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South African Market Review South African markets closed higher yesterday, supported by financial sector stocks. Capitec Bank, Barclays Africa and Nedbank Group gained 4.9%, 2.8% and 2.3%, respectively. Truworths International, Cie Financiere Richemont and Foschini Group climbed 4.2%, 1.8% and 1.8%, respectively. Remgro added 0.2%, ahead of its interim results which was released after the market’s close and indicated that diluted EPS was up 12.3% from the same period a year ago. Attacq was marginally higher, after reporting that its net rental income for six months ended 31 December 2014 was up 78.0% from the same period of last year. However, African Rainbow Minerals declined 7.9%.The JSE All Share Index rose 0.7% to close at 52,139.15. |
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UK Market Review UK markets finished higher yesterday, lifted by retail sector stocks. Tesco advanced 3.7%, after reports indicated that WPP could possibly purchase a majority stake in the firm’s Dunnhumby business. Peers, J Sainsbury and Wm Morrison Supermarkets rose 3.7% and 0.9%, respectively. Mining sector stocks, BHP Billiton and Rio Tinto added 1.4% and 1.9%, respectively, after China’s Premier Li Keqiang stated that its government would improve efforts to boost economic growth if the nation’s growth continued to ease. Bucking the trend, CRH, which plans to buy assets from Holcim and Lafarge, fell 4.4%, as the proposed merger between the two companies appeared to be falling apart. The FTSE 100 Index advanced 0.9% to close at 6,804.08. |
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US Market Review US markets finished higher yesterday, ahead of the US Federal Reserve’s policy statement on Wednesday. Amgen and Regeneron Pharmaceuticals climbed 5.7% and 5.2%, respectively, after data on their respective cholesterol drugs revealed that the injections reduced the rate of major cardiac events and death. Raytheon added 2.9%, amid reports that it is in talks to acquire Websense Incorporation. Procter & Gamble rose 2.1%, following reports that the company is exploring a sale or IPO of some of its beauty brands in a single deal. However, Netflix and Wynn Resorts dropped 3.8% and 1.1%, respectively. The S&P 500 Index rose 1.4% to settle at 2,081.19, while the DJIA Index climbed 1.3% to close at 17,977.42. The NASDAQ Index advanced 1.2% to finish at 4,929.51. |
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Asia Market Review Asian markets are trading higher this morning, as the BoJ maintained its monetary stimulus programme. In Japan, Tokyo Gas gained 2.5%, after a report indicated that the company might repurchase shares worth JPY50.00bn in FY16. Hitachi and Mitsubishi Heavy Industries jumped 4.8% and 2.6%, respectively, amid reports that both companies aim for more than 10.0% for return on equity. In Hong Kong, Huaneng Power International climbed 7.0%, after data showed China’s electricity usage increased 2.5% for January and February. In South Korea, exporters, Hyundai Motor and Kia Motors advanced 3.7% and 2.8%, respectively, as the Won weakened against the majors. The Nikkei 225 Index is trading 1.0% higher at 19,430.22, while the Kospi Index is trading 2.0% in the green at 2,027.79. The Hang Seng Index is trading 0.3% firmer at 24,022.97. |
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Commodities At 06:00 SAST today, Brent crude oil declined 0.4% to trade at $52.38/bl. Yesterday, Brent crude oil fell 2.3% to settle at $52.61/bl. The Organisation of the Petroleum Exporting Countries (OPEC), in its monthly report, projected that global demand for its crude oil would stood at 29.19mn bls/d, which is down slightly from its previous estimates by 0.10mn bls/d. Yesterday, the Illinois North Central No.2 Yellow corn spot prices rose 0.1% to $3.54/bushel. At 06:00 SAST today, gold prices advanced 0.1% to trade at $1,155.70/oz, ahead of this week’s US Federal Reserve policy meeting. Yesterday, gold declined 0.3% to close at $1,154.81/oz. Yesterday, copper declined 0.3% to close at $5,864.25/mt. Aluminium closed 0.2% higher at $1,772.50/mt. |
