Anchor Capital: Essential market review, 11 March

Yesterday, Brent crude oil fell 3.9% to settle at $55.88/bl, as expectations of a midyear rise in US interest rate pushed the US dollar to multi-year highs. Additionally, Saudi King Salman indicated that the country would continue with oil and gas exploration despite the price drop. Meanwhile, the US Energy Information Administration revised its forecasts for total domestic oil production from 9.30mn bls/d to 9.35mn bls/d.

Yesterday, the Illinois North Central No.2 Yellow corn spot prices fell 0.3% to $3.61/bushel.

At 06:00 SAST today, gold prices advanced 0.1% to trade at $1,163.43/oz. Yesterday, gold declined 0.5% to close at $1,161.84/oz, amid strength in the US dollar.

Yesterday, copper declined 1.8% to close at $5,788.50/mt. Aluminium closed 1.1% lower at $1,746.00/mt.

At 06:00 SAST, the US dollar is trading 0.1% higher against the South African rand at R12.3711, while the euro is trading 0.2% lower at R13.2097.

Yesterday, the euro declined against the major currencies and advanced against the South African rand. Meanwhile, France’s industrial production surprisingly advanced in January and Italy’s industrial production unexpectedly declined for the same month.

At 06:00 SAST, the euro slipped 0.2% against the US dollar to trade at $1.0681, while it has weakened 0.2% against the British pound to trade at GBP0.7085.>

The BoE Governor, Mark Carney, stated that it would be “extremely foolish” to add more stimulus to boost the nation’s inflation, as the weakness in Britain’s consumer price growth is mainly due to the low energy prices. He added that this move would just stoke unnecessary volatility in the economy as the effect of adding more stimulus would be seen only after the drop in the oil prices have passed through the economy.

In Italy, the seasonally adjusted industrial production unexpectedly dropped 0.7% on a monthly basis in January, compared to market expectations for a rise of 0.2%. Industrial production had registered a rise of 0.4% in the prior month.

Industrial production unexpectedly climbed 0.4% on a monthly basis in January, in France, more than market expectations for a fall of 0.3%. In the previous month, industrial production had recorded a revised rise of 1.4%.

The NFIB Research Foundation has indicated that, in February, the small business optimism index recorded a rise to 98.00 in the US, compared with market expectations of a rise to a level of 99.00. In the prior month, the small business optimism index had recorded a level of 97.90.

The Bureau of Labour Statistics has indicated that, in January, JOLTs job openings advanced to 4998.00k in the US, lower than market expectations of an advance to 5039.00k. In the prior month, JOLTs job openings had recorded a revised level of 4877.00k.

In January, on a monthly basis, machinery orders registered a drop of 1.7% in Japan, compared to market expectations for a drop of 4.0%. Machinery orders had advanced 8.3% in the previous month.

In January, on a monthly basis, the seasonally adjusted home loan approvals in Australia dropped 3.5%, more than market expectations for a drop of 2.0%. Home loan approvals had recorded a rise of 2.7% in the prior month.

In March, the Westpac consumer confidence index in Australia registered a drop of 1.2%, on a monthly basis, to a level of 99.50, compared with a level of 100.70 in the prior month.

FirstRand Limited: The banking company, in its 1H15 results, indicated that its net income from operations was 13.7% up to R14.24bn from the corresponding period of preceding year. Its diluted EPS was R1.88, compared with R1.60 posted in the same period a year ago. Its diluted headline EPS rose 13.5% to R1.81 from the same period of last year. The company has declared a gross cash dividend of 93.00c/share, up 20.8% from 1H14. Furthermore, the company stated that it is working on further diversifying by starting a life insurance business in SA and aims to start operating in Ghana by midyear.

Discovery Limited: The healthcare services company announced that it has entered into a memorandum of understanding with FirstRand Ltd to increase its participation in DiscoveryCard to 74.99%. It has stated that the company would make a cash payment of R1.35bn to FirstRand on 1 July 2015.

AngloGold Ashanti Limited: The gold mining company announced the appointment of Chris Sheppard as the new Chief Operations Officer for its South African operations.

Sappi Limited: The forest and paper products company revealed that it is offering EUR450.00mn ($484.00mn) of bonds that will be used to buy back existing debt. It stated that its subsidiary, Sappi Papier Holding GmbH, would issue senior secured notes maturing in FY22, net proceeds of which will be used to redeem all of the unit’s outstanding EUR250.00mn senior secured notes due FY18 and $300.00mn senior secured notes due FY19.

