Anchor Capital: Essential market review, 3 February

By Anchor Capital

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Gold counters drive the JSE in January

January was a volatile month on international markets and the JSE with shares in energy companies sliding as the oil price hit fresh new lows. However, following the European Central Bank’s (ECB’s) quantitative easing (QE) programme announcement, which is hoped to revive the euro area’s lacklustre economic growth and boost corporate earnings, European stocks posted their best MoM performance in over three years. In the US, GDP data disappointed (coming in at 2.6% – a sharp drop from the robust 5.0% level seen in the previous quarter), while the impact of a strong dollar on company earnings, plummeting oil prices and the Greek election, weighed on investor sentiment. Adding to concerns over Greece was the election of the leftist Syriza party, which has vowed to fight the austerity measures international lenders have imposed on the country. In mid-January the World Bank revised its global growth forecasts downward (from 3.4% to 3.0% in 2015 and 3.5% to 3.3% in 2016) blaming low oil prices, weak global trade, financial market volatility and the risk of prolonged stagnation and deflation in the eurozone and Japan. This put further pressure on global markets. Adding to growth concerns, China’s factory sector shrank in January – the first time in over 2 years.

January was a volatile month on international markets and the JSE with shares in energy companies sliding as the oil price hit fresh new lows. However, following the European Central Bank’s (ECB’s) quantitative easing (QE) programme announcement, which is hoped to revive the euro area’s lacklustre economic growth and boost corporate earnings, European stocks posted their best MoM performance in over three years. In the US, GDP data disappointed (coming in at 2.6% – a sharp drop from the robust 5.0% level seen in the previous quarter), while the impact of a strong dollar on company earnings, plummeting oil prices and the Greek election, weighed on investor sentiment. Adding to concerns over Greece was the election of the leftist Syriza party, which has vowed to fight the austerity measures international lenders have imposed on the country. In mid-January the World Bank revised its global growth forecasts downward (from 3.4% to 3.0% in 2015 and 3.5% to 3.3% in 2016) blaming low oil prices, weak global trade, financial market volatility and the risk of prolonged stagnation and deflation in the eurozone and Japan. This put further pressure on global markets. Adding to growth concerns, China’s factory sector shrank in January – the first time in over 2 years.

January was a volatile month on international markets and the JSE with shares in energy companies sliding as the oil price hit fresh new lows. However, following the European Central Bank’s (ECB’s) quantitative easing (QE) programme announcement, which is hoped to revive the euro area’s lacklustre economic growth and boost corporate earnings, European stocks posted their best MoM performance in over three years. In the US, GDP data disappointed (coming in at 2.6% – a sharp drop from the robust 5.0% level seen in the previous quarter), while the impact of a strong dollar on company earnings, plummeting oil prices and the Greek election, weighed on investor sentiment. Adding to concerns over Greece was the election of the leftist Syriza party, which has vowed to fight the austerity measures international lenders have imposed on the country. In mid-January the World Bank revised its global growth forecasts downward (from 3.4% to 3.0% in 2015 and 3.5% to 3.3% in 2016) blaming low oil prices, weak global trade, financial market volatility and the risk of prolonged stagnation and deflation in the eurozone and Japan. This put further pressure on global markets. Adding to growth concerns, China’s factory sector shrank in January – the first time in over 2 years.

January was a volatile month on international markets and the JSE with shares in energy companies sliding as the oil price hit fresh new lows. However, following the European Central Bank’s (ECB’s) quantitative easing (QE) programme announcement, which is hoped to revive the euro area’s lacklustre economic growth and boost corporate earnings, European stocks posted their best MoM performance in over three years. In the US, GDP data disappointed (coming in at 2.6% – a sharp drop from the robust 5.0% level seen in the previous quarter), while the impact of a strong dollar on company earnings, plummeting oil prices and the Greek election, weighed on investor sentiment. Adding to concerns over Greece was the election of the leftist Syriza party, which has vowed to fight the austerity measures international lenders have imposed on the country. In mid-January the World Bank revised its global growth forecasts downward (from 3.4% to 3.0% in 2015 and 3.5% to 3.3% in 2016) blaming low oil prices, weak global trade, financial market volatility and the risk of prolonged stagnation and deflation in the eurozone and Japan. This put further pressure on global markets. Adding to growth concerns, China’s factory sector shrank in January – the first time in over 2 years.

The US Fed’s Federal Open Market Committee (FOMC) statement in late January indicated US economic activity was expanding at a “solid” pace and, although rates weren’t raised, it kept open the possibility of an 2015 interest rate increase. During the month the dollar moved higher against most currencies, while the South African rand lost further ground against the greenback, closing the month down 0.8% MoM. On the local economic front, the South African Reserve Bank (SARB) left interest rates on hold, saying that any possible cuts would depend on further declines in consumer inflation which slowed to 5.3% YoY in December. On the JSE, the All Share Index ended the month 3.0% higher, while the Indi-25 gained 3.1%, the Fini-15 was up 4.6% and the Resi-20 ended the month 0.4% in the green. The gold price rose sharply MoM, closing January 8.1% higher, despite a brief retreat last week.

