fall, forcing more and more people into the share market. But shares will certainly be vulnerable to any shocks, particularly if they cause a back up in global bond yields.
2.12pm:McMillan Shakespeare shares tank
Shares in salary packaging and leasing services group McMillan Shakespeare have tanked as a record full-year profit result came in just shy of market expectations and its most important contract promised to deliver lower returns, writes Daniel Palmer.
For the year to June 30, McMillan reported a 22.2 per cent jump in net profit to $82.5m on the back of a 29.5 per cent lift in revenue to $504.7m.
The company’s adjusted profit of $87.2m was up 25 per cent, but came in short of market projections for a reading of $89.3m.
Investors were cautious in response to the minor miss, although news of a major contract being at risk was the key to a 10 per cent decline in its value.
Read more
2.02pm:Alumina half-year profit slumps
Alumina is the latest group to record a sharp decline in earnings due to weak commodity prices, reporting its half-year profit was almost entirely wiped out.
For the six months to June 30, Alumina (AWC) said net profit slumped 93.8 per cent to $US7.8 million as weaker alumina prices more than halved margins.
Chief executive Peter Wasow said the result was reasonable given the trying market environment.
1.45pm:Price deflation hits Coles
Coles has borne witness to the unprecedented slide in shelf prices currently pressuring the $90 billion food and grocery sector, after the nation’s second-biggest supermarket chain this morning posted its biggest year-on-year decline in food prices since 2014, writes Eli Greenblat.
Unveiling its latest results as part of Wesfarmers’ full-year results, Coles said it recorded 2.4 per cent deflation in the fourth quarter, or a near $200 million reduction in food prices for the quarter relative to the fourth quarter of 2015.
It was the biggest year-on-year fall in prices since the first quarter of 2014. The slide in food prices places extra pressure on retailers such as Coles as they scramble to eke out more earnings, and cover growing costs, from shrinking shelf prices.
Read more
1.32pm:Rex plunges to full-year loss
The nation’s regional largest airline Regional Express has swung to a loss for the full year, its first red ink in 14 years, writes Daniel Palmer.
For the year to June 30, Rex logged a loss of $9.6m, a sharp turnaround on last year’s $6.7m profit, owing to writedowns tied to the loss of a contract with the Department of Defence.
In total, the group booked impairments of $15m in goodwill and assets.
Read more
1.09pm:Telstra, Wesfarmers drag on ASX
A quick lunchtime look at the market shows healthy gains from banks and miners are being offset by sizeable losses from Telstra, which is trading ex-dividend today, and Wesfarmers.
At 1pm AEST local stocks are slightly positive for the day at 5560 points, with the big four doing the heavy lifting.
CBA is up 1 per cent, Westpac and NAB have gained around 1.2 per cent and ANZ lifted 0.8 per cent.
Meanwhile BHP added 1.7 per cent, Rio Tinto is up 0.8 per cent and Woodside Petroleum added 0.6 per cent despite oil price weakness.
Telstra dropped 3.6 per cent as it goes ex-div, while Wesfarmers is weighing heavily on the market on the back of a disappointing full-year result — the market heavyweight is down 2.3 per cent.
Blackmores is still the worst performer, down 13.7 per cent, while Aconex is pushed 7.3 per cent lower and A2 Milk falls 6.6 per cent.
Ardent Leisure is leading the way on the ASX 200 with a 13.4 per cent rise, while Sirtex Medical isn’t far behind with a 12.6 per cent gain.
1.00pm:Slater and Gordon braces for $1bn loss
Troubled law firm Slater & Gordon says it will book a loss of more than $1 billion for the last financial year, a period marred by huge writedowns and a share price plunge of nearly 90 per cent, writes Michael Roddan.
Slater in February notched a half-year loss of $958.3m after booking a more than $800m writedown on its troublesome UK acquisition.
Slater & Gordon bought Quindell’s professional services division in April last year in what was a $1.23 billion deal, later writing down $814.2m from the business now rebranded Slater Gordon Solutions.
The law firm has since been in negotiations with its bankers over restructuring plans.
Read more
12.35pm:Metcash buys Woolies’ hardware business
Retail giant Woolworths has offloaded its Home Timber & Hardware business to ASX-listed rival Metcash for $165m.
The announcement follows a report in The Australian’s Data Room column today that pointed to an imminent deal between Woolworths (WOW) and Mitre 10 owner, Metcash (MTS), over the operation.
While Metcash has since announced the deal for Home Timber and Hardware, Woolworths has not released any details to the market.
Its trading suspension is expected to come to an end before the market opens tomorrow.
Meanwhile, Metcash has said it will push back a plan to reinstate dividends until FY2018 to help its balance sheet absorb the acquisition.
The deal, which is tipped to be finalised in October, will be funded by about $85m in new debt and an $80m capital raising. Fully underwritten by Macquarie Capital, the raising will be reserved for institutional investors and will come at a price of $2 a share, a 2.9 per cent discount to its last traded price. The raise equates to 4.3 per cent of current issued capital and books on the deal close at 4.30pm Sydney time.
12.20pm:Wesfarmers shares tumble
Wesfarmers shares have tumbled 3.1 per cent to $42.209 and are heading for their biggest one-day fall in three months amid concern about margins in its core food & liquor business.
“While the result hit expectations at the NPAT and EBIT lines, it is the mix that is interesting,” Macquarie says.
“The big news in this result is the decline in food and liquor (F&L) margins implied in 2H16 of 13bps compared to an estimated 4bp expansion in 1H16. Competition has definitely arrived in the supermarket sector.”
The broker is forecasting flat EBIT margins from FY17, but notes this has happened a little quicker than expected. It says F&L comps are still high enough at Coles to generate operating leverage and deliver market share gains, and that Coles is therefore likely to have made further price investment over the half to maintain price leadership.
Overall, Macquarie says that while the F&L margin compression from FY17 should not be a shock, the market could be surprised that it has occurred in 2H16.
“Overall, the result has met expectations at EBIT and NPAT lines and the earnings outlook will come down to where consensus is placed on Coles’ margin over the medium term.
We are currently assuming flat margins from FY17 and declining from FY19.”
Investors have evidently been taking profits in the conglomerate after an almost 13 per cent rally since the most recent low in late June.
Read more on Wesfarmers’ result
11.47am:John McGrath quits as CEO
Renowned real estate agent John McGrath is stepping away from the daily operations of the listed McGrath group amid a number of executive changes unveiled today.
Mr McGrath said his new job would focus on growing the company’s “brand, growth and innovation”.
The company’s current joint chief executive Cameron Judson will take on Mr McGrath’s role.
11.35am:Blackmores shares plunge on outlook
Blackmores shares fell as much as 13 per cent to a five-week low of $139.50 in early trade amid concern about the vitamin giant’s outlook.
Alarm bells roared in investors’ ears as the company warned trading conditions in the first quarter of the new financial year will lead to lower sales.
Price dives this big are not that rare for BKL, with today marking the biggest one-day drop in a little over four months. The shares are sitting around $140, the lowest they’ve been since June 13.
CLSA’s Shaun Weick notes that while second-half revenue was up 9 per cent on the first half, fourth-quarter revenue was down 2.5 per cent on the third quarter, indicating a “very rapid deceleration of revenue in the back half of the year”.
In terms of FY17 guidance, no specific commentary was provided, as has been the trend with the China-facing consumer names.
FY16 NPAT of $100m was 0.7 per cent above consensus and NPAT margins rose to 13.90 per cent, in line with consensus, Weick says, while FY16 revenue of $717.2m was also in line.
BKL made mention of an “increasingly complex business environment”, and “strangely perhaps” there was no conference call.
BKL shares were last down 12 per cent at $141.80, the worst performer in the ASX 200.
11.22am:Worley Parsons misses expectations
Engineering giant Worley Parsons has fallen just short of market expectations despite swinging to profit for the full year.
The former market darling declared a full-year profit of $23.5m for the year to June 30, a sharp improvement on the prior year’s $54.9m loss.
However, its underlying earnings slumped 37 per cent to $153.1m, below market projections for a marginally less extreme drop to $156.8m.
The company’s chief executive Andrew Wood said the result showed progress in its cost-cutting program to address soft market conditions.
Read more
11.17am:Blackmores profit cracks $100m
Vitamin giant Blackmores has cracked the $100m ceiling in annual profit as Chinese customers fuel robust sales growth, writes Michael Roddan.
