The ASX 200 is up 34 points in mid morning trade, recovering some of the losses of the last 2 days. Defensive sectors underperform while Materials, Energy and Financials lead. OZL acquisition, FMG amends price guidance, upgrades for IFL and WHC #ausbiz


  • Ex-dividend – Iluka Resources (ILU) 25.0c, Japara Healthcare (JHC) 4.0c, Link Administration Holdings (LNK) 7.0c, Northern Star Resources (NST) 4.5c, Pacific Energy (PEA) 1.0c, Sg Fleet Group (SGF) 8.8c, Webjet (WEB) 8.0c
  • Economic data – HIA New Home Sales
  • China – Industrial Profits (YTD)


  • European data – Loan Growth, Consumer Confidence Final, Industrial Sentiment, Services Sentiment, Economic Sentiment, Business Confidence
  • US data – Consumer Confidence, Case-Shiller Home Price Index
  • Fed Speak – Cleveland Fed President (2018 voter) Loretta Mester, Fed Governor (2018 voter) Randal Quarles, Atlanta Fed President (2018 voter) Raphael Bostic


  • Fortescue Metals Group (FMG) – Has amended its iron ore price guidance to reflect an expected contractual realisation of approximately 65% of the average benchmark Platts 62 CFR index for the financial year ending 30 June 2018 (FY18). 1H18 revenue realisation rate was 68%. The updated guidance reflects a slower than anticipated recovery in contractual realisations due to Chinese construction activity remaining subdued, the extension of temporary production restrictions in certain Provinces in China as well as speculation regarding the potential impact of global trade tensions.
  • Mayne Pharma (MYS) – Has launched an authorised generic of Quartette® (levonorgestrel and ethinyl estradiol tablets, 0.15mg/0.02mg; 0.15mg/0.025mg; 0.15mg/0.03mg and ethinyl estradiol tablets, 0.01mg) in the US. Quartette is an oral contraceptive. Mayne Pharma directly markets more than 55 products and has a growing pipeline of approximately 30 drug products targeting US markets with IQVIA sales greater than US$5 billion. According to IQVIA, US brand and generic sales for this product were approximately US$10 million for the 12 months ending 31 January 2018.
  • Newcrest Mining (NCM) – Following a tailings dam breach on 9 March, mining operations have recommenced at Cadia East. Pursuant to a predefined test and response program, mining will initially be from Panel Cave 1 and then progressively recommence from Panel Cave 2. Mined ore will be stockpiled at surface until processing recommences. Processing remains suspended.
  • Fortescue Metals Group (FMG) – Has redeemed US$1,552m of Senior Secured Notes.
  • BTT Investment Management (BTT) – General meeting to change name to Pendal Group Limited.
  • Sirtex (SRX) – FIRM approval for acquisition by Varian
  • Eclipx (ECX) – Greg Ruddock will step down from the Board with effect from 31 March 2018.
  • Independence Group (IGO) – Goldman Sachs Battery Day presentation.
  • Oz Mineral (OZL) – Has made an off-market takeover offer for Avanco Resources, for total equity value of $418m, representing 16% of OZL market cap. The offer has been unanimously recommended by Avanco’s Board. The price represents a premium of 119% to Avanco’s 1-month VWPA. OZL says the deal will be a value and earnings accretive opportunity for OZ Minerals, offering significant upside embedded in Avanco’s portfolio and a pathway to optimise assets. The aim is to be a 50ktpa+ copper and 100koz+ gold producer in Brazil at bottom half of cost curve.


  • Evolution Mining (EVN) – Cowral Site Visit and presentation
  • Pilbara Minerals (PLS) – Corporate presentation on Pilgangoora – the world’s leading development project.
  • Skycity Entertainment (SKC) – Investor Day Presentation


  • IOOF (IFL $9.97) – UBS has upgraded to a Buy (from Neutral) recommendation with a target price of $111.500.75 (from $10.75). The analyst notes that shares have fallen -11% since October, when IFL announced the acquisition of ANZ Wealth. It represents concerns regarding earnings attrition from the acquisition but they think earnings prospects are better going forward, supported by re-pricing opportunities. The upgrade is based on the view that the current 12% discount to market is not warranted.


  • Whitehaven Coal (WHC $4.26) – Morgan Stanley has upgraded to an Overweight (from Equal-weight) recommendation with a target price of $5.70 (from $5.05). The MS analyst notes that WHC is benefiting from higher coal prices. While the benefit from balance sheet repair has run its course, the believe the company’s cash flow and future growth potential underpin compelling value, and looks cheap versus global thermal coal peers.


