Anchor Capital: Essential market review, 24 February

Yesterday, the Illinois North Central No.2 Yellow corn spot prices fell 1.5% to $3.57/bushel.

At 06:00 SAST today, gold prices advanced marginally to trade at $1,201.88/oz. Yesterday, gold declined marginally to close at $1,201.83/oz. Meanwhile, economic data from the US showed that existing home sales dropped in January.

Yesterday, copper declined 0.4% to close at $5,684.50/mt. Aluminium closed 0.2% lower at $1,771.75/mt.

The yield on benchmark government bonds were mixed yesterday. The yield on 2015 bond fell to 6.20% while that for the longer-dated 2026 issue advanced to 7.65%.

At 06:00 SAST, the US dollar is trading 0.1% higher against the South African rand at R11.6545, while the euro is trading 0.2% higher at R13.2080. At 06:00 SAST, the British pound has declined marginally against the South African rand to trade at R17.9909.

Yesterday, the euro declined against the major currencies, amid concerns over the Greek debt deal. Meanwhile, the Ifo business climate index in Germany recorded a rise for February, although it missed market expectations. Moving ahead, investors will keep a tab on consumer price inflation data in the eurozone and revised fourth quarter GDP data in Germany due later today.

At 06:00 SAST, the euro remained almost unchanged against the US dollar to trade at $1.1333, while it has gained 0.1% against the British pound to trade at GBP0.7341.

The Swiss National Bank has indicated that, in January, on an annual basis, M3 money supply climbed 3.2% in Switzerland. In the previous month, M3 money supply had advanced 3.3%.

In Germany, the Ifo business expectations index recorded a rise to 102.50 in February, compared with a level of 102.00 in the previous month. Markets were expecting the Ifo business expectations index to climb to 103.00.

The Ifo business climate index recorded a rise to 106.80 in February, in Germany, compared with a level of 106.70 in the previous month. Market anticipations were for the Ifo business climate index to rise to 107.70.

The National Association of Realtors has indicated that, in January, existing home sales dropped 4.9%, on a monthly basis, to a level of 4.82mn in the US, lower than market expectations of 4.95mn. Existing home sales had registered a revised level of 5.07mn in the previous month.

The Dallas Fed manufacturing business index eased unexpectedly to -11.20 in the US, in February. The Dallas Fed manufacturing business index had registered a reading of -4.40 in the prior month.

The Chicago Fed national activity index registered a rise to 0.13 in January, in the US, higher than market expectations of a rise to 0.05. The Chicago Fed national activity index had registered a revised level of -0.07 in the prior month.

The corporate service price index in Japan recorded a rise of 3.4% on an annual basis in January, compared with a revised advance of 3.5% in the previous month. Markets were anticipating the corporate service price index to rise 3.6%.

The Reserve Bank of New Zealand, in its latest quarterly survey, has reported that the two-year-ahead expectation of consumer price inflation in New Zealand has fallen to 1.8% from 2.1% in the prior quarter.

Nedbank Group Limited: The company, in its FY14 results, indicated that its net interest income increased 8.2% to R22.96bn, compared with the previous year. Its diluted EPS rose to R20.49 from R18.22 posted in the preceding year. The company also indicated that it would repurchase 8.90mn shares from trusts as part of process of terminating components of original BEE transaction.

Anglogold Ashanti: The company, in its FY14 results, indicated that revenue dropped 5.8% to $5.38bn from the previous year. Its diluted loss was 14.00¢/share, compared with a loss of 631.00¢/share posted in the preceding year. It posted a second consecutive growth in annual production alongside a 13.0% improvement in all-in sustaining costs, as it continued to focus on portfolio improvements and capital discipline. The company guided to a production of between 4.00mn oz to 4.30mn oz for FY15.

Hyprop Investments: The real estate company, in its 1H15 results, revealed that revenue rose 12.0% to R1.31bn from the corresponding last year. Its basic and diluted EPS dropped to 538.90c from 583.10c posted in the same period a year ago. The company expects dividend growth of between 12.0% and 15.0% for FY15.

