The ASX 200 is down 37 points in mid-morning trade, despite strength in US. Gold the only shiny sector, Materials & Energy ok and banks lower. BWX management takeover offer, HSO profit warning, JHX and TNE mixed results. RC Round 3 continues #ausbiz
- Ex-dividend – AusNet Services (AST) 4.6c, Incitec Pivot (IPL) 4.5c
- Japanese All Industry Activity Index
- UK economic data – CBI Industrial Trends Orders
- Banking Royal Commission continues – ANZ will be first up. Yesterday looked at parents acting as guarantors
- BWX – Management buyout. CEO John Humble (who own 11% of BWX) and Finance Director Aaron Finlay, in partnership with Bain Capital Private Equity, has made an offer. There are 2 options: (a) $6.60 cash per share; or (b) a scrip alternative in a newly incorporated acquisition entity of 75% shares and 25% cash, The $6.60 represents a 50% premium to the closing price on Friday of $4.41. The Board has established an independent committee to review the offer and recommends shareholders take no action at this stage.
- Healthscope (HSO) – 2 announcements this morning. Portfolio review. Will close Geelong Private Hospital and Cotham Private Hospital in Victoria and record an impairment relating to Frankston. The closures will be phased over the next 4 weeks and will result in a charge to FY18 results of approximately $17 million comprising asset write-downs, redundancies and other costs. Frankston FY18 result impact will be a charge of $68m. Now expects Hospital Operating EBITDA for FY18 to be $340-$345m compared with FY17 $359.4m. (Previously was broadly similar to FY17.) 2H Hospitals Operating EBITDA is expected to be in line with pcp, reflecting an improved performance relative to 1HFY18, which was down 8.6% on pcp. FY19 Hospital Operating EBITDA growth is expected to be at least 10%. HSO also announced it will not provide due diligence access to the 2 interested parties, the BGH – AustralianSuper Consortium or Brookfield.
- James Hardies (JHX) – NPAT up 47% on sales up 7%.
- TechnologyOne (TNE) – 1H result. Exceeds previous guidance. Net Profit Before Tax up 1% to $10.4m, revenue up 6% to $120m, total expenses up 6% to %110m, R&D up 8% to $25.6m fully expensed, total annual recurring revenue up 14% to $64.1m, Annual Licence Fees up 6% to $51m, Annual SaaS Platform Contract Value up 51% to $31m, Initial Licence Fees up 7% to $25.9m. Dividend up 10% to 2.86cps. “On track to deliver profit growth of between 10% to 15% over the full year.”
- Wattle Health (WTA) – Will supply its baby food to Metcash (MTA) and expand its product offering
- APN Outdoor (APO) – Has lodged a bid for Adshel from HT & E (HT1). It comes after a revised offer from oOh! Media (OML) on 30 April. The HT1 board has determined that the OML offer is not the most attractive offer, not in the best interests of the Company and does not offer compelling value for shareholders.,,and says shareholders don’t need to do anything
- AMP ($3.96) – Morgan Stanley has upgraded to an Overweight (from Equal-weight) recommendation with a target price of $4.50 (from $5.75). It’s a deep value and brand rebuild story, with AMP’s resilience like to surprise. I’m not so sure…but it will be a trading buy at some stage
- BHP Billiton (BHP $33.94) – UBS has a Buy recommendation with a target price of $36.00 (from $35.00). Compelling valuation and big discount to RIO which has potential to reverse. It’s hard toget excited at this level of RSI but the MACD indicator (the blue bars) are still rising.
- Eclipx (ECX $3.49) – Credit Suisse has an Outperform recommendation with a target price of $4.10 (from $4.50). The analyst thinks the derating of the company is overdone and the company offers earnings growth, stable operating environment and positive momentum. Shares look very interesting from a technical perspective. The MACD indicator is just about to move into positive territory (a buy signal) while the RSI gave a buy signal earlier in the month.
- Seven Group Holdings (SVW $20.03) – UBS has a Buy recommendation with a target price of $22.55. Recent upgrade to FY18 earnings guidance (+20-15%) has been confirmed and investor briefing with focus on WA facilities and Coates hire. The UBS analyst expects double digit earnings growth with mining capex cycle strengthening. But it’s very hard to get too excited about shares at this price.
- Corporate Travel Group (CTD $25.72) – Morgan Stanley has an Overweight recommendation with a target price of $31.00 (form $27.00). The analyst thinks the scope for market share increase offers upside if CTD can scale its model over the next 4-5 years through technology, capital and M&A.
SPI FUTURES -10
US EQUITIES – S&P500 +20 (+0.74%), Dow Jones +298 (+1.21%), Nasdaq +40 (+0.54%).
Main themes –
- Market responds to comments over the weekend by Treasury Secretary Mnuchin that the US-China trade war is “on hold”
- Dow closes back over 25,000 (first time since March)
- General Electric (+1.94%) announced a $11.1bn deal to merge its transportation business with locomotive manufacturer Wabtec. The rally was tempered following reports of possible further dividend cuts (or even dividend elimination).
- Italian politics continue to weigh on equity (-1.52%) and bond markets (10-year yield up 15bps). The Five-Star Movement and the League reportedly poised to propose new cabinet to Italy’s president.
EUROPEAN MARKETS – All lower. STOXX 600 +0.02%, UK FTSE +1.03%, German DAX -0.28%, French CAC +0.41%.
- The US dollar was down 0.11% at 93.54.
- The Aussie dollar is stronger at US75.86c.
BONDS – 2-yr: +3 bps to 2.57%, 5-yr: +1 bp to 2.90%, 10-yr: UNCH at 3.07%, 30-yr: UNCH at 3.21%.
- WTI oil futures ended the day up US96c or 1.4% at US$72.24.Key factors included potential sanctions on Venezuela after the weekend re-election of Nicolas Maduro, while comments from US Secretary of State Mike Pompeo gave concern about policy towards Iran. Energy Ministers of Saudi Arabia, UAE and Russia will meet at the end of the week. Some analysts have expressed the view that this may result in additional supply to address price volatility and the potential shortfall in Iranian supplies for any sanctions.
- Gold futures closed down 0.03% to US$1290.90.
- Iron ore rose was unchanged at US$68.00
- LME metals – Prices were mixed. Cu +0.35%, Ni -0.51%, Al +0.44%
ECONOMIC DATA, NEWS & POLITICS
- US-China trade developments – Trade war with China “on hold.” Previously announced tariffs to be halted while talks continue. China reported to buy more US goods with emphasis on agricultural and energy imports. No specific details were provided.
QUOTE OF THE DAY
“You must stand up for multilateralism. You must make trade great again.” – Arancha Gonzalez, Spanish economist and Executive Director of the International Trade Centre (a joint agency of the UN Conference on Trade and Development and the WTO), born this day in 1969.