ASX closes lower as US futures fall
Australia’s sharemarket slipped Friday as US futures turned down after the Trump administration moved to end several emergency pandemic lending programs at the FED.
- IAG to captial raise
- Orica profit falls 31%
- Regis rejects $555m takeover bid
- APRA trims CBA’s risk weight
- BuzzFeed to buy HuffPost
That's all from Trading Day. Australia’s sharemarket slipped on Friday as US futures turned down after the Trump administration moved to end several emergency pandemic lending programs at the FED. Regis Healthcare surged after rejecting a takeover bid, while IAG remains in a trading halt for a capital raising after an unfavourable court ruling on business interruption insurance.
4.50pm: ASX slips with US futures
Australia’s sharemarket slipped Friday as US futures turned down after the Trump administration moved to end several emergency pandemic lending programs at the FED.
The S&P/ASX 200 ended a 4-day winning streak with a 0.1pc fall to 6539.20 after ranging between an intraday low of 6535.6 and a fresh 8.5-month high of 6562.1.
It came as S&P 500 futures fell as much as 0.7pc after the US Treasury Secretary Steven Mnuchin asked the FED to let five emergency lending programs expire on Dec 31st.
He also asked the Fed to return unused funds, allowing Congress to re-appropriate $US455bn and spend the money elsewhere.
The Fed said it “would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.”
Still the rare public rift highlighted the obstacles to agreement on more US fiscal support during the “lame duck” period until January 20th.
Quality and growth sectors including Health Care and Technology outperformed with CSL up 1.4pc and Xero up 2.6pc, while CBA rose 1.4pc after APRA reduced a regulatory capital requirement for CBA.
But value sectors including Energy, Materials, Consumer Discretionary and Real Estate lost ground with Oil Search down 5.1pc, James Hardie down 3.2pc, Aristocrat down 1.8pc and Lendlease down 2.7pc.
IAG remained in a trading halt for a capital raising after an unfavourable court ruling on business interruption insurance and Regis Healthcare jumped 23pc after rejecting a takeover bid.
The Australian dollar was slightly stronger against the US dollar by the close of the session, trading around US72.95c.
Perry Williams 4.34pm: Storm could cut coal port capacity
Australia’s biggest coal port faces a cut in capacity after a storm cell knocked out a Newcastle shiploader, part owned by BHP, potentially hitting thermal coal supplies for several weeks.
The Newcastle Coal Infrastructure Group, a major coal terminal at the Port of Newcastle, suffered significant damage to one of its shiploaders at 8pm on Monday night after a major storm swept through the city.
The incident means the coal export terminal, which controls over a third of the Port of Newcastle’s coal capacity, will be forced to rely on a single shiploader for weeks or even months while the existing piece of equipment is repaired or replaced.
“Efforts are underway to ensure a safe working area, to ascertain the extent of the damage and to develop a recovery plan,” NCIG said in a statement, noting the terminal had restarted operations after a 24 hour shutdown.
The NCIG terminal is one of three that operate at the Port of Newcastle with the facility jointly owned by coal producers BHP, Whitehaven Coal, Peabody, Centennial Coal and Yancoal. It provides about 79m tonnes of the Port’s overall 224m tonne capacity although only about three-quarters of that capacity is used most years.
Still, it is estimated the damage could result in potential lost exports of 1m tonnes of coal if the shiploader is out even for two weeks, Shaw & Partners estimates.
The incident “means less steam coal going out for the next few weeks/months,” Shaw mining analyst Peter O’Connor said.
Port Waratah Coal Services operates the other two coal terminals with capacity of 145m tonnes.
“Port of Newcastle is assessing the potential impact of a storm that occured on Monday. The most significant issue was the damage to a shiploader at the Newcastle Coal Infrastructure Group terminal. That issue affects one of its two shiploaders,” the Port of Newcastle said in a statement.
“It is too early to know the potential impact on overall export volumes. Actual volumes have been well below that theoretical capacity ceiling for some time, keeping within a narrow range of 158-166mtpa since 2014.”
Thermal coal volumes are due to “flatten out” over the next 15 years, according to Port of Newcastle chair Roy Green, who said the port giant would continue to export the resource as “long as there is a market”.
Thermal coal, shipped to Asian buyers for use in power stations, has endured a tough period with prices trading at half the level of two years ago, although a recent uptick has added come confidence for Australian producers.
Whitehaven chairman Mark Vaile told shareholders the recent increase in the thermal coal price - with the Newcastle benchmark price for coal lifting back above $US60/tonne - as the start of a “meaningful improvement”.
Still, tensions with China are keeping the broader coal industry on edge with the Asian superpower limiting its purchases of Australian coal.
Wood Mackenzie analyst Rory Simington said China appeared to be looking to restrict coal imports to 2017 levels, with the latest round of restrictions likely to hit Australian coking coal as well as thermal coal exporters.
3.15pm: Moody’s downgrades Crown
Moody’s has cut Crown’s credit rating to reflect the risk of the company facing regulatory actions resulting in impacts of its licence to operate Barangaroo as well as Crown Melbourne and Perth. Crown’s issuer rating and their backed senior unsecured medium-term notes fell to Baa3 from Baa2 and remain on review with a possibility of further downgrade.
Moody’s analyst Maadhavi Barner said the downgrade reflects the decision of the NSW gaming regulator to delay the opening of the Barangaroo casino and the risk of regulatory action against Crown Perth and Melbourne.
“The downgrade reflects our opinion that there is an increasing likelihood of material downside implications from the escalating regulatory investigations Crown is facing,” he said.
In particular, the review will focus on the potential for further material negative outcomes that could not only affect the license for Crown Sydney, but could also bring forth regulatory challenges to Crown’s other licenses.”
Despite the escalation of regulatory risk, Moody’s said they considered the loss of the Sydney licence as a result of the inquiry a “still unlikely” outcome.
But another key factor influencing the credit risk was “a number of governance and compliance shortfalls” revealed throughout the inquiry.