  • Catapult (CAT $1.18) – Morans has an Add recommendation with a target price of $1.76 (from $2.02). CAT has announced a $25m equity raising with funds to be used for expanding revenue growth through higher investment in sales and marketing. The accelerated level of investment will result in higher operating losses, particularly in FY19 and FY20, but the analyst thinks it should lead to a more robust business.


  • Japara Healthcare (JHC $1.89). UBS has a Neutral recommendation with a target price of $1.90. JHC has acquired Riviera Health, a residential aged care provider that currently operates four facilities across New South Wales. Japara has paid around $39m net of bonds for the acquisition, funded from existing cash and debt. UBS believes this is a reasonable purchase price.


  • Skynetwork TV (SKT) – CS has upgraded to Neutral from Underperform.
  • Treasury Wine Estates (TWE $17.16) – Credit Suisse has an Underperform recommendation with a target price of $15.35. Following the Chinese 15% tariff on US wines, the CS analyst thinks poor US/China relations will make it more difficult for TWE to develop positive consumer attitudes towards American-made wine, even though there is longer term value. In FY19 the company’s Chinese earnings are likely to be driven by the release of the 2016 Penfolds Vintage rather than Californian wines and the broker estimates Treasury Wine has a 25-30% increase in luxury wine available in FY19.


  • Wesfarmers (WES $41.60) – Credit Suisse has an Outperform recommendation with a target price of $44.98. The analyst sees no significant constraints on the funding of an independent Coles, even where there is more significant price competition and higher requirements for capital expenditure. They estimate that 27-37% of the current equity value of Wesfarmers would reside in a de-merged Coles and it would have an equity value of between $15-18bn, implying a free cash flow yield of 4.8-5.7%.





US EQUITIES – S&P500 +70 (+2.72%), Dow Jones +669 (+2.84%), Nasdaq -174 (-2.43%).

Main themes –

  • Trade war fears ease on reports US and Chinese trade officials are reportedly working on an agreement to address the imbalances in trade and improve American access to Chinese markets.
  • Technology (+4.0%) and financials (+3.2%) were the best performing sectors. Defensive sectors – utilities, staples, telcos, real estate – underperformed but still ended in positive territory.

EUROPEAN MARKETS – All weaker, missing out on the US rebound. STOX500 -0.72%, UK FTSE -0.48%, German Dax -0.83%, French CAC -0.57%


  • The US dollar is down 0.40% to 89.08.
  • The Aussie dollar is stronger at US77.47.

BONDS – 2-yr: +3 bps to 2.29%, 5-yr: +2 bps to 2.64%, 10-yr: +1 bp to 2.84%, 30-yr: -1 bp to 3.07%


  • WTI oil was down US33c to US$65.55 a barrel on easing fears of a trade war. On Friday, the Baker Hughes weekly oil rig count rose by 4 to a 3 year high of 804 in total, up 152 rigs from a year ago.
  • Gold rose 0.27% to US$1,353.50.
  • Iron ore was unchanged at US$67.50. The price used by CommSec (Fines 62% CFR Tianjin port) is down $1.00 or 1.6% to US$63.05.
  • LME metals were mostly stronger – copper -0.87% the exception, nickel +0.04%, aluminium +0.07%, zinc +1.35%.


  • Chinese Oil Futures – Shanghai crude oil futures, the world’s new oil trading instrument priced in Yuan, has made a strong debut.
  • Russians expelled – The US will expel 60 Russian diplomats for Russia’s alleged poisoning of a former intelligence officer living in the UK. More than 100 Russian diplomats have now been expelled from 18 countries, making for the largest collective expulsion of Russian intelligence officers in history.
  • North Korea’s Supreme Leader Kim Jong-un is said to have visited Beijing ahead of an expected summit with President Trump. If true, this marks the first time that an active North Korean ruler stepped foot outside the country.
  • European data – France’s Q4 GDP +0.7% (expected 0.6%; last 0.6%) to be +2.5%yoy, as expected (last 2.5%); Italy’s non-EU trade surplus €1.99bn (last deficit of €EUR520m).
  • Facebook (+0.4%) was under pressure for most of the session after the Federal Trade Commission announced it was investigating the company’s data practices
  • Boeing (+2.5%) rose after announcing it delivered its first 787-10 Dreamliner jet to Singapore Airlines over the weekend. Boeing had been under pressure lately because it was seen as vulnerable to a trade war.
  • Lowe’s (+6.6%) rallied after announcing that CEO Robert Niblock will retire after 13 years at the helm


“It is not possible to go forward while looking back.” – Ludwig Mies van der Rohe, American architect born this day in 1886. Died August 17, 1969.


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