Top-20 performers: January 2015 and YTD performance

(Full details available in the PDF)

 On the back of the robust gold price, gold counters ruled in January with half of the top-10 best performing shares this past month coming from the gold sector. Gold counters posted double-digit gains, reaffirming the yellow metal’s status as a safe-haven asset as uncertainty over European stability, the continued drop in the oil price, the Swiss National Bank (SNB) scrapping the franc’s peg to the single currency and the ECB saying it would pump billions into the European economy as it initiated new steps of QE, saw investors scrambling for gold shares. For January/ YTD, Harmony Gold’s share price soared 48.6% to become the best-performing counter on the JSE. Harmony was followed by DRDGold (+37.8%), Sibanye Gold (+36.5%), AngloGold Ashanti (+34.5%) and in 7th spot, Gold Fields (+24.8%). Gold Fields had said in early January that it expected its attributable gold equivalent production to be better than it had originally guided.

Spur Corp (+26.9% MoM) was the month’s fifth-best performer. The company released interim results in January, which saw total restaurant sales increase 14.1% YoY to R3.2bn in 2H14. Of this domestic sales grew 12.6% YoY and international sales increased 25.8% YoY. During the month, The Foschini Group (+25.8% MoM and the sixth-best performer) announced its acquisition of an 85% stake in UK-based international retailer, Phase Eight. The company also released its Christmas trading update which revealed that Group sales grew 12.5% YoY and LfL growth came in at 7.3% YoY. Another retail counter, Lewis Group saw its share price end the month 22.8% higher MoM – eighth spot among the top-20 stocks. Investors reacted positively to Lewis’ trading update, which said that revenue for the nine months to December grew by 4% and merchandise sales were up 3% YoY. Despite local trading conditions remaining under pressure due to continued weak consumer demand, the company showed an 8% improvement in revenue with merchandise sales climbing 12% higher in the quarter to December.

Hudaco’s share price (+21.5% MoM) rebounded following reports that an agreement was reached between the South African Revenue Services (SARS) and the company, which will see Hudaco paying SARS a final settlement of R312mn (vs an expected R1.9bn). Hudaco has already made a payment of R120mn under SARS’ “pay now, argue later” principle and the company said that the balance of R192mn was due in March.

In tenth position, Real Estate Investment Trust (REIT), the Hospitality Property Fund (HPF) gained 20.8% MoM. Reports emerged during the month that HPF would dispose of five of its hotel properties with CEO Andrew Rogers saying that the company was confident that “…we will realise optimal market value on the properties, …”. Another REIT, Octodec Investments, which recently completed a reverse merger with Premium Properties, rose 17.6% MoM coming in at 11th spot. Combined Motor Holdings increased 17.2% MoM, with the National Association of Automobile Manufacturers of South Africa (NAAMSA) reporting in January that new car sales improved 10.7% YoY in December.

Retail shares also performed well this past month as trading updates surprised on the upside. Massmart Holdings saw its share price buoyed (+16.6% MoM) after revealing a rise in its total FY14 sales, which rose 10.4% YoY to R78.2bn in the 52 weeks to 28 December. The shares of hospital group Mediclinic, which derives c. 50% of its profits from Switzerland, reacted positively to the move by the SNB to no longer hold the Swiss franc at a fixed exchange rate with the euro, gaining 15.0% MoM. Retailer, Spar Group (up 14.3% MoM) advised shareholders in January that BWG Group, the Company’s subsidiary in Ireland, has entered into negotiations to acquire the trading business of ADM Londis for EUR23mn.

Rand hedge, Sappi was up 13.7% MoM. The Business Day reported last month that Sappi should be able to reduce its interest bill when it refinances various bonds, thereby improving the pulp and paper producer’s investment case along with lower oil prices and weaker currencies vs the dollar. Cashbuild, which gained 13.3% MoM, released its 2Q15 operational update in January which showed that revenue increased 13% YoY. Stores opened since 1 July 2013 (19 new stores) contributed 6% of this increase, whilst existing stores’ (198 stores) contribution rose 7% YoY. This, together with the growth reported in 1Q15, equated to an increase in revenue for 1H15 of 12%, 6% of which was contributed by existing stores. Transactions through the tills during the period increased 7% YoY.

Mr Price Group (+12.8% MoM) also released a positive 3Q15 update last month which showed that the Group recorded retail sales growth of 14.2% YoY – in line with that achieved for 1H15. The company said it was a pleasing performance given the high sales base in the prior year (especially in Mr Price Apparel), the subdued retail environment for homewares (a more discretionary purchase), and the power outages in November and early December, which impacted trading. In January, Woolworths Holdings (+12.7%) reported a 55% rise in 1H results after receiving a boost from its acquisition of Australian department store David Jones. The company said that without including the impact of David Jones, group sales grew 12.5 % YoY. Finally, rounding out the top-20 performers on the JSE, Capitec Bank gained 12.6%.

Bottom-20 performers: January 2015 and YTD performance

(Full details available in the PDF)

On the flipside, among the 20-worst performing stocks, construction counters featured prominently. Cement maker, PPC (-22.2%) was the worst performing share among the top-20. PPC released a trading update for the quarter, saying it expects 1H15 EPS to reflect a YoY decline mainly due to last year’s once off tax credit combined with increased finance costs in this year. In addition, PPC announced changes to their board and respective committees. Finally, PPC released a further cautionary announcement stating that the board was still considering the indicative proposal from AfriSam and that it would make a further announcement once it has concluded its consideration of the proposal.

On the flipside, among the 20-worst performing stocks, construction counters featured prominently. Cement maker, PPC (-22.2%) was the worst performing share among the top-20. PPC released a trading update for the quarter, saying it expects 1H15 EPS to reflect a YoY decline mainly due to last year’s once off tax credit combined with increased finance costs in this year. In addition, PPC announced changes to their board and respective committees. Finally, PPC released a further cautionary announcement stating that the board was still considering the indicative proposal from AfriSam and that it would make a further announcement once it has concluded its consideration of the proposal.

Construction company, Stefanutti Stocks (-21.5% MoM) emerging as the second-worst performer, followed by Grindrod (-18.8%), Invicta (-15.9%) and African Oxygen (Afrox, -12.9%). In early January, Afrox announced the surprise resignation of Brett Kimber as MD, effective 12 January 2015. Company Chairman, Mike Huggon, would assume transitional responsibility for the executive management of the company until a successor was identified. The company has also seen a sharp drop in EPS for the year to December because of soft demand for its products.

The abovementioned shares were followed by Pinnacle (-12.6%), Adcock Ingram (-12.0%), Coal of Africa Ltd (-10.5%) and Coronation Fund Managers (-10.1%). Adcock Ingram was the clear loser among the domestic drug manufacturers after it won only R700mn of the government’s R14bn HIV/AIDS drug tender. It also emerged last week that Bidvest had significantly overpaid for its shareholding in Adcock, prompting Bidvest to write down its investment in the Group to a level in line with a realistic market valuation. Bidvest CEO Brian Joffe said in the group’s annual report that the write-down involves c. R1bn. While Coal of Africa’s (CoAL) quarterly update recorded a series of financial settlements, environmental go-aheads and project advances, CoAL also announced the issuing of 20mn unlisted share options to Investec at R1.32/share as well as a spread of listed and unlisted share options for CEO David Brown. Brown is also in the process of implementing plans that target the production of c. 7mn tonnes of saleable coal p.a., 5mn tonnes of which is expected to be import-substituting price-premium hard coking coal used in steelmaking. In January, Coronation Fund Managers again won the Raging Bull Award for the South African Management Company of the Year for the sixth time.

Group Five (-9.8% ), this week released a 1H15 trading statement saying that it expects fully diluted HEPS to be between 40%- 50% lower; HEPS to be between 40%-50% lower and EPS to be between 35% – 45% lower (1H14: R2.00). Grand Parade Investments (-9.4%) said last month that it would be purchasing a further 35% of Mac Brothers Catering Equipment from Nadesons Investments, taking their holding to 100%.

Consolidated Infrastructure Projects lost 9.1% MoM, while Anglo American closed the month 9.0% lower. Last month, Anglo reported 4Q production numbers (including data for Kumba and Amplats) which were in line with guidance; however the company remained under pressure on the back of the sharply lower commodity price environment, particularly in the case of bulk commodities. MTN Group and Petmin were both down 8.7%, while RCL Foods Ltd lost 8.5% MoM. Petmin saw its share price impacted by lower commodity prices while RCL Foods reversed its December MoM gains.

Richemont (-8.1% MoM), the world’s largest jewellery maker, reacted strongly to the surprise news that the SNB had decided to stop intervening to peg the franc against the euro, resulting in the franc soaring against all major global currencies. Richemont could see a strong franc impacting its profit as the appreciation of the franc vs euro, dollar etc. impacts its euro-and dollar-denominated earnings base. Richemont has Swiss franc-denominated costs but sells its product in different global currencies. Barloworld (-7.8%) further extended its losses in January, following December’s 8.4% MoM drop.

Murray & Roberts and Tongaat-Hulett accounted for the rest of the bottom-20 stocks with both shares down 7.5% MoM. Murray & Roberts has been under pressure on the back of lack of infrastructure spending in its key markets. Tongaat last month concluded a BEE deal for the sale of prime land at its Cornubia Business Hub in KwaZulu-Natal.