Lonmin Plc: The platinum mining company, in its operational update, stated that the repairs to the Number One furnace and the additional maintenance work that was brought forward have been completed within schedule. It indicated that the Number One furnace is now operating in line with expectations and the Number Two furnace has also ramped up and stabilised according to plan.

UK and US

Weibo Corporation: The social media company, in its FY14 results, indicated that total revenue increased 77.5% to $0.33bn from the preceding year. However, it reported a diluted net loss of $0.34, compared with loss of $0.26 posted in the previous year. For 1Q15, the company estimates its net revenues to be between $93.00mn and $96.00mn.

SINA Corporation: The Chinese online media company, in its FY14 results, indicated that its total revenue was up 15.5% to $0.77bn from the previous year. Its diluted net EPS was $2.63, compared with diluted EPS of $0.66 reported in the prior year. The company also announced changes in management roles, whereby Mr. Herman Yu, its Chief Financial Officer, will assume a new role as the Chief Financial Officer of Weibo Corporation, one of the company’s subsidiaries, and Ms. Bonnie Yi Zhang, Weibo’s Chief Financial Officer, will serve as the Chief Financial Officer of the company, effective immediately.

China Lodging Group Limited: The company, in its FY14 results, indicated that its net revenue increased to RMB4.96bn, compared with RMB4.17bn recorded in the previous year. Its diluted EPS per ADS was up 8.2% to RMB4.86 from the last year. For 1Q15, the company guided to a net revenue growth of between 12.0% and 14.0% and for FY15 net revenue is expected to grow between 7.5% and 11.5%.

Analogic Corporation: The multinational corporation, in its 2Q15 results, indicated that its total net revenue dropped 5.3% to $0.13bn from the corresponding period of preceding year. Its net diluted EPS was $0.78, compared with $1.53 posted in the same period a year ago. The company declared a cash dividend of $0.10/share, payable on 3 April 2015.

Ocular Therapeutix Inc.: The biopharmaceutical company, in its FY14 results, indicated that its loss from operations was $27.09mn, compared with loss of $12.90mn reported in the previous year. Its revenue was $0.77mn for the year. The company further stated that its lead eye therapy successfully wrapped the first of two Phase III studies, reducing inflammation and pain among a group of patients after cataract surgery.

Theravance BiopharmaInc.: The biopharmaceutical company, in its FY14 results, indicated that its total revenue was $11.69mn, compared with $0.23mn posted in the preceding year. It incurred a basic and diluted net loss of $7.46/share, compared with loss of $4.92/share in the prior year. The company indicated that with VIBATIV, it has expanded the field force supporting the commercial launch, initiated a Phase 3 bacteremiaregistrational study and initiated a patient registry study.

Supernus Pharmaceuticals Inc.: The company, in its FY14 results, indicated that total revenue increased sharply to $122.05mn, compared with $12.02mn recorded in the last year. It reported a diluted EPS of $0.32, compared with a diluted loss of $2.90/share posted in the previous year. For FY15, the company expects total revenue to grow by approximately 50.0%ranging from $130.00mn to $140.00mn.

Verisk Analytics Inc.: The data analytics and risk assessment firm announced the acquisition of energy consultancy, Wood Mackenzie from Hellman & Friedman and other Wood Mackenzie shareholders for approximately $2.80bn to be paid in cash.

American Realty Capital Properties Inc.: The real estate company announced the appointment of Glenn J. Rufrano as Chief Executive Officer, effective 1 April 2015.

Pernix Therapeutics Holdings Inc.: The specialty pharmaceutical company announced that it has entered into a definitive agreement to acquire Zohydro ER (hydrocodone bitartrate) business from Zogenix for $100.00mn plus regulatory and sales milestones up to $283.50mn. It indicated that the acquisition would help the company to significantly reduce its operating expenses, eliminate all R&D expenses related to ongoing abuse-deterrent formulations, and further enhance its financial strength with non-dilutive capital.

Prudential Plc: The insurance company, in its FY14 results, indicated that its IFRS profit before tax attributable to shareholders was GBP2.61bn, compared with GBP1.64bn reported in the previous year. Its basic EPS based on total profit after tax was 86.90p, compared with 52.80p posted in the preceding year. The company stated that its board has decided to rebase the full year dividend upwards by 10.0% and hence has recommended a final dividend of 25.74p/share which brings the total dividend for the year to 36.93p/share. Furthermore, the company announced the retirement of TidjaneThiam, group Chief Executive, from his role as CEO and from the board.

