Anchor Capital: Essential market review, 7 April

On Thursday, copper declined 1.1% to close at $6,003.25/mt. Aluminium closed 0.3% higher at $1,781.25/mt.

Yesterday, the euro declined against major currencies. Moving ahead, traders will eye the final print on the Markit services PMI data in the eurozone and Germany for March, scheduled for release today.

At 06:00 SAST, the euro advanced 0.2% against the US dollar to trade at $1.0940, while it has gained 0.1% against the British pound to trade at GBP0.7343.

The final Markit services PMI registered a rise to 59.20 in the US, in March, higher than market expectations of a rise to 58.60. In the prior month, Markit services PMI had recorded a level of 57.10. The preliminary figures had recorded an advance to 58.60.

The ISM has indicated that compared with a reading of 56.90 in the previous month the non-manufacturing PMI eased to 56.50 in March, in the US. Market expectations were for the non-manufacturing PMI to ease to a level of 56.50.

The Bank of Canada, in its quarterly senior loan officer survey on business-lending practices, indicated that overall business lending conditions in Canada tightened during the 1Q15, with the reading coming in at 6.70 from a reading of -2.70 in the previous quarter.

The seasonally adjusted Ivey PMI in Canada recorded an unexpected drop to a level of 47.90 in March. Ivey PMI had recorded a reading of 49.70 in the prior month.

The flash coincident index in Japan registered a drop to 110.50 in February, compared with a reading of 113.30 in the previous month. Market anticipations were for the coincident index to fall to 110.70.

The flash leading economic index eased to 105.30 in February, in Japan, compared with market expectations of a drop to 105.10. The leading economic index had recorded a reading of 105.50 in the prior month.

The seasonally adjusted retail sales registered a rise of 0.7% on a monthly basis in February, in Australia, more than market expectations for an advance of 0.4%. In the prior month, retail sales had risen by a revised 0.5%.

Rhodes Food Group Property: Further to the announcement regarding the acquisition by the company’s wholly owned subsidiary, Rhodes Food Group Proprietary Limited, of 100.0% of the issued share capital of Pacmar Proprietary Limited, the company stated that all conditions precedent have been met and the acquisition has become unconditional. It stated that the effective date of the acquisition is1 April 2015.

Vodacom holds the line as fury mounts: Vodacom is not backing down from its plan to hike tariffs on its voice and data contracts – even though the National Consumer Commission has launched a probe into the case.

Sasol coal miners seek damages over lung disease: Coal miners in South Africa who worked at a unit of Sasol and contracted lung diseases filed a suit seeking damages from the company, according to their lawyer.

UK and US

A. Schulman Inc.: The global plastics supplying company, in its 2Q15 results, indicated that its net sales dropped 7.9% from the same period a year ago to $542.30mn. It reported a diluted loss from continuing operations of $0.03/share, compared with EPS of $0.22 recorded in the corresponding period of previous year. The company stated that it has revised its previously announced FY15 adjusted diluted EPS guidance to $2.50 to $2.55, which is a 6.0% to 8.0% improvement in earnings despite the negative impact of the continuing steep decline of the euro and other foreign currencies.

Tesla Motors: The electric car making company announced that it has delivered 10,030 cars in 1Q15, which is a new company record for the most deliveries in a quarter and represents a 55.0% increase over 1Q14.Its stated that the results were above the company’s guidance of 9,500.Going forward, the company will publish the number of new car deliveries within three days of quarter end.

Ventas Inc.: The real estate company announced that it has signed a definitive agreement to acquire privately-owned Ardent Medical Services for $1.75bn in cash.

NVIDIA Corporation: The semiconductor company revealed that it has received favourable ruling from ITC in dispute over a patent case with Qualcomm and Samsung.

Marks & Spencer Group: The retail company, in its 4Q15 trading statement, reported a 1.9%rise in group sales excluding value added tax and on constant currency basis, on the back of good performance in food and general merchandise. It also stated that clothing sales registered a growth, reversing the last 14 quarters’ trend. The company also stated that it has also improved its operating costs performance.

Dyax Corporation: The healthcare company revealed that it is offering to sell 7,000,000 shares of its common stock in a proposed underwritten public offering.