Sun International: The company, in its 1H15 results, stated that revenue increased to R4.34bn, compared with R4.05bn reported in the preceding previous year. Its diluted EPS was 843.00c, compared with 323.00c posted in the same period a year ago.The group is confident that it would achieve growth in both EBITDA and adjusted headline EPS in 2H15.

Super Group Limited: The company, in its 1H15 results, revealed that revenue was up 22.6% to R8.75bn from the previous year. Its diluted EPS rose to 126.70c from 8.30c posted a year ago.

Murray & Roberts Holdings: The company, in its trading statement for 1H15, stated that its diluted headline EPS from continuing operations is expected to increase between 30.0% and 47.0% from the same previous period a year ago to the range of 74.00c to 84.00c. Furthermore, its basic EPS from continuing operations is expected to be between 76.00c and 86.00c, compared with 58.00c posted in the preceding period a year ago.

Adcock Ingram Holdings: The company, in its unaudited financial results for the six month period ended 31 December 2014, indicated that its revenue increased to R2.72bn from R2.69bn posted in the corresponding period a year ago. Its diluted EPS rose to 83.80c from 60.70c recorded in the same period previous year. Meanwhile, Bidvest Group offered about $515.00mn for the shares it does not already own in Adcock Ingram in a new attempt to build a big presence in the pharmaceutical market.

Wilson Bayly Holmes-ovcon: The company, in its unaudited 1H15 results, indicated that revenue increased 11.1% to R14.68bn from the same period a year ago. However, its diluted EPS from continuing operations dropped to 555.20c from 639.10c posted in the corresponding previous period in the prior year.

Grand Parade Investments: The company, in its trading statement for the six months period ended 31 December 2014, indicated that its basic EPS would be between 125.81c and 131.05c, compared with the basic EPS of 26.21c reported in the same period a year ago. Furthermore, it expects to report a headline loss in the range between 4.19c/share and 6.98c/share, compared with headline EPS of 13.95c posted in the corresponding period in the previous year.

Hulamin Limited: The company, in its FY14 results, stated that revenue increased 6.3% to R8.04bn from the preceding year. Its diluted EPS stood at 118.00c, compared with a loss of 417.00c/share reported a year ago. The board declared a final cash dividend of 25.00c/share, the first since FY08, following resumption by the company of its dividend payment policy.

Harmony Gold Mining: The gold mining company announced that all of the 486 employees at its Kusasalethu mine were brought to surface safely on 22 February 2015, following a successful operation undertaken by mine rescue teams who were deployed underground to contain a fire.

Nedbank’s BEE deal has matured: Nedbank’s broad-based black economic empowerment deal has matured, having created R8.20bn in value over the past 10 years, CEO Mike Brown said on Monday.

Completion of Rosebank Mall project lifts Hyprop: HYPROP Investments, SA’s third-biggest listed real estate investment trust, grew its distributions 13.7% in the six months to December, remaining a reliable income payer for unit holders.

BHP Billiton chief to shed light on major spin-off plan: BHP Billiton’s diversification across commodities from aluminium to oil earned it darling status in an industry where many of its rivals were shackled to the fortunes of a single commodity.

UK and US

Express Scripts Holding: The company, in its FY14 results, indicated that revenue dropped 3.1% to $100.89bn from the preceding year. However, its net diluted EPS increased to $2.64, compared with $2.25 recorded in the previous year. The company anticipates achieving adjusted diluted EPS for FY15 in the range of $5.35 to $5.49.

DISH Network: The broadcast satellite service providing company, in its FY14 results, stated that revenue increased 5.0% to $14.60bn from the previous year. Its diluted EPS stood at $2.04, compared with $1.76 posted in FY13. Furthermore, the company announced the retirement of the President and Chief Executive Officer, Joseph P. Clayton, effective 31 March 2015.

Abengoa SA: The telecommunications company, in its FY14 results, revealed that revenue was EUR7.15bn, which represented a 1.3% decrease compared with EUR7.25bnposted in the previous year. However, its net income increased 23.8% to EUR0.13bn, compared with the previous year. For FY15, the company expects revenue to increase between 10.0% and 11.0% from the prior year to in the range of EUR7.85bn to EUR7.95bn.

ONEOK Inc.: The oil and gas producing company, in its FY14 results, indicated that operating income rose 29.5% to $1.14bn from the preceding year. The company declared a quarterly dividend in January 2015 of 60.50¢/share, a 3.0% increase from the previous quarter. The company has reduced its FY15 cash flow available for dividends guidance to a range of $0.57bn to $0.65bn, compared with a previous guidance range of $0.58bn to $0.66bn announced on 2 December 2014.

Tenet Healthcare: The company, in its FY14 results, revealed that its net operating revenue was up 49.7% to $16.62bn from the prior year. Its net diluted EPS amounted to $0.12, compared with a loss of $1.32/share reported a year ago. The company expects FY15 EPS to be in the range of $1.32 to $2.40.

American National Insurance: The company, in its FY14 results, indicated that revenue was down 2.2% to $3.05bn from the preceding year. It stated that its net diluted EPS dropped to $9.18 from $9.97 recorded in the previous year.

Abengoa Yield Plc: The energy company, in its FY14 results, stated that revenue increased to $0.36bn from $0.21bn reported a year ago. The company reported a basic loss per share of $0.04.

Apple Inc.: The company announced its EUR1.70bnplan to build and operate two data centres in Europe, each powered by 100.0% renewable energy. Meanwhile, media reports suggest that the company is looking for chip designers and other experts, prompting speculation that it might be looking for experts to design its rumoured car.

First Solar Inc.: The company announced that it is in advanced negotiations with Sun Power Corporation to form a joint YieldCo vehicle to which they each expect to contribute a portfolio of selected solar generation assets from their existing portfolio of assets. Furthermore, the parties intend to file a registration statement with the Securities and Exchange Commission for an initial public offering of limited partner interests in the YieldCo.

Exact Sciences Corporation: The company has been approved by the Wisconsin Economic Development Corporation to receive up to $9.00mn in tax credits if it adds at least 750 jobs and makes a capital investment of $26.00mn by 2020. The company stated that it is now committed to develop tests for other types of cancer.

HSBC Holdings: The banking and financial services company, in its FY14 results, indicated that adjusted revenue increased marginally to $62.00bn from $61.85bn reported in the previous year. However, its diluted EPS dropped to $0.69, compared with $0.84 posted a year ago. The company would continue to focus on the execution of its strategy and on delivering value to their shareholders in FY15.

Associated British Foods: The company, in its trading update for 1H15, revealed that underlying trading remains in line with expectations and it continues to expect a marginal decline in adjusted EPS for FY15. It further stated that it anticipates adjusted operating profit to be lower than1H15.

Bunzl Plc: The company, in its FY14 results, stated that revenue rose1.0% to GBP6.16bn from the previous year. Its diluted EPS increased to 63.70p, compared with 62.70p recorded in the prior year. The company is confident that its strong market position and the ongoing benefit from acquisitions carried out during the year is expected to lead to further growth at constant exchange rates in each of its business areas in FY15. Furthermore, the company announced the acquisition of Quirumed, S.L. in Spain and Jan-Mar Sales Limited in Canada.

DS SmithPlc: The recycled corrugated packaging company announced the proposed acquisition of the Duropack business for approximately EUR300.00mn. Furthermore, the company, in its trading update for three month period ended 31 January 2015, indicated that the business has continued to perform in line with their plans. It further stated that the disposal of its testliner mill in Nantes, France has been completed on 30 January 2015.

Bovis Homes Group: The company, in its FY14 results, revealed that revenue increased 45.6% to GBP0.81bn from the preceding year. Its diluted EPS stood at 78.20p, compared with 44.80p posted in the prior year. The company expects further growth in active sales outlets during FY15, driven by the land acquisitions achieved in FY14.

Unite Group: The student accommodation developing and managing company, in its FY14 results, revealed that total revenue was up 6.8% to GBP108.50mn from the prior year. Its diluted EPS increased to 52.30p, compared with 46.00p recorded in the preceding year. The company expects rental growth and secured development pipeline, offset by disposals, could add 15.00p to 20.00p to EPRA EPS over the next four years.

Shire Plc: The company announced the successful completion of the tender offer for all of the outstanding shares of NPS Pharmaceuticals and the subsequent acquisition of NPS Pharma.

Antofagasta Plc: The company announced that it anticipates cash costs for FY15 to be lower than previously guided, driven particularly by a weaker Chilean peso and lower oil prices. Production guidance for the year remains unchanged.

Hansteen Holdings: The property investment company announced the acquisition of a further 24.20mn unit in the Ashtenne Industrial Fundfor GBP11.00mn.

Financial Times

SSE accused of failing to pay all staff the minimum wage: SSE, the UK’s second-biggest energy supplier, has been named and shamed by the government for failing to pay the minimum wage to all its employees.

North Sea oil and gas drains cash at fastest rate since 1970s: Spending on new North Sea oil and gas projects is to plunge by a third this year, industry operators will warn on Tuesday, with the basin draining cash at its fastest rate since the 1970s.

US safety Chief in warning over railcars: The failure of regulators, operators and manufacturers to agree higher safety standards for railcars carrying dangerous materials poses long-term risks to safety, the acting head of the US’s main transport safety investigator has warned.

Oil slide could trigger Opec emergency meeting: Members of Opec have discussed holding an emergency meeting if crude continues to slide, according to Nigeria’s oil minister, in a sign of their growing alarm over the impact of a lower oil price on their economies.

Solar eclipse puts Europe’s power supplies at risk: An eclipse of the sun next month could disrupt Europe’s power supplies because so many countries now use solar energy, electricity system operators have warned.

Areva warns of looming EUR4.90bn full-year loss as writedowns grow: Areva, the French nuclear group, on Monday issued its fifth profit warning in seven months, saying it expected to report a EUR4.90bn loss for FY14 as cost overruns ballooned on key European projects.

Review green belt rules to ease London housing crisis, says study: London’s local authorities should review the rules protecting green belt land round the city and allow homes to be built in some areas to help ease the housing crisis, according to a new report.

P2P lender OnDeck’s shares climb on sales jump: OnDeck has become the first member of the fast-growing peer-to-peer lending industry to report earnings as a public company, unveiling a fourth-quarter loss of $4.30mn.

Junior UK bank non-execs to escape new FCA rules: British regulators have exempted junior non-Executive directors of banks and insurance companies from a tough new personal liability regime which could make them criminally liable for bank failures.

US subpoena adds to HSBC’s burden: US regulators have subpoenaed HSBC in connection with their investigation into precious metals trading, adding to the number of regulatory actions hanging over Europe’s biggest bank.

Bankers held to higher standards than bishops, claims HSBC Chief: HSBC’s Chief Executive has complained that bankers are being held to a higher standard than bishops as the UK government promised a legal crackdown on banks that facilitate tax evasion.

Weary Chief offers an ‘everyday explanation’ for Swiss bank account: HSBC Chief Executive Stuart Gulliver on Monday found himself in the kind of situation he loathes — being quizzed by journalists and investors, both about poor performance at the bank and, worse still, about his own personal affairs.

George Osborne vows crackdown on banks that facilitate tax evasion: George Osborne has promised a legal crackdown on banks that facilitate tax evasion, saying that he will use his Budget to combat practices exposed by the HSBC tax evasion scandal.

Valeant shares surge 13.0% on Salix deal: Valeant shares rose more than 13.0% in New York trading after the serial pharma dealmaker unveiled its biggest acquisition — the $14.50bn takeover of Salix.

Hitachi nears EUR2.00bn deal for Italian transport group: Italian defence group Finmeccanica is close to agreeing a roughly EUR2.00bn takeover of its transport group Ansaldo by Japan’s Hitachi, according to two people with direct knowledge of the talks.

Brussels launches in-depth probe into GE’s tie-up with Alstom: Brussels has launched in-depth probe into GE’s partial takeover of French industrial champion Alstom, in a signal that antitrust issues over power equipment may further complicate a $16.90bn deal already heavily influenced by politics.

‘Disturbing’ decline in food production: Britain’s agricultural sector is in a “disturbing” decline with farmers unable to produce enough food to keep up with the country’s growing population, the National Farmers Union will warn on Tuesday.

BAT set to pay GBP2.30bn for remaining stake in Souza Cruz: A century since Albina Souza Cruz sold a majority stake in his eponymous Brazilian tobacco business to British American Tobacco, the UK cigarette maker is seeking to take over the rest of the company.