South African Market Review

South African markets closed higher yesterday, supported by oil and mining sector stocks. Sasol surged 6.8%, following a sharp rise in oil prices. Platinum miners, Northam Platinum, Anglo American Platinum and Royal Bafokeng Platinum advanced 3.6%, 1.8% and 0.9%, respectively. Gold miners, Sibanye Gold, Harmony Gold and Gold Fields rose 3.2%, 2.8% and 2.6%, respectively. On the downside, Group Five lost 1.6%, after its latest trading update indicated that its diluted headline EPS is expected to be significantly lower in 1H15. Standard Bank Group fell 1.0%, after revealing that it has completed the sale of its 60.0% controlling interest in Standard Bank to the Industrial and Commercial Bank of China. The JSE All Share Index climbed 0.2% to close at 51,394.55.
UK Market Review

UK markets finished higher yesterday, following strength in energy sector stocks and after data showed that UK’S manufacturing activity expanded at faster-than-expected pace in January. Tullow Oil and Royal Dutch Shell surged 9.3% and 2.5%, respectively. CRH jumped 7.2%, after agreeing to acquire cement assets from Holcim and Lafarge. BP advanced 3.1%, after a report indicated that it would slash its capital expenditure by around 10.0%. On the flip side, aviation sector stocks, easyJet and International Consolidated Airlines Group tumbled 6.4% and 2.8% respectively, amid a rise in oil prices and after Ireland-based peer firm, Ryanair, warned that the slump in crude oil prices would impact air fares. The FTSE 100 Index advanced 0.5% to close at 6,782.55.
US Market Review

US markets ended in the green yesterday, amid a rise in energy sector stocks. Denbury Resources and Chesapeake Energy advanced 12.3% and 7.0%, respectively, following a rise in crude oil prices. Apple gained 1.3%, amid reports revealing that it plans to sell bonds worth $5.00bn in its fourth multibillion dollar debt offering in the past two years. Intel climbed 1.9%, after it agreed to acquire a German firm, Lantiq, from Golden Gate Capital. However, Sysco fell 1.9%, after announcing that it would sell 11 distribution centres run by US Foods to Performance Food Group. The S&P 500 Index rose 1.3% to settle at 2,020.85, while the DJIA Index advanced 1.1% to close at 17,361.04. The NASDAQ Index surged 0.9% to finish at 4,676.69.
Asia Market Review

Asian markets are trading lower this morning. In Japan, Honda Motor slipped 2.5%, amid reports that the company is planning to slash production by 20.0% at its Suzuka plant. However, Panasonic added 1.0%, after it announced that it has shutdown TV manufacturing plant in China and will liquidate the division. In Hong Kong, China Southern Airlines, Air China and Cathay Pacific Airways slumped 5.9% 5.0% and 3.1%, respectively, following a rise in crude oil prices. In South Korea, Kia Motors dipped 2.0%, after it reported a 1.8% decline in sales for January. The Nikkei 225 Index is trading 1.0% lower at 17,376.26, while the Kospi Index is trading 0.2% in the red at 1,948.30. The Hang Seng Index is trading 0.3% in negative territory at 24,413.33.
Commodities

At 06:00 SAST today, Brent crude oil rose 0.5% to trade at $53.94/bl. Meanwhile, a Bloomberg News survey revealed that crude stockpiles in the US probably rose by 3.75mn bls in the prior week. Yesterday, Brent crude oil rose 5.8% to settle at $53.69/bl., as labour strike at several oil refineries in the US extended for a second day, impacting approximately 10.0% of the nation’s refining capacity and heightening concerns of a slowdown in gasoline production.
Yesterday, the Illinois North Central No.2 Yellow corn spot prices remained unchanged at $3.46/bushel.
At 06:00 SAST today, gold prices remained almost flat to trade at $1,274.11/oz. Yesterday, gold declined 0.7% to close at $1,274.41/oz.
Yesterday, copper declined 0.3% to close at $5,525.00/mt. Aluminium closed 0.1% higher at $1,855.75/mt.
Currencies

Yesterday, the South African rand strengthened against the majors, after the Kagiso report revealed that manufacturing Purchasing Managers’ Index (PMI) in South Africa rose surprisingly for January. The South African rand gained further ground against the US dollar following the release of downbeat ISM manufacturing PMI reading for January. Going forward, market participants will keep a tab on today’s factory orders data in the US for further direction.
The yield on benchmark government bonds remained mixed yesterday. The yield on 2015 bond fell to 5.95% while that for the longer-dated 2026 issue advanced to 7.15%.
At 06:00 SAST, the US dollar is trading 0.3% higher against the South African rand at R11.5399, while the euro is trading 0.3% higher at R13.0734. At 06:00 SAST, the British pound has gained 0.4% against the South African rand to trade at R17.3419.
Yesterday, the euro advanced against the US dollar and the British pound, after the revised Markit survey showed that manufacturing PMI in the eurozone remained in line with the preliminary estimate for January. Later today, traders will eye producer price inflation report in the euro bloc for further direction to the euro against the majors.
At 06:00 SAST, the euro slipped 0.1% against the US dollar to trade at $1.1329, while it has weakened 0.1% against the British pound to trade at GBP0.7540.
Economic Updates