Clovis Oncology: The pharmaceutical company announced that the US Food and Drug Administration (FDA) has granted Breakthrough Therapy designation for its investigational agent rucaparib as monotherapy treatment of advanced ovarian cancer in patients who have received at least two lines of prior platinum-containing therapy, with BRCA-mutated tumours, inclusive of both germline BRCA (gBRCA) and somatic BRCA (sBRCA) mutations.

Home Loan Servicing Solutions: The asset management company alongwith New Residential Investment announced that they have entered into a purchase agreement, under which New Residential would acquire all the assets and assume substantially all of the liabilities of the former. Simultaneously, the companies terminated the merger agreement originally announced on 22 February 2015.

Ocular Therapeutix: The biopharmaceutical company announced that topline data for its lead drug candidate, OTX-DP, a treatment for ocular inflammation following cataract surgery, met one of its two primary endpoints. The company stated that both endpoints needed to be met for the trial to be considered successful and that it was disappointed that the second Phase 3 clinical results for resolution of inflammation did not have the same magnitude of differential as what OTX-DP achieved in the first trial.

Tate & Lyle: The agribusiness company, in its trading statement for FY15, stated that it continues to expect adjusted profit before tax to be modestly below the range from its guidance issued in September 2014 of GBP230.00mn to GBP245.00mn. It indicated that as previously expected, the group’s adjusted operating profit would be held back by the impact of the operational and supply chain issues experienced mainly in the 1H15, and the continued extremely competitive market for SPLENDA® Sucralose.

Booker Group: The convenience store company, in its 4Q15 trading update, stated that total sales including Makro rose by 1.0% on the same period last year. Its like-for-like total sales (excluding Makro) were 1.7% higher with non tobacco like-for-likes up 2.3%. Furthermore, the company stated that for FY15, total sales (including Makro) were GBP4.75bn, up by 1.5% compared with the last year. The company also announced that Richard Rose would be stepping down as Chairman at the AGM on 8 July 2015.

Electrocomponents Plc: The distributor of electronics and maintenance products, in its trading statement for FY15, indicated that underlying sales growth was 3.0%. The group anticipates that headline profit before tax would be in line with market expectations.

SABMiller Plc: The brewing and beverage company announced that its non-Executive Director, Ms Helen Weir, has joined the board of Marks and Spencer Group as Chief Finance Officer with effect from 1 April 2015.

Diageo Plc: The alcoholic beverages company announced that it has entered into an agreement to acquire a 50.0% interest in the company which owns United National Breweries’ traditional sorghum beer business in South Africa. The company would further acquire the remaining interest from Pestello Investments Inc. for an initial payment of $22.00mn (approximately GBP14.80mn) and a potential earn-out payment of upto $14.00mn (approximately GBP9.40mn).

Playtech Plc: The software company announced that it has conditionally agreed to acquire a 91.1% fully-diluted stake in TradeFX Limited, an online CFDs and binary options broker and trading platform provider, for an initial cash payment of EUR208.00mn and an earn out payment of up to EUR250.00mn based on future performance.

Premier Oil: The energy company announced that Zebedee well (14/15b-5) in PL004b (Premier 36.0% equity) discovered 81.00ft of net oil-bearing reservoir and 55.00ft of net gas-bearing reservoir. It stated that reservoir at both the Hector and Zebedee intervals is of good quality and the results are in line with prognosis. The company revealed that good oil shows were recorded at the deeper F3 targets but at this location the sands are not well developed.

Financial Times

More young renters give up on ever buying a home: A growing number of young people have given up on the idea of buying their own home, reinforcing signs that property ownership could cease to be the norm for the next generation.

UK’s top 5 banks slash bonus pools by more than GBP1.00bn: The UK’s five largest banks cut bonus pools by more than GBP1.00bn last year and most also reduced pay and staff numbers, according to Financial Times analysis, potentially blunting political attacks on banker excess ahead of the general election.

Cadbury hit with $92.00mn tax bill in India over ‘phantom’ factory: Cadbury has been hit with a new Rs5.70bn ($92.00mn) tax claim in India in relation to allegations that the Dairy Milk chocolate producer claimed excise benefits on a “phantom” factory.

Small housebuilders struggle to fill balