Australian stocks lift to three-week high as banks surge
Commonwealth Bank led a financial rally with gains of 3.4pc and Kogan and Adairs hit records.
- Bank results hinge on asset quality: Citi
- Adairs lifts payout amid online boom
- Qantas raise dented by lockdown
- ‘Valuation upside’ for News Corp: Macq
That’s all from the Trading Day blog for Monday, August 10. Australian stocks soared to a three-week high with reports of lower Victorian coronavirus cases. Banks outperformed and Qantas ticked higher.
Reporting season stepped up a level with results from Adairs, Aurizon and GPT.
Perry Williams 8.23pm: Can Transurban widen the Westlink M7?
Toll road giant Transurban and partners QIC and Canada’s CPPIB have lobbed an unsolicited proposal to the NSW government to widen its busiest road, the Westlink M7 motorway, with an interchange connecting to the government-backed $1.8bn M12 road which leads to the new Western Sydney Airport.
The NSW government has already indicated the scheme is of “sufficient interest” to progress to stage two of the state’s unsolicited proposals process noting Transurban and its partners were well placed given they hold the long-term concession out to 2048.
Transurban and its partners were “uniquely placed to deliver the proposal and potentially deliver better transport and value for money outcomes than could otherwise be achieved.
The M12 operations, maintenance and incident response component of the proposal remains subject to development of a compelling and verifiable case that the proposal would provide better value for money than could be achieved by a government initiated procurement process.”
Transurban and its partners were “uniquely placed to deliver the proposal and potentially deliver better transport and value for money outcomes than could otherwise be achieved.
Samantha Bailey 7.53pm: Kogan.com shares surge
Shares in Kogan.com shot up 9.8 per cent on Monday after the online retailer said its number of active customers had surged in August, as shoppers continue to favour online retailing over heading to shopping centres amid the COVID-19 restrictions.
The company’s share price, which closed at $20.66, has increased five-fold since the beginning of the coronavirus crisis, after trading at below $4 a share in March.
In a market update on Monday, Kogan said that based on unaudited results, its number of active customers had grown by 126,000 to 2.3 million over the month of July, while gross profit had grown more than 160 per cent.
Jared Lynch 7.05pm: Medicine deliveries in ‘good shape’
Australia’s biggest pharmaceutical wholesaler is assuring Victorians that they will still be able to access essential medicines as Melbourne enters the harshest lockdown the country has ever seen.
While distribution centres across Victoria have had to slash their workforces by a third, including the major supermarket chains, fuelling fears of grocery shortages and panic buying, the Andrews government has granted Sigma Healthcare a full exemption.
Chief executive Mark Hooper said the national distribution network, which he described as the “hidden” side of the business, was continuing at full capacity to supply essential medicines to hospitals, aged-care facilities and pharmacies, playing a crucial role as Victoria stepped up efforts to curtail the rampant spread of the coronavirus.
“We’ve got an exemption from the Victorian government to continue operating. It’s been great to get that support,” Mr Hooper said.
Sigma operates four warehouses across the country, including one in Rowville in Melbourne’s southeast, which abuts their head office. It also owns the Amcal, Guardian, Chemist King, Discount Drug Stores and PharmaSave pharmacy brands.
Mr Hooper said overall the supply chain for medicines was in “good shape”, although he added that there was an “odd exception for some products when Donald Trump comes out and claims it as a cure” like hydroxychloroquine.
John Durie 7.05pm: Blast to haunt mining sector
Rio Tinto’s attempt to place a 17-year historical perspective on the decision to blow up the 46,000-year-old archaeological site Juukan Gorge in May doesn’t get around the fact that it was blown up under the watchful eyes of Rio boss JS Jacques and his iron ore chief Chris Salisbury.
One industry leader spoken to on Monday said “they will make life hell for the big miners, putting a focus on the industry which will be hard to shake for a decade”.
The matter is compounded by in-house spats like that between Rio and former boss Sam Walsh which has seen his untimely entry into the debate in an attempt to defend his role.
The man who took his place as iron ore boss, Aurizon’s Andrew Harding, declined to comment on Monday when asked about the issue, citing company policy not to comment on other companies.
When the significance of the site became clear Rio, having laid some 382 blast holes, decided it was either too dangerous or difficult to remove them.
Industry experts say both claims have some merit but it is not impossible. It’s just that the hunt for eight million tonnes of quality ore would be costly to remove working at the rate of five holes a day using water and suction techniques for many months.
James Kirby 6.39pm: Gold: What could go wrong?
As gold crests a record price above $US2000 and a new generation of investors ride the rise of the yellow metal, the question looms...what might go wrong?
New investors might be surprised to hear the gold price can plunge just as fast as it soars - in 2013 the price of gold fell by 35 per cent in less than six months as the “taper tantrum” caused a spike in bond yields and a parallel fall in bullion prices.
Or perhaps it might be news to hear that the Australian government under the terms of the Banking Act can still confiscate gold from investors.
This time round, the gold price rally involves “mum and dad” investors in a fashion never seen before as the Exchange Traded Fund industry allows investors to participate in the rally for as little as $500.
Certainly the very rapid run up in gold prices has returned the commodity to the forefront of investment debate along with a range of issues that gold investors might do well to consider.
In the latest edition of the Money Cafe Podcast (which I co-host with Alan Kohler), our guest Doug Turek of Professional Wealth raised the ire of some listeners with a lengthy list of concerns surrounding gold as an investment.
Turek who has appeared in The List- Australia’s Top Financial Advisers every year since its inception in 2017, spelled out three key concerns:
Perhaps the most contentious of Turek’s observations is that gold can be confiscated by national governments.
5.22pm: China inflation higher
China’s consumer inflation edged up in July, official data showed Monday, in part due to rising food prices from flood-related disruptions and as the country continues its recovery from the coronavirus outbreak.
The consumer price index (CPI), a key gauge of retail inflation, had been pushed up over the past year by livestock prices after China’s pig herds were ravaged by African swine fever, with the COVID-19 outbreak later hitting supply chains.
Consumer inflation has been easing since January but ticked up again in recent months, with the CPI up 2.7 percent on-year last month, according to the National Bureau of Statistics (NBS), as the world’s second-largest economy continued its recovery from the virus outbreak.
This was just above the 2.6 percent rise a Bloomberg poll of analysts predicted. Senior statistician Dong Lijuan said Monday that food prices rose 13.2 percent from a year ago, nudging the CPI up -- with pork prices climbing 85.7 percent.
“With the gradual recovery of catering services, demand for pork continued to increase”, said Dong, adding that this was accompanied by floods in many areas across the country which hit the transportation of live pigs, causing supplies to remain tight.
Prices of vegetables rose also, affected by “unfavourable weather”, according to Dong.
Meanwhile, the producer price index (PPI) fell 2.4 percent from a year ago in July, better than the three percent drop the month before.
The PPI - which measures the cost of goods at the factory gate - also shrank less than the 2.5 percent drop forecast by analysts.
Factory gate prices had been dragged by the pandemic fallout but started rising again in June, with analysts noting a recovery in industrial demand.
China is working to bounce back from a historic economic contraction in the first quarter caused by the virus, which had shut down most activity in the country
AFP
4.43pm: Adairs, Kogan lead top performers
The ASX was positive across all sectors on Monday, with big moves in the big four banks along with record trade in some retailers.
Adairs soared to record highs of $3.24 after strong full year results, as did Kogan – lifting by 9.8pc at the close to $20.66 after hitting a high of $20.77.
On the flip side, oOh!Media led the worst performers with a slip of 4.3pc while ResMed continued lower after warning of weakness at its results last week.
Here’s the biggest movers at the close:
4.12pm: Shares rise 1.8pc
Shares rose 1.8pc to a three-week high, as all sectors rose in the market’s best day in a week.
The benchmark ASX200 hit 6125.3 in afternoon trade, but was up by 105 points or 1.8pc to 6110.2 at the close.
Major banks were the key driver of the lift – Commonwealth Bank soaring by 3.4pc while Westpac added 3.3pc, ANZ rose 2.8pc and NAB by 2.9pc.
3.59pm: Improving virus trend positive for shares
Australia’s share market is up 2pc at a 3-week high of 6124.6, on track for its best day in 3 weeks, with coronavirus-sensitive stocks outperforming, as traders sense that Australia’s second-wave of coronavirus may have peaked.
“Of course there are still risks in VIC and NSW but the trend is improving,” a veteran trader tells Trading Day.
“VIC numbers flattened out late last week, and while today’s number of deaths is sad news, the drop in cases is indicating the masks and lockdown is starting to work.”
But the numbers are quite volatile, with both the lowest and highest changes in daily case numbers having occurred on a Monday, notes Perpetual’s head of investment strategy, Matt Sherwood.
“I would argue that the market appears to be questioning its downside risk scenarios around key sectors which have been exposed to the COVID disease,” Mr Sherwood says.
“The market might be giving the impression that the Victorian numbers are coming down, so therefore the lockdown is having the desired effect on disease spread.
“I would be very hesitant at this stage to draw such a conclusion, for the simple fact that it’s just very early. There is noise day to day for R factors (reproduction rates) for COVID-19.”
I would just say the market is questioning what it has priced in, given that backdrop where they believe that the worst is over.”
Read more: Teens arrested aft er skipping quarantine
3.31pm: BWX upsizes share purchase plan
Just as Qantas said it struggled to garner enough interest for its share purchase plan, natural skincare group BWX has upsized its own offer, due to strong demand.
The group behind brands such as Sukin, USPA and Andalou Naturals said today it had received applications of $30.3m in its share purchase plan, from a planned $10m raise.
As such, BWX said it would accept a portion of the oversubscribed amount up to $12m.
Approximately 3.52 million shares will be issued from the offer at $3.40 apiece on August 13, representing 2.6pc of the group’s shares on issue.
BWX last traded up 1pc to $4.19.
Read more: Qantas raising falls short
3.14pm: China CPI edges up
China’s consumer inflation edged up in July, official data showed Monday, partly because of rising food prices from flood-related disruptions and as the country recovers from the coronavirus outbreak.
The consumer price index (CPI), a key gauge of retail inflation, had been pushed up over the past year by livestock prices after China’s pig herds were ravaged by African swine fever, with the COVID-19 outbreak later hitting supply chains.
Consumer inflation has been easing since January but ticked up again in recent months, with the CPI hitting 2.7 per cent last month, according to the National Bureau of Statistics (NBS), slightly better than forecasts in a Bloomberg News poll of analysts.
NBS senior statistician Dong Lijuan said Monday that food prices rose 13.2 per cent from a year ago, nudging the CPI up — with pork prices climbing 85.7 per cent.
AFP
2.32pm: Broker banned after fake application
Brisbane finance broker Jeffry Leonard Gordon has been permanently banned from engaging in credit activities after an ASIC investigation found he faked a home loan approval letter from St George.
Mr Gordon had knowingly given a false letter to a client stating that they had formally been approved for a home loan with St George, when in actual fact, no home loan application had been lodged on the client’s behalf.
ASIC found that Mr Gordon had failed to comply with his obligations under the National Credit Act, including by failing to lodge an annual compliance certificate; failing to maintain a trust account and failing to notify ASIC of a change in an approved external dispute resolution scheme.
The Australian Securities and Investments Commission has permanently banned Mr Gordon and cancelled his credit licence, after cancelling his ACL earlier this year.
The banning will be recorded on ASIC’s Banned and Disqualified Persons Register.
Mr Gordon has the right to appeal the decision in the Administrative Appeals Tribunal.
Lachlan Moffet Gray 2.15pm: Pressure on Scentre to raise capital
DataRoom | The pressure on Westfield shopping mall owner Scentre Group to raise capital to combat rising vacancy rates and falling rents is growing, with analysts from Macquarie Bank calling attention to the company’s increasing debt.
Scentre Group, which owns 42 Westfield Australian centres, reported in its full year results that its net debt is $12.9bn.
With a market capitalisation of $9.97bn and a pro-forma debt gearing of 36.5 per cent, the company is moving closer towards being downgraded by Moody’s to a AA rating, which would occur if gearing reaches 45 per cent, analysts say.
In an analyst note, Macquarie said that potential solutions include “asset sales” or “equity issuance”.
However, with Macquarie estimating that the value of Scentre’s portfolio could have fallen by up to 15 per cent, from a net asset position of $23 billion and the end of last year to $19.58 billion today, an equity raise would be the most likely way to reduce debt.
The company paused a $800m share buyback program in March when the pandemic hit after clawing back $479m of stock.
2.13pm: ASX optimistic on COVID-19
The Australian share market seems to be betting that the second wave of coronavirus in Australia has peaked, with new cases in Victoria falling sharply and new cases in NSW remaining low.
The S&P/ASX 200 rose 1.6pc at a 9-day high of 6098.1, with shares of companies exposed to Victoria’s second-wave of coronavirus outperforming after the number of new cases recorded in the state fell to a 12-day low of 322, albeit with more deaths.
Among domestically focused stocks outperforming today, Flight Centre rose 4pc, CBA and Qantas both rose 3pc, Vicinity Centres gained 2.7pc, Bendigo Bank was up 2.4pc, Scentre, NAB and Westpac all rose 2.3pc
Shares have also been helped by a slight rise in S&P 500 futures after US President Trump passed an executive order to extend unemployment benefits and said US politicians indicated readiness to resume talks on the next round of US fiscal support.
2.06pm: US hedge fund sells down Afterpay stake
Stephen Mandel’s US-hedge fund Lone Pine and its associated funds have quietly been selling a net position of more than $70m worth of shares in Afterpay since April, according to filings with the ASX.
The move comes as Afterpay shares have surged to record highs in recent weeks.
While they are off the all time high of $76.62, they are last traded on Monday at $72.86, giving Afterpay a market capitalisation of $20.4bn.
Of note, Afterpay is not recorded in Mandel’s 13F filings of long holdings with the US SEC. So it remains to be seen whether Afterpay had been part of Mandel’s long/short holdings. Mandel also has a $US190m stake in Atlassian.
Lilly Vitorovich 1.44pm: News Corp lifted on ‘valuation upside’: Macq
Macquarie Wealth increases its earnings forecasts on News Corp and 12-month target price by 4.2 per cent to $24.16 after the media group posted stronger-than-expected 4Q results.
The broker increases EPS estimates by 16pc for FY21, and by 9pc and 3pc for the following two years, respectively, after News posted 4Q earnings of $195m, down 27.5pc from a year earlier. That compares to Macquarie’s $111m forecast and consensus of $106m.
Macquarie retains outperform on News, with “valuation upside” remaining from core assets of Dow Jones, digital real estate and Books.
Restructuring initiatives have accelerated during COVID, which is another positive, and separation of Dow Jones should assist in underlying value being unlocked. Its nearest peer is New York Times, which trades on 27x FY earnings,” Macquarie says.