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Currencies Yesterday, the South African rand strengthened against the US dollar. Meanwhile, February’s US industrial production, NY Empire state manufacturing activity and NAHB’s housing market data came in below market expectations. Going forward, investors will eye the release of fourth quarter current account balance data in South Africa along with US housing starts and building permits data, scheduled today. The yield on benchmark government bonds fell yesterday. The yield on 2015 bond declined to 6.13% while that for the longer-dated 2026 issue fell to 7.93%. At 06:00 SAST, the US dollar is trading 0.1% higher against the South African rand at R12.4038, while the euro is trading almost unchanged at R13.1017. At 06:00 SAST, the British pound has remained almost unchanged against the South African rand to trade at R18.3840. Yesterday, the euro advanced against most of the major currencies, after the ECB President, Mario Draghi, stated that there is an upturn in the eurozone’s economic conditions due to the central bank’s stimulus measures. Later today, traders will keep a tab on the final consumer prices reading from the eurozone for February and Germany’s economic conditions ZEW survey report for March for further direction. At 06:00 SAST, the euro fell 0.1% against the US dollar to trade at $1.0563, while it has remained unchanged against the British pound to trade at GBP0.7127. |
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Economic Updates On a monthly basis, the Conference Board (CB) leading economic index advanced 0.2% in the UK, in January. In the previous month, the CB leading economic index had registered a revised flat reading. On a monthly basis, the producer and import price index slid 1.4% in Switzerland, in February, compared with a drop of 0.6% in the prior month. Markets were anticipating the producer and import price index to drop 1.0%. The real retail sales in Switzerland registered a drop of 0.3% on an annual basis, in January. In the previous month, real retail sales had recorded a revised rise of 1.9%. The ECB President, Mario Draghi, opined that a sustained economic recovery in the eurozone is taking hold. Further, he stated that confidence among firms and consumers is rising. He urged eurozone nation’s governments to use such upbeat outlook to draw economic reforms that could improve the region’s long-term growth prospects. The National Association of Home Builders (NAHB) / Wells Fargo have indicated that the housing market index recorded an unexpected drop to 53.00 in March, in the US. Markets were expecting the housing market index to climb to a level of 57.00. On a monthly basis, in February, industrial production recorded a rise of 0.1% in the US, less than market expectations for a rise of 0.2%. Industrial production had registered a revised drop of 0.3% in the previous month. The Federal Reserve Bank of New York has reported that the NY Empire State manufacturing index recorded an unexpected drop to a level of 6.90 in March, in the US. Markets were expecting the NY Empire State manufacturing index to advance to 8.00. The Bank of Japan (BoJ) held its monetary policy unchanged and reiterated its upbeat assessment of the Japan’s economy, indicating that the nation is on the path of recovery from the recession without additional monetary loosening. In February, on an annual basis, actual foreign direct investment (FDI) in China climbed 0.9%. Actual FDI had recorded a rise of 29.4% in the previous month. The minutes of Reserve Bank of Australia (RBA) latest monetary meeting revealed that further rate cut would be kept on hold and awaits fresh data that might show that the economy is strengthening. |
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Corporate Updates South Africa Remgro Limited : The company, in its results for the six months ended 31 December 2014, indicated that sales increased 3.5% from the same period a year ago to R13.11bn. Its diluted headline EPS was R7.04, compared with R7.00 reported in the corresponding period of previous year. Its diluted EPS rose 12.3% from the same period of last year to R8.31.African Rainbow Minerals Limited: The mining company, in its 1H15 results, stated that revenue increased 4.6% from the corresponding period of previous year to R5, 210.00mn. However, its diluted headline EPS dropped to R4.70 from R10.76 posted in the same period a year ago. The company indicated that it could cut jobs at its Black Rock manganese mine to reduce costs. Attacq Limited: The asset management company, in its interim results for six months ended 31 December 2014, indicated that its net rental income rose 78.0% from the same period of preceding year to R423.22mn. However, its