Shares fade to 0.5pc gain, Mesoblast dives 31pc
Shares hit a two-month high but finished just 0.5pc higher, led by a rally in travel and leisure stocks, while James Hardie jumped 7pc.
- Coles’ environmental excuse ‘disingenuous’
- Upgrades likely for James Hardie: Citi
- Business confidence drops as recovery fades
- Sydney Airport in $2bn raising
That’s all from the Trading Day blog for Tuesday, August 11. Australian stocks gained as much as 1.2pc through the day to hit a two-month high, after a mixed night on Wall Street, but closed just 0.5pc higher.
Locally, the NAB business survey for July showed a pull back in confidence even before the onset of Victoria’s stage 4 restrictions, while earnings results have been released by NBN, Sydney Airport (which also launched a $2bn raise), James Hardie and Challenger.
Lachlan Moffet Gray 7.20pm: Thanks for the JobKeeper
The $12bn Sydney Airport and multi-million property giant GPT have emerged as recipients of millions of dollars in JobKeeper payments, with both expected to continue to receive the wage subsidy to support staff through the pandemic through to the end of September.
Details of how corporate Australia is using the $100bn wage subsidy scheme have emerged as some revealed jobs are still likely to be cut at the end of the program.
On Tuesday, Sydney Airport reported a full-year net loss of $51.8m and that it had received $5m in wage subsidies for 498 employees on JobKeeper.
Despite the subsidy, the airport said the six-month job guarantee for 500 employees would not be extended beyond September.
“The staff job guarantee will regretfully not be extended beyond 30 September 2020 and a review is currently underway to restructure the organisation,” the company said in its full-year results.
Some companies who received the wage subsidy had enough money on hand throughout the pandemic to pay all their staff and will likely not be eligible to receive the subsidy beyond September, when businesses must demonstrate their turnover is still depressed compared with the same quarter in 2019.
Cliona O’Dowd 6.07pm: Computershare sees ‘early recovery’ in parts
Share registry group Computershare says its events and market-facing businesses are showing early signs of recovery following the COVID-19 crisis which triggered a 44 per cent plunge in its net profit for the year.
ASX-listed Computershare posted a net profit of $232.7m for the 12 months through June, compared with a $415.7m profit in the year prior. Revenue fell 7.6 per cent to $2.3bn.
The result was marred by a decline in margin income on the back of lower interest rates, as well as reduced activity levels across its businesses, including corporate actions, as the pandemic hit at the start of the year.
Flagging the prospect of operating profit growth in 2021, Computershare chief executive Stuart Irving said all of its business lines saw improved performance over the last two months of the 2020 financial year.
“I am pleased to report that our operating business has proven its resilience, continuing to perform during the last few months of the financial year despite the deepening impact of COVID-19 and the associated volatility it’s brought to our markets,” he said.
Computershare is targeting positive operating profit growth for 2021, with earnings before interest and tax (excluding margin income) to be up around 10 per cent.
Assuming margin income is down by about $100m in fiscal 2021, management earnings per share is expected to decline by around 11 per cent, Mr Irving said.
The company’s focus on investing for growth and driving efficiencies was unchanged, he said.
Despite the earnings hit, Computershare maintained its final dividend at 23c per share.
“The group is well positioned to self-fund our growth strategies and still reward our shareholders,” Mr Irving said.
Computershare shares finished Tuesday’s session down 1.16 per cent at $13.67, before the after-market release of its full-year result.
Bridget Carter 5.36pm: Redfine drops stake in Cromwell Property Group
Redfine Properties has offloaded its stake in Cromwell Property Group through investment bank UBS.
Shares were sold at 89c and the holding equated to a 2.29 per cent interest or 60m shares.
The company’s stock price closed at 90.5c.
It is understood that at least two-thirds of the shares offloaded by the South African investor were sold to hedge funds that had been shorting the stock and were looking to close out their positions.
It comes as Cromwell, which has a $2.39bn market value, remains subject to a proportional takeover by ARA Asset Management and the latest sell down sees the Singaporean investor take greater strides towards its goal of achieving a 49 per cent interest.
It currently holds about 27 per cent of the company, according to Bloomberg data and is offering to buy shares at 92c each, sweetened from 90c per share earlier.
It bought the shares from Redefine at a lower price after being offered a discount because it was a large parcel.
ARA’s aim is to secure boardroom control of Cromwell, sell the Polish assets, which sources close to the company suggest will have to be offloaded for a lower price than that paid for, and also divest other properties to drive down gearing levels.
The thinking is that making a full takeover bid, which would be a cheque too large to write for ARA.
Long-time backer Redefine sold Cromwell shares in 2018, with ARA acquiring 19.5 per cent of the group’s shares for $405m.
4.29pm: Coles, Wesfarmers set record highs
Retail chains Coles and Wesfarmers were among the best performers in the market’s lunchtime rally - setting new record highs amid optimism of a trend lower in coronavirus cases.
Wesfarmers set a record of $47.44 but closed slightly lower at $46.98 while Coles touched $19.16 but finished the session higher by a more moderate 0.6pc to $18.97.
Similarly, Domino’s touched as much as $77.95 as Goldmans tipped the group to deliver earnings upgrades at its results next week, while Kogan continued its rally to set new heights of $21.57.
Here are the biggest movers at the close:
4.12pm: Gains trimmed to 0.5pc
Shares hit 2-month highs intraday but faded at the close, finishing up just 0.5pc.
A trend lower in Victorian coronavirus cases prompted a rally in stocks exposed to the state, sending the ASX to highs of 6186.1 – the highest level since early June.
By the close however, the benchmark ASX200 was up by a more moderate 29 points or 0.47 per cent to 6138.7 – still a three-week high.
Banks were a key driver of the rally – led by a 1pc lift in Commonwealth Bank and 2.7pc surge in Westpac, while BHP put on 0.9pc.
Mesoblast dropped by 31pc after concerns were raised ahead of its FDA meeting on Thursday, while Afterpay pulled back by 3.3pc.
Eli Greenblat 3.45pm: Coles’ environmental excuse ‘disingenuous’
The peak body representing catalogue printers and distributors has attacked Coles’ sustainability excuse for ending the distribution of its weekly catalogues to letterboxes as “disingenuous”, adding that digital catalogues also pump carbon into the atmosphere.