The catalyst will be Dow Jones Investor Day next month, broker adds
Read more: News Corp posts revenue, profit hit
1.15pm: Nasdaq beats S&P more than early ‘00s
The Nasdaq index is outpacing the S&P 500 in relative terms by more than it did in 2000, and with similar market concentration, Citi’s Tobias Levkovich says clients are wondering if anything can stop this performance momentum or whether they should just chase the benchmarks.
He notes that the IT sector plus Media & Entertainment and Internet Retailing makes up 45pc of the S&P 500’s market capitalisation, equivalent to the TMT concentration high of the early 2000.
“We have stressed that the dot.com bubble involved stratospheric valuation on less proven business models than the current major four or five names that are much more powerful industry leaders with relatively moderate P/Es though not cheap ones,” Mr Levkovich says.
“Such elevated proportions of market indices have not lasted, however, and thus growing complacency can lead to serious portfolio damage if everyone decides to exit at the same time.”
He cautions that potentially much higher capital gains taxes under a Biden administration, inflation pushing up – thereby lifting the discount rate – and a return to normalcy post-pandemic that slows the currently accelerated pace of growth all could foster a shift in portfolios.
“Given the massive appreciation of disrupter stock prices, a possible near doubling of capital gains tax treatment likely would force a major sell-off as investors choose to lock in their gains without sharing as much with the IRS,” he says.
“The pendulum does seem to be swinging, and pressure on technology firms may increase, including the concept of minimum corporate income taxes or efforts to heighten regulatory oversight over app store pricing, monopoly/duopoly powers and user privacy.”
1.01pm: Shares lift 1.3pc in broad gains
Shares are climbing to the nine-day highs at lunch, buoyed by more than 2pc lift in major bank stocks.
At 1pm, the benchmark ASX200 is up by 77 points or 1.3pc to 6082.2.
All sectors are now in the green, even resources reversing their early drop into the red.
Commonwealth Bank is up by 2.9pc, Westpac by 2.6pc, NAB by 2.4pc and ANZ by 2.7pc.
Here’s the biggest movers at 1pm:
Bridget Carter 12.34pm: Seafolly administrators buy Jets
DataRoom | Seafolly’s administrators have emerged as a buyer of one of the labels within the fellow collapsed retailer Pas Group.
The swimwear brand Seafolly that itself is forging a path back to recovery has secured its rival, Jets Swimwear, which sits within the Pas Group stable.
Pas, which also owns other high profile fashion brands such as Review Clothing, was placed into voluntary administration on May 29 and is now under the control of PwC.
Administrators for Seafolly include KordaMentha’s Scott Langdon and Rahul Goyal and it was placed into voluntary administration on June 29.
However, the company has since returned to the hands of its original owner, L Catterton, which was named the preferred bidder in a recent sales process.
Read more: Seafolly heading back to private equity
12.12pm: ASX rises to 9-day high
It took two hours but the Australian share market eventually reached then surpassed the level projected by overnight futures.
The S&P/ASX 200 share index rose 1.1pc to a 9-day high of 6072.
Financials remain the driving force, with the four-major banks still up about 2pc before results and trading updates start on Wednesday.
Consumer Staples are also strong with Woolworths and Coles up about 2pc.
Lilly Vitorovich 12.02pm: Dow Jones upside for News Corp: Jarden
Jarden hikes its target price on News Corp to $23.25 from $22.85 following the media group’s fourth quarter results, which beat its estimates.
“The beat was predominantly driven by lower-than-expected costs at Subscription Video Services as a result of lower sports rights and production costs, as well as better-than-expected growth at the Books segment,” the broker says in research note.
Jarden says the group’s Books division performance was “particularly impressive”, while Dow Jones earnings shows valuation upside.
While Jarden’s DCF valuation for what were the old News & Info Services assets is unchanged, it only implies a 6.0x earnings multiple for Dow Jones with minimal value applied to News Media.
“With peer NYT trading on 27x CY21 earnings, we recognise that Dow Jones may warrant a
significantly higher multiple, but retain our existing valuation pending further detail on Dow
Jones’ historic financials and potential growth trajectory (with an Investor Briefing due to be held mid-September),” broker says.
News Corp, publisher of The Australian, shares up 6.5pc to $20.82 on the ASX at midday.
11.55am: Bank results hinge on asset quality: Citi
Citi’s Brendan Sproules says banks could have a “perception issue” regarding asset quality in their upcoming results, albeit a “pathway to dividends” will provide valuation support.
He notes that because the regulators have driven an environment where there are no actual credit losses or impaired loans, the banks are left with their scenario modelling in their expected credit losses.
In that environment, Mr Sproules cautions that whether banks stick to their May macroeconomic assumptions and make no real change in provisions for bad debts, or cite a deterioration and need to top-up, the market could take both avenues sceptically.
“This is the challenge for the banks in explaining the issues,” he says.
Bank results offshore have seen revenue beats deemed to be ‘low quality’, particularly in markets income, big provisions are not rewarded as ‘front-loading’ because they are being viewed as a sign of things to come, while low provisions are deemed to be not facing up to reality.
“Even strong capital beats are being discounted, with the presumption that they are a product of regulatory forbearance,” Mr Sproules says.