diluted EPS fell to R0.54, compared with R0.68 recorded in the corresponding period of previous year. Shell still seeking SA exploration licence: Royal Dutch Shell is pulling back from its shale projects in SA due to lower energy prices although it is still seeking an exploration licence for the onshore Karoo Basin, its country manager said on Monday. Telkom Boss invests in black industrial dream: Telkom Chairman JabuMabuza is reinvesting between R60.00mn and R100.00mn from his pension savings to help drive SA’s agenda to create large, black-owned industrial companies. UK and US Qunar Cayman Islands: The company, in its FY14 results, indicated that total revenue increased sharply to RMB1.76bn from RMB0.85bn recorded in the preceding year. However, it reported a net diluted loss of RMB5.26/share, compared with a loss of RMB0.61/share posted in the previous year. For 1Q15, the company expects annual revenue growth in the range of 85.0% to 90.0%. Karyopharm Therapeutics: The clinical-stage pharmaceutical company, in its FY14 results, stated that its contract and grant revenue decreased 40.8% from the previous year to $0.23mn. It incurred a diluted net loss of $2.43, compared with a net loss of $5.59 recorded in the last year. The company expects to end FY15 with greater than $200.00mnin cash, cash equivalents and investments. Omeros Corporation: The biopharmaceutical company, in its FY14 results, revealed that revenue dropped to $0.54mn from $1.60mn reported in the previous year. Its basic and diluted net loss was $2.22/share, compared with a loss of $1.39/share posted in the prior year. For FY15, the company anticipates that operating expenses would be in the range of $110.00mn to $120.00mn, with non-cash expenses of approximately $15.00mn. BioDelivery Sciences International: The drug making company, in its FY14 results, indicated that net revenue climbed to $38.94mn, compared with $11.36mn recorded in the preceding year. However, its diluted loss was $1.12/share, compared with a loss of $1.51/share posted in the preceding year. The company stated that acceptance of BELBUCA NDA filing in February 2015 triggered a $10.00mn milestone payment form Endo Pharmaceuticals and results of first Phase 3 study for Clonidine Topical Gel for treatment of painful diabetic neuropathy is anticipated at the end of March, along with initiation of a second Phase 3 trial. Providence Service Corporation: The human services company, in its FY14 results, stated that service revenue increased 31.9% from the last year to $1.48bn. However, its diluted EPS stood at $1.35, compared with $1.41 recorded in the previous year. Progenics Pharmaceuticals: The company, in its FY14 results, revealed that total revenue increased sharply to $44.38mn from $7.86mn recorded in the prior year. Its diluted net EPS stood at $0.06, compared with a diluted loss of $0.76/share reported in the previous year. RadNet Inc.: The company, in its FY14 results, indicated that its total net revenue was up 2.1% from previous year to $717.57mn. However, its net diluted EPS was $0.03, compared with $0.05 posted in the preceding year. For FY15, the company expects revenue in the range of $745.00mn to $765.00mn, despite price cuts to Medicare which was announced last November. American Airlines Group: S&P Dow Jones Indices indicated that the airlines company would replace Allergan in the S&P 500 after the close of trading on 20 March 2015. Kindred Biosciences: The biopharmaceutical company announced positive results from its pilot field study of KIND-012 for the control of pyrexia (fever) in horses. Fidelity European Values: The company, in its FY14 results, indicated that its total gains on investment dropped to GBP17.55mn, compared with GBP95.24mn recorded in the previous year. Its return per ordinary share stood at 8.28p, compared with 28.27p posted in the preceding year. Meanwhile, the company recommend a final dividend of 3.10p/share and a special dividend of 0.54p/share, a total of 3.64p/share, compared with 2.98p/share reported in the prior year. AstraZeneca Plc: The pharmaceutical and biologics company, in its results from the PEGASUS-TIMI 54 study, announced that both 90.00mg and 60.00mg doses of ticagrelor with aspirin significantly reduced the primary composite endpoint of cardiovascular death, myocardial infarction or stroke compared with placebo. During the trial, it also observed an increase of bleeding, but there was no excess of fatal