G4S Plc: The security services company, in its FY14 results, stated that revenue from continuing operations dropped 3.0% to GBP6.85bn from the preceding year. However, its basic and diluted EPS from continuing operations was 5.80p, compared with a loss of 17.30p/share reported in the previous year. The company expects to make further progress in FY15.

Grafton Group Plc: The building materials company, in its FY14 results, stated that revenue was up 9.6% to GBP2.08bn from the previous year. Its diluted EPS was 33.99p, compared with 26.67p reported in the last year. The company has approved 2H14 dividend of 7.00p/share which would take the total dividend for the year to 10.75/share, an increase of 26.5% from the previous year’s dividend.

IP Group Plc: The intellectual property business company, in its FY14 results, indicated that its portfolio return and revenue was GBP28.40mn, compared with GBP85.40mn reported in the prior year. Its diluted EPS was sharply down to 1.96p from 19.27p posted in the preceding year. The company further announced the appointment of Mike Humphrey as the group’s non-Executive Chairmanin March 2015.

esure Group Plc: The company, in its FY14 results, revealed that its total income was marginally down to GBP570.50mn, compared with GBP573.50mn reported in the preceding year. However, its diluted EPS sharply increased to 19.81p, compared with 4.57p posted in the prior year. The company stated that it expects to achieve modest growth in in-force policies and gross written premiums in 1Q15.

BHP Billiton Plc: The company indicated that at the annual Global Iron Ore and Steel Forecast Conference in Perth, it would highlight the exceptional returns from its productivity agenda. It would reaffirm its ongoing commitment to safely maximising returns on installed capacity at its Western Australia Iron Ore business. It further stated that it has continued to boost production despite the price downturn.

WPP Plc: The media company announced the acquisition of a minority stake in FlowNetwork, in line with its strategy to develop its integrated services in fast-growing and important markets and sectors and strengthen its capabilities, including those in digital media.

Antofagasta Plc: The company announced that its subsidiary Minera Los Pelambres has been notified by the Civil Court of Los Vilos that the plan submitted is not sufficient to address the requirements of the Supreme Court order on the basis that the proposed works do not allow the natural flow of the Pupío stream to the town of Caimanes and that as a consequence Los Pelambres must destroy part, or all, of the tailings dam wall.

Financial Times

Missing cash marks fresh blow to Eike Batista trial: Two weeks after a judge was photographed driving a Porsche appropriated from former Brazilian billionaire Eike Batista, court authorities have revealed that cash seized from the tycoon has also disappeared.

Chevron expects sharp slowdown in output growth at end of decade: Chevron, the US oil group, expects a sharp slowdown in its production growth towards the end of the decade as it cuts investment in response to the fall in oil prices.

RWE warns core earnings will fall amid energy market shake-up: RWE on Tuesday warned of a “crisis” in fossil fuel power generation as Germany’s second-largest utility by market value predicted a sharp fall in underlying earnings this year and unveiled new cost-cutting plans.

Cairn served with $1.60bn tax bill by Indian authorities: Cairn Energy has been served with a $1.60bn bill by the Indian tax authorities, in the latest twist in a dispute between the UK-listed oil explorer and New Delhi.

Ineos to embark on ‘fracking’ in northwest England: Ineos, the Swiss-based chemicals group, is to embark on an ambitious “fracking” campaign in northwest England, with plans to spend GBP138.00mn in the next few years to drill for shale gas after buying exploration rights from rival IGas.

Univision sets sights on $1.00bn IPO: Univision, the largest Spanish-language broadcaster in the US, has hired bankers to raise more than $1.00bn in an initial public offering that could value the company at as much as $20.00bn including debt, according to three people familiar with the matter.

Masters joins cryptocurrency start-up: Blythe Masters, the former JPMorgan Executive who helped pioneer credit derivatives in the 1990s, has re-emerged as Chief Executive of a cryptocurrency start-up.

MPs call for review of ‘unfair’ payouts for bank mis-selling: The UK’s financial watchdog has been urged to review its compensation scheme for businesses mis-sold interest rate hedging products after complaints that they have been treated “unfairly”.

Credit Suisse surges on Thiam appointment: Credit Suisse’s market value surged on the appointment of Tidjane Thiam from UK insurer Prudential to be the Swiss bank’s new Chief Executive as investors bet he would respond to their calls for an overhaul of its strategy.

Brady Dougan saw Credit Suisse through acute crisis: Brady Dougan spent 25 years at Credit Suisse applying his much-admired intelligence to problems throughout the bank and carving a fan base big enough to make the quietly spoken American its first non-Swiss Chief Executive.