“At least one difference in Australia is a pathway to dividends, which is still missing in many offshore jurisdictions.”
Banks are coming off their intraday highs after rising more than 2pc in early trading.
11.42am: Stimulus used for bills, savings: ABS
Government stimulus handed out in May was most commonly used for household expenses and saving, according to the latest data from the ABS.
A third of Australians received a Commonwealth stimulus payment in May, and of those, 29pc used the funds to add to savings, while 28pc used the funds to pay bills and 12pc put the money towards food and non-alcoholic drinks.
“People living in Tasmania were the most likely to have received a stimulus payment in May (47pc) followed by people in South Australia (39pc) and Queensland (37pc),” head of household surveys Michelle Marquardt said.
“Women were more likely to have received a stimulus payment than men (36pc compared to 27pc) and Australians without a non-school qualification were more likely to have received a stimulus payment (41pc) than those with a qualification (27pc).”
The study also asked about changes to behaviours in light of the COVID-19 pandemic, finding that those born overseas were twice as likely to have worn a face mask at least once in the four weeks before the survey was conducted in May.
11.30am: Former Kmart boss joins Scentre board
The former head of Kmart who lead the chain’s turnaround, Guy Russo, has been appointed on the board of Westfield owner Scentre.
Mr Russo will take on the role from September 1, adding to his role as chairman of Mexican fast food chain Guzman Y Gomez.
“As part of its ongoing renewal and succession planning, the Board is committed to ensuring a strong and diverse membership. Guy has a highly accomplished career and we welcome him as a valuable addition to the Board,” Scentre chairman Brian Schwartz said.
Lachlan Moffet Gray 11.15am: Nick Scali poised for acquisitions
An explosion of sales and increased share-price for listed furniture retailer Nick Scali has analysts tipping the brand as well-placed to make acquisitions as COVID-19 continues to disrupt the furniture market.
The retailer, which has seen its share price more than treble from its March lows of $3 apiece, had previously been rumoured to be on the acquisition prowl, with DataRoom last month writing that the company could be looking to expand its exposure to the more affordable end of the furniture market.
Well-placed sources say Nick Scali now valued at $705m – is looking at the purchase of Greenlit Brands’ Fantastic Furniture, potentially through an equity raising.
In a note, analysts from Citi said Nick Scali’s 2021 H1 guidance of net profit after tax growth of 50 – 60 per cent was “conservative”, with the company likely to grow earnings through increased demand for renovations due to the government’s Homebuilder grant, restrictions on travel and leisure activities and its newly-launched online sales channel.
Read more: Fantastic opportunity for Nick Scali
Lilly Vitorovich 11.05am: News Corp upgraded on earnings beat: GS
Goldman Sachs upgrades its News Corp earnings forecasts and target price following the media group’s stronger-than-expected FY20 results.
The broker upgrades FY22 and FY23 earnings forecasts by 5pc and 3pc respectively, reflecting the FY20 result, significant cost initiatives and updated REA estimates. Goldman also increases its 12-month target price to $25.60 from $25.20.
News’s FY20 sales, earnings and net profit all came in ahead of Goldman’s forecasts by 4pc, 15pc and 15pc, with “earnings beats across all segments”, the broker says in a research note.
News Corp broke out Dow Jones earnings for the first time, with 4Q/FY20 earnings +13pc/13pc to $US60m and $US236m, respectively, and accounting for 82pc of its News & Information Services division.
Goldman expects the media group, publisher of The Australian, to deliver at least $US1.1bn of earnings in the current financial year, even though the outlook remains highly uncertain
The broker reiterates its buy rating on the stock, noting that at the current share price, investors are “effectively getting either REA or Dow Jones for free”.
“With an investor briefing scheduled for mid-Sept, we expect the greater operational/strategic details to be a positive catalyst to crystallise this value.”
Read more: News Corp posts revenue, profit hit but subscribers increase
David Ross 10.54am: Bird flu serves $23m blow to Farm Pride
An outbreak of bird flu has struck ASX-listed poultry producer Farm Pride Food’s Lethbridge facility, set to wipe out between $18m and $23m in full-year revenue.
Farm Pride, the nation’s largest egg producer, placed its shares in a trading halt on August 6 before updating the market to the viral outbreak at the facility on Monday.
The group said it was “depopulating” the site and would lose approximately 340,000 hens across its cage, free range and barn flocks – representing 30 per cent of its overall productive flock.
Agriculture Victoria confirmed the positive case of H7N7 avian influenza virus on the site.
The business said all action was being taken to reduce costs and “rigorously” manage cash flow, including the reduction of non-essential capital expenditure and a crisis management team had been set up.
Farm Pride will report its full year 2020 results on August 31, with the revenue hit to be recorded in FY21.
FRM shares last down 23pc to 23c.
Ben Wilmot 10.42am: Sigma sells industrial sites for $172m
Pharmaceutical distributor Sigma Healthcare has capitalised on the boom in industrial property, selling off two distribution centres to property funds manager Logos for $172m.
