Live coverage: Financial markets and companies, plus analysis and opinion
The broader market may have cruised through earnings season, but several key insights have been uncovered in the wash.
- Stocks end week in the red
- Earnings season: what we’ve learned
- Trump could cause recession
- Market risks loom: AMP
- Time to sell Macquarie?
- Brokers slash Blackmores price target
- Woolworths share price “very full”: CLSA
Welcome to the BusinessNow blog for Friday, August 26. We’re at the tail end of earnings season, with Coca-Cola Amatil, Cabcharge, Star Entertainment and APN News & Media all reporting today. Meanwhile, brokers weigh in on Woolworths and Blackmores.
7.56pm:Value makes a welcome return
With the Australian sharemarket tracking sideways for the past four weeks, it might seem as though the latest corporate earnings season has been a non-event, writes David Rogers.
After surging 11 per cent following the sell-off after Britain’s vote to leave the EU, Australia’s benchmark S&P/ASX 200 has been unusually quiet throughout the reporting period.
But the flat trend of the broader market masks the fact that some of the unloved “value” stocks are making a comeback, while some of the “expensive defensives” and other highly priced “market darlings” of recent years have started to lag behind.
It’s a sign that investors are locking in profits in case of a retreat in the overall market, while seeing better opportunities in companies that may be due for a recovery in earnings. Stalwarts like CSL, Transurban, Brambles, AGL and REA Group — long favoured for their reliable earnings and dividends in a world of record low interest rates — have underperformed the S&P/ASX 200 index this month. Read more.
7.37pm: US dollar dips, shares hit two-week low
The US dollar has edged down and global shares slipped to a two-week low as investors turned cautious before a keynote speech by Federal Reserve Chair Janet Yellen that could map out a clearer path for US interest rates.
The MSCI All-Country World index was down 0.1 per cent by 0817 GMT, after slipping to its lowest level since August 9, while the pan-European STOXX 600 fell 0.2 per cent.
Investors were wary of Yellen hinting at a near-term interest rate rise, which could divert some of the liquidity that has underpinned riskier assets worldwide, though others predicted she would strike a more equivocal note.
The US dollar index, which tracks the currency against six major peers, slipped 0.14 per cent to 94.721, while eurozone government bond yields crept up. AFP
7.11pm: Brits back at the shops
British consumers have regained some of the confidence they lost after the Brexit vote in June, according to a new survey, the latest sign that households are largely taking the decision to leave the European Union in their stride. The YouGov/CEBR Consumer Confidence Index rose by 3.2 points in August, its biggest month-to-month jump since February 2013.
The index, which stands at 109.8, has now recovered around half of the ground it lost following the EU referendum. Read more.
6.31pm:Storm Financial heads breached duty
Storm Financial’s former directors contravened their legal duty to carry out their job with “care and diligence” by giving inappropriate financial advice to vulnerable clients, a Federal Court justice has found.
The Australian Securities and Investments Commission (ASIC) began civil proceedings against Emmanuel and Julie Cassimatis in 2010, alleging that as the executive directors of Storm Financial Ltd they breached their fiduciary duties under Australian corporate law.
The Townsville-based company’s strategy backfired badly on thousands of customers during the global financial crisis with many losing their entire life savings and homes.
Storm folded in 2009 with debts of $88 million.
The Storm model was not in dispute during the case against the pair, Justice James Edelman noted. Read more.
6.11pm:A motley Broo of liquid assets
A long hard thirst for a beer-related investment deserves a big chunky ASX exposure, writes Tim Boreham.
The trouble is, there aren’t any following the 2011 sale of Foster’s Group to global house SABMiller and Kirin of Japan’s purchase of Tooheys owner Lion Nathan two years earlier.
Much has changed in the sector since the Bondy and John Elliott beer baron days: mainstream beer sales are in almost irreversible decline, with boutique drops filling the gap.
But if you get it right it’s still good cash flow business, as evidenced by the resilience of the defiantly family-owned Coopers.
The biggest remaining listed ASX play — Coca-Cola Amatil (CCL, $9.17) — is also a diluted one, given revenue is still dominated by soft drinks and water. Read more.