Russia downturn takes toll on car sales: Car sales plunged 38.0% in Russia last month compared with the same period a year ago in a fresh sign of the economy’s deterioration as it hurtles towards recession.

BBC suspends Jeremy Clarkson over ‘fracas’: Jeremy Clarkson, the host of the hit programme Top Gear, has been suspended by the BBC “following a fracas” with a producer.

Tesco registers best sales in 18 months: Turnround efforts by Tesco Chief Dave Lewis have been boosted by the company’s best sales performance in 18 months, according to industry figures published on Tuesday.

Google finance Chief Pichette to quit: Patrick Pichette, the Chief financial officer responsible for handling Google’s increasingly frayed relationship with Wall Street, is to quit when a replacement is found, the company said on Tuesday.

Digital economy transforms UK workforce: The transformation of the workforce is rapidly expanding beyond London as the UK embraces the digital economy, with about 1.80mn people – 6.0% of workers – now employed in a type of job that did not even exist in 1990.

Hutchison Whampoa and VimpelCom in advanced talks on Italy merger: Hutchison Whampoa and VimpelCom are in advanced talks on a deal to merge their Italian mobile operations, bringing nearer to conclusion one of the longest running deal negotiations in the European telecoms market.

Heathrow link to HS2 ruled out before FY33: The government has ruled out building a link connecting Heathrow airport to the High Speed 2 line between London and the north of England before FY33.

English devolution: Bus companies fear end of commercial freedom: For the transport industry, the current push for devolution in the UK has raised fears about how this will affect the franchising of services and whether it could spell the end of commercial freedom for bus companies.

E sure: Lost 9.1% to 212.50p after cautious guidance on income and underwriting overshadowed results.

Antofagasta: Down 5.5% to 711.00p after cutting production guidance for its flagship copper mine, Los Pelambres in Chile.

Lonmin: Dropped 10.1% to 113.50p even after the platinum miner said repairs to a furnace had been completed and that extra spending caused by the damage should unwind.

Prudential: baton pass: Investors in Prudential marked down the UK life insurer’s shares by more than 2.0%, despite tidy FY14 results, when they learned its Chief Executive had been lured away by Credit Suisse. A change of leadership at Prudential these days raises the fear that his successor might fiddle with Tidjane Thiam’s proven model. It was not always so. Roll back to Prudential’s abortive 2010 attempt to buy AIA, the Asian operations of US insurer AIG, and some investors were disgruntled with Mr Thiam. But he has confounded doubters since, proving that the company can grow in Asia even without dealmaking. Today’s investors have little quibble with his strategic direction. The near-tripling of Prudential’s share price under his tutelage suggests as much. Yet he leaves as the opening chapter of Prudential’s Asia growth narrative is still unfolding. It has barely scratched the surface of the potential of Asia’s middle classes. It has 700,000 clients in China, versus 7.00mn in the UK. Fertile territory for Mr Thiam’s successor, who will inherit a well-oiled machine. But economic growth in China is not what it was and the slowdown in Asia is starting to show through. Prudential’s operating profit from the region rose 5.0% in 2014. At constant exchange rates that would have been a more impressive 16.0%, but even that is 4 percentage points lower than the growth rate in FY13. At least a tie-up with Standard Chartered is going great guns – sales from that deal in 2H14 were up a third on a year earlier.

Apple: Mac, still big: Consider the new device that Apple launched on Monday. No, not the one on Tim Cook’s wrist – the new MacBook. A decade ago, Apple’s personal computers were at risk of being overshadowed by their Windows rivals, but in recent years Macs have been a steady source of revenue growth. Mac revenues were $25.00bn in the past 12 months – watch sales this year will come nowhere close, even by the rosiest projections. It would take, say, 60.00mn watches a year to get there. As a peek inside a university classroom confirms, Apple has gained ground in PCs. The market as a whole shrank last year in units shipped, while Mac unit sales rose 16.0%. Apple computers are now the fifth most-shipped PCs globally, according to IDC, a forecaster. Meanwhile the average selling price of the Mac has held firm, falling only 3.0% in the last three years. And Mac demand will benefit as Apple further integrates the software on its computer, tablets and phones. But there is a catch. When Macs comprised 15.0% of Apple’s revenues, they were just 7.0% of gross profits, according to a Credit Suisse analysis last year. The gross margin, of about 20.0%, is far below the company average, which was 40.0% last quarter. It is the iPhone, of course, that generates most of the profits. Analyst estimates put the iPhone gross margin at 45.0% or more. The iPhone has dramatically increased Apple’s gross margins over the past decade (unlike virtually every other hardware company in the world).