The purchase by Logos, with the backing of New South Wales Treasury Corporation, indicates the deep appetite for logistics property which has become the most favoured sector as coronavirus restrictions crimp retail and office properties.
Sigma has executed long term sale and leasebacks on the two properties. The company had originally planned a part sale of four centres but the final structure will see the full sale of the land and buildings at Kemps Creek in NSW and Berrinba in Queensland.
Sigma said the proceeds are well above the original investment cost, and the gain will be offset by the utilisation of existing capital tax losses.
Sigma has retained its newly built centre in Canning Vale in WA and another facility in Truganina in Victoria, which is currently under construction.
The sale process led by PWC’s Real Estate Advisory team involved 14 expressions of interest.
Sigma has entered into a 15-year lease agreement with two five-year options to extend, with first year lease cost around $8m annualised.
“Owning and managing the construction phase gave us control over the build and created value for shareholders. By completing this transaction, we benefit from Logos as the owner and manager of our tenancies at Kemps Creek and Berrinba, while capturing the latent value that was not previously recognised on Sigma’s balance sheet,” Sigma chief executive Mark Hooper said.
Proceeds from the sale will reduce net debt to below $100m.
SIG last traded up 4.5pc to 69.5c.
Joyce Moullakis 10.26am: AMP issues staff memo on complaints
AMP chief executive Francesco De Ferrari has sent an internal memorandum to staff at the under-fire wealth group, reminding employees the company takes complaints seriously.
The brief memo was distributed on Monday to AMP’s more than 5,000 staff and while it didn’t address the reasons for the sudden departure last week of senior executive Alex Wade, it said AMP did take staff complaints seriously.
The memo comes after The Australian revealed the departure of Mr Wade was linked to inappropriate conduct and lewd photos.
An AMP spokesman declined to comment on the memo on Monday. Mr Wade was head of AMP’s Australia division and joined the embattled company in January last year.
The allegations of the photos sent by Mr Wade are understood to have been the final straw and last week triggered the end of his tenure as a senior executive at AMP. They added to other claims relating to Mr Wade’s conduct and performance that had already been raised with the board.
AMP shares down 0.6pc to $1.41.
Read more: Lewd photos behind Wade’s sudden AMP exit
10.09am: Shares stride higher by 0.5pc
Energy and real estate shares are leading the benchmark higher in early trade, with all sectors bar materials in the green.
At the open, the ASX200 is up by 32 points or 0.5 per cent to 6036.5.
The index undershot a 1pc rise projected by overnight futures relative to fair value, but the global risk appetite has improved slightly since US President Trump indicated that Democrats “have called and want to get together” regarding another fiscal stimulus.
S&P 500 futures are flat after falling as much as 0.4pc in early trading, while the Australian dollar also turned up slightly as Trump’s comments fuelled hopes of a deal on a phase 4 coronavirus stimulus plan for the US.
Major banks are doing the heavy lifting, up 1pc to 1.6pc, while Aurizon slips 3pc.
9.55am: What’s on the broker radar?
- Coronado Global GDRs rated new Hold – Benchmark
- Mineral Resources cut to Underweight – JP Morgan
- REA Group cut to Neutral – JP Morgan
- Sonic Healthcare raised to Buy – Jefferies
- Super Retail cut to Sell – Morningstar
9.43am: ASX poised to hit 7-day high
Australia’s share market is poised to hit a 7-day high in early trading amid overall positive leads from global markets.
S&P/ASX 200 futures relative to fair value suggest the index will open up 1pc at 6065, though slightly weaker US stock index futures and gold prices this morning may limit the rise in Australian shares.
Stronger-than-expected US non-farm payrolls data were partly offset by fallout from the US decision to prohibit WeChat and TikTok, with a 2.3pc fall in Apple, lowering the Nasdaq by 0.9pc.
But the S&P 500 rose 0.1pc to a 5-month high close of 3351.28 with the VIX index down 0.4pc to a 5-month low close of 22.21pc and the Russell 2000 small caps index jumped 1.6pc.
US President Trump’s weekend executive order to extend US unemployment benefits has not affected risk assets this morning and S&P 500 futures slipped as much as 0.4pc.
Spot gold has traded slightly weaker after a bearish key reversal from a record high of $US2075.47 on Friday.
On a cautionary note for gold, weekly net inflows to precious-metal-tracker funds hit a record $US7bn in late July, according to Bloomberg.
Also on Friday, spot iron ore fell 2.1pc to $US118.85 and WTI crude oil futures fell 1.7pc to US41.22, but have risen 0.8pc this morning.
Otherwise it’s a big week for earnings and economic data with 23 of the top 200 companies reporting, and the NAB business survey and employment data due.
9.30am: Qantas SPP impacted by lockdown
Qantas has raised $71.7m in its share purchase plan, well short of its $500m target, blaming new lockdowns in Melbourne and border restrictions parts of the country.
The SPP, which closed on August 5, attracted applications of $71.7m from 8660 eligible shareholders, representing a take up rate of 5pc, and an average SPP application of $8200.
Eligible shareholders were able to subscribe for up to $30,000 of new shares under the offer.