The Real Media Collective, the Australian industry association representing the interests of companies in the paper, print, publishing/media and related distribution sectors across Australia, also savaged the decision by Coles to end letterbox drops and only offer the weekly catalogue in its stores saying it will add to job losses amid the recession.
In a blistering attack on Coles for deciding to end the distribution of its catalogues to more than 7 million homes, the Real Media Collective challenged the grocery chain for using the environment as a reason.
Kellie Northwood, chief executive of The Real Media Collective said in a statement provided to The Australian: “The claim that Coles is stopping production of its supermarket catalogues due to environmental concerns is simply disingenuous.”
Read more: Coles scraps print catalogue distribution
Bridget Carter 3.41pm: Elliot brings reinforcements in Bluewaters bid
DataRoom | Activist investor Elliott has hired law firm Corrs Chambers Westgarth in its quest to control the destiny of the Bluewaters Power Station.
Elliott was recently among a number of distressed debt investors that purchased loans from the original lending syndicate to the coal fired power station in Collie, 200km south of Perth.
Others include Soliton Capital Partners, Oaktree Capital Management, Deutsche Bank, SC Lowy and Bank of America.
The only original lender in the syndicate that still has an exposure is Starwood Capital.
It is understood that the firm’s head of restructuring, insolvency and special situations in Australia, Cameron Cheetham is the lawyer working for the US-based Elliott – the activist investor that shook up mining giant BHP and lobbied for the sale of its US-based shale gas portfolio and abandoning its dual-listed structure.
Mr Cheetham is known for his connections to activist investors in the United States such as Elliott.
3.16pm: Platinum FUM to fall below $20bn: BP
Persistent outflows are set to pull Platinum’s funds under management below $20bn in the current year, with no respite in sight according to Bell Potter.
Analyst Lafitani Sotiriou notes that Platinum last month notched its 21st consecutive month of negative flows, even despite the reinvestment of distributions.
“The net-flows totalled -$3.1bn in FY20, coupled with a -$532m distribution, amounts to a total -$3.6bn headwind,” he says.
“This is contributing to the negative EPS momentum, and to an overall reduction in FUM which stands at $21.4bn at the end of July, down -15.0pc vs pcp level of $25.2bn.”
The broker forecasts negative double digit earnings per share growth forecasts in FY21 and FY22, adding that a ~20x FY21 price-to-earnings ratio was “too expensive given this headwind”.
Bell Potter has a sell rating on the stock with a $2.50 price target.
PTM last traded up 1.8pc to $3.87.
Lachlan Moffet Gray 2.55pm: HRL Morrison closes funding at $580m
Asset manager H.R. L Morrison & Co have closed the third and final funding round for their unlisted infrastructure and development fund, bringing the total fund size to approximately $580m.
The company says it intends to invest the money in long-term essential infrastructure services, with a targeted gross return of 13-15 per cent per annum.
Initial investments have been secured in the areas of water, energy and sustainable agricultural assets, the company said, including a South Australian integrated energy, water and greenhouse facility; a community-based water and electricity infrastructure network provider in eastern Australia.
2.54pm: ASX rally fading to 0.5pc
Australia’s share market rally is fading fast after a strong start to the week.
The S&P/ASX 200 is up 0.5pc at 6137.9 after rising 1.2pc to a 2-month high of 6189.1 in lunch trade.
It was on track for its best close since early March, but might now have to settle for the best close in three weeks.
All sectors bar tech remain in the green, led by outperformance in Real Estate, Financials, Materials, Energy, Health Care, and Communications.
2.37pm: Mesoblast addresses share slide
Mesoblast says it has “extensively prepared” for its FDA Advisory Committee meeting later this week, breaking its silence as its shares dive by 28pc in today’s trade.
The stem-cell focused biotech set out the run of events for Thursday’s meeting – noting that the Oncologic Drugs Advisory Committee (ODAC) would vote in the afternoon session “on whether the available data support the efficacy of remestemcel-L in paediatric patients with steroid-refactory acute graft versus host disease”.
A discussion paper released earlier today raised doubts as to the drugs effectiveness, but Mesoblast said the final decision was down to the FDA alone.
“Although the FDA will consider the recommendation of the advisory committee, the final decision regarding the approval of the product is made by the FDA solely, and the recommendations by the panel are non-binding,” it said.
MSB shares last down 27.5pc to $3.53 after hitting $3.43.
Read more: Mesoblast shares plunge as FDA questions treatment
Lachlan Moffet Gray 2.17pm: Sigma sales can fund growth: analysts
The sale of two distribution centres by listed pharmaceutical wholesaler Sigma Healthcare has been met with approval by analysts, who say the proceeds can be used to fund growth prospects.
Sigma, which owns and operates Amcal and Guardian pharmacies, announced on Monday it had finalised the sale and leaseback of two distribution centres in NSW and Queensland to Logos for $172m after earlier flagging that a sale of the assets were on the cards.
The deal, led by PWC’s real estate advisory team, includes a 15-year lease agreement by Sigma with two five-year options to extend, with the first year lease to cost around $8m a year.
The company said it would use the proceeds of the sale to reduce net debt below $100m, with settlement expected to occur at the end of August. Company net debt was $146m in March.
In an analyst note, UBS said the funds free up Sigma to execute “project pivot” – a strategy designed in 2018 to reset the company’s cost base and achieve $100m in annual efficiency gains or could be used to fund “selective growth opportunities as they transpire”.
SIG last traded up 1pc to 68.7c.
Read more: Medicine deliveries in ‘good shape’ despite lockdown
1.44pm: New highs for Domino’s as peer sales grow
Domino’s Pizza shares have set a new record high on Tuesday, as Goldmans tips the stock to be a beneficiary of global stay-at-home directives.
Ahead of its results to be released next week, analyst Andrew McLennan notes that peers Papa Johns and the US Domino’s chain both reported strong second quarter comparable sales, “providing greater confidence in DMP’s ability to deliver earnings growth in FY20”.
Mr McLennan updates his earnings forecasts for the group – tipping 10pc year-on-year growth to $310.8m – and keeps the stock at a buy rating with a $70 per share target price.
DMP shares hit $77.95 in early trade and last traded up 2.4pc to $77.50.
1.22pm: Provisions likely the last for Fletcher: Citi
Fletcher Building has revealed a net loss of $NZ196m for the full year, but a long list of provisions should be the last from the group, according to Citi.