5.41pm: Update your iPhone, Apple warns
Apple iPhone users are being urged to update their handsets after a private cyberarms dealer found a way to hack the iPhone with sophisticated malware, David Swan writes.
The Israel-based NSO group developed the ‘world first’ malware, which exploited three previously unknown iOS vulnerabilities.
NSO Group’s software effectively transforms the phone into a surveillance device, tracking its movements, logging messages and downloading personal data.
It also allowed hackers access to their passwords and could record sounds. Read more.
5.17pm: Dollar lifts as Fed eyed
The Australian dollar has edged higher as financial markets wait for further clarity on the timing of a US interest rate hike from US Federal Reserve chair Janet Yellen.
At 5pm (AEST) on Friday, the local unit was trading at US76.33 cents, up from US76.25c on Thursday.
Moody’s Analytics economist Emily Dabbs expressed surprise in the Australian dollar’s rise, given the caution in the market ahead of Dr Yellen’s speech at an annual symposium in Wyoming, scheduled for midnight on Friday, Australian time. “It’s the calm before the storm so you’ll see the occasional bump up or down,” Ms Dabbs said.
If Ms Yellen signals a rate hike is possible in September, the US dollar is likely to rise, and the Australian dollar fall, she said. AAP
4.23pm:Stocks end week in the red
The Australian sharemarket has ended the week on a negative note as investors were wary to make heavy bets ahead of a Friday night speech from US Federal Reserve chair Janet Yellen, writes Daniel Palmer.
At the closing bell, the benchmark S&P/ASX 200 index weakened 26.4 points, or 0.48 per cent, to 5,515.5, while the broader All Ordinaries index lost 24 points, or 0.43 per cent, to 5,607.4.
The local market ended the week down 0.2 per cent, with two straight losses overshadowing gains in the banks and miners through the Tuesday and Wednesday sessions. Read more.
4.15pm:Yellow Brick Road widens FY loss
Mark Bouris’ loss-making Yellow Brick Road has dived further into the red, revealing a net loss of $9.5 million for the year through June, writes Michael Roddan.
The deterioration on the prior year’s $2.55m loss came despite the financial services firm increasing its revenue 31 per cent to $218m.
YBR, which has never booked an annual profit, declined to pay a dividend.
3.50pm:The Star trumps Crown
The Star Entertainment Group’s VIP revenue at its Sydney casino has, for the first time, outstripped the revenue at its major rival — the Melbourne property of the James Packer-backed Crown Resorts, writes Sarah-Jane Tasker.
The Star’s annual results today show its international VIP rebate business turnover was up 7 per on the prior year to $49.5bn, with normalised revenue of $670m.
The Star’s jump on Crown’s VIP revenue was recorded in the second half of 2016.
3.19pm:Warning: update your iPhone
Apple iPhone users are being urged to update their handsets after a private cyberarms dealer found a way to hack the iPhone with sophisticated malware, writes David Swan.
The Israel-based NSO group developed the ‘world first’ malware, which exploited three previously unknown iOS vulnerabilities.
NSO Group’s software effectively transforms the phone into a surveillance device, tracking its movements, logging messages and downloading personal data.
It also allowed hackers access to their passwords and could record sounds.
Apple quickly moved to patch the insecurities, and is advising all users to update their iPhones.
Read more
3.00pm:No ‘bad blood’ with Borghetti: Luxon
Air New Zealand chief Christopher Luxon says the circumstances around his sudden departure from the board of Virgin Australia have been “chronically overplayed” and that the Kiwi carrier’s exit was purely a commercial decision, writes Mitchell Bingemann.
In his first comments discussing his dramatic exit from Virgin Australia’s board in March, Mr Luxon said there was no “bad blood” between him and Virgin chief John Borghetti, that their relationship remained “good” and they spoke regularly.
It had been widely reported that Mr Luxon quit the Virgin board after an unsuccessful coup to oust Mr Borghetti. But Mr Luxon said such reports were exaggerated.
Read more
2.35pm:Six things we’ve learned in earnings season
It’s been a slog but earnings season is just about over.