Qantas said the timing of the raise, when border restrictions were tightened and as Melbourne went into lockdown, “had an obvious impact on the Qantas share price and take-up of the SPP”.
New shares will be issued at $3.18 per share, representing a 2.5pc discount to the 5-day volume weighted average price of shares.
Qantas Directors applied for and received their full entitlement under the SPP; one Director was unable to participate due to being resident outside Australia/New Zealand.
The raise is on top of the $1.36bn institutional placement completed last month.
9.14am: Kogan posts 160pc monthly profit jump
Online retailer Kogan has posted impressive sales and profit growth for July, in an update ahead of its full year results next week.
The group, which has been a beneficiary in the shift to online retailing during the pandemic, said unaudited gross sales for July were up by more than 110pc, while gross profit was up by more than 160pc.
Active customers for the site grew past 2.3 million by July 31.
KGN last traded at $18.81.
9.07am: Tabcorp reviewing funding options
Gaming operator Tabcorp Holdings said it has not made any decision to undertake a capital raising.
Comments come amid speculation Tabcorp was about to pull the trigger on a capital raising.
“Since the onset of COVID-19 and the associated temporary Government mandated closures of licensed venues and TAB agencies, and other measures to address the pandemic, the Board has continued to review the Company’s balance sheet and potential funding options,” Tabcorp says in a statement.
Tabcorp is scheduled to deliver its full year results on August 19.
Samantha Bailey 9.01am: Adairs lifts payout amid online boom
Manchester retailer Adairs has booked a full-year profit lift and declared a final dividend of 11 cents per share fully franked, up from 8c a share a year ago.
In an unaudited results statement, Adairs said that net profit after tax jumped 19 per cent to $35.3 million for the full-year through June. Earnings before interest and tax jumped 39.7 per cent to $60.7m.
“We have seen strong trading since reopening our stores and websites throughout May, which has continued up to today,” said chief executive Mark Ronan, as the group posted a 12.9pc sales lift, largely from online sales.
“The acceleration in online penetration and growth rate brought about by COVID-19 restrictions has long term benefits for us as more of our customers shop across our brands.”
Ben Wilmot 8.48am: Loss for GPT as portfolio value drops
The GPT Group has plunged to a $519.1m loss for the first half as it was hit by negative property movements related to the coronavirus crisis and will not provide earnings guidance.
The company recorded took a $711.3m hit on property valuations and its funds from operations, a metric of earnings, plunged by 23.3 per cent on last year’s first half to a FFO per security of 12.55 cents.
GPT has a portfolio heavily weighted to retail assets and also had tenants who sought the protection of the Morrison government leasing code. The company paid an interim distribution per security of 9.3 cents.
But it is attempting to tilt its holdings towards industrial property and completed three logistics properties worth $89.1m and acquired two other industrial properties for $74.6m.
The company said it was well positioned with gearing at 25.1 per cent and a weighted average cost of debt of 3.1 per cent.
GPT said it had about sheet in a strong position with $1.2bn of available liquidity held in cash in and drawn bank facilities.
The retail portfolio started the year with positive sales with combined specialty sales up 3 per cent in January and at 4.9 per cent in February year on year. But it was hit by the introduction of government measures designed to contain the spread of COVID-19.
GPT said it was not providing FFO or distribution guidance for the full year citing “unprecedented circumstances” that continue to evolve in relation to the COVID-19 pandemic, including stage for restrictions that became effective in Melbourne last week.
8.43am: Newcrest reports COVID case
Gold miner Newcrest has identified a COVID-19 case at its isolation and treatment facility in Lihir Island, but says it will have no impact to the group’s operation.
Newcrest said the individual, a PNG national, had flown into Lihir from Port Moresby on July 30 and was isolated along with other arrivals upon arrival.
“The individual is asymptomatic and has been moved from the isolation camp into a separate isolation and treatment facility. We are providing the individual with care and support,” the miner said in a statement this morning.
The miner said its protocols were working to plan, with stringent isolation required for all inbound flight and ferry arrivals.
Follow the latest in coronavirus updates at our live blog
8.19am: Aurizon lifts profit 28pc
Rail freight company Aurizon says full year statutory net profit was up 28 per cent to $605m.
Revenue was up 5 per cent to $3.06bn, while EBITDA rose 7 per cent to $1.47bn.
Aurizon declared a final dividend of 13.7c per share, up 10 per cent.
Aurizon also announced a further $300m on-market share buyback, to be completed in FY2021.
CEO Andrew Harding said: “Despite the emergence of COVID-19 in the second half of FY2020, the company has delivered a solid operational and financial performance with no material impact as a result of the pandemic.”
6.00am: ASX set to open higher
Australian stocks are poised for a firmly positive start, after Wall Street closed mixed on Friday in the wake of encouraging jobs data.
At 6am (AEST) the SPI futures index was up 42 points, or 0.7 per cent.
The Dow ended the week up 0.2 per cent, the S&P 500 gained 0.1 per cent and the Nasdaq dropped 0.9 per cent, ending a four-day streak of records.