The ongoing impact of the COVID-19 pandemic on gaming operations is also relevant, with Moody’s forecasting subdued earnings from that sector of the business for the remainder of the financial year.
Despite these factors, Moody’s said that the company’s 1.6x leverage, cash on hand of $286.9m and upcoming apartment sales of apartments in the Barangaroo building “will help Crown to withstand a meaningful, but temporary, cash burn from its weakened operating
performance.” The outlook could be changed to stable if Crown is found to be suitable to operate Barangaroo, or suitable after making certain mandated changes, but could be downgraded if it is unable to make any necessary changes or is found unsuitable.
2.55pm: ASX turns down again
Australia’s share market has swung into the red for the second time today as US futures remain negative. The S&P/ASX 200 fell 0.2pc to 6538 after bouncing from an intraday low of 6535.6 to a fresh 8.5-month high of 6562.1.
The Health Care, Tech, Utilities and Financials sectors were still positive, with CSL up 1.4pc, Xero up 3.5pc, AGL up 1.1pc, CBA up 0.9pc and Suncorp up 3pc.
But the Energy, Materials, Real Estate, Industrials, Consumer Discretionary and Communications sectors are struggling, with Oil Search down 5.9pc, Lendlease down 2.2pc, Atlas Arteria off 2.8pc, Aristocrat down 1.9pc and Vocus down 3.3pc.
It will be hard to avoid a weaker closer while Dow Jones index futures are down 0.9pc andS&P 500 futures are down 0.7pc, although Nasdaq futures are only slightly negative.
Looking ahead to next week, recent optimism about coronavirus vaccines could be tested by the worsening pandemic, particularly with Thanksgiving coming up next Thursday.
Lachlan Moffet Gray 2.39pm: No email means no confidence
Counsel assisting the Crown Inquiry says the failure of Crown to submit a crucial email to the inquiry - revealed only this week - means the NSW gaming regulator can have no confidence in the company to operate Barangaroo.
Scott Aspinall said the failure of Crown to produce emails in which company AML officer Louise Lane proposed a review of company accounts due to money laundering risks, meant the inquiry operated on the basis that the accounts were overlooked for months.
He said CEO Ken Barton’s statements to the inquiry “gave the impression of merely careless or inadequate consideration being given to the question at the time before it was brought to the attention by the inquiry.”
Mr Aspinall said Crown’s explanation was inadequate.
“The lack of the submission appears to be because of the way the search was conducted, with Southbank and Riverbank combined with investments, [which] brought up too many documents so exclusions happened,” Mr Aspinall said.
“In my submission, there is no explanation for why a document that said ‘I would like to look into the Riverbank investment accounts’ was not picked up and produced in February.
“It’s a very serious concern, commissioner, that a summons that seeks documents - and this was a critical document, as I’ve submitted, to the course of this inquiry, which includes the very words ‘Riverbank investments account’ was not able to be found by Crown or its lawyers.
“It shows a problem of regulating Crown.
“A regulator of a casino licensee needs to be confident when it asks for information from the regulated entity that what it gets in response is correct.”
Ms Bergin said that the fact Ms Lane’s desire to audit the accounts was ignored was a concern. “I think the deeper concern is the fact that the suggestion...the fact that the sensible and professionally appropriate step that Ms Lane suggested, was in fact shut down.”
Lachlan Moffet Gray 2.24pm: Crown advice not written down
The counsel assisting Crown has revealed that legal advice from MinterEllison that dissuaded Crown CEO Ken Barton from reviewing accounts that “more likely than not” facilitated money laundering does not exist in a physical form.
It comes after commissioner Patricia Bergin demanded a copy of the advice, as the inquiry for months operated on the assumption that Crown merely overlooked a review of the accounts, not that they were instructed not to review them.
Ms Bergin said she wanted to communicate her concern to MinterEllison.
“Let’s assume that it was a discussion and it wasn’t recorded,” Ms Bergin said.
“If you could transmit to MinterEllison my deep, very deep concern, that I do need to get to the bottom of this.”
Ben Wilmot 2.17pm: Moelis buys Courthouse Hotel for $22m
Sydney’s pub boom is rolling on with the hotel management arm of investment bank Moelis snapping up the Courthouse Hotel, in inner Sydney’s Darlinghurst, for $22m.
The acquisition, backed by the new Moelis Australia Courthouse Fund, is the latest pub to sell for a premium, with the Gladstone Hotel in Dulwich Hill selling for $38m earlier this week.
The Darlinghurst landmark has been under the same ownership since 1990 and Moelis will come in as manager and operator of the pub.
Moelis Hotels chief executive Dan Brady said the pub had a prominent place in the history of the Darlinghurst and Oxford Street community.
“[Moelis] will honour this as we look to re-establish the hospitality heartbeat of Taylor Square through a refurbishment that celebrates its significant heritage,” he said.
“We anticipate the refurbishment work ... will deliver attractive returns for investors, enhanced and enriching experiences for Darlinghurst patrons and a fantastic opportunity to reimagine the late-night economy with Sydney as it opens up post COVID,” he said.
HTL Property brokered the off-market sale after a campaign to major buyers.
The agents were Dan Dragicevich, Andrew Jolliffe and Sam Handy and they said Oxford Street was in for a renaissance in the years to come as it will be the city’s only 24-hour precinct following the reshaping of the lockout laws.
HTL Property’s data illustrates the run rate of hotel sales in NSW during the COVID-19 period from March to November now sits at 37 sales in 36 weeks.
“Whilst down on the same period last year, the comparative data certainly points to a transaction landscape which houses willing buyers and sellers; and critically, financiers,” HTL Property market analyst, Liam Regan, said.
With about $300m worth of NSW hotels transacting during the COVID-19 period alone Mr Jolliffe said pubs were heavily pursued by astute sources of both capital and debt.
1.27pm: ASX may fade as US futures fall
Australian shares may face a weaker close if an intraday fall in US index futures is sustained.
S&P 500 futures are down 0.7pc, while Nasdaq 100 futures are down 0.1pc and Dow Jones futures are down 0.8pc.