Before today’s list of reports, 80 per cent of ASX 200 companies (90 per cent by market cap) had shown their numbers. And the news has been “fairly good”, according to Deutsche Bank.
Despite that enthusiastic review, analysts point out the local index has lagged global markets.
“This may reflect a realisation that Australia’s price-to-earnings ratio is a little high after the outperformance of the past nine months and that while earnings aren’t being cut a lot, expected growth isn’t that great,” equity strategist Tim Baker said.
Here are six observations on earnings season from Deutsche Bank:
1. A good month for resources and service providers. Lower capex, ongoing cost cuts and firmer commodity prices are helping.
2. Housing exposure solid, consumer mixed, as expected. Housing-exposed companies continue to report robust profit growth, with upgrades to forecasts in general.
3. Share price volatility is quite low. While there have been numerous large moves in share prices, it’s easy to miss those that haven’t moved, and to forget that large moves are fairly normal.
4. Notwithstanding low volatility, it does seem that value wants to perform. Value stocks have had a tough couple of years. But value has beaten growth in August so far, with some cheap names racing higher (Ansell, Downer EDI, WorleyParsons, ComputerShare, Lend Lease). On the other hand, some high price-to-earnings stocks have suffered (Blackmores, Medibank Private, REA, CSL). Watch this space.
5. A bad half for earnings — falls across the major sectors. Market earnings growth remains in negative territory (June half -6 per cent year-on-year). But now it’s not only resources dragging down the aggregate. Bank earnings are down on higher bad debts and softer non-interest income.
6. The full-year results can mask a lot. Most companies have reported full-year 2016 results, and that can mask large differences in the first half/second half pace of growth. Profit growth slowed through FY16 for a range of companies, including Treasury Wine, Origin Energy, Seek, Boral and AGL.
2.05pm:Patties shareholders vote for sale
Patties Foods (PFL) shareholders have voted overwhelmingly in favour of the group’s $232 million sale.
At a meeting of investors today, 99.31 per cent of votes were passed in favour of the June takeover proposal from Pacific Equity Partners.
1.55pm:Murray Goulburn salaries leave sour taste
Former Murray Goulburn boss Gary Helou was paid $2m last year for his work up to his formal resignation on April 28.
As John Durie writes, this was down on the $2.9m he picked up in the 2015 year, in large part because he received no short-term bonuses last year. He was paid $751,442 in short-term bonuses in the 2015 year.
Murray Goulburn chair Phil Tracy was paid $314,046 last year, up $28,213 on his prior year pay.
Current MG boss David Mallinson received $754,175 in pay last year.
The payouts are in stark contrast to those to farmers who have been forced off the land, or have had to cut back sharply, after the cut in farmgate milk prices last financial year.
Read John Durie’s full analysis on the dairy industry storm.
1.40pm:Trump could cause global recession: Citi
If New York developer Donald Trump wins the White House in November, the global economy could slip into recession, according to a forecast from Citigroup on Thursday.
In a research note, a team led by the US bank’s chief economist Willem Buiter said the election was a major source of uncertainty in the global economy.
“Our base case is for a (Hillary) Clinton victory and mostly continuity in policies,” the note said, adding that a Clinton administration could result in a major fiscal expansion.
A victory by Republican candidate Trump could foretell of darker times, however, they said.
1.25pm:Worst may be over for earnings: AMP
While it’s been a bad year for listed company profit growth in Australia, the worst may be behind us, according to AMP Capital.
The total number of companies exceeding expectations has fallen back to 41 per cent, below the norm of around 45 per cent.
And while profits have fallen by around 8.5 per cent in 2015-16 due to the resources slump, 62 per cent of companies have seen their profits rise on a year ago and the median company has seen profit growth of around 4 per cent, AMP Capital’s Shane Oliver says.
Moreover, 54 per cent have seen their share price outperform the market the day results were released, suggesting that results haven’t been worse than expected, he adds.
“Overall profits are on track to return to growth in 2016-17 as the slump in resources profits reverses and non-resource stocks see growth. 2016-17 earnings growth is expected to be around 8 per cent, with mining companies now seeing the fastest rate of upgrades.”