The building materials group said today it would book significant charges of $NZ187m at its upcoming results, relating to 1500 job cuts and closure of some of its supply chain and manufacturing facilities to whether the pandemic.
A further $NZ59m impairment of its Rocla business and $NZ30m of costs on the early exit of its USPP 2012 notes takes total significant items to $NZ276m.
Citi notes that the groups balance sheet is in “better shape” with net debt at $NZ497m, and provisions taken should be the last for the company.
“The book of “high risk” projects is down to $NZ600m from $NZ2.2bn two years ago. The company has experienced disruptions due to COVID-19 and higher labour costs in some areas which accounts for half the provision,” Citi writes.
“The other half is addressing issues on existing projects and a more prudent view. The size of the provision is large. However, assuming no major change in COVID-19 disruptions, the likelihood of further provisions is now low.”
FBU last trading flat at $3.22.
Read more: Fletcher to cut 1500 jobs from Australia, NZ
1.01pm: Shares extend gains to 1.2pc
Australia’s S&P/ASX 200 share index is higher by 1pc, after hitting a 2-month high of 6186.1 in lunch trade.
The index exceeded its downsloping 200-day moving average, currently near 6180, for the first time since late February and is now on track for its best daily close since early March.
The June peak at 6198.6 offers additional resistance on the chart, but a break could trigger more buying from fund managers who are underweight equities in a near zero interest rate environment.
Additional gains came as S&P 500 futures turned up 0.3pc, adding to strength fuelled by strong gains in shares of companies exposed to improving coronavirus trends in Victoria. Banks remain a standout with the four majors rising between 2.3pc and 3.0pc before Commonwealth Bank kicks off earnings and trading updates from the sector on Wednesday.
12.49pm: Ophir focused on growth amid uncertainty
Small and mid-cap investor Ophir says its backing growth companies going into reporting season, noting that markets are becoming more comfortable with COVID-19 uncertainty and that the “worst is likely behind us”.
In market commentary for July, the Andrew Mitchell and Steven Ng led fund said investors appeared to be seeing the business cycle moving into the recovery phase, with a “high bar”’ for economies to return to strict lockdowns.
Ophir says Mineral Resources had been a key winner over the past month on the back of rising iron ore prices, while gold miners too found support from the commodity boom.
“Going into reporting season the Fund remains well placed with key holdings skewed towards quality growth companies that we believe can grow largely irrespective of the state of COVID-19,” the fund says.
“In an environment of greatly reduced earnings guidance by listed companies, we believe our holdings are more likely to provide clarity on the outlook than average and look forward to the greater visibility we expect management to provide.”
The funds top five holdings are a2 Milk, Afterpay, Domino’s, NextDC and ResMed.
12.37pm: SCA joins rally despite disappointment
SCA Property shares are joining the rally, even after posting lacklustre results for the full year.
Goldmans tipped a negative reaction to the shopping centre owner’s profit drop, noting that rent collection was lower and funds from operation were on the decline too.
“Management highlighted that the Victorian lockdowns will have a significant impact on tenant sales in FY21, resulting in further waivers and deferrals,” analyst Jeffrey Pehl writes.
“The result was below both Goldman Sachs (15.6c) and consensus (VisibleAlpha) at 14.9c. SCA Property did not provide FY21 guidance but did disclose it will continue to target a distribution payout ratio of ~100pc of annual funds from operation. We expect this result to have a negative impact on SCP’s shares.”
Regardless, SCP shares are up by 3.2pc to $2.28.
Read more: SCA supermarkets hold up
Jared Lynch 12.00pm: Mesoblast dives as FDA raises concerns
Shares in stem-cell focused biotech Mesoblast have dived more than 20 per cent after the US Food and Drug Administration raised questions about the effectiveness of its new treatment to combat COVID-19.
Mesoblast’s shares have had a stellar run in past months, rising more than 323 per cent, largely due to the success of its drug remestemcel-L, which has been trialled in the US on patients with serious COVID-19 complications.
But a discussion paper the FDA released ahead of an advisory committee meeting on Thursday has rattled investors, sending Mesoblast shares down 20.5 per cent to $3.84.
“FDA’s position is that the product attributes the applicant has identified as related to potency and activity, however, do not have a demonstrated relationship to the clinical performance of specific DP (drug product) lots, and that the product’s proposed immunomodulatory mechanism of action has not been demonstrated in vivo in study subjects receiving remestemcel-L,” the FDA said in its discussion paper.
“Without a demonstrated relationship with clinical effectiveness and/or in vivo potency/activity, controlling these CQAs (critical quality attributes) may not be sufficient to ensure the manufacturing process consistently produces remestemcel-L lots of acceptable quality.”
Read more: Time is right for Mesoblast in fight against coronavirus
11.50am: ASX hits 2-month high
Australia’s share market is rising 1pc to a 2-month high of 6174.2, adding to its 1.8pc surge on Monday thanks to improving trends in coronavirus cases.
The index has ignored a renewed slump in business confidence in NAB monthly business survey, and a decline in Victorian payroll jobs.
In any case, the virus trends are now improving with the 7-day average case change hitting a 12-day low.
Travel companies are leading gains with Flight Centre and Webjet up about 6pc and Qantas up 2.8pc. Property trusts are also strong with Stockland up 3pc, Vicinity Centres up 2.3pc, Scentre up 1.8pc and Lendlease up 1.7pc.
Banks are the main drivers again with Bendigo up 4.7pc, Westpac up 2pc, NAB and ANZ up 1.8pc and CBA up 1.1pc.
Interestingly, the market darling, Afterpay is down 3.4pc after recent US tech sector weakness.
Commonwealth Bank now seems to be getting some “speed wobbles” before its full year results tomorrow.
The index might also run into some technical selling near its downward-sloping 20-day moving average near 6180.
11.36am: Victorian jobs give back recovery
Payroll jobs in Victoria lost much of their early recovery as the state dialled back activity in its second lockdown, while the rest of the country remained flat.
In the latest ABS jobs data for July, nationwide jobs remained steady with just a 0.1pc slip, while Victorian jobs fell by 1.5pc ahead of the introduction of stage four restrictions.