In January, the manufacturing Purchasing Managers’ Index (PMI) advanced unexpectedly to a level of 54.20 in South Africa, higher than market expectations of a drop to 50.10. In the previous month, the manufacturing PMI had registered a reading of 50.20.
Markit Economics has reported that, in January, the manufacturing PMI in the UK advanced unexpectedly to a level of 53.00, compared with a revised reading of 52.70 in the prior month. Markets were anticipating the manufacturing PMI to remain unchanged.
SVME/Credit Suisse has reported that compared with a revised level of 53.60 in the previous month, the SVME manufacturing PMI eased to 48.20 in January, in Switzerland. Markets were anticipating the SVME manufacturing PMI to fall to 50.60.
Markit Economics has indicated that the final manufacturing PMI climbed to 49.20 in January, in France, compared with market expectations of an advance to 49.50. The preliminary figures had indicated an advance to 49.50. In the prior month, manufacturing PMI had registered a reading of 47.50.
Markit Economics has reported that, in January, the final manufacturing PMI in Germany recorded a drop to 50.90, compared with a level of 51.20 in the prior month. The preliminary figures had recorded a fall to 51.00. Market anticipations were for manufacturing PMI to drop to a level of 51.00.
Markit Economics has reported that the final manufacturing PMI in the eurozone registered a rise to 51.00 in January, in line with market expectations. In the prior month, the manufacturing PMI had recorded a reading of 50.60. The preliminary figures had also recorded an advance to 51.00.
The ISM manufacturing activity index eased to 53.50 in the US, in January, more than market expectations of a drop to 55.00. The ISM manufacturing activity index had registered a revised level of 55.10 in the previous month.
US Census Bureau has indicated that, on a monthly basis, construction spending rose 0.4% in December, in the US, less than market expectations for a rise of 0.7%. Construction spending had registered a revised drop of 0.2% in the previous month.
The Reserve Bank of Australia unexpectedly cut its interest rate for the first time since August 2013 to a record low of 2.25%, from 2.50%, citing a below-trend pace of growth and expectations that inflation will remain consistent with its target over the next one to two years. It also indicated that a lower exchange rate is required to achieve balanced growth in the economy.
Corporate Updates