News of a clash between the US administration and the FED over unused funds from the Federal Reserve’s emergency lending facility hit sentiment in afterhours trading, according to Stephen Innes, chief global markets strategist at Axi.
The Trump administration moved Thursday to end several emergency pandemic lending programs at the Federal Reserve, triggering a rare public rift when the central bank objected to the Treasury Department’s instruction, Bloomberg reported.
“The White House wants to pull the unused portions back so Congress can spend the money elsewhere, while the FED is pushing back,” says Axis’ Innes.
“Indeed, this does not help the push-pull tug of war around short-term versus long-term markets narrative at a time when it’s important that all levels of government, including the Fed, at least put up the pretense of a unified front.
The S&P/ASX 200 is up 0.2pc at 6557 after ranging between 6535.6 and 6562.1.
John Durie 1.19pm: Bega Cheese closes in on Lion Dairy
Bega Cheese is close top buying Lion Dairy for around $550 million with Saputo dropping out of the race for control.
Bega Cheese is close top buying Lion Dairy for around $550m, with Saputo dropping out of the race for control.
Bega is the favourite but is already leveraged at some 2.3 times earnings, with a stated goal to get the ratio under two times — something only possible with an equity raising.
Chairman Barry Irvin could surprise by using more debt for the deal, noting interest rates are at record lows and that Lion earnings currently depressed because COVID-19 has killed food service earnings.
The heroic Bega multiple comes ironically enough in part because of promised cost-cutting and new plant at its Koroit facility.
Read more: Bega Cheese circling Lion Dairy as Saputo drops out
1.00pm: AEMO director now interim CEO
The Australian Energy Market Operator has tapped one of its board directors as interim chief executive ahead of Audrey Zibelman’s exit in December.
Nino Ficca, an AEMO director and former managing director of AusNet Services, will act in the role until a new chief executive is appointed.
“The demands on AEMO will not slow during the CEO transition. Nino’s broad experience in the energy sector will enable him to maintain momentum on the critical initiatives underway until a new CEO is appointed,” AEMO chairman Drew Clarke said.
“While the Board is very sorry to see Audrey leave, under Nino’s guidance the important work of AEMO will continue smoothly.”
AEMO, which runs Australia’s electricity grid, announced on September 29 that Ms Zibelman would quit the organisation for a leadership role at X, the “moonshot” factory at Google’s parent company Alphabet.
Ms Zibelman, who joined AEMO in March 2017, will depart by the end of 2020 for the new role at X developing clean energy technologies.
The US executive arrived in Australia amid a turbulent period for the national electricity market, in the wake of blackouts in South Australia and political tensions as industry and regulators attempted to secure a passage for the national energy guarantee.
She was previously rumoured to be on a shortlist for US Energy Secretary had Hillary Clinton won the White House.
Perry Williams 12.15pm: Skip Capital could join bid for Regis
Conglomerate Soul Patts has kept the door open to tech billionaire Scott Farquhar joining its $555m takeover bid for aged care provider Regis Healthcare.
Regis on Friday rejected an $1.85 a share offer from Soul Patts and Regis co-founder Bryan Dorman while also revealing Soul Patts had previously lobbed a separate $1.65 bid with Mr Farquhar’s investment fund Skip Capital, headed up by his wife Kim Jackson.
While Mr Farquhar is not part of the current bid, it’s understood his Skip investment vehicle may again link up with a combined Soul Patts/Dorman takeover offer should it ultimately progress.
Sources said Skip’s involvement would be dependent on any takeover offer operating via a scheme of arrangement rather than a hostile deal.
“We have identified a minority private financial investor who may join the consortium prior to announcement of a definitive transaction,” Soul Patts said, referring to Skip Capital.
“Our revised proposal is not conditional on their participation,” Soul Patts chairman Rob Millner and Mr Dorman said in a letter sent on Thursday to Regis chairman Graham Hodges.
Private equity group TPG Capital has previously been weighing up its own takeover tilt for Regis but failed to gain traction with its two largest shareholders and co-founders: Mr Dorman and Ian Roberts who both own a 27 per cent stake in the company.
Read more: Aged care provider Regis rejects $555m takeover by Soul Pattinson
Ben Wilmot 12.10pm: Lendlease cops ‘first strike’
Lendlease’s shareholders have harshly rejected its pay practices with a 47 per cent vote against its remuneration report, giving the company a first strike, at its annual meeting on Friday.
But the global developer and builder will avoid a board spill motion as it has not had a strike since 2012 when it copped a 26 per cent protest vote against its pay report.
The re-election of former Westpac deputy chief executive Phillip Coffey also drew a substantial protest vote of about 30.32 per cent and about 19.97 per cent of proxies were against the re-election of Jane Hemstritch.
Proxy house ISS had recommended a vote against both directors as they are on the remuneration committee and it noted that Lendlease had consistently received high votes against its pay report.
Last year it avoided a strike with a protest vote of 20.8 per cent and in 2018 it had a 14.6 per cent vote against its scheme.
ISS said there were “substantial deficiencies” in remuneration practices and disclosure for this year and singled out the directors for their previous roles.
“Shareholders may have concerns with Coffey’s prior executive roles at Westpac and Hemstritch’s prior non-executive roles at Commonwealth Bank, Tabcorp and Telstra where corporate governance concerns have been identified,” ISS said.
The adviser said shareholders may have concerns in relation to Mr Coffey’s roles as a senior executive and Deputy CEO of Westpac during the period in which governance, risk and reputation failures were identified in the Banking Royal Commission.
and allegations by AUSTRAC that resulted in a civil penalty of $1.3bn.
ISS said shareholders may have concerns about Ms Hemstritch’s time on the Commonwealth Bank board due to failures identified in the Royal Commission.
When she wasa director at Tabcorp there was an AUSTRAC case resulting in a $45m penalty and at her time at Telstra the company also had a “first strike” on remuneration.
ISS criticised the pay practices for the high remuneration paid to the CEO relative to market median despite the company’s weak performance, and for failing on other key metrics.