1.15pm:Housing boom sees AFG smash forecasts
Australia’s biggest mortgage broker, Australian Finance Group, has smashed its prospectus forecasts, riding the tailwind of the housing boom in its first full year as a listed company, writes Michael Roddan.
AFG today booked a net profit of $22.7m for the year through June, an 11 per cent increase year-on-year and 15 per cent ahead of the group’s prospectus forecasts. The company was floated on the local exchange in mid-2015.
Revenue for the company (AFG) rose 2.8 per cent to $547m.
Read more
1.03pm:Regis pays out full profit in dividends
Aged care group Regis Healthcare has met guidance despite reporting a sharp drop in earnings for the full year, writes Daniel Palmer.
In the 12 months to June 30, Regis saw its net profit slide 20 per cent to $46.1m despite a 10 per cent lift in revenue to $480.7m
Regis also declared a fully franked final dividend of 5.94c a share, a 100 per cent payout of its earnings.
12.40pm:$13 million hit for Cash Converters
Cash Converters will book an impairment charge of up to $13 million in its FY2016 accounts as the corporate regulator probes its lending practices, Daniel Palmer writes.
The pawnbroker and small loans provider said today it had been co-operating with an investigation from ASIC into its compliance with responsible lending laws, with issues flagged that could hit the group’s bottom-line.
12.30pm:Market risks loom, Shane Oliver says
Share markets are due for a breather after strong gains in recent months and weak seasonal factors combined with Italian banks, Italian Senate referendum, the Fed and weak global growth pose risks, according to AMP Capital.
“However, after a 1-2 month correction or consolidation, we anticipate shares to trend higher over the next 12 months helped by okay valuations, very easy global monetary conditions and continuing moderate global economic growth,” says Shane Oliver, AMP Capital’s head of investment strategy and chief economist.
“Ultra-low bond yields point to a soft medium term return potential from them, but it’s hard to get too bearish in a world of fragile growth, spare capacity, low inflation and ongoing shocks. That said, the recent bond rally has taken yields to pathetic levels leaving them at risk of a snapback.
He notes that the Australian dollar has been stuck around 76-77 US cents lately and that if the Fed continues to delay rate hikes, a break of April’s high of at 78 and a push up to 80 cents is likely. But he sees the longer term downtrend ultimately resuming as the interest rate differential in favour of Australia narrows as the RBA continues cutting and the Fed eventually resumes hiking, the risk of a sovereign ratings downgrade continues to increase, and commodity prices remain in a secular downswing.
12.25pm:Telstra, Wesfarmers rise above
The ASX 200 is 0.2 per cent lower at lunchtime despite the best efforts of Telstra and Wesfarmers, who are looking to offset minor but broad losses from market heavyweights.
The index is still just positive for the week at 5532.4 points with around four hours remaining.
Telstra is up 1.1 per cent, while Wesfarmers lifts 1.9 per cent and gold miners see solid gains.
Coca-Cola Amatil is bleeding, down 4.4 per cent following what analysts seem to think was a decent result.
The big four banks have lost between 0.2 per cent and 0.6 per cent, while BHP Billiton is 0.3 per cent higher and Rio Tinto trades flat.
In terms of the week’s biggest winners and losers — Blackmores has tumbled almost 25 per cent, while APN Outdoor tanked 38.6 per cent. Altium gained 24 per cent and GWA Group rose 23.6 per cent.
12.00pm:Cimic JV exec released from jail
The head of Cimic’s Middle East joint venture has been released from jail but investors remain none the wiser as to the reasons for his recent detention, writes Daniel Palmer.
In an update to the market this morning, engineering group Cimic — formerly known as Leighton — said Habtoor Leighton Group chief executive José Antonio López-Monís had been freed by Dubai police.
Mr Monis was arrested on August 17 for unknown reasons, with Cimic not disclosing any information on the nature of the case.
More to come
11.45am:Time to sell Macquarie?
Marketmatters.com.au has just alerted subscribers that it is selling its Macquarie Group (MQG) shares above $80.
“Although we remain positive on Macquarie and the market, we think it’s prudent to book a profit and increase cash levels leading into Janet Yellen’s speech around US monetary policy this evening in the US,” the share trading advisory service says.
