The ASX200 is up 4 points having recovered from a 16 point loss early. FED raises 25bp as expected and adds a dot. Telstra up 7c a big highlight, ORI loses FMG contract to IPL. Employment datat today #ausbiz
TODAY
- Economic data – Employment Change, Unemployment Rate
- Ex–dividend – Iron Mountain (INM) 54.4c, Jumbo Interactive (JIN) 8.0c, Plato Income Maximiser (PL8) 0.5c
- Goodman Group (GMG) – Investor Day
- Chinese data – Fixed Asset Investment (YTD), Industrial Production, Retail Sales
- Japanese data – Capacity Utilization, Industrial Production
TONIGHT
- ECB Interest Rate Decision
- UK – Retail Sales
- US economic – Import Prices/Export Prices, Retail Sales, Business Inventories
COMPANY NEWS
- Goodman Group (GMG) – Conference presentation
- Orica (ORI) – Update on Western Australia business. Has lost its FMG ammonium nitrate contract to Incitec Pivot. Will continue to supply explosives products and services to FMG until the end of our existing contract term in December 2019. FMG will source a portion of their ammonium nitrate requirements from IPL from July 2018. Expect the Burrup plant to be essentially loaded from 2020 onwards and do not expect any material change to our financial outlook in FY18 and FY19 and a minimal financial impact in FY20. Deutsche Bank has a Hold recommendation with a target price of $18.00. With Burrup operating under capacity, the analyst suggests the initial earnings impact will not be material.
- Incitec Pivot (IPL) – Has taken over the contract for supplying ammonium nitrate to FMG. Expected combined impact (with other mitigating asctions) on NPAT: FY18 – no change to amounts previously disclosed; FY19 + $6m (adverse NPAT impact has reduced from $16m to $10m); FY20 + $15m (adverse NPAT impact has reduced from $32m to $17m); FY21 + $24m (adverse NPAT impact has reduced from $43m to $19m); FY22 + $9m (adverse NPAT impact has reduced from $20m to $11m). Deutschw Bank has a Buy recommendation with a target price of $4.40. The analyst notes the new contract reduces losses for the end of other contracts previously flagged. It represents upside to concensus forecasts of 2.3% for FY19-20.
ANALYST CHANGES
- APA Group (APA) – Unsolicited proposal from CK Infrastructure for $11 (permitting a distribution of up to 24c for the half). The board makes no recommendation and is engaging further with APA offering an opportunity for due diligence. To address ACCC concerns, CKI divest assets including APA’s interests in the Goldfields Gas Pipeline, Parmelia Gas Pipeline, Mondarra Gas Storage Facility and a standalone management team.
- Credit Suisse has double upgraded to an Outperform (from Underperform) recommendation with a target price of $11 (from $7.45). The analyst thinks the offer is attractive and notes CKI has a track record of paying what others won’t. FIRM approval remains the key.
- Deutsche Bank has a Buy recommendation with a target price of $10.85. Despite having had initial discussions, the analyst thinks FIRB approval will be a challenge.
- Macquarie has not rating. The analyst notes that CKI is likely to be the first company to test the Security of Critical Infrastructure Act. Despite approval for both DUET and Envesta in the pas,t it is untested under this act.
- Morgans has an Add recommendation with a target price of $11.00 (from $8.52). The analyst estimates the bid price implies a forward distribution yield of 4.3%, an enterprise value/EBITDA of 13.9x and a thin 5% pa equity return on long-run forecasts. Other bidders can’t be ruled out but the CK has significant Infrastructure firepower.
- Adairs (ADH) – Morgans has upgraded to an Add (from Hold) recommendation with a target price of $2.50 9from $2.30). After a difficult FY17, the analyst thinks FY18 will mark a material bounce and has increased its FY lfl sales to 4%.
- Challenger Investor Day (CGF) – FY guidance of $545-565 was reiterated. Confirmation of strategy to grow and develop annuity market.
- Deutsche Bank has a Hold recommendation with a target price of $11.70. Confirmed annuity strategy and will continue to develop the Fidante Partners business, including fixed interest ETFs. The analyst sees value.
- Macquarie has an Outperform recommendation with a target price of $13.00. Will reduce property allocation, which the analyst thinks will reduce capital intensity at the expense of near-term earnings. Lowe interest rates and favourable regulatory backdrop should support the share price but the recent rally has reduced the valuation upside.