Proxy house CGI Glass Lewis also recommended a vote against Mr Coffey but for the remuneration report.
There was also an 18.63 per cent proxy vote against equity grants to chief executive Steve McCann.
12.03pm: ASX slightly higher at lunch
The ASX is up slightly at lunch after clawing back from a slip in early trade. The index is now up 0.1 per cent at 6554.
CBA is up 0.8 per cent while BHP is down 0.4 per cent. CSL is gaining 1.3 per cent.
Lendlease is down 1.7 per cent after flagging subdued earnings, while explosives maker Orica is 4 per cent lower after its full year results disappointed the market.
Regis Healthcare is surging 19 per cent after rejecting a $555m takeover bid, saying it undervalued the company.
Energy is the worst performing sector, with Woodside up 0.3 per cent but Santos 1 per cent lower and Oil Search down 5.9 per cent.
IAG remains in a trading halt following a court decision that opens the door to business interruption claims relating to the coronavirus pandemic.
Ben Wilmot 11.51am: Lendlease flags subdued first half earnings
Global development and building giant Lendlease has warned about the ongoing impact of COVID-19 on its operations at its annual meeting as many of the global cities in which it operates deal with cornavirus outbreaks.
The developer has major projects in London, Milan and New York, as well as California, which have been hit by new waves of the pandemic.
“While we are making good progress on our strategy, earnings in the first half of fiscal 2021 are expected to be subdued. We are focused on converting a number of investment partnerships in the second half which are expected to contribute to earnings,” Lendlease chief executive Steve McCann said.
But Mr McCann said the company was confident the “significant growth” in its secured pipeline of more than $100bn and expected appetite from investment partners, laid the foundation for the company to accelerate developments to a target of more than $8bn annually.
“Although we are dealing with an uncertain COVID environment, we already have work in progress with an end value of approximately $8.5bn as at 30 June and are looking to put more than $10bn into delivery over the coming 18 months,” he said.
The company’s investment partnership with Mitsubshi Estate to deliver the first residential tower at One Sydney Harbour at Barangaroo that will contribute about $140m to earnings this financial year.
11.36am: Retail trade edges up in October
Preliminary figures released by the ABS today indicated that retail trade rose 1.6 per cent from September to October on a seasonally adjusted basis.
Australian turnover rose 7.3 per cent for October to $29.6m, compared to the same month a year ago.
11.21am: ASX turns positive
The ASX has turned positive in the second hour of trade, after slipping in early trading.
The index is now up 0.22 per cent at 6561.5.
CBA is up 0.6per cent while BHP is 0.4 per cent lower.
Tech is the best performing sector followed by healthcare, with Afterpay up 1.7per cent while CSL is 1.4 per cent higher and Regis Healthcare is surging 20 per cent, after it rejected a $555m takeover bid, saying it undervalued the company.
Eli Greenblat 11.11am: Shareholders oppose $80m bonus for Kogan execs
Kogan.com has been slapped with a 42.51 per cent vote against the lucrative $80 million incentive package it wants to extend to its chief executive and founder Ruslan Kogan and chief financial officer David Shafer.
Even if shareholders had rejected the resolution for the long term incentive plan Kogan.com had pledged to offer the awards to the CEO and CFO anyway.
All proxy adviser firms recommended a vote against the awarding of the incentives. Kogan.com chairman Greg Ridder said at the AGM there was a 56.35 per cent vote in favour of the options.
It comes as earlier at the AGM it likely earnt a ‘first strike’ against its remuneration report with a 43.74 per cent vote against that AGM resolution.
Mr Kogan and Mr Shafer, who are major shareholders in the online retailer, could not vote their shares on the resolution put at the annual general meeting on Friday morning.
All leading proxy adviser firms in Australia recommended their clients vote against the equity incentives.
These bonuses will deliver over the next three years 3.6 million options to Mr Kogan and 2.4 million to Mr Shafer. The options have a strike price of $5.29 against a current share price for Kogan.com of $18.32, with Mr Kogan’s options worth $46.9m and Mr Shafer’s $31.27m.
Lachlan Moffet Gray 11.06am: Packer should reduce Crown stake to 10pc: inquiry
James Packer should not be approved as a close associate of Crown Sydney and should have to sell his interest in Crown down to 10 per cent if the company is to retain its licence to operate Barangaroo, a NSW inquiry has heard.
Counsel assisting the inquiry into Crown’s suitability to operate Barangaroo said the finding should be based infamous confidential email from 2015 when Mr Packer threatened BGH capital’s Ben Gray for not providing enough support for the potential privatisation of Crown
“You should recommend to the authority that it recommend the authority that it recon its approval of mr pack as a close ass of the licence,” counsel assisting Adam Bell told Commissioner Patricia Bergin.
“You have read these emails. They raise very serious issues you need to consider.
“Any reasonable person reading those emails would have grave misgivings as Mr Packer’s character and integrity.”
Mr Packer’s lawyer previously told the inquiry that the unknown but serious threats Mr Packer conceded were “disgraceful” were unlikely to recur as Mr Packer was suffering from bipolar disorder at the time and is now receiving treatment.
But Mr Bell said the inquiry had received no proof Mr Packer was diagnosed with or being treated for bipolar.
“It remains the case that no medical evidence has been presented to the inquiry,” he said.
“In the absence of that evidence you are not in the position to draw a conclusion that the conduct was caused by any medical condition.”
He said Mr Packer was acting rationally at the time as he calmly discussed the deal over email with other businesspeople following the threats to Mr Gray.
Eli Greenblat 10.47am: Kogan hit with ‘first strike’ at AGM
Kogan.com chairman Greg Ridder concedes the company should have called an extraordinary general meeting to vote on the $80 million in option incentives to be awarded to chief executive Ruslan Kogan and chief financial officer David Shafer.
Mr Ridder has also revealed at the AGM the company had been likely hit with a ‘first strike’ against its remuneration report. He called the decision by proxy advisers to recommend a vote against the remuneration report as “perplexing”.