“Around 40 per cent of jobs lost in Victoria by mid-April had been regained by 25 June, but by the end of July this had reduced to 24 per cent,” ABS head of labour statistics Bjorn Jarvis said.
“The Accommodation and food services and Arts and recreation services industries were the two most impacted by payroll job losses during the COVID-19 period.
“These industries saw the largest increases in payroll jobs since mid-April (26.6 per cent and 18.2 per cent), but remained 17.9 per cent and 15.1 per cent lower than mid-March.”
AUDUSD spiking by 0.2pc to US71.64c.
AU payrolls data - Victorian divergence is clear in this release. A material rise ex-Vic offset entirely to see the overall number of jobs down 0.1% #ausbiz pic.twitter.com/9IQl8Za0en
— Alex Joiner (@IFM_Economist) August 11, 2020
Patrick Commins 11.33am: Business confidence drops as recovery hopes fade
Business confidence suffered a dramatic reversal in July, as the Victorian second wave of coronavirus infections smashed hopes for a rapid exit from the COVID-19 recession.
NAB’s survey showed confidence slumped 14 points to -14pts, ending two months of sharply climbing optimism following April’s dramatic collapse in the wake of the initial national shutdowns.
Confidence saw a “significant deterioration” across all industries and in each state, except South Australia and Western Australia, the report said.
But business conditions continued to climb in July, lifting 8pts to zero, the survey showed. Firms in NSW and Victoria, however, reported the weakest improvement in operating conditions. The drop in confidence was also greatest in these east coast states, with Queensland showing a more modest decline.
The survey was conducted prior to the escalation to stage 4 restrictions in Melbourne and stage 3 restrictions in the rest of Victoria earlier this month.
Bridget Carter 11.31am: Syd Airport to be key mandate for UBS
DataRoom | Investment bank UBS pulled off a coup in securing the role of sole lead manager and sole underwriter for the $2 billion equity raising by Sydney Airport.
Sources say that the mandate – one that will prove lucrative for the bank – was won after UBS earlier embarked on an extensive amount of work on western Sydney Airport being developed at Badgerys Creek.
Sydney Airport was considering for an acquisition of the airport. The thinking is that the mandate was payback for that work.
It is understood that the deal is already covered at its floor price of $4.56 per share, a 15.4 per cent discount to their last traded price of $5.39.
It is understood that other banks had offered to carry out the raise at a skinnier discount.
Bids are being accepted in 5c increments and shareholders will receive one share for every 5.15 owned.
Read more: Sydney Airport raising follows loss
11.24am: Upgrades likely for James Hardie: Citi
James Hardie is primed for further consensus upgrades after handing down its first quarter results this morning, according to analysts at Citi.
While the group posted a profit drop to $US89m, the broker says the growth in the North American business is promising.
Citi noted strong volume growth in North America, along with strong earnings margin outcomes due to higher operating leverage, manufacturing savings and lower freight and pulp costs.
The group’s outlook was ahead of Citi’s estimate, and “the continuation of strong top line growth in the US into 2Q21 will likely drive consensus upgrades,” the broker added.
JHX last up 4.7pc to $31.57, after hitting $32.59.
Read more: James Hardie profit dives 89pc
Eli Greenblat 10.55am: Coles catalogue distributor dives 20pc
Shares in marketing group IVE have dived by 20pc in morning trade, as key client Coles announces the end of its printed catalogue deliveries.
Earlier today, Coles said it was moving to a digital format, with specials catalogues only provided in store, effectively wiping out $35m to $40m in IVE’s revenue.
IVE Group said today it was currently printing and distributing catalogues to roughly 7 million households weekly, through approximately 14,000 walkers and was evaluating the full impact of the reduction in revenue.
“IVE moved quickly at the outset of the COVID-19 pandemic with a range of initiatives in response to revenue volatility and the risk of negative impacts to revenue in the short to medium term,” the group said.
“These initiatives place the Company in a stronger position to mitigate the impacts of revenue declines.”
IGL shares last down 19.4pc to 64.5c.
10.52am: Syd Airport raise removes doubts: RBC
RBC’s James Nevin says the question of whether Sydney needed to raise equity to get through COVID-19 has been a key uncertainty over the stock and its $2bn capital raising deals with that uncertainty.
“On our estimates Sydney Airport required $1.5bn-$2bn to provide liquidity until the end of 2022 in the unlikely scenario of zero revenue for that period and it has chosen to raise at the top of that range,” he says.
“We think this provides ample liquidity to remove doubts on liquidity even in an uncertain recovery.”
He keeps his Outperform rating and thinks the equity raise should “help lift an overhang on the share price”.
Read more: Sydney Airport raise follows loss
10.40am: Victorian-exposed stocks lead lift
Australia’s share market remains buoyant amid rising offshore markets, another fall in Victoria’s new cases of coronavirus, and encouraging results from James Hardie.
The S&P/ASX 200 is up 0.5pc at a 3-week high of 6142.2 after surging 1.8pc on Monday. The 200-day moving average at 6180 looms as key resistance on the chart.
James Hardie surged 7pc after reporting strong volume growth in North America and stronger-than-expected margins.
Companies with Victorian-exposed earnings were among the best performers for a second day running after new cases in the state fell to 331 and the 7-day average of new cases hit a 12-day low of 451.
Webjet 4pc, Bendigo Bank and Qantas rose 2.5pc, Westpac and NAB rose 1.7pc, ANZ rose 1.6pc, CBA rose 1.2pc, and Crown Resorts gained 0.1pc.
10.32am: 500 Sydney Airport employees on JobKeeper
Sydney Airport, which this morning is tapping investors for $2bn, said it enrolled in the JobKeeper government assistance program for 498 eligible employees to steer it through the coronavirus pandemic.
Sydney Airport said for three months April 2020 to June 2020, the group recognised $5m in government assistance for employees.
At the same time, it said it had concessions in the form of rent abatements of $52.9m and rent deferrals of $6.0m were negotiated.
Earlier Tuesday, Sydney Airport said a sharp fall in airline traffic had prompted it to unveil a $2bn equity raising as it announced a $53.6m net loss for the first six months of 2020 after passenger numbers plunged by 57 per cent.
Read more: Sydney Airport raising follows loss
10.11am: Shares edge higher
Local shares are holding slightly higher in early trade, as banks extend yesterday’s more than 3pc rally.