Blackmores booked a net profit of $100 million for the year through June, an increase of 115 per cent year-on-year.
Chief executive Christine Holgate said the company was on the cusp of a demographic and regional boom.
Read more
11.10am:Big winners lift sharemarket
The Australian sharemarket has edged higher as the focus on earnings ratcheted up following a quiet session offshore.
At 10.30am (AEST), the benchmark S&P/ASX 200 index tacked on 4 points, or 0.07 per cent, to 5,557.8, while the broader All Ordinaries index lifted 2 points, or 0.04 per cent, to 5,649.1.
The big winners in early action were Qantas, Worley Parsons and two big names in the embattled dairy sector, while high-flying Wesfarmers and Blackmores appeared the latest high-profile casualties of earnings season.
Read more
11.00am:Di Pilla consortium in play for Masters
Veteran banker David Di Pilla is understood to be leading a consortium of wealthy families to buy Woolworths’ Masters hardware portfolio.
Mr Di Pilla, who is married to a member of Sydney’s wealthy Salteri family, is believed to have injected some of his personal wealth in to the transaction, as have Di Pilla’s parents-in-law, Mary and Alex Shaw.
The planned acquisition of the Masters business has been backed by two other unnamed high net worth families.
The consortium includes investors Greg Hayes and legendary banker Matthew Grounds, who heads up UBS’s operations in Australia. Chemist Warehouse and Spotlight are also part of the group.
It is understood the private consortium has already lined up a follow-on deal with Masters’ arch rival, Bunnings, with between 10 and 20 of the large format stores likely to be leased to the hardware retailer. A number of the properties have also been earmarked for redevelopment.
The price of the transaction, which is expected to be unveiled shortly, is yet to be disclosed.
Hayes and Grounds are also investors in the Aurrum aged care venture, which Di Pilla founded two years ago. The business now operates 7 aged care facilities in NSW and Victoria and owns three greenfields sites.
The developments come after DataRoom exclusively revealed that Metcash was finalising contracts Tuesday night to buy Home Time and Hardware from Woolworths, with the price expected to be between $150m and $200m. Metcash has since announced to the market that it is purchasing the hardware chain from Woolworths for $165m.
It is understood that Anchorage also bid close to the same valuation as Metcash and raises questions in some quarters about the synergy value Metcash will extract from the deal.
Following that report, Woolworths shares were placed in a trading halt Wednesday morning, pending an announcement on its home improvement joint venture business, which includes Masters and HTH.
Sources said Wednesday morning that with HTH being immaterial to Woolworths, a deal involving Blackstone could also be announced.
— Gretchen Friemann and Bridget Carter
10.52am:Aconex results not as bad as they look
Aconex results are not as bad as they look, according to Morgan Stanley and RBC.
Morgan Stanley says the FY16 results: “reaffirm our view that ACX is leading in the race to gain global dominance in construction workflow collaboration ... acceleration in revenue from the Americas and Asia, and ongoing dominance in the enterprise and large project space give us greater confidence.”
RBC says the FY16 results: “reflected the top end of guidance on an organic growth basis, and provided updated medium-term guidance consistent with past commentary that provides reassurance about the longer-term trajectory for the company.”
Aconex’s FY16 statutory NPAT of $5.7m vs $11.6m in FY15 isn’t a like-for-like comparison because FY15 included nearly $21m in finance income from the conversion of class A preference shares and listing costs as part of the IPO, which distorted the figure.
ACX shares were last down 5.3 per cent at $7.37.
10.45am:Boral in US bricks JV
Boral has announced plans to fold its US bricks business into a new joint venture with an affiliate of Forterra as it reported flat net profit of $256m, writes Andrew White.
Extending a formula applied to its US gypsum business and the Australian brick venture formed with CSR in May 2015, chief executive Mike Kane said he expected to pull up to $US25m of synergies out of a business with the capacity to produce 2.6 billion bricks a year.
Mr Kane said the US housing market was four years into a cyclical upswing but that the high fixed costs and energy intensive nature of brickmaking meant it was difficult to create a profitable business.
10.36am:Qantas’ crowd-pleaser
Qantas shares roared into the session, shooting 5 per cent higher to $3.565 after the flying kangaroo announced a record $1.52bn profit and the long-awaited return of its dividend.
If the stock closes at its current level it’ll be the best one-day rise in two months. The shares are now sitting at their highest level since April 19.
Qantas (QAN) has not paid a regular dividend since 2009 as it lacked the franking credits to hand over a meaningful payout.
CLSA says the result was slightly below consensus, but the dividend is a “key positive”.
“This is the bright spot of the result, particularly given it copped some investor grief at 1H16 result for only declaring a buyback and not re-starting the divvy,” CLSA analysts said.
Read more
10.28am:Broker rating changes
Caltex cut to Neutral vs Buy — Citi
Charter Hall cut to Neutral vs Buy — Citi
Healthscope cut to Neutral vs Buy — Citi
Scentre Group cut to Sell vs Neutral — Citi
Greencross cut to Sell vs Hold — Deutsche Bank
Aconex cut to Hold vs Buy — Deutsche Bank
10.18am:Are the banks back in value?
Value-hunting investors will soon turn their attention to Australia’s out-of-favour big banks, according to MarketMatters analysts, who see Westpac as showing a “very encouraging” technical setup.
Here are the year-to-date moves of Australia’s biggest banks:
CBA -13.8% to $73.85
Westpac -9.4% to $30.41
ANZ -3.7% to $26.92 (after an 18.5% rally from July’s low)
NAB -8.6% to $26.92
“Yesterday the ASX200 broke out of its recent extremely tight trading range led by a satisfying +1% rally by the banking sector,” MarketMatters noted today.
“Our view that banks outperform over the next 3-6 months has clearly been challenged but yesterday’s strength and Westpac’s (WBC) technical set up is very encouraging.
“We continue to believe that investors who scour the market for any value will soon switch their attention to the oversold banking sector, especially with chunky fully-franked dividends looming in November.”
What about Westpac?
“Technically, WBC’s recent close over $30 is bullish, initially targeting a move towards $31.50-32, ~4% higher.”
Where is the ASX 200 heading?
“Our view is yesterday’s strength will eventually follow through and take the ASX200 towards the 5625-point area.”
10.10am:Wesfarmers profit plunges 83%
Wesfarmers has suffered an 83.3 per cent slump in its full-year profit to $407m after more than $2bn in impairments flowing from its loss-making coal operations and its underperforming merchandise chain Target overwhelmed otherwise strong profitability from its key retail arms Coles and Bunnings.
The Perth-based conglomerate (WES) will now rely more than ever before on its sprawling retail operations to bolster its bottom line, with chief executive Richard Goyder warning that competition in the retail sector is expected to remain robust as customers continue to be driven by value.
Read Eli Greenblat’s full report on the results.
10.00am:Woolworths, Metcash in trading halt
Woolworths shares are in a trading halt pending news on its home improvement JV.
The halt comes a day before the release of Woolworths’ full-year earnings, with the retailer saying it was finalising deals relating to the planned exit from its home improvement businesses.
The suspension of trade is expected to come to an end before the market opens tomorrow.
Metcash has also placed its shares in a trading halt “pending the release of an announcement by the company”.
As reported in The Australian today, Metcash is set to buy Woolworths’ Home Timber and Hardware unit.
More to come
9.53am:Murray Goulburn meets guidance
Embattled dairy co-operative Murray Goulburn has met downwardly revised guidance for the full year despite posting a result well below expectations shown in its prospectus last year, writes Daniel Palmer.
Through an incredibly turbulent year, Murray Goulburn trimmed profit forecasts three times, saw its chief finance and executive officers stand down and shocked farmers by delivering a retrospective price cut in April and the lowest opening farmgate price in the sector for the 2017 financial year.
Read more
9.45am:A2Milk result above guidance — UBS
A2Milk’s full-year result was above its guidance, with solid cash flow as China demand drove very strong infant formula sales, according to UBS.
EBITDA was $NZ54.6m vs $NZ53m estimated by the broker, with infant formula sales of $NZ214m vs $NZ199m expected.
“China regulatory changes require close monitoring but company is actively managing,” UBS analyst Jordan Rogers says.
It notes that guidance was limited apart from a comment referring to expected “growth in 2017”.
9.35am:Time to bail out of Aconex?
Aconex was one of yesterday’s most interesting stocks to watch, and there could be more fireworks in the session ahead as Credit Suisse cuts its rating to neutral.
The project management software company announced a 50 per cent slide in full-year profit, along with a 50 per cent rise in revenue. The stock tumbled as much as 12.5 per cent at the open but finished 1.6 per cent in the black after a huge fightback.
Investors love Aconex. It has surged 50 per cent so far this year to last trade at $7.78, an incredible 321 per cent higher than its listing price back in December 2014.
Yesterday’s result saw Credit Suisse cut its rating on the stock to neutral from outperform as it sees a “lack of catalyst”.
“Previously we believed ACX would exceed near-term consensus revenue estimates based on a combination of: volume momentum, roll out of the cost management product and Conject revenue synergies,” Credit Suisse said.
“However … we believe there is little upside to consensus estimates in the short term and valuation continues to be demanding (8.4x FY17 EV/revenue).”
“Our target price increases to $7.40 (prev. $7.10) and rating moves to neutral (previously outperform).”
The mood from other analysts is still positive, overall, with Bloomberg data showing four ‘buys’, four ‘holds’ and no ’sell’ recommendations.
9.27am:Bega doubles profit, CEO to depart
Dairy company Bega Cheese has shrugged off challenging market conditions to report a doubling of profit for the full year as the group announced the retirement of its chief executive, writes Daniel Palmer.
The ASX-listed group said its net profit surged 132 per cent to $28.8m in the 12 months to June 30 on the back of a 7.5 per cent rise in revenues to $1.2bn.
The positive showing came despite a year of tumult in the dairy industry as a global glut forced prices down. The greatest impact was seen at Bega rival Murray Goulburn, which announced a shock retroactive price cut to farmers and saw its chief executive and finance officers head for the exit.
Read more
9.20am:The Reject Shop in sharp sales turnaround
The Reject Shop has unveiled a sharp turnaround in its sale performance after rejigging its retailing offering and shaking-up its marketing strategy.
The Reject Shop today revealed a net profit of $17.1m for the 53 weeks ending July 3, an increase of 20 per cent compared to the 52 weeks through June 28.
Excluding the 53rd trading week and the costs associated with the exit of its Tullamarine distribution centre, profit was up 47.5 per cent year-on-year.
9.15am:ASX set for slight rise at open
Aussie stocks could see a flatter start than expected this morning, with the SPI200 pointing to a 0.3 per cent rise but fair value suggesting a shallower 0.1 per cent gain.
BHP Billiton looks set to add almost 2 per cent at the open after giving up 1 per cent over the last two sessions.
Iron ore gained almost 1 per cent overnight to $US61.75, while the price of crude oil has lost 1.3 per cent so far today.
It’s another mega-earnings day, which will make for an interesting open. We’ll have updates on Wesfarmers, Qantas, Murray Goulburn, Boral, A2 Milk, Alumina, Ardent Leisure, APA Group, Bega, Paladin, Qube, Reject Shop, Spotless and Worley Parsons, so stay tuned.
9.05am:Broker rating changes
A mixed bag today with an equal number of upgrades and downgrades as follows:
Ainsworth cut to Sell vs Underperform — CLSA
APN Outdoor cut to Underperform vs Outperform — CLSA
NEXTDC raised to Buy vs Outperform — CLSA
Scentre Group raised to Outperform vs Underperform — CLSA
Greencross cut to Neutral vs Outperform — Macquarie
Aconex cut to Neutral vs Outperform — Credit Suisse
BHP Billiton raised to Buy vs Hold — Jefferies
Fortescue Metals raised to Hold vs Sell — Jefferies
Caltex raised to Overweight vs Neutral — JP Morgan
GWA Group cut to Sell vs Neutral — UBS
Mesoblast raised to Buy vs Hold — Morningstar
Monadelphous raised to Hold vs Reduce — Morgans
Monadelphous cut to Sell vs Neutral — UBS
Virtus Health cut to Neutral vs Buy — UBS
8.53am:Evolution launches offer for Glencore mine
Gold miner Evolution Mining has snapped up Glencore’s Ernest Henry gold and copper mine in Queensland for $900m.
To fund the deal Evolution has launched a $401m accelerated entitlement offer.
Credit Suisse and RBC are the joint lead managers to the equity raise which has been priced at $2.05, a 13 per cent discount to the theoretical ex-rights price or Terp.
Evolution is issuing a total of 196 million new securities under the two-for-15 entitlement offer, with books due to close on the deal later today.
The deal was brokered by RBC Capital on behalf of Evolution.
Shares in the stock have been suspended.
8.45am:Qantas dividend, buyback sweeten result
Qantas reported FY16 underlying profit of $1.532bn, a record for the airline, but still 2.4 per cent below Bloomberg’s $1.57bn market consensus and near the bottom of the $1.53bn-$1.57bn range of estimates. However the results have been sweetened by a share buyback of up to $366m and a $0.07 final dividend, the first dividend payment from the airline since 2009.
Read more on Qantas’ profit result.
8.30am: McGrath optimistic about industry
Newly-listed real estate group McGrath is confident the challenges facing the real estate industry will be temporary.
McGrath today revealed a profit of $8.41 million for the year through June, a 20 per cent increase year-on-year. Revenues for the group were up 41 per cent to $121 million.
7.55am:A2 Milk swings to profit
A2 Milk has notched up an incredible turnaround in annual profit after benefiting from huge demand for its infant formula products locally and in Asia.
A2 Milk today booked a net profit of $NZ30.4 million for the year through June, a stunning turnaround from the prior year’s loss of $NZ2.1m.
Revenue for the group swelled 127 per cent to $352.8 million but the company decided against paying a dividend.
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7.25am: Stocks set to climb after US gains
The Australian market looks set to open higher after US stocks rose modestly, as gains in the tech sector helped buoy the Nasdaq to a record intraday high and solid housing market data provided more evidence the US economy may be picking up momentum.
At 6.45am (AEST), the share price index was up 19 points at 5,534.
Data overnight showed that new US single-family home sales unexpectedly rose in July, reaching their highest level in nearly nine years as demand increased broadly, brightening the housing market outlook.
Locally, in economic news today, the Australian Bureau of Statistics releases June’s construction work figures.
7.20am: Iron ore strength buoys miners
The iron ore price pushed higher overnight and is continuing to hover around three-month highs, defying two fresh calls for a looming slump.
Iron ore rose 0.8 per cent to $US61.60 overnight, according to The Steel Index, from $US61.10 in the previous session.
The commodity is now a whisker below the three-and-a-half-month peak of $US61.80 it reached last week, buoying large and small producers despite expectations the rally will not last.
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7.10am: IMF Bentham triples profit
Litigation funder IMF Bentham has reported a strong rise in profit as it shifts its strategy to work on a larger number of legal cases.
Net profit attributable to members more than tripled to $20.9 million in the year to June 30, compared with $6.3m in the previous year.
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7.00am: Fortescue rewarded for debt cuts
Ratings agency Moody’s has upgraded its credit ratings for Fortescue Metals Group, after the pure play iron ore miner paid down debt aggressively over the past year as it slashed costs and benefited from a surprise bounce in prices.
The miner (FMG) this week tripled its full-year profit and announced it had repaid $US2.9bn in debt during fiscal 2016, pushing its gearing below 40 per cent.
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6.50am: Dollar falls as greenback trims losses
The Australian dollar is lower against its US counterpart which rose on unexpectedly strong US housing figures.
At 6.35am (AEST), the local unit was trading at US76.15c, down from US76.42 cents yesterday.
US housing stocks jumped 2 per cent after the Commerce Department reported new single-family home sales unexpectedly soared in July to near nine-year highs. The bump in new home sales helped the US dollar trim losses, though the greenback was still down 0.02 per cent to 94.54 against a basket of major currencies.
6.40am: Wall St rises in broad rally
US stocks rose broadly overnight, while European markets rebounded after improving eurozone data.
The positive global leads are set to buoy the Australian share market this morning, with ASX futures up 19 points at 6.19am (AEST).
On Wall Street, the Dow Jones Industrial Average climbed 18 points, or 0.1 per cent, to 18547. The S&P 500 rose 0.2 per cent, with materials shares leading gains across most major sectors. The Nasdaq Composite added 0.3 per cent.
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