He said media coverage of the highly valuable options to be handed to Mr Kogan and Mr Shafer had been a “distraction”.
Mr Ridder said most of the company’s largest shareholders have support the resolution to award 3.6 million options to Mr Kogan and 2.4 million to Mr Shafer which are now worth $80m as the Kogan.com share price has rocketed.
Kogan.com has stated that even if shareholders reject the awarding of the options to the pair the company will award the incentives anyway.
He said it was mostly newer shareholders to the company’s share register who opposed the long term incentives.
Lachlan Moffet Gray 10.43am: Packer a ‘defactor director’: Crown inquiry
Counsel assisting the NSW inquiry into Crown is re-asserting that James Packer continued to act as a de-facto director of Crown even after he stepped down from the board, meaning he breached his duties by failing to inform the board of his intention to sell company shares to Melco.
Last year Mr Packer announced his intention to sell 19.99 per cent of Crown shares to Melco Resorts, placing the company’s licence to operate Barangaroo in doubt as it arguably violated a clause preventing Hong Kong magnate Dr Stanley Ho from gaining an interest in the casino.
“If his influence is such that he is properly characterised a de-facto director of Crown Resorts...then there is a basis to contribute his knowledge of the Melco transaction to Crown Resorts,” counsel assisting Adam Bell said today.
Crown rejected the characterisation of Mr Packer as a de-facto director, saying a special arrangement that allowed Mr Packer to request information from the board was for the purposes of Mr Packer providing “advice” not “orders.”
Adesholda Ore 10.41am: NAB slashes savings rates
NAB has hit its savers with a rate cut on range on its savings and term deposit accounts, as more institutions respond to the low-interest rate environment.
Australia’s third largest bank cut savings rates on two of its popular savings accounts after the Reserve Bank reduced the cash rate to a historic low of 0.10 per cent on November 3.
The maximum rate on NAB’s Reward Saver is now 0.55% – down 15 basis points from 0.70%. NAB’s iSaver now has a four month introductory rate of 0.60% before moving to an ongoing rate of 0.05 per cent.
RateCity research director Sally Tindall said more banks would follow suit to adjust to the low-interest rate environment
“Savings rates are dropping like flies. Thirty lenders have already cut rates with plenty more banks set to follow,” she said.
Ms Tindall said Westpac currently offered a 3 per cent rate for people aged between 18 and 29.
“The big question now is how long will Westpac hold out, and will they cut their market-leading savings rate for young Australians?” she said.
“Savers have to be on their toes if they want to keep their interest rate competitive. This typically means jumping through hoops to qualify for bonus interest each month, or bouncing from bank to bank chasing introductory rates,” she said.
10.40am: IAG bookbuild fully covered: sources
Goldman Sachs’ latest bookbuild message for the $650m institutional part of IAG capital raising is that it’s now fully covered at the $5.05 offer price, according to sources.
The ease by which the bookbuild was covered shows pent up demand.
It suggests the share price may not dip much at all when trading resumes.
IAG shares remain in trading halt. Last at $5.46.
10.26am: ASX slips in early trade
Australia’s sharemarket slipped 0.2pc to 6536.5 in early trading despite a 0.4pc rise in overnight futures.
Value sectors including Financials, Energy, Materials and Real Estate underperrformed along with Industrials.
Quality and growth sectors including Health Care and Tech outperformed.
Orica dived 6.3pc after its FY20 results disappointed the market.
Mesoblast surged 14pc after Novartis agreed to buy Mesoblast’s remestemcel-L production and sales rights.
Regis Health Care surged 23pc to an 8.5-month high of $1.815 after saying a $1.85 a share takeover bid materially undervalued the company.
Major banks are taking a breather with falls of of 0.4-0.7pc.
Lachlan Moffet Gray 10.13am: Crown inquiry demands account information
The commissioner of the NSW Inquiry into Crown has demanded the company’s law firm MinterEllison produce legal advice relating to company accounts where money laundering may have occurred by noon today.
On Tuesday night at 11pm Crown submitted documents reversing their earlier evidence that they overlooked a review of bank accounts linked to subsidiary companies Southbank and Riverbank investments even though numerous banks closed accounts linked to the companies over money laundering concerns.
In the new documents, CFO turned CEO Ken Barton indicated that law firm MinterEllison advised the company not to conduct a review of the accounts, throwing earlier evidence given by him and other Crown executives into doubt.
This morning Commissioner Patricia Bergin told Crown’s Counsel Neil Young QC that the legal advice had to be produced.
“The advice Minters gave to Crown at the time, in whatever way it was expressed, needs to be produced,” Ms Bergin said.
“I know that you have indicated that Crown does not have a record of it, but through you Minters needs to produce its records relating to that advice.”
Ms Bergin said that any defence of legal privilege was waved when Mr Barton chose to mention the advice to the inquiry and a summons would be produced for the advice.
“We need to get to the bottom of it, and get to the bottom of it urgently.”
The inquiry then returned to hearing evidence from Counsel assisting, who submit that James Packer acted as a shadow director of Crown from 2018.
10.12am: IAG bookbuild 50% covered
A bookbuild message from Goldman Sachs at the launch of IAG’s $750m capital raise has the institutional placement more than 50pc covered at the $5.05 offer price by indications of demand from a small number of wall-crossed investors, according to sources.
Eli Greenblat 9.58am: Kogan chair defends hefty bonuses
The chairman of online marketplace Kogan.com, Greg Ridder, has defended the plan to award the company’s chief executive and chief financial officer as much as $80m in options even if the resolution is rejected by shareholders, saying the pair have not received long term bonuses in four years.
Mr Ridder said in his chairman’s address at the company’s AGM on Friday that CEO and founder Ruslan Kogan and CFO David Shafer would also not be earning any long term incentives for the next few years.
“As you know, items on today’s agenda relate to the long-term incentive arrangements for the executive directors, who otherwise have not received any LTI (long term incentive) awards in the four years since IPO and will not receive any other form of LTI over the coming three years,” Mr Ridder said.