At the open, the benchmark ASX200 is higher by 4 points or 0.1pc to 6114.1.
Banks are doing the heavy lifting, while tech stocks reverse by 1pc, and healthcare drags by 0.8pc.
Fortescue is adding 0.9pc after its target price was raised by JP Morgan, while Rio rises by 0.9pc and BHP by 0.3pc.
Bridget Carter 10.09am: Fineos raising $90m
DataRoom | Macquarie Capital and Moelis Australia are working on an $90m equity raising for software company Fineos Corp.
The company will issue one CHESS depositary interest for every share.
The raising by way of a placement will secure $85m and the share purchase plan $5m.
Shares will be sold at $4.26 each, a 7.2 per cent discount to the last closing price of $4.59.
9.45am: Kodak’s US loan suspended, shares slump
Shares of Kodak plunged Monday after a US agency suspended a loan intended to support the former photo giant’s launch of a new pharmaceutical venture.
The US International Development Finance Corporation’s (DFC) said Friday it will halt further action following controversy that has surrounded its July 28 announcement of a $US765m loan to Kodak.
The loan is part of a program to boost US pharmaceutical capacity in the wake of the coronavirus pandemic.
Shares of Eastman Kodak dived 28.3 per cent to $10.67 in afternoon trading. The Wall Street Journal has reported that the Securities and Exchange Commission is investigating Kodak’s disclosures about the loans and is expected to probe the company’s awarding of stock option grants to executives on July 27.
Trading volumes in Kodak surged the day before the DFC announcement and shares rocketed up as much as 500 per cent on July 28 after the loan’s announcement.
AFP
9.36am: Shares to trim yesterday’s rally
Australia’s share market may extend Monday’s strong rise amid buoyant global markets and more evidence that Victoria’s mobility restrictions are working.
Overnight futures relative to value suggest the S&P/ASX 200 will open down 0.2pc at 6098 after surging 1.8pc to a 3-week high close of 6110.20 on Monday after the number of new cases of coronavirus in VIC hit a 12-day low.
But if downside does prove limited as it did in offshore markets, the S&P/ASX 200 may go on to test its 200-day moving average at 6181 this week.
Leisure names also outperformed on Wall Street, led by MGM International and even Royal Caribbean Cruises.
[CHART] Leisure related names flourished in US trade overnight #ausbiz Bloomberg pic.twitter.com/CCHrPr0V0m
— CommSec (@CommSec) August 10, 2020
Victoria has just reported 321 new cases of coronavirus and 19 deaths in the past 24 hours after 322 cases and 19 more deaths a day earlier. Shares that suffered the most from Victoria’s worsening second wave of coronavirus in recent weeks may continue to outperform.
The Financials sector could be the key driver again after the S&P/ASX 200 Banks index rose 3.2pc on Monday. Traders seem to be betting on an upside surprise from CBA when it reports full-year results on Wednesday.
Focus turns to the 11.30am releases of NAB’s monthly business survey for July and ABS weekly payroll jobs and wages data for early indications of the fallout from Victoria’s extended lockdowns.
9.32am: Broker rating changes
- AGL Energy price target raised 14pc to $20.12 – Citi
- Breville cut to Neutral – Credit Suisse
- Charter Hall Long WALE cut to Hold – Ord Minnett
- Domain Holdings cut to Sell – Morningstar
- Fortescue target price raised 19pc to $18.60 – JP Morgan
- Mineral Resources price target raised 14pc to $21.40 – JP Morgan
Eli Greenblat 9.26am: Coles scraps print catalogues
Supermarket retailer Coles is increasingly pivoting to online platforms as the COVID-19 pandemic turns more consumers to shopping online, and is launching coles&co, a brand new digital experience offering specials alongside exclusive content to inspire customers with new products, tips and recipes.
The move online will come at the cost of Coles traditional printed catalogue that is distributed to letter boxes, which will end next month, though customers can still pick up a printed copy in store.
During the first wave of the COVID-19 pandemic Coles, Woolworths and other large retailers suspended their popular printed mail catalogues, but Coles is the first major retailer to permanently end the publication as it focuses on its digital advertising and marketing assets.
“With COVID-19, we’ve really seen a shift to online shopping in the last few months, as lots of our customers try our contactless home delivery and Click&Collect services for the first time. We’ve also seen an increase of more than 50pc in readership for our digital catalogue since March,” Coles Group chief executive Steven Cain said.
coles&co features ‘shoppable’ specials, allowing customers to do their shopping right from the screen. Consumers can tap on a product to add it to their basket, and then check out via online shopping services.
Read more: Print catalogue slashed as retailers go digital
David Swan 9.20am: NBN Co lifts revenue 36pc
NBN Co has exceeded its own targets, lifting revenue by 36 per cent year-on-year to $3.8bn, and active premises to 7.3 million, as the decade-long government-owned infrastructure project nears completion.
In its FY20 results Tuesday morning NBN Co said it had surpassed its corporate plan target by more than 230,000 premises, with 11.73 million homes and businesses now ready to connect to the national network.
Its $3.8bn in revenue was also $100m higher than the FY20 forecast in its corporate plan, despite the company giving away more than $80m in capacity to providers, to help them meet demand stemming from COVID-19.
Still, the group posted another bumper loss, $3.78bn for the financial year, versus $3.89bn last year.
NBN Co posted earnings before interest, tax, depreciation and amortisation (EBITDA), before subscriber costs, of $1.77bn, up 190 per cent year-on-year, while Monthly Residential Average Revenue Per User (ARPU) clocked in at $45, up from $44 in FY19.
Capital expenditure declined from $5.9bn in FY19 to $5.04bn in FY20, which the company said reflected the fact construction work was winding down.
Ben Wilmot 8.59am: SCA Property profit slides 22pc
SCA Property Group, which was spun out of Woolworths, has reported a 22 per cent slump in first half net profit after tax to $85.5, saying COVID-19 had dented is revenue and pulled lower its portfolio value.
Earnings were hit by $20.5m due to additional expenses such as COVID-19 cleaning and security, along with $4.5m from waived rent and an incremental expected credit loss allowance of $14.4m against rental arrears.
In addition, its property portfolio was cut by $87.9m but funds from operations slipped by just $140.8m, a 0.7 per cent last year, and on a per unit basis was off by 10.3 per cent.