bleeding or bleeding into the brain. Financial Times Grant Thornton faces GBP49.00mn negligence claim: Grant Thornton is facing a GBP49.00mn negligence claim from Manchester Building Society over advice and audit services it provided on “the implementation and application of hedge accounting” following a FY13 bailout after an interest rate swap backfired. BHP to spin off South32 with less debt than expected: BHP Billiton has loaded South32 with less debt than expected as it positions the company it plans to spin off in May to withstand the downturn in commodities markets, maintain an investment grade credit rating and take advantage of growth opportunities. Aviva to boost Chief’s potential pay to GBP6.70mn: Aviva is to increase Chief Executive Mark Wilson’s potential pay package to GBP6.70mn as he prepares to lead an enlarged group as a result of the insurer’s planned acquisition of FTSE 100 rival Friends Life. WPP eyes stake in Tesco Clubcard operator: WPP has teamed up with private equity group General Atlantic to bid for a majority stake in Dunnhumby, the data analysis company that operates Tesco’s Clubcard loyalty scheme. RSA considers Latin America sale: RSA is considering a sale of its Latin America business in what would be the largest disposal yet by the UK insurer’s Chief Executive Stephen Hester as he undertakes a wide-ranging restructuring. Elliott picks fight with battle hardened Alliance Trust: Alliance Trust is facing a second onslaught from activist investors in five years after the US hedge fund Elliott declared that it wanted to place three new directors on to the 127-year-old investment trust’s board. UK brickmakers revived by surge in housebuilding: Dormant brick plants are reopening across the UK as manufacturers respond to a surge in demand from housebuilders, though there are questions about how long the revival may last. Blackstone looks to check out from Center Parcs: Blackstone Group has put the Center Parcs rural resorts business up for sale. Outgoing Standard Chartered Chief Peter Sands paid $5.00mn last year: Peter Sands took home $5.10mn in pay last year even after he was unseated as Standard Chartered’s Chief Executive and waived his bonus to reflect sharp falls in the bank’s profits and share price. Gala Coral prepares for IPO following general election: Gala Coral, the UK bookmaker, is preparing for an initial public offering following the general election, according to a person familiar with the matter. Activist investor Elliott pushes for Alliance Trust board seats: An activist hedge fund has mounted a push to install three City heavyweights on the board of Alliance Trust, setting the stage for another fight over the future of the Dundee-based investment group. Raised offer from Valeant knocks Endo out of Salix race: Valeant’s Chief Executive dug deep to raise his company’s offer for Salix by $1.00bn on Monday, putting a $15.80bn price tag on the gastrointestinal drugmaker to thwart an eleventh-hour counter-offer from his erstwhile protĂ©gĂ©. Leonard Green and TPG in $4.00bn deal for Life Time Fitness: Life Time Fitness has agreed to be sold to private equity groups Leonard Green & Partners and TPG in a transaction valuing the North American fitness group at more than $4.00bn, including debt. Cairn’s woes turn spotlight on India business environment: Jerry Seinfeld became the latest in a long line of foreign visitors to discover that India is a tough place to do business, as the US comedian’s plans for two stadium shows in Mumbai at the weekend suffered last-minute cancellations following a snarl-up over permits. Holcim rejects EUR40.00bn merger with rival Lafarge: The planned EUR40.00bn merger between the world’s two largest cement makers by sales has been thrown into jeopardy after Holcim demanded better financial terms and privately insisted Lafarge’s French Chief Executive did not head the combined group. BuzzFeed changes European head: BuzzFeed has abruptly replaced the head of its European operations, saying that the move will help accelerate its growth in advertising revenues. Scripps revives European push with EUR584.00mn stake in Poland’s TVN: Scripps Networks Interactive has agreed to buy a majority stake in Polish television company TVN, in a EUR584.00mn deal that continues the US media group’s push into Europe. Ben Verwaayen set to raise EUR200.00mn to invest in European start-ups: Dutch businessman Ben Verwaayen is looking to raise more than EUR200.00mn to help fund European start-ups in the latest sign of optimism in the continent’s technology sector. Pinterest funding round values group at $11.00bn: Pinterest has raised $367.00mn in new equity from new and existing investors, according to a regulatory filing published on Monday afternoon, taking the online scrapbooking site’s total funding to $1.10bn. CRH: Dropped 4.4% to GBP17.31 after Holcim demanded changes in merger terms, which Lafarge rejected. AB Foods: Added 2.1% to GBP30.48 after the Kantar data showed its Primark chain taking market share. |