At the AGM shareholders will be voting on a resolution to award a highly lucrative LTI package for the Kogan CEO and CFO. A strike price was chosen earlier this year of $5.29 for the options package, derived from the three-month volume-weighted average price to April 30 that took in the global equities collapse in March. In May, when that LTI was announced to the market, these bonuses would have delivered 3.6 million options to Mr Kogan and 2.4 million to Mr Shafer. On the share price at that time, Mr Kogan’s options were worth $31.8m and Mr Shafer’s $21.24m.
They were immediately in the money and, with Kogan shares later traded above $23, making the LTI package worth $138m, of which more than $100m is profit. Since then the share price is trading closer to $18 but the options are still worth around $80m.
Kogan.com chairman Mr Ridder has since declared that if shareholders reject the resolution at the AGM the company will still award the options, buying up the shares to award the executives.
Last month Mr Ridder told The Australian Mr Kogan and Mr Shafer deserved the multi-million dollar incentives and was crucial in retaining their services. He said the pair were the best online retailers in the country.
In a trading update provided at the AGM by CEO Mr Kogan, he said for the financial year-to-date, gross profit has grown faster than gross sales, driven by strong performance from its product divisions and Kogan Marketplace. He said both gross Sales and gross profit outperformed the equivalent prior period by 99.8 per cent and 131.7 per cent respectively.
9.57am: What’s impressing analysts?
Atlas Arteria cut to Hold: Morgans Financial
Centuria Industrial started at Buy; $3.40 target price: Jefferies
Estia Health raised to Overweight: JPM
Flexigroup raised to Outperform: Macquarie
GUD Holdings raised to Outperform: CS
Insurance Australia cut to Hold: Bell Potter
Japara raised to Overweight: JPM
Oil Search cut to Neutral: JPM
Oil Search cut to Underperform: CS
Oil Search cut to Neutral: UBS
Oil Search raised to Buy: Citi
Nickel Mines started at Buy; $1.30 target price: Citi
Regis Healthcare raised to Neutral: Macquarie
Seek cut to Neutral: UBS
Virtus Health raised to Buy: Jefferies
Vocus cut to Neutral: UBS
9.47am: IAG to capital raise as it counts cost of business claims
Insurance Australia Group has outlined plans to tap shareholders for $750m in new equity capital in response to the Supreme Court of New South Wales Court of Appeal judgment on the business interruption insurance test case.
At the same time the insurer behind brands such as NRMA, RACV and CGU will make a provision of $865m to cover for potential payouts.
In a unanimous decision, the NSWCA determined pandemic exclusions that refer to the Quarantine Act and subsequent amendments, rather than the Biosecurity Act, are not effective to exclude cover for losses associated with COVID-19.
“IAG’s view is that the intent of its business interruption policies is to not provide cover for any losses related to pandemics such as COVID-19,” IAG said.
“Given the court decision, IAG said intends to recognise a post-tax provision of $865m and is taking decisive action to strengthen its balance sheet via a fully underwritten institutional placement of $650m and a non-underwritten share purchase plan to raise up to $100m.
The Australian’s Joyce Moullakis on Friday wrote that for months investors had asked the insurer to provide modelling on potential outcomes, IAG held the line it was confident pandemics were excluded and any estimates of exposures would be too diverse to quantify.
IAG placed its shares under a trading halt on Thursday, ahead of the raising.
Ben Wilmot 9.38am: Grocon falls into administration
The storied Grocon construction business has fallen into the hands of administrators with the company saying its legacy construction companies, established by Grocon chief Daniel Grollo’s grandfather Luigi 73 years ago, had been hit by heavy losses from the NSW government’s handling of the Central Barangaroo project.
Grocon chief executive Daniel Grollo said he was making the move reluctantly.
“It is unfortunate that INSW is forcing our hand to place the construction business into administration. While I have spoken before about moving Grocon away from the construction business model to new initiatives such as Build to Rent, I did not want to call in administrators,” Grollo said.
He insisted that he would pay out creditors, saying they would be first in line if the company won its $270m legal action against the NSW government.
“My desire is to pay the creditors in full. I believe we will ultimately win the case against INSW and when we do so, the creditors will be the first in line to be compensated,” he said.
High profile projects, The Ribbon development in Sydney and the Northumberland development in Collingwood, Melbourne would not be included in the administration entities.
Grocon said that while the federal government is taking extreme measures to support Australian businesses during COVID-19, Mr Grollo remained furious at the conduct of INSW in its handling of Grocon’s participation in Central Barangaroo project, which has led to the administration and impacted creditors of the Group.
Grocon said it was now fighting for compensation in the NSW Supreme Court after two years of attempting to negotiate with INSW, the government’s agency handling the precinct since the closure of the Barangaroo Development Authority in July 2019, to no avail.
With John Stensholt
Read more: Grocon collapses, blames Barangaroo | Collingwood site delays turn financial screw on Grocon
9.35am: Regis rejects $555m takeover bid
Regis Healthcare has rejected a takeover proposal from Washington H. Soul Pattinson and Ashburn, saying the offer of $1.85 a share materially undervalues the company, given its medium to long term prospects.
Yesterday, Washington H. Soul Pattinson and Ashburn, trustee for Regis Healthcare co-founder Bryan Dorman lobbed a takeover bid for the listed aged care provider to acquire all shares in Regis not already controlled by Ashburn.
Ashburn already owns 27.2 per cent on the company.
The Proposal follows rejection by the Regis Board of an earlier proposal from WHSP and Skip Capital in September 2020 at $1.65 per.
Read more: Soul Pattinson in $555m takeover of aged care provider Regis Healthcare
9.30am: ASX rise set to continue
The exceptionally strong rise in Australian shares this month looks set to continue Friday after another renewed strength on Wall Street.
Overnight futures suggest the S&P/ASX 200 will open up about 0.4pc near 6573 points, setting a fresh 8.5-month high.