- Morgans has a hold recommendation with a target price of $13.17 (from $13.02). Reposition towards fixed interest given better relative value, which will release capital but weight on FY19 earnings. The analyst has reduced future year earnings by 5-6% on lower COE margins.
- Gateway Lifestyle Group (GTY) – Takeover offer from Hometown Australia Holdings Pty Ltd and Hometown America Communities Limited Partnership (collectively, Hometown) at an indicative price of $2.10, reduced by the value of any dividends or distributions announced following receipt of the Proposal. Up 14.75% yesterday. Macquarie has an Outperform recommendation with a target price of $2.26 (from $1.92). With due diligence not granted, the analyst thinks a higher offer might be required., and that there are other potential bidders.
OVERNIGHT
SPI FUTURES -5
US EQUITIES – S&P500 -11 (-0.40%), Dow Jones -120 (-0.47%), Nasdaq -8 (-0.11%).
Main themes –
- FOMC – Rates raised 25bp to 1.75%-2.00% as expected. Dot plot suggests two more hikes in 2018 (and increase from 3 to 4 for the year)
- Chinese trade – The Wall Street Journal reported the White House is preparing to implement tariffs on tens of billions of dollars of Chinese goods as early as Friday
- Market moved from positive to negative (although bounced after the Fed decision) and then sold off after China trade report.
- PPI inflation data higher than expected (0.5% versus 0.3% expected).
- Federal judge rules AT&T (-6.2%) can acquire Time Warner (+1.8%)
EUROPEAN MARKETS – Mixed. STOXX 600 +0.19%, UK FTSE flat, German DAX +0.38%, French CAC -0.01%. Peripheral markets were stronger once again
CURRENCIES
- The US dollar was down 0.2% to 93.59
- The Aussie dollar is little changed after another volatile day, trading at US75.75c.
BONDS – Sold off after the Fed meeting. 2-yr: +1 bp to 2.56%, 5-yr: +3 bps to 2.84%, 10-yr: +2 bps to 2.98%, 30-yr: +1 bp to 3.10%
COMMODITIES
- WTI oil futures were up US28c at US$66.63 to its highest close in 2 weeks after US inventories fell 4.1mb (-2.7mb expected). Other factors included rising US oil production (10.9mbpd) and expectations OPEC/Russia could relax production cuts.
- Gold futures were down 0.11% to US$1,298.00.
- Iron Ore – IRESS reports iron ore unchanged at US$67.00 a tonne. The CommSec site says China Import (Fines 62% Fe) was down US15c to US$65.80/dry ton. (CFR Tianjin port)
- LME metals – Mixed. Cu +0.48%, Ni +2.73% and Al -1.17%.
ECONOMIC DATA, NEWS & POLITICS
- US economic data – PPI 0.5% (consensus 0.3%; prior 0.1%), Core PPI 0.3% (consensus 0.2%; prior 0.2%), MBA Mortgage Index -1.5% (prior 4.1%)
- Fed notes – Press conference after every policy meeting (starting in January. This is seen as meaning the Fed wanted to accelerate the pace of policy tightening). The Fed changed several phrases from its prior comments, namely more optimistic economic growth and higher inflation expectations. Also removed the reference to “keeping rates below long-run levels for some time”. The Fed doesn’t seem concerned with recent developments in many emerging market economies
- Argentina – Announced plans to sell up to US$7.50bn to support the peso. Will conduct daily sales of dollars to stem capital outflows. The funds will be sourced from the recently agreed-upon loan from the IMF.
- European data – Industrial Production -0.9% (expected -0.5%; last 0.6%) to be +1.7%yoy (expected 2.8%; last 3.0%). Q1 Employment Change +0.4% (expected 0.3%; last 0.3%) to be +1.4%yoy (last 1.6%); Spain May CPI +0.9% (as expected, last 0.9%) to be +2.1%yoy (expected 2.0%; last 2.0%)
- UK data – CPI +0.4% (as expected, last 0.4%) to be +2.4%yoy (as expected, last 2.4%), Core CPI +2.1%yoy (as expected, last 2.1%). Input PPI +2.8% (expected 1.8%; last 0.6%) and Output PPI +0.4% (expected 0.3%; last 0.4%). May House Price Index +3.9%yoy (expected 4.4%; last 4.2%)
QUOTE OF THE DAY
“You can have a certain arrogance, and I think that’s fine, but what you should never lose is the respect for the others.” – Steffi Graf, American athlete born this day in 1969.
RunningMoney 