On Friday, the ASX closed down 0.6pc with US President Trump’s executive order banning WeChat in the US and the weight of losses in Rio Tinto and BHP, even as iron ore prices gained.
The Australian dollar was this morning at US71.54c, down from US72.06c, after the greenback was boosted by US jobs data.
Spot iron ore was down 2.1 per cent at $US118.85. Brent oil was down 1.5 per cent at $US44.40 a barrel.
Ahead, the local reporting season gets into full swing, with some ugly results expected. Investors in particular will be watching the Commonwealth Bank’s full year result on Wednesday.
On Monday, results are expected from AGL, Aurizon and GPT.
Latest jobless figures are released on Thursday.
5.30am: Tech takeover at new heights
The US stock market is more top-heavy than it has been in decades.
The collective market value of the top 10 companies in the S&P 500 has swelled to about $US8 trillion as of Friday as investors have piled into big technology stocks including Apple Inc., Microsoft Corp. and Amazon.com Inc.
Together, the 10 biggest firms comprise 29pc of the index, according to data through July 31 from S&P Dow Jones Indices. That is the highest percentage in at least 40 years and up from 22.7pc at the end of 2019.
The gains among the top stocks are pushing the S&P 500 and Nasdaq Composite back to record levels. But they are masking the underlying weakness of the broader market where other indexes like the Russell 2000, which tracks small-cap stocks, are still in the red for the year.
Some investors also warn that such a heavily concentrated market is dangerous because any tumult in the tech sector would likely exacerbate a broader downturn.
“This is clearly a narrow market dominated by extraordinary gains by a very small segment,” said Andrea Bevis, senior vice president at UBS Private Wealth Management. “The disparity between sectors is the largest we’ve ever seen.”
The S&P 500 is up 3.7pc this year and just 1pc below its February record, while the tech-laden Nasdaq Composite index is up 23pc and has set 32 records in 2020.
Dow Jones
5.25am: Saudi Aramco profits dive 73pc
Saudi Aramco said its second-quarter profits plunged a massive 73 per cent due to sharply lower oil prices as the coronavirus crisis undercuts global demand.
But the company, recently dethroned by Apple as the world’s most-valuable listed company, has fared better than several international energy giants, all reeling from a drop in oil demand since the start of the novel coronavirus pandemic.
Aramco posted a net profit of $US6.6 billion for the three months to June 30, compared to $US24.7 billion for the same period last year.
The results were in line with analysts’ expectations and reflected a downbeat oil market as coronavirus-led economic shutdowns crush demand for crude.
“Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results,” Aramco’s chief executive Amin Nasser said in a statement.
“Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce, and unrivalled financial and operational strength.” The world’s top five oil firms — BP, Chevron, ExxonMobil, Royal Dutch Shell and Total — have reported combined losses of $US53 billion for the second quarter.
Aramco’s net profit for the first half of the year also slumped, by 50.5 per cent to $US23.2 billion, compared to $US46.9 billion in the same period last year.
Nasser said Aramco’s results reflected its “financial resilience” as he observed a “partial recovery in the energy market” amid an easing of virus restrictions in some countries.
AFP
5.20am: Wall Street recap
Wall Street stocks finished mixed on Friday, with the Nasdaq retreating from a record following solid US jobs data as Washington talks on a new spending package remained stalemated.
The US added 1.8 million jobs last month, fewer than in May and June, but better than expected, the Labor Department reported.
While unemployment fell to 10.2 per cent from 11.1 per cent, that is still an extremely high number by historic standards and economists continue to view the US economy as being on shaky ground.
The Dow Jones Industrial Average ended up 0.2 per cent at 27,433.48. The broadbased S&P 500 gained 0.1 per cent to 3,351.28, while the tech-rich Nasdaq Composite Index dropped 0.9 per cent to 11,010.98, ending a four-day streak of records.
The latest talks between Democratic congressional leaders and Trump administration officials again ended with finger-pointing.
“Another fiscal package is urgently needed, but alarmingly, policymakers may be at an impasse,” said a note from Oxford Economics. “Failure to reach an agreement adds downside risk to an economy that is already at a critical juncture.”
Investors were also monitoring escalating friction between Washington and Beijing. On Friday, the United States slapped sanctions on Hong Kong’s top leader in the wake of a new Chinese security law imposed on the city.
The move came after Trump on Thursday night announced sweeping restrictions against Chinese-owned social media giants TikTok and WeChat, drawing a rebuke from Beijing, which slammed the move as “arbitrary political manipulation and suppression.” Among individual companies, Uber Technologies slumped 5.1 per cent as it reported a $US5.2 billion quarterly loss amid the hit to the ride sharing company from COVID-19 shutdowns.
UPS surged 7.9 per cent as it announced new surcharges for the coming holiday season, underscoring the benefit to the company from the increase in e-commerce orders.
Goldman Sachs advanced 1.6 per cent as it disclosed it would restate second-quarter results following a settlement with the Malaysia government over the bank’s role in the long-running 1MDB scandal. The move will reduce Goldman’s second-quarter profits to $US197 million from $US2.25 billion.
AFP
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