South Africa
Group Five Limited: The company, in its trading statement for the six months ended 31 December 2014, stated that its fully diluted headline EPS and headline EPS is expected to be between 40.0% and 50.0% lower compared with R2.01 and R2.04, respectively, reported for the corresponding period a year ago.
Standard Bank Group Limited: The lender indicated that that it has completed the disposal of a 60.0% controlling interest in Standard Bank to the Industrial and Commercial Bank of China Limited with effect from 1 February 2015. The disposal proceeds from the transaction are expected to total approximately $690.00mn, $75.00mn less than the company had estimated earlier. The company also indicated that its FY14 earnings and headline EPS would differ between -5.0% and +5.0% compared with those reported for FY13.
Old Mutual: The insurance company announced the completion of the sale of its Skandia (France) and Skandia (Luxembourg) businesses to APICIL, the fifth biggest social protection group in France.
Trustco Group Holdings Limited: The company indicated that its total group revenue for 9M15 rose 28.8% to N$612.00mn, compared with the same period previous year. Its headline EPS stood at 17.99c, compared with 7.12c posted in the corresponding period preceding year, while its basic EPS stood at 21.06c, compared with 12.69c in the previous year period. The company also stated that the Board, in line with the objective stated in the 2014 integrated report to seek other opportunities in different sectors of the Namibian economy, has resolved to pursue opportunities in the Resources sector during FY16.
Murray & Roberts Holdings Limited: The company indicated that Kagiso Asset Management (Pty) Limited has acquired a beneficial interest in securities in the company and the total interest in securities held by Kagiso now amounts to 5.09% of the issued ordinary share capital of the company.
Sibanye agrees to cut fewer jobs at Cooke mine: Bullion producer, Sibanye Gold, said on Monday it had reached an agreement with unions to cut fewer jobs than had been at risk at its struggling Cooke 4 operation.
Illovo ‘not badly affected by floods’: Illovo Sugar, which is housing about 3,000 displaced people at its Malawian estate amid deadly floods, says the torrential rains in the country will have “little or no impact on our season this year”.
Eskom mum on blackout plans: Eskom on Monday stated that it would not divulge what plans it has in the event of a national blackout.
Koeberg to be fully powered by weekend: A unit at Koeberg power station is undergoing tests in preparation for being restarted, power utility Eskom said on Monday.
UK and US
Exxon Mobil Corporation: The oil and gas corporation, in its FY14 results, indicated that total revenue and other income stood at $411.94bn, compared with $438.26bn in the previous year. The company further revealed that earnings were $32.52bn, down 0.2% compared with the previous year. It also stated that diluted EPS increased 3.1% to $7.60.
Anadarko Petroleum: The oil and gas exploration company, in its FY14 results, stated that total revenue increased 26.7% to $18.47bn. Meanwhile, it reported a net diluted loss per share of $3.47, compared with net diluted EPS of $1.58 in FY13.
Sysco Corporation: The marketer and distributor of food products, in its 1H15 results, revealed that sales increased 6.9% to $24.53bn. Furthermore, the company’s net diluted EPS was $0.73, compared with $0.84 a year ago. Meanwhile, the company stated that it has reached a definitive agreement to sell 11 US foods facilities to Performance Food group related to its pending merger with US Foods.
Hartford Financial Services: The investment and insurance company, in its FY14 results, stated that the company reported core earnings of $1.55bn, compared with $1.42bn in the preceding year. It also indicated that net diluted EPS available to common shareholders was $1.73, compared with $0.36 in FY13. Furthermore, the company indicated that it expects FY15 core earnings to be in the range of $1.55bn to $1.65bn.
XL Group: The property and casualty insurance company, in its FY14 results, indicated that total adjusted revenues decreased 8.1% to $6.98bn, compared with the previous year. It further revealed that the net income attributable to ordinary shareholders was $0.19bn, compared with $1.06bn in FY13.
American Capital Agency: The real estate investment trust, in its FY14 results, stated that net interest income was $1.10bn. The company posted diluted loss per share $0.72 for the year.
Torchmark Corporation: The financial services holding company, in its FY14 results, indicated that net income was $4.09 per share, compared with $3.79 per share for the year ago period. It further stated that the net operating income was $4.03 per share, compared with $3.80 per share for the prior year. Meanwhile, the company expects FY15 net operating income per share to be in a range of $4.20 to $4.40.
Apple Inc.: The company stated that it would build a $2.00bn global command center located in Mesa, Arizona and employ 150 full-time personnel, and will also result in between 300 and 500 construction and trade jobs, and would play host to the company’s data operations across the globe. Additionally, media reports revealed that the company plans to sell bonds worth $5.00bn in its fourth multibillion dollar debt offering in the past two years.
Intel Corporation: The company announced that it has agreed to acquire Lantiq, a German maker of communications chips, from Golden Gate Capital for an undisclosed amount.
Visa Inc.: The company announced that it has appointed Vasant Prabhu as its CFO, effective 9 February 2015, wherein he would replace Byron Pollitt, who is retiring.
Mylan Inc.: The drug making company revealed that it has signed a definitive agreement to acquire certain women’s health care businesses from Famy Care Limited, a specialty women’s health care company with global leadership in generic oral contraceptive products, for $750.00mn in cash plus additional contingent payments of up to $50.00mn.
SS&C Technologies Holdings: The technology company announced that it has agreed to buy fellow financial services software provider, Advent Software Inc., for about $2.40bn.
Shire Plc: The biopharmaceutical company announced that the US Food and Drug Administration (FDA) approved its Vyvanse capsules, the first and only medication for the treatment of moderate to severe binge eating disorder in adults.
CRH Plc: The company announced that it has entered into a binding commitment to acquire certain assets from Lafarge SA and Holcim Limited for an enterprise value of EUR6.50bn. It further announced an underwritten placing of 74,039,915 ordinary shares, representing approximately 9.99% of the current issued ordinary share capital of the company.
Standard Life: The company announced the completion on 30 January 2015 of the sale of its Canadian companies, Standard Life Financial Inc. and Standard Life Investments Inc., to The Manufacturers Life Insurance Company, a subsidiary of Manulife Financial Corporation, for a total cash consideration of C$4.00bn (equivalent to GBP2.20bn).
Randgold Resources Limited: The company indicated that with its Loulo-Gounkoto gold mining complex continuing to grow production, it is looking at the development of a third underground mine there while at the same time expanding its footprint elsewhere in the region. The company’s CEO, Mark Bristow, stated that a feasibility study on an underground mine at Gounkoto had been completed and its findings would be made known when the company publishes its 2014 results later this month.
Inmarsat Plc: The satellite telecommunications company announced that it has successfully launched its second Global Xpress satellite (Inmarsat-5 F2) on board an International Launch Services Proton Breeze M rocket launched from Baikonur Cosmodrome in Kazakhstan on 1 February 2015.