With a 2.2pc rise so far this week, the S&P/ASX 200 is up 10.1pc so far this month, on track for its best month since inception in 2000. A 9.6pc month-to-date rise in the long-standing All Ordinaries index puts in on track for its best month since March 1988.
Wall Street saw an unusual mix of value and growth sectors leading gains, with Energy, Banks, Consumer Discretionary and Materials outperforming alongside Technology.
That pattern may flow through into the Australian market, which will focus on AGMs from ResMed, Lendlease and Platinum, results from Orica and preliminary retail sales data.
M&A activity continues to pick up with WHSP and Ashburn lobbing an indicative $1.85 share cash or scrip takeover proposal for Regis Healthcare.
Regis has since rejected this bid because it materially undervalues the company. That suggests the share price could go well above $1.85 this morning.
On the charts, the S&P/ASX 200 may soon test 6600 after forming support at the former resistance at level around 6500 in recent days.
Coronavirus vaccine news this week continues to drive the risk appetite in the face of the worsening pandemic in Europe and the US.
But as the VIX volatility index nears the August low of 20.28pc, the share market may be underpricing short-term US economic risk from the pandemic.
9.01am: City Chic boasts strong sales growth
Retailer City Chic Collective has touted positive sales growth for the first 20 weeks for the 2021 financial year.
Comparable sales growth lifted 7.9 per cent or 18.7 per cent excluding Victoria, where 18 of its retail stores were forced to close temporarily due to the COVID-19 lockdown, chief executive Phil Ryan said in an update released to the ASX ahead of the company’s annual general meeting.
“The strong momentum for ANZ online has continued into FY21, as we further expand our range on our digital platform and capture an increased share of wallet,” he will tell investors this morning.
“Avenue has traded well throughout the disruptions caused by COVID-19 and the US Presidential election and continues to exceed the expectations we had for the business upon acquisition.”
While Avenue, the US retail chain acquired by City Chic, had been trading well, Mr Ryan said that trading levels for the City Chic website in the US were below trading levels in the corresponding period in FY20.
8.50am: Sydney Airport foot traffic lull continues
The total number of passengers passing through Sydney Airport in October was down 94.3 per cent on the same month a year ago.
Domestic traffic recovered modestly for the month, as travel restrictions between New South Wales and South Australia and the Northern Territory eased.
“The downturn in passenger traffic is expected to persist until further government travel restrictions are eased,” the company said in a statement to the ASX.
8.43am: APRA trims CBA’s risk weight
APRA has trimmed CBA’s $1bn regulatory capital add-on - applied since May as part of its response to prudential enquiry - to $500m. It comes as APRA cites the bank’s progress in addressing concerns over its governance, accountability and risk culture framework and practices after breaching anti-money laundering laws in 2018.
The remaining $500m of capital add-on will remain until the bank completes a remediation plan set out by the regulator.
“We welcome APRA’s acknowledgment of the progress we have made over the past two years,” CBA chief executive Matt Comyn said in a statement responding to APRA’s announcement.
“At the same time, we and APRA recognise there is still a substantial amount of work to do before our remedial action plan is fully implemented and embedded across CBA.
“We remain committed to achieving these outcomes and to ensuring the improvements to strengthen governance, accountability and risk culture frameworks, practices and outcomes are sustained.”
8.26am: Orica profit falls 31%
Orica’s net profit for the year to September fell 31 per cent ot $168m, with underlying EBIT earnings down 9 per cent to $605m.
The explosives manufacturer declared an unfranked final dividend of 16.5c cents per share, bringing tis full year dividend to 33c cents per share.
CEO Alberto Calderon said the company had achieved key objectives during the year, including the acquisition of Exsa, Burrup commencing production of ammonium nitrate. Technology projects including those based on an entreprise-wide SAP implementation were also highlights for the year, alongside a successful raising and US private placement, he said.
Orica would cut scope 1 and 2 emissions by at least 40 per cent by the end of the decade,” Mr Calderon said.
“While the COVID situation means the year ahead cannot be predicted with any great certainty, the impacts are temporary. With most of our customers operations returning to pre-COVID activity, we have cautious optimism about the year ahead. With continued momentum, we expect to deliver a significant increase in EBITDA and a return to EBIT growth in the year ahead,” Mr Calderon said.
Robert Gottliebsen 7.59am: Has Telstra set a trend?
The share price of Telstra has risen by around 15 per cent this month on the basis of a simple asset restructure – the creation of an infrastructure separate company to own and develop the group’s infrastructure assets. There was no change in the company’s basic operations and trading performance.
Is this a magic pudding that can boost the value of many other Australian listed companies? And what are hazards in such a manoeuvre that the market may be ignoring?
Many companies have properties, plants and similar assets that can be hived off into a separate listed entity to take advantage of the market’s thirst for infrastructure-owning vehicles that pay high dividends.
The token interest rates offering on bank deposits and the low corporate bond rates has created an unprecedented demand for investments that provide a worthwhile yield with a high degree of safety. And that global demand for such assets will increase further by this week’s China bond tender which saw negative rates further enhancing the value of “yield” assets as Australia is pressured to take the same path.
In the case of Telstra the trading company will pay the infrastructure fund a “rent” to use the mobile phone network and other assets. Accordingly Telstra profits are diverted into a high distribution fund and therefore gain a greater market rating because they are priced on the basis of cash flow available for distribution.
While maintenance expenditure is required there is no need for substantial retained earnings. New infrastructure will normally be funded by a new rental agreement and a new capital raising based on the attraction of the deal.
Read more: Has Telstra’s restructure found a magic pudding?
6.55am: Starbucks lifts pay
Starbucks will boost pay by at least 10 per cent for baristas and other cafe staff in the United States, a company spokesperson said Thursday.
The hike, taking effect from December 14, benefits servers and shift supervisors who were with the company on or before September 14.
Staff who have worked at the company at least three years will receive an increase of at least 11 per cent, the spokesperson said.
Starbucks first told employees of the increase on November 2, shortly before the election of President-elect Joe Biden, who promised during the campaign to raise the federal minimum wage to $15 an hour from $7.25 an hour.
Several states, including New York, California and Maryland, have already raised the minimum wage to $15 an hour, but the lower level remains in place at the national level.
“For almost 50 years, Starbucks has been a leader in providing industry-leading benefits,” the spokesperson said.
“This announcement is the next phase of the company’s commitment to ensuring the wellbeing of partners with one of the most significant investments to hourly pay in the US in the history of the company.”
AFP
6.04am: Americans warned to stay home at Thanksgiving
In one of its sharpest warnings to date, the Centers for Disease Control and Prevention strongly urged Americans on Thursday not to travel for Thanksgiving, with an official saying the agency is “alarmed” by the recent exponential growth in the number of COVID-19 cases, as well as rising hospitalisations and deaths.
As the pandemic enters its 11th month in the US, many families are grappling with whether to meet up with friends or family for traditional celebrations. About 50 million Americans are expected to travel in the coming days, which is traditionally the busiest travel period of the year.
But the holiday comes at a particularly precarious time in the current virus surge, and doctors and government officials say even gathering with one other household is too much of a risk.
More than one million people were diagnosed with COVID-19 between Nov. 5 and 13, according to the CDC. It took 96 days for the U.S. to log one million cases last spring, though testing was less readily available then. The CDC said it is concerned about COVID-19 transmission during gatherings, as well as at transportation hubs where people might crowd to get on a train or plane.
Dow Jones
5.40am: BuzzFeed to buy HuffPost
BuzzFeed Inc. has agreed to acquire Verizon Media’s HuffPost in a stock deal, the companies said Thursday, uniting two of the larger players in digital media as companies across the sector search for ways to jump-start growth.
The acquisition is part of a larger deal between BuzzFeed and Verizon Media, a unit of Verizon Communications Inc. Under the pact, the companies will syndicate content on each other’s platforms and look to jointly explore advertising opportunities. Verizon Media will get a minority stake in BuzzFeed as a result of the tie-up, the companies said.
Verizon Media is also making an undisclosed cash investment in BuzzFeed in addition to the stock deal for HuffPost, according to a person familiar with the matter.
Jonah Peretti, BuzzFeed’s founder and chief executive, will run the combined company. BuzzFeed will lead the search for a new editor in chief of HuffPost, a position that has been vacant since the previous top editor.
In a joint statement, the companies said BuzzFeed and HuffPost have complementary audiences and will benefit from greater scale.
New-media companies like BuzzFeed and HuffPost were growing at breakneck speed a few years ago, as online readers flocked to fast-paced delivery of news, lifestyle and entertainment content, and advertising dollars followed. The business became more challenging as tech goliaths Facebook Inc. and Alphabet Inc.’s Google sucked up digital ad dollars. The coronavirus pandemic delivered another blow this year.
Dow Jones
5.32am: US unemployment jumps
The United States saw a sharp increase in new filings for jobless benefits last week, a sign that the unemployment crisis could be intensifying again as the world’s largest economy weathers a surge in COVID-19 infections.
The worrying increase comes as lawmakers in Washington remain at an impasse on enacting another stimulus spending measure, meaning extra payments to the unemployed and loans and grants to small businesses that helped the economy through the early months of the pandemic are yet to return.
The Labor Department on Thursday reported a seasonally adjusted 742,000 new claims for unemployment benefits filed in the week ended November 14, and 320,237 claims, not seasonally adjusted, made separately under a program for workers not normally eligible for jobless aid.
The worse-than-expected data marked the 35th straight week that new jobless claim applications have remained above the worst single week of the 2008-2010 global financial crisis, and analysts fear the latest increase is just the beginning.
The US is home to the world’s largest outbreak of COVID-19, which has accelerated in recent weeks.
The country saw 157,950 new infections over the 24 hours prior to Wednesday, the same day total deaths from the disease climbed above 250,000.
AFP
5.25am: Global stocks pull back
Global stocks mostly pulled back Thursday as a global rally fuelled by vaccine optimism petered out in the face of surging infections that are forcing fresh lockdowns and threatening to shock the global economy again.
While the broad consensus is that 2021 will see a healthy recovery across the world as people are gradually inoculated, traders are focusing on the immediate crisis as the US and Europe suffer a new wave of the killer disease.
Europe’s main markets finished the day lower. On Wall Street the Dow and S&P 500 were both in the red in late morning trading, while the tech-heavy Nasdaq Composite pushed higher.
“After the soaraway gains of the past two weeks, equities now look much more richly valued, and thus vulnerable to an outbreak of bad news,” said Chris Beauchamp, chief market analyst at IG trading group.
“This is precisely what we got in the form of spreading infections in the US but also in Japan, a worrying sign indeed for a country that had been successful earlier in the year in controlling the spread.
World markets have enjoyed an impressive run this month thanks to Joe Biden’s US election victory and then news that two vaccine candidates had shown to be more than 90 per cent effective in late trials.
The announcements lifted hopes that the planet can begin to get back to some form of normality soon.
However, Wall Street took a decisive turn lower in late trade Wednesday when New York Mayor Bill de Blasio said he would shut schools because of rising infections.
The move indicated that the soaring number of new cases around the US – the country has registered more than 100,000 every day for two weeks – could force lockdowns similar to those that battered the economy earlier this year.
AFP
ASX to seesaw; Chemist debut-day; IAG lifts div
IAG profit up 91 per cent. Earnings blitz ahead with updates due from Origin Energy, ASX Ltd, Northern Star, South32 and Treasury Wine too. ASX debut for new pharmacy and healthcare behemoth after Sigma-Chemist merger. Rising US inflation adds to Fed's Trump tariff challenges.
ASX hits record; Woolworths cutting jobs; BHP finds new chair
CBA and Computershare hit records. Woolworths cutting jobs. AGL narrows guidance after profit fall. Suncorp's March cash windfall, buyback promise. Star ex-boss: Casino 'run in clean and legal' way. BHP appoints new chairman. US CPI data next equity markets trigger.