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Lex Irish tradition: a fast-growing economy: Time to dust off the shamrocks, Guinness hats and other tired clichĂ©s of Irish culture. Time also to admire the re-emergence of another Irish tradition – that of the fast-growing economy. Barely a week goes by without encouraging data – strong figures on mortgage arrears, for example, or an upgrade to the outlook for the country’s banks from Moody’s. The Irish stock market’s ISEQ index, up a quarter in six months, has beaten eurozone peers. The good news is being driven by strong fundamentals. Exports rose 13.0% last year, helping to drive a fall in unemployment. That in turn helped consumer confidence and the housing market. Ireland’s banks are feeling the benefit. Bank of Ireland swung back to profit last year on the back of a two-thirds drop in the impairment charge. So there are reasons for short-term caution. The medium term, too, holds possible challenges. What if the Irish economy – driven by low eurozone interest rates – expands too fast? What if the UK – a leading trading partner – leaves the EU? The ISEQ, at 20 times forecast earnings, is taking such uncertainties in its stride. And while the good news keeps coming it can afford to: the recovery looks well-founded. But remember what happened last time it looked like Ireland was defying gravity. Rackspace: turn, turn, turn: Rackspace Hosting originally focused on “managed hosting” – housing companies’ servers in its data centre. The hosting business has, however, shifted toward “public clouds,” in which customers share hosts’ data centre hardware, rather than having devoted servers there. Rackspace launched a public cloud in FY12, and struggled. Competition from Amazon and Google was intense. Its stock slipped, then its Chief Executive left. There were murmurs of a private equity bid. The market is certainly buying the pivot: the share price is up 60.0% from July. Is the rally overdone? Competition remains fierce. Amazon and Microsoft both offer various services themselves, as well as having scores of smaller companies dedicated to providing services around their cloud platforms. This crowded dance floor could mean slower growth for Rackspace: it has guided for 14.0% to 18.0% growth this year, in constant currency. Meanwhile much of its free cash flow will be eaten up by share buybacks this year, limiting its room to invest in the business. Rackspace is right to try to pivot toward the high-margin part of the market. But not every pivot has a happy ending. UK renewables: price discovery: Whatever your preferred metaphor, life is becoming tougher for UK renewable energy producers. Previously they were able to sell to the grid at government-set tariffs that frequently made no allowances for falling input costs – solar module prices, for example, have fallen 67.0% over the past five years. Renewables producers now have to bid for the right to produce energy – and the lowest cost wins. The prices bid for projects came in below expectations last month. The lower renewable costs could also add pricing pressure to the rest of the power network. Solar farms, say, always send electricity to the grid. Gas and coal only do so when needed. If renewables (around a sixth of generation capacity) displace sufficient capacity from fossil fuel generators, only the cheapest of the latter can survive. And those tend to use the dirtiest fuels such as coal. In Germany this has resulted in a high proportion of renewable energy in its capacity (25.0%), but also has increased CO2 emissions because of greater coal use. The new auction system for renewable energy has generated hope that it can, finally, dominate fossil fuel power. Renewable costs appear to be falling quickly. This shift, though, could have a disproportionate impact on the bulk of a power system with high fixed costs. Not so sunny a notion. |