Ticket vendor CTS Eventim’s shares slide on antitrust inquiry: Europe’s largest ticket vendor is under investigation by antitrust regulators over the strength of its market position.

DFS flotation price range confirmed at 245.00p to 310.00p: Sofa retailer DFS set a price range of 245.00p to 310.00p per share ahead of its planned float next month, amid weakening investor enthusiasm for London’s initial public offerings market.

Google in deal to boost mobile payments: Google on Monday struck a deal with struggling start-up Softcard and several US telecoms companies to beef up its Google Wallet app as it tries to tackle Apple in the fast-growing area of mobile payments.

Facebook’s new privacy policy violates European law, report finds: Facebook has been accused of violating EU data protection rules as the social network became the latest US technology company to be criticised by a European regulator.

Apple to spend EUR1.70bn to build two data centres in Europe: Apple is set to make its biggest ever investment in its European operations by spending EUR1.70bn on two new data centres, the first such facilities it will have built outside the US.

Yahoo Executive and NSA Chief clash over online data privacy: A Yahoo Executive clashed with the new head of the National Security Agency at a conference on Monday as tensions continued to simmer between the Obama administration and Silicon Valley over the privacy of online data and new security technologies.

Heathrow rules out IAG using Dublin as a third runway: Heathrow has dismissed suggestions that Dublin could act as a so-called third runway for International Airlines Group, a key argument in IAG’s contentious EUR1.40bn bid for Aer Lingus.

Standard Chartered: Down 4.7% to 928.10p ahead of full-year results due on March 4.

Quindell: Rallied 26.3% to 96.00p after the legal services group said its talks with Australian peer Slater & Gordon over the possible disposal of a division were at indicative terms and “would imply a significant premium to the company’s market capitalisation “

Gold: tarnished value: To its fans, gold has multiple attractions. Purportedly, it is an inflation hedge. But over the past decade there is little proof of that. There has been little inflation over the period. A rising dollar has capped the price of most (dollar-priced) commodities that might cause inflation, such as oil and copper. But when there has been inflation, the gold price has shown little correlation with it. There is a strong correlation between gold and real rates (when the latter rise, the former falls), reflecting the opportunity cost of holding yieldless gold. But that does not make the metal a hedge against inflation. On to attraction number two: gold treads its own path, and is not swayed by the
excesses of the equity or bond markets. That may be an attraction sometimes, but not recently. Since peaking in FY11 at more than $1,800 an ounce, the spot price has dropped to $1,200; meanwhile, world equity and bond prices touch record highs. Attraction number three is rising Asian demand for the metal. According to the World Gold Council, China and India together account for more than 40.0% of total gold consumption, including for investment. In these two countries demand fell by more than a quarter last year. In part, that is due to import limits put in place in India. But most of the volume decline occurred in China. Global demand has fallen for three years; thi s year that trend
has continued in both these countries.

Valeant/Salix: at what cost: The next step is obvious. Valeant should buy HSBC. Or failing that, J. Michael Pearson, boss of the drug company/acquisition machine, should be put in charge of some other big bank. Cost cuts are the global banks’ only shot at earning their cost of capital; HSBC’s slashed targets are just the latest proof. Mr Pearson and his team set cost reduction targets that make the average rationalisation plan look like a company picnic. Consider the plan for Salix, which Valeant announced on Monday it is to buy for $14.50bn. The savings target is $500.00mn, to come out of research, selling and overheads. In November, Salix forecast those costs would total $560.00mn in FY14, on an adjusted basis. The cuts amount to 90.0% of the budget. The standard way to reduce outgoings that much involves a can of petrol and a match. On the same basis, the cost targets in Valeant’s last two big deals — Bausch & Lomb in FY1 3 and Medicis in FY12 — were much less aggressive. Valeant says it calculates Salix’ cost base as $750.00mn, making the cuts a mere two thirds of all spending. That is a FY15 number, accounting for some of the difference, and Valeant includes stock compensation and depreciation in adjusted expenses, which Salix does not. Valeant also argues that not all the saving come from the target — that as the company grows by acquisition, more cuts can be found throughout the business. (One does wonders what fat is left at a company that is
already several belt loops leaner than any peer.)