HICL Infrastructure Company Limited: The company announced that it has sold its 56.0% equity and subordinated debt interest in the Colchester Garrison MoD Project to subsidiaries of Allianz Group, the PPP Equity PIP limited partnership, and Dalmore Capital Fund II limited partnership.
Balfour Beatty: The infrastructure company indicated that the Balfour Beatty joint venture with Skanska and MWH Treatment has inked a five year contract with Thames Water, with an option to extend for a further 5 years. The initial GBP800.00mn contract covers the AMP 6 regulatory period, running from April 2015 to March 2020.
Kennedy Wilson Europe Real Estate: The property company announced the completion of its acquisition of the GBP503.00mn Aviva portfolio of 180 mixed use properties located across the UK, along with associated vendor financing from Aviva Commercial Real Estate Finance. The company further mentioned that the acquisition is being funded from the company’s cash resources and a new GBP352.30mn secured loan facility with Aviva. The purchase price reflects a net initial yield of 6.9% (gross yield 7.2%).
Grainger Plc: The residential property owner and manager revealed that it has exchanged contracts for the acquisition of a regional tenanted residential property portfolio for around GBP58.00mn from Sarunas Properties Limited, a company owned by the PervaizNaviede Family Trust. The transaction brings the company’s total investment into residential assets in the UK regions to around GBP76.00mn in recent months, and represents over 900 residential units.
RPS Group: The company indicated that its performance would be at the top end of market expectations in FY14. Despite the steep fall in the oil price since June 2014, its Energy business, which represents about 40.0% of group fee income, grew its profits significantly in 2H14, compared with 1H14. The company also mentioned that the acquisitions made in FY14 have integrated well and would make a significant contribution in FY15 and the board continues to believe that the group would have another successful year in FY15 and would deliver further growth.
Fenner Plc: The company announced that its wholly owned subsidiary, Fenner Drives Inc., has acquired 100.0% of the share capital of Charter Medical from its parent company, Lydall Inc., for$9.90mn million in cash.
EnQuest: The company has cancelled operations in Tunisia after finding that it expected no material oil production from the Didon field in which it agreed to acquire a stake in 2013.
Financial Times
IAG seeks to ease political concerns over its Aer Lingus bid: Willie Walsh, Chief Executive of International Airlines Group, has promised to leave ownership of valuable take-off and landing slots at Heathrow with Aer Lingus if the Irish government agrees to back its EUR1.35bn bid for the country’s flagship carrier.
ICAP to face EU fine over yen cartels: ICAP faces an EU fine this week for allegedly facilitating cartels on yen-denominated inter-rate benchmarks, as Brussels tackles the holdouts in rate-rigging probes that have already resulted in about EUR1.70bn in penalties.
John Lewis kills off final salary pension: The John Lewis Partnership has taken the final step in ditching its final salary pension scheme in favour of a hybrid arrangement, combining elements of both final salary and investment-linked pensions.
Towergate tussle continues: The battle for Towergate is set to continue even after the insurance broker’s directors reached a debt-restructuring agreement with senior creditors, as junior bondholders negotiate to buy them out.
AG Barr splashes out on cocktail group: AG Barr, the maker of Irn-Bru and Rubicon fizzy drinks, is making moves towards the clubbing scene by splashing out GBP21.00mn on Funkin, a privately-held company that makes natural fruit ingredients for cocktails.
CRH transformed into a heavyweight with EUR6.50bn deal: It has taken more than a decade, but with just one deal, CRH has transformed itself from an Irish buildings group into the world’s third-biggest building materials supplier by market value.
Free banking model stifles UK competition, warns Virgin Money: Britain’s free in-credit banking model is stifling competition and needs to change, Virgin Money said on Monday as it revealed it would launch its current account across the UK.
Santander to offer cloud storage services: Santander is to be the first global bank to offer cloud data storage services to corporate clients as it fights back against the competitive challenge posed to its business by some of the world’s biggest technology groups.
Cable warns UK companies over slowdown in female appointments: Leading British companies risk failing to hit a voluntary target for increasing the number of women on boards and must redouble their efforts this year or face legislation from Brussels, Vince Cable has warned.
Ryanair raises full-year profits forecast for fifth time: Ryanair will miss out on big gains from the plunging cost of fuel the airline warned on Monday as it raised its full-year profit guidance a fifth time and said it would launch a EUR400.00mn share buy-back.
Three chief Dyson questions consumer appetite for ‘quad play’: Doubts have been cast on the consumer appetite for so-called “quad-play” services in the UK by the chief executive of Three, whose parent Hutchison Whampoa is in talks to buy UK rival O2 from Telefónica to create a market-leading mobile-only provider.
Big pharmaceuticals groups faces biosimilars challenge: Global pharmaceuticals companies have seen an improvement in their drugs pipelines but the industry is facing a fresh challenge as the first generation of blockbuster biological drugs begins to face competition.
Genel to part with founding CFO: Genel, the energy group led by former BP chief Tony Hayward, is to part ways with one of its founders at a time when falling oil prices are hitting companies in the sector.
Areva warns of ‘significant’ increase in provisions: Areva expects a significant increase in provisions as well as a further writedown of assets in its FY14 accounts, in another blow for the French state-owned nuclear group.
Shell prepares to dismantle North Sea giants: Royal Dutch Shell will on Tuesday set out ambitious plans to decommission the North Sea’s Brent oilfield — one of the UK’s biggest — in a multibillion-dollar project over the next 10 years that could be followed by other closures after the plunge in oil prices.
Peer-to-peer lender SoFi raises $200m: SoFi, the peer-to-peer lender that specialises in student loans, has raised $200.00m in a financing round that values the four-year-old start-up at $1.30bn ahead of its upcoming initial public offering.
Jack Ma welcomes US scrutiny of Alibaba: Jack Ma said that a US class action lawsuit against the Chinese ecommerce group he founded would help western countries “understand Alibaba’s business better”, adding that he welcomed the opportunity for greater transparency.
Albert Frère to step down from GBL: Albert Frère, Belgium’s richest man and the longstanding chief executive of conglomerate Groupe Bruxelles Lambert, is to step down from the group he helped turn into Europe’s second largest holding company.
News Corp avoids US charges on phone hacking: The US Department of Justice has told Rupert Murdoch’s News Corp and 21st Century Fox that they will not face US charges over phone hacking.
John Lewis kills off final salary pension: The John Lewis Partnership has taken the final step in ditching its final salary pension scheme in favour of a hybrid arrangement, combining elements of both final salary and investment-linked pensions.
Uber funds driverless car research: Uber, the US ride-hailing company, is setting up its own vehicle research labs to study driverless cars and other advanced technologies, opening a new front in its ambitious efforts to shape the future of transportation.
BG: rose 5.3% to 934.20p ahead of year-end results due on Wednesday.
CRH: rose 7.2% to GBP17.18 as forecast upgrades followed its EUR6.50bn bid for assets sold by Lafarge and Holcim.
Lex:

CRH: changing the mix: Back in FY12 it was EUR15.00mn. In FY13 it jumped to EUR26.00mn. Last year it fell to EUR9.00mn. CRH’s average acquisition size moves around a fair bit. But there is a common theme — it is not a very large number. Until now. The building materials producer is proposing a EUR6.50bn deal, breaking with years of tradition to snap up assets that Holcim and Lafarge need to sell. To put that EUR6.50bn in context, it is equivalent to a third of CRH’s enterprise value and is more than the company has spent on acquisitions over the past eight years combined. Worrying, to say the least. And the price does not look excessive.
The enterprise value of the assets is 8.6 times historic earnings before interest, tax depreciation and amortisation (or 7.7 times if EUR90.00mn of annual synergies are included). CRH itself has traded at an average of 9 times over the past decade, and its recent disposals have fetched double-digit multiples. But look at the change in the business mix. Pre-deal, CRH derives 56.0% of its ebitda in the (recovering) US and 31.0% in (stagnant) western Europe. Post the deal, that will change to 38 per cent in the US and 36 per cent in western Europe. There is some mitigation. Much of the new European exposure is in the UK, which is doing better than the continent. And CRH is talking to KKR about bringing outside finance into the UK assets. That would shift some exposure off CRH’s books. But it would leave the deal looking messy, as well as big.
US oil majors: the rating game: The S&P 500 was up 30.0% in FY13. Shares in the two leading US supermajors rose by just more than half that. But as oil has slid 50.0% in the past seven months, the pair have offered some measure of protection. Since July 1, the shares of the two are off 14.0% and 21.0% respectively. True, the S&P 500 has been flat since then, but more-leveraged oil and gas producers are fighting for survival in a way that ExxonMobil and Chevron are not. In FY14, neither ExxonMobil nor Chevron could cover its buybacks and dividends through free cash flow. Exxon generated $18.00bn and paid out $24bn in buybacks and dividends.
Chevron’s situation is trickier with break even in cash flow and $18.00bn in cash return. Chevron’s goal has been to reach production of 3.10mn bls day by FY17 and has spent well over $100.00bn in recent years on far-flung on- and offshore oil and gas projects. Its management wants to maintain its AA credit rating. Between capital spending (to be down only around a tenth to $35.00bn), credit rating target, and dividend, Chevron will not buy back shares this year. Exxon has been a regular buyer of its own shares, having bought back more than $10bn worth in FY14. However, it says it will spend only $1.00bn in the first quarter. Share repurchases by themselves should not alone create shareholder value. But moderately levering up to optimise the capital structure, especially when interest rates are low, should be tempting.
Ryanair: gloomy place: For months, Ryanair has been spreading a message of gloom: pressure on prices; too much competition; too much capacity. Phooey, has been the response. As the oil price has fallen Ryanair’s shares have moved in the opposite direction, up 53.0% in the past six months. They have beaten the MSCI European airlines index by six percentage points. Perversely, the threat to Ryanair comes via high-cost, highly indebted rival airlines.
These companies cannot afford as much fuel price protection as their low-cost rival. According to Nomura, both Air France-KLM (55.0% hedged for FY15) and Lufthansa (65.0%) have less of their fuel costs covered than Ryanair at 90.0%. The latter worries that these rivals will gain more from the falling fuel price, and pass these savings on. Ryanair’s management deserves credit for trying to keep market expectations grounded. Jet fuel trades about 50 per cent below last year’s peak, so it is easy to get overexcited. Ryanair gave a clear signal of price “softening” on forward bookings made during January. Worse, it promised up to 8 per cent fare discounts in the next quarter — read price war — which led to the share price fall.
*Published with special permission by Anchor Capital (ACG)
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