“Our average entry price was $72.00.”
Macquarie shares were last down 0.7 per cent at $80.26.
11.30am:NBN expects $5bn revenue in 2020
NBN Co is confident that it will start making money faster than expected even as the costs associated with connecting premises to the Hybrid Fibre Coaxial (HFC) start to push up.
According to NBN Co’s latest corporate plan, it will generate $5 billion in annualised revenue in fiscal 2020, $1bn higher than the figure stipulated in the 2016 corporate plan. However, the latest data on the cost of connecting premises to the network has shown that HFC costs have increased to $2300 premise.
The company is also sticking with its target of completing the project for $49bn, with Mr Morrow maintaining that the government won’t need to tip in any extra cash.
The federal government is investing $29.5bn in public equity into the project and NBN Co has access to $9.2bn of that funding left. Mr Morrow said that the company was in talks with credit ratings agencies to secure the extra funding needed to finish the job.
11.10am:Coca-Cola results good overall: UBS
Investors have shunned Coca-Cola Amatil in early trade after it delivered a net profit rise of 7.8 per cent to $198.2m for the six months to June 30, but UBS is of the view that the results were good overall, with normalised net profit after tax of $198m beating the market consensus by about 2 per cent.
The local Coke bottler is heading for its worst fall since June as investors rush for the exit, with the shares down 3.1 per cent so far.
The bar had been set high for CCL’s result after the shares gained 20 per cent between June 28 and yesterday.
Other analysts are mostly on the fence on Coca-Cola shares, with two ‘buy’ ratings shown by Bloomberg data, seven ‘holds’ and four ‘sells’, with a consensus price target of $9.28.
11.03am:More broker rating changes
South32 cut to Sell vs Neutral — Citi
Asaleo Care raised to Buy vs Neutral — Citi
10.59am:Wild swings fail to budge the market
On the surface, it’s been a calm earnings season for the broad ASX 200, with individual winners and losers not impacting the overall direction of the market.
“An Australia 200 index close today between 5505 and 5565 would complete a run of 15 days in the same territory,” CMC Markets chief strategist Michael McCarthy points out.
“This low volatility comes despite 10 per cent plus swings in individual stocks as investors react to result releases, reflecting uncertainty attached to the Fed’s stance.
“This may all change on Monday as markets digest Yellen’s speech and institutional investors return as the local reporting season peters out,” Mr McCarthy said.
A particularly interesting name to note is BHP Billiton, which has seen its shares lurch up and down during this low-volatility period, with the world’s biggest miner moving more than 1.5 per cent on seven of the last 10 full trading days.
10.53am:Stocks dip at the open
The Australian sharemarket is eyeing a second red session in a row as traders following a negative lead from offshore, writes Daniel Palmer.
At the opening bell, the benchmark S&P/ASX 200 index weakened 23.8 points, or 0.43 per cent, to 5,518.1, while the broader All Ordinaries index lost 22.4 points, or 0.4 per cent, to 5,609.
Earnings season drew the spotlight to beverages giant Coca-Cola Amatil, which weakened 2.7 per cent as its core Australian operations floundered, Mayne Pharma soared 4 per cent as profit rose fourfold, Godfreys tumbled 11 per cent as it slashed its dividend and Cabcharge eased 3 per cent as earnings skidded 45 per cent.
The sentiment hit from the disappointing round of profit updates was partially offset by a 1 per cent lift in crude prices and steady trade for base metals, which drove interest in the resources space.
10.45am:Woolies shows signs of recovery: Goldman
The market may be over-estimating the pace of the turnaround in Woolworths given it trades on a FY17 PE ratio of 20 times, say Goldman Sachs analysts Adam Alexander and Nick Basile.
Their preference remains Wesfarmers, which trades on a FY17 PE of 18.7 times, in their view.
But they note that “signs of recovery” have emerged and Woolworths is “more sustainable” after the rebasing of the food business and its home improvement exit.
“While the supermarket business is certainly not out of the woods in terms of recovering top-line sales momentum, the signs are encouraging that the significant investments made are starting to gain traction with customers,” they say.
“Sustainability of the improvement is now paramount through FY17.”