SCA paid distributions of 12.50c per unit, down by 15 per cent on last year, as its supermarkets kept paying rent but some smaller tenants struggled.
Chief executive Anthony Mellowes said the group’s convenience-based centres had been resilient, with anchor tenants such as the major grocery chains experiencing strong growth.
“Nevertheless, the COVID-19 pandemic has impacted many of our specialty tenants who have experienced sales declines,” Mr Mellowes said.
“We have provided rental assistance to over 600 tenants in accordance with the Mandatory Code of Conduct.
“Our rental collection rate was 77pc during the COVID-19 period, and we will continue to pursue payment from tenants of all of the outstanding amounts not covered by agreed waivers or deferrals.”
SCP shares last traded at $2.21.
Cliona O’Dowd 8.53am: Challenger stays defensive, posts loss
Annuities provider Challenger says it will maintain a more defensive portfolio in the coming year due to the uncertain economic outlook but gave investors little clarity on when it will restart paying dividends as it posted a net loss for the 2020 financial year.
For the 12 months through June, ASX-listed Challenger swung to a loss of $416m, from a $308m profit the year prior, as its investments took a $750m hit in the COVID-19 market rout.
The investment hit represented fair value movements on Challenger Life assets and liabilities, the company said on Tuesday.
Normalised net profit before tax was down 8 per cent to $507m, while normalised net profit after tax fell 13 per cent to $344m. Group assets under management grew 4 per cent to $85.2bn in the year.
“While investment losses resulting from the major COVID-19 market event have impacted our net statutory performance, our strategy of growing funds under management and diversifying our revenue base demonstrates underlying business resilience,” Challenger chief executive Richard Howes said.
8.48am: Ampol to restart Lytton refinery
Ampol has set a date for the restart of its Lytton refinery, after a prolonged outage period for maintenance in light as fuel demand collapsed during the pandemic.
In a notice to the market today, Ampol said it had made the decision “based on its assessment that refining will deliver better integrated supply chain and earnings alternatives than its product imports”.
It added that maintenance activities were due to be complete by the end of the month, with the phased restart of refinery units to begin in September.
“Ampol expects the refinery to be able to produce at full production by the beginning of October and will continue to evaluate make versus buy decisions based on prevailing market conditions,” it said.
“Ampol believes that market conditions for refining continue to be highly uncertain and Ampol will continue to review its refining operations and provide routine updates of its refining performance once operations recommence.”
ALD shares last traded at $29.75.
Read more: Petrol sales fall as Caltex considers asset sale
Bridget Carter 8.44am: UBS tapped for Sydney Airport raise
DataRoom | Sydney Airport is raising $2bn in an entitlement offer through investment bank UBS.
Shares are being sold in a book build with a floor price of $4.56, a 15.4 per cent discount to their last traded price of $5.39.
Bids are being accepted in 5c increments.
Shareholders will receive one share for every 5.15 owned.
More to come
Cameron Stewart 8.34am: Security scare outside the White House
A shooting outside the White House forced Donald Trump to cut short a news conference as secret service agents whisked the president off the stage.
The president later resumed his press conference in the media briefing room, telling reporters that a person had been shot by secret service agents near the White House.
The secret service removed the president from the lecturn back into the Oval Office shortly after the sound of two gunshots was heard nearby. As the president was leaving he asked the secret service agent ‘What’s happening?”
“They just wanted to step aside for a moment to make sure everything was clear,’ Mr Trump said after resuming the press conference.
It is not yet clear why the shooting occurred. The victim is said to be on the way to hospital.
LIVE: President @realDonaldTrump holds a news conference https://t.co/Vbc9lndRoK
— The White House (@WhiteHouse) August 10, 2020
8.20am: Sydney Airport in $2bn raising, loss
Sydney Airport has announced a $2bn equity raising in a bid to strengthen its balance sheet amid continuing uncertainty caused by the coronavirus pandemic.
It came as the airport announced a half-year after-tax loss of $53.6 million.
The raising is via a fully underwritten pro rata accelerated renounceable entitlement offer, with retail rights trading.
Sydney Airport chief executive Geoff Culbert said: “The equity raising will position Sydney Airport for the future.
“Sydney Airport took pre-emptive action at the start of the COVID-19 pandemic, putting in place significant liquidity which gave us the flexibility to monitor how the situation evolved.
“Six months into the pandemic, there remains uncertainty as to how long it will take for aviation markets to return to pre-COVID-19 levels.
“Accordingly, Sydney Airport is taking further decisive action to strengthen its balance sheet and to help ensure it remains well capitalised to meet the challenges presented by an uncertain COVID-19 operating environment, and to ensure it is positioned for growth in the future.”
The raising came as Sydney Airport announced an after-tax interim loss of $53.6 million.
Earnings before interest, tax, depreciation and amortisation were down $35.4 per cent to $300.4m.
Revenue fell 35.9 per cent to $511.0m.
Read more: Sydney Airport raising follows loss
8.10am: ASX set for small early loss
Australian stocks are set for a steady, or mildly negative, start after a mixed night on Wall Street.
Shortly after 8am (AEST) the SPI futures index was down three points, after wavering between negative and positive territory.
On Monday, Australian shares rose 1.8pc to a three-week high, as all sectors rose in the market’s best day in a week.
The Aussie dollar was slightly lower at US71.50c, from US71.62c.
7.35am: James Hardie quarterly profit dives
Building materials supplier James Hardie Industries said its first-quarter net profit fell by 89 per cent, but it had gained significant market share in North America despite the coronavirus pandemic.
James Hardie said its net profit totalled $US9.4 million in the three months through June, down from $US86.5 million a year earlier.
The company’s adjusted net operating profit, which strips out asbestos liabilities, was broadly in line with a year earlier at $US89.3 million. James Hardie has faced thousands of compensation claims in Australia after workers who mined asbestos for decades, before it was phased out in the 1980s, developed deadly asbestos-related lung diseases such as mesothelioma.
Looking across the full year, James Hardie said it expects an adjusted net operating profit of between $US330 million and $US390 million. That compares to a $US352.8 million profit achieved in the 2020 fiscal year.
“While the COVID-19 pandemic has caused disruptions to markets that we participate in and creates uncertainty regarding economies and housing markets in the future, I am confident in our global team’s ability to execute to accelerate our strategy through the crisis,” said Chief Executive Jack Truong.