The broker has kept its ‘neutral’ rating on Woolworths, but lifted its price target from $22.00 to $23.00 after increasing its EPS forecasts for the next two years.
Woolworths shares were last down 0.5 per cent at $25.04 after tumbling to $24.50 in early trade.
Read David Rogers’s full analysis on Woolworths and its turnaround potential
10.35am:Star shines bright
The Star Entertainment Group has booked a healthy increase in profit after appearing to neutralise poor performance in its VIP gaming rooms, writes Michael Roddan.
The Star (SGR) today booked a net profit of $194.4m for the year through June, a 15 per cent increase year on year.
Revenue for the group, formerly known as Echo Entertainment, rose 6 per cent to $2.27bn.
The company will pay a fully franked 7.5c final dividend, bringing the year’s total distribution to 13c per share.
Read more
10.30am:AusPost swings to profit
Australia Post has swung to profit after reporting its first loss in 30 years in fiscal 2015 as the leaking of cash at its legacy postal unit was partially curtailed and as its parcels business continued to expand.
The government-owned mail business said it booked a net profit of $36 million for the 12 months to June 30, a sharp improvement from the prior year’s $222m loss.
Australia Post said parcels profit growth was up 8 per cent to $314m, while total revenue advanced 3 per cent to $6.6 billion.
The robust result was partially offset by a $138m loss in its parcels division as letter volumes slumped 9.7 per cent.
Read Daniel Palmer’s full news report
10.19am:Brokers slash Blackmores price target
Credit Suisse has slashed $20 a share from its Blackmores price target but retains its ‘outperform’ rating on the prospect of continued China retail growth, which it says is yet to be priced in.
Meanwhile CLSA analysts have pushed a ‘sell’ rating forward on Blackmores, wiping their price target all the way down to $110 and issued a stern warning on the future of its core business:
“We still believe BKL will face material challenges in selling products via cross border e-commerce (CBEC) after completion of the grace period in May-17.”
Blackmores last traded at $129.50 after slumping just under 23 per cent in the last two sessions following a poorly received profit result.
“Beyond a weak [first quarter of fiscal 2017], there are prospects of double digit EPS growth in fiscal 2018 supplemented by China retail growth in fiscal 2019/20,” Credit Suisse said.
“Even on lower earnings Blackmores’ [return on equity] sits at 50 per cent. China retail is yet to be priced in.”
Blackmores shares exploded in 2015, touching a high above $220 a share after gaining around 580 per cent in 12 months.
10.10am:Cabcharge profit slumps 45%
In the face of intense competition from Uber and app-based fare payment intermediaries, Cabcharge has seen its profit whittled away by a regulatory crackdown on the taxi payment group’s service fees, writes Michael Roddan.
Cabcharge (CAB) today booked a net profit of $25.6m for the year through June, a slump of 45 per cent year-on-year.
Revenue fell 10 per cent to $168.8m.
Recent decisions by NSW, Victorian and Western Australian state governments capping Cabcharge’s service fee at 5 per cent have cut Cabcharge’s national average service fee. Cabcharge derives about 40 per cent of its revenue from payments processing.
Read more
10.00am:APN in line despite profit — UBS
APN News & Media’s results were operationally in line with expectations, UBS says, despite a disappointing net profit due to higher-than-expected interest costs.
This may trigger an early dip in the share price before strength emerges.
Underlying NPAT, including its Australian Regional Media business, which it is in the process of selling to News Corp, came in at $14.7m in the first half, versus the $20m expected by UBS. The media company booked a statutory net loss of $256.9m for the six months through June, swinging into the red from the prior interim profit of $7.5m.
EBITDA of $35.9m was only slightly below the broker’s estimate of $36.6m.
Despite a slower start of the second half, “ratings improvements are having a positive impact” and “cost actions have been taken to maintain earnings”, the broker notes.
For the Adshel Outdoor & Digital Advertising, UBS notes that the “market remains buoyant”, with good visibility through to October and underlying earnings growth continues.
While weak economic conditions are significantly impacting the market, UBS notes APN’s cost-out program partially offset revenue loss.
UBS has a ‘neutral’ rating and $4.20 target on the stock.
9.45am:Aussie market dampens Coca-Cola result
Beverages giant Coca-Cola Amatil has reported a steady lift in earnings for the half year as strength offshore offset a subdued performance in its core Australian market.
The local Coke bottler said net profit rose 7.8 per cent to $198.2m for the six months to June 30, on the back of a 3 per cent lift in revenue to $2.57bn.
Its pre-tax earnings climbed 3.2 per cent to $326.9m, driven by 65.2 per cent growth in Indonesia and Papua New Guinea and growth of 5.4 per cent in the New Zealand and Fiji market.
Offsetting the gains was a 1.9 per cent retreat in pre-tax earnings in Australia as competition strengthened and consumer preferences continued to shift.
More to come
9.35am:Woolies share price “very full”: CLSA
Woolworths’ share price understates the risk involved with an investment in the retail giant, analysts say. The warning comes the day after the stock saw a near 4 per cent jump.
“The stock trades on 20x forward earnings, which we consider a very full price given competitive pressures, risks around execution and balance sheet constraints,” CLSA analysts said, as they slightly raised their price target to $19 and retained a sell rating.
“Woolworths’ aggressive store rollout programs of the past have created a structural headwind that remains inadequately dealt with against the backdrop of balance sheet pressures,” CLSA warned.
Meanwhile UBS is also sticking with its sell rating and a $19.30 price target.
“We have left our ‘sell’ unchanged with the view that earnings risk remains [in the first half of fiscal 2017], competitors will react (price) if Woolworths’ like-for-like sales accelerate further and feedback from our channel checks suggesting challenges remain at Woolworths,” UBS analysts lead by Ben Gilbert said.
Yesterday saw Woolies’ share price close 3.9 per cent higher at $25.17, which sounds impressive but it’s a long way below the initial 7.6 per cent surge at the open, which took it to a 10-month high.
9.20am:Broker downgrades dominate
Perpetual raised to Buy vs Hold; target increased to $55 vs $44.80 — Bell Potter
Platinum cut to Sell vs Hold; target cut to $4.90 vs $5.40 — Bell Potter
Amcor raised to Hold vs Reduce — Morgans
Ausdrill cut to Hold vs Buy — Argonaut
Asaelo Care raised to Outperform vs Neutral — Macquarie
ERM Power raised to Neutral vs Underperform — Macquarie
AWE cut to Underperform vs Neutral — Credit Suisse
AWE raised to Neutral vs Sell — UBS
A2Milk cut to Neutral vs Buy — UBS
Breville Group raised to Overweight vs Neutral — JP Morgan
National Storage REIT raised to Buy vs Hold — Wilsons
Southern Cross Media cut to Sell vs Neutral — Citi
Blackmores target cut to $110 vs $140; keeps Sell — CLSA
Cromwell cut to Sell vs Outperform — CLSA
Flight Centre raised to Buy vs Outperform — CLSA
Perpetual cut to Underperform vs Buy — CLSA
Sims Metal cut to Sell vs Underperform — CLSA
Southern Cross Media cut to Underperform vs Outperform; target cut to $1.14 vs $1.40 — CLSA
9.05am:Mayne Pharma profit surges
Pharmaceuticals group Mayne Pharma is confident of “significant” growth over the coming year after lifting profit nearly 400 per cent over the last 12 months, writes Michael Roddan.
Mayne (MYX) today posted a net profit of $37.4m for the year through June, a fourfold increase on the prior year’s $7.8m result.
Revenue for the company surged 90 per cent to $267m.
Still, the company decided against paying a dividend.
Read more
8.55am:A Masters plan for profit
The mastermind behind a plan to harness the vast wealth of Australia’s richest families and canniest investors to snap up hardware chain Masters’ properties, former UBS Australia boss David Di Pilla, will present his investment case next month for a new force in big-box retail.
Mr Di Pilla, who on Wednesday night sealed a deal with Woolworths worth more than $750 million to buy its 61 Masters sites and a further 21 development sites, is not expected to plump up his new investment vehicle for a public float just yet.
But his big-name backers, who include the families behind retailer Spotlight, Chemist Warehouse and members of one of Sydney’s richest families, the Salteri clan, are likely to be keen on an eventual exit strategy to crystallise the expected massive profits to be made on the back of Woolworths’ misfortune.
Read Eli Greenblat’s full report
8.33am:Lay it on us, Fed
The Aussie dollar only has eyes and ears for Fed chair Janet Yellen, with experts predicting a quiet session in the lead up to a key speech from the world’s most powerful central banker.
“With a lack of local data and the market patiently waiting for tonight, expect narrow trading ranges during the day,” ANZ analysts said this morning.
The title of the speech, to be given at 12am AEST (10am US time) the global central banking summit in Jackson Hole, Wyoming, is titled ‘The Federal Reserve’s Monetary Policy Toolkit’.
All eyes and ears will be on the lookout for any reiteration the market is underpricing an upcoming Fed cut.
“There is plenty of room for [Yellen] to touch on a number of topical and interesting issues. And while it is possible that her comments will have a longer-term feel about them and could also be reasonably technical in nature, markets will be particularly interested if she follows on from some of her Fed colleagues (including George and Kaplan overnight) that have signalled recently that markets are underpricing potential upcoming Fed tightening,” ANZ said.
“Those comments haven’t really shifted market pricing, but if the boss was to signal it too, markets would likely listen.”
8.21am:Depositors slugged as banks box
It’s now apparent that the banks have abandoned the Marquess of Queensberry rules in the great term deposit boxing match. And, accordingly, depositors can very quickly be ripped off because they are unaware that punches are being thrown below the belt, writes Robert Gottliebsen today.
It is generally agreed among the banks that they do not have the skills to box on both home loan rates and deposits at the same time.
For the last few years, banking has been about gaining market share in the home loan market, so, various deals were made available.
8.13am:APN swings sharply into the red
APN News & Media is keen on its post-print future as a media company with no traditional publishing assets, as it books a hefty interim loss, writes Michael Roddan.
APN today booked a net loss of $256.9 million for the six months through June, swinging into the red from the prior interim profit of $7.5m.
Revenue edged down slightly to $129.1m over the half year.
7.10am:Stocks tipped for subdued open
The Australian market looks set to open flat or slightly higher after Wall Street was pulled down by healthcare and consumer stocks and ahead of Federal Reserve chair Janet Yellen’s key speech tonight (AEST) at Jackson Hole.
Investors worldwide will be watching for any clues on the course of monetary policy or Ms Yellen’s assessment of the US economy.
At 6.45am (AEST), the share price index was up five points at 5,518. Locally, no economic news is expected today.
Yesterday the benchmark S & P/ASX200 index was down 19.8 points, or 0.36 per cent, at 5,541.9 points.
The broader All Ordinaries index was down 22.2 points, or 0.39 per cent, at 5,631.4 points.
7.00am:Iron ore slips as China cuts
The iron ore price has edged lower after one Chinese steel manufacturer said it would pull out of the steel industry and switch its focus to finance.
Iron ore lost 0.7 per cent to $US61.10 overnight, according to The Steel Index, from $US61.50 yesterday.
6.50am: Dollar slips ahead of Yellen speech
The Australian dollar is lower against the greenback as the US currency holds firm against regional currencies ahead of a speech by Federal Reserve chair Janet Yellen at a global central bankers’ meeting in Wyoming.
At 06.35am (AEST), the local unit was trading at US76.17 cents, down from US76.25 cents yesterday.
6.40am: Wall St lower head of Fed
US stocks drifted lower overnight, with market attention focused on the Federal Reserve’s annual meeting at Jackson Hole, Wyoming.
Across the Atlantic, European stocks also slid as investors focused on poor German data.
But the Australian share market is set to defy global leads, with ASX futures up 5 points at 6.25am (AEST).
Fed chair Janet Yellen is set to give a speech at the central bankers’ conference on Friday, US time. While little guidance on interest rates is expected, investors will be watching for any clues on the course of monetary policy or her assessment of the US economy.
The Dow Jones Industrial Average fell 33 points, or 0.2 per cent, to 18448. The S&P 500 fell 0.1 per cent, and the Nasdaq Composite lost 0.1 per cent.
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