James Hardie says dividends remain suspended.
Dow Jones Newswires
Richard Gluyas 7.20am: Ex-NAB exec Hagger cleared
ASIC has told former senior National Australia Bank executive Andrew Hagger that no action would be taken against him over evidence he gave at the Hayne royal commission.
Mr Hagger left NAB in September 2018, becoming chief executive of iron ore billionaire Andrew Forrest’s philanthropic Minderoo Foundation as well as its investment arm in March last year.
Unlike former AMP chairman Catherine Brenner, who got her no-action letter from the Australian Securities & Investments Commission on Monday, Mr Hagger is understood to have received similar correspondence from the conduct regulator last December.
The former banker was unavailable for comment.
Royal commissioner Kenneth Hayne recalled Mr Hagger to give evidence to the royal commission a second time over the bank’s fees-for-no-service scandal. The core of the issue was a 2016 telephone conversation between the NAB executive and ASIC commissioner Greg Tanzer over the scale of the issue.
The position of senior counsel assisting Michael Hodge was that Mr Hagger had withheld information that NAB would refund $34m to customers instead of half that amount.
7.10am: ASX set for flat start
Australian stocks are set to open steady after a mixed night on Wall Street.
Shortly after 7am (AEST) the SPI futures index was up just one point, after wavering between negative and positive territory.
On Monday, Australian shares rose 1.8pc to a three-week high, as all sectors rose in the market’s best day in a week.
The Aussie dollar was slightly lower at US71.50c, from US71.62c.
6.50am: a2 Milk names new CEO
Infant formula and milk-marketing company a2 Milk said it has appointed clothing industry executive David Bortolussi as chief executive.
Mr Bortolussi, who is group president of international innerwear at American clothing company Hanes Brands, will start in early 2021, a2 Milk Company Ltd. said Tuesday.
A2 Milk’s previous CEO, Jayne Hrdlicka, resigned unexpectedly in December after a short tenure.
Mr Bortolussi, who succeeds interim CEO Geoffrey Babidge, will take up the Sydney-based role early in 2021.
The New Zealand- and Australian-listed company said Mr. Bortolussi will be paid a base annual salary of $1.75m as well as short- and long-term incentives.
He will also receive one-time cash payments and share rights valued at $3.97 million when he starts with a2 Milk.
Dow Jones Newswires
6.20am: ASX set to edge up at open
Australian stocks are set to edge higher at the open after a mixed night on Wall Street.
Shortly after 6am (AEST) the SPI futures index was up four points, after earlier being in negative territory.
On Monday, Australian shares rose 1.8pc to a three-week high, as all sectors rose in the market’s best day in a week.
The Aussie dollar was slightly lower at US71.50c, from US71.62c.
6.10am: Wall Street edges higher
US stocks ended with gains as investors assessed the chances of fresh federal stimulus spending, the slowing pace of new coronavirus infections and escalating tensions with China.
The Dow Jones Industrial Average climbed 1.3 per cent, about 358 points, buoyed by shares of Boeing and Caterpillar. The S&P 500 added 0.3 per cent, after a week during which the benchmark index advanced 2.5 per cent.
The Nasdaq Composite dropped 0.4 per cent, dragged lower by shares of the big technology giants that have pushed the stock market higher since late March.
Investors are attempting to gauge whether steps taken by President Trump over the weekend to offer aid to American households will go into effect or potentially spur a new round of Congressional deal making.
Mr Trump on Saturday directed the federal government to provide $US300 a week in additional payments to the unemployed. That was one of four executive orders aimed at extending relief spending after the White House and politicians on either side of the aisle in Congress failed to reach an agreement on a broader stimulus package. The president’s directives are facing criticism for not offering sufficient aid, and for potentially breaching congressional spending authority.
The US also reported its lowest number of new coronavirus cases in nearly a week, as new infections in some parts of the country trended down. Economists pointed to the slowing new case numbers as a signal that moderate measures might make it possible to contain the virus, without again crimping economic activity severely.
The stimulus debates come as investors are turning their attention back to broader macroeconomic uncertainty, after weeks of focus on US corporate earnings and which companies appear best placed to survive the crisis.
Last week, Citigroup’s derivatives desk saw clients trading individual stocks three times as much as they traded indexes, a split they expect to revert to normal levels, said Dan Baranovsky, the head of Citi’s North American equity derivatives and cash trading desk.
“Here we are coming out of a pretty important earnings and guidance season and people are going to focus on macro concerns, specifically stimulus,” he said.
Oil, gold rise
Brent crude, the international oil benchmark, rose 1.6 per cent to $US45.09 a barrel.
Worries remain that government actions around the world to fight the pandemic’s impact will eventually fan inflation. The trading around that theme is accelerating, Mr. Baranovsky said.
Gold rose 0.7pc, or $US14.30 per troy ounce, to $US2024.40, and silver climbed 6.2pc, or $1.72, to $US29.249 a troy ounce. Both metals had posted nine straight weeks of gains heading into this week and are up sharply for the year.
Tensions are also escalating between the U.S. and China. China’s foreign ministry said it will impose sanctions on 11 US citizens, including Republican Sens. Ted Cruz and Marco Rubio, in retaliation for similar measures by Washington against Hong Kong and mainland Chinese officials.
“I’m not surprised we’re seeing yoyo like moves at the moment reflecting short-term developments like the sanctions,” said Ella Hoxha, senior investment manager at Pictet Asset Management.
Talks scheduled between top U.S. and Chinese officials on Aug. 15 about the phase-one trade deal are viewed as crucial by investors, she said. “That’s more important for markets than the sanctions, which seem much more of a tit-for-tat diplomatic spat rather than something with deep economic implications.”
Tech stocks slumped broadly after their big rally this year, with stocks including Netflix, Facebook and Tesla off more than 2pc.
Overseas, Hong Kong’s Hang Seng index dropped 0.6pc. Political tensions in the region continued to simmer as Jimmy Lai, the outspoken publisher of Hong Kong’s widely read pro-democracy newspaper, was arrested Monday on suspicion of foreign collusion under a new national security law. That step marks an expansion of Beijing’s crackdown on the former British colony.
Dow Jones Newswires
5.47am: Marriott swings to loss
Marriott International posted a larger-than-expected quarterly loss, though a budding recovery in China offered signs of hope as the pandemic continues to pound the lodging industry.
The world’s largest hotel company posted a second-quarter loss of $US234 million, or 72 cents a share, compared with a profit of $US232 million, or 69 cents a share, in the same quarter last year, as travel remained depressed during the usually lucrative summer season.
For the three months ended June 30, adjusted losses were 64 cents a share, wider than the 41 cents a share analysts polled by FactSet predicted. The company incurred impairment charges and bad-debt expense due to COVID-19 that hurt reported and adjusted losses by $US61 million and $US54 million, respectively, after taxes.
The hotel industry is suffering through its worst period in modern times, as the pandemic has led to worldwide cutbacks in business travel and cancellations of conference events. While leisure travel during the summer has shown some pick-up in the U.S., some hotel executives have said it could be two or more years until business travel returns to pre-COVID-19 levels.
Dow Jones
5.45am: Kodak loan put on ice
Eastman Kodak shares lost more than a quarter of their value after news that a planned $US765 million loan to the company was put on hold as the deal has come under congressional and regulatory scrutiny.
The U.S. International Development Finance Corp. announced plans last month to loan Kodak the funds to produce drug ingredients at its factories. But in a tweet late Friday, the agency said that “recent allegations of wrongdoing raise serious concerns. We will not proceed any further unless these allegations are cleared.”
A Kodak spokeswoman said Monday that it “appreciates and supports” the decision by the agency to await clarification before moving forward with the process. The company said on Friday it would launch an internal review.
Monday, shares of Kodak fell 30pc to $US10.40, after losing as much as 43pc earlier in the session. The stock, which ended 2019 at $US4.65 and hit a 2020 high of $US60 following news of the loan, was trading below $US3 for much of the year.
The Securities and Exchange Commission is investigating how Kodak controlled disclosure of the loan, word of which began to emerge on July 27, causing Kodak’s stock price to rise 25pc that day.
The SEC is also expected to examine the stock options granted to executives on July 27. The option grants instantly became profitable, at least on paper, after Kodak’s loan became public.
Dow Jones
5.40am: Kazia shares fall back 10pc
Australian biotech Kazia Therapeutics’ shares were down 10 per cent at $US5.79 in US trade after the company said on Friday the US Food and Drug Administration has awarded Rare paediatric Disease Designation to its paxalisib for the treatment of Diffuse Intrinsic Pontine Glioma, a rare childhood brain cancer.
The stock closed Friday’s session up 50 per cent at $US6.40 on high volume.
The oncology-focused biotechnology company said it may now be eligible to receive a rare paediatric disease priority review voucher if paxalisib is approved for DIPG.
A priority review voucher grants the holder an expedited six-month review of a new drug application by the FDA. Priority review vouchers can be sold to other companies and have historically commanded prices between $US68 million and $US350 million. Initial clinical efficacy data are expected in the second half of 2020.
Dow Jones Newswires
5.35am: Saudi Aramco chief optimistic
The head of Saudi Aramco said he was optimistic that the global demand for oil was growing as the worst of the coronavirus pandemic “might be behind us”.
Amin Nasser told reporters through a video conference that global demand for crude oil currently stands at around 90 million barrels per day, just 10 million barrels short of the pre-pandemic level.
“At year-end demand is expected to be in the mid-90s,” Aramco’s chief executive added.
Demand for oil was hit hard by the worldwide shutdowns to counter the pandemic, sliding at one stage by over 20 million bpd.
“While it remains unclear how long the current wave of uncertainty will continue, we see growing evidence that the worst of the crisis might be behind us,” Nasser said.
“We are witnessing a partial recovery in the energy market in the second half of 2020 as countries around the world take steps to ease restrictions and reboot their economies.”
AFP
5.30am: Stocks unfazed by US-China tensions
Stock markets largely shrugged off the latest spike in US and Chinese tensions as a review of a crucial trade deal approaches.
Europe’s main markets closed higher while New York’s top indices were mixed. Talks on the phase one US-China trade deal are set for this weekend, but the US administration imposed sanctions on several Hong Kong officials, with Beijing slapping sanctions on a number of leading Americans.
“With trade talks — via videoconference — scheduled for Saturday, you’d think investors would be in a state of distress over the tinderbox situation between the two superpowers,” said market analyst Connor Campbell at Speadex.
“Instead the markets were fairly blasé about a topic that has caused triple-digit losses in the past,” he added.
Away from domestic policy, Washington has slapped sanctions on a group of Chinese and Hong Kong officials — including the city’s leader Carrie Lam — in the latest salvo of a row linked to Beijing’s decision to impose a security law on the city.
China on Monday sanctioned 11 Americans, including senators Marco Rubio and Ted Cruz, in retaliation to the US measures.
It comes after the White House set the clock ticking on forcing Chinese internet giants TikTok and WeChat to end all operations in the US, as part of a diplomatic-commercial offensive analysts fear will likely worsen leading into November’s American presidential election.
US regulators have also recommended overseas firms listed in the US should be subject to local public audit reviews from 2022, which could cause Chinese firms to delist.
London closed up 0.3 per cent, Frankfurt added 0.1 per cent and Paris climbed 0.4 per cent.
5.25am: McDonald’s sues former CEO
Fast-food giant McDonald’s announced it is suing former CEO Steve Easterbrook for lying about allegedly inappropriate sexual relationships with employees.
Easterbrook was dismissed in November 2019 over his “poor judgment” in engaging in a relationship with a member of staff.
McDonald’s said it had subsequently learned that Easterbrook lied “and destroyed information regarding inappropriate personal behaviour” and relationships with three other employees, as well as providing stock worth hundreds of thousands of dollars to one of the employees.
The chain is seeking to recover compensation paid to the executive, according to a securities filing.
AFP
Markets rebound; UBS upgrades News Corp, cuts Nine
US markets stem bleeding after White House delays tariffs. ASX rebounds. Local household spending data beats estimates. Woolworths, Westpac announce leadership changes. Nine remains in 'difficult position': UBS.
Aussie dollar, stocks, crypto smashed as trade war starts
Aussie shares retreat heavily along with the Aussie dollar and cryptos as Trump orders tariffs. A$ hits five-year low. Tariffs biggest trade shock since 1930s: RBC. Cettire "assessing" US tariff changes. Anna Bligh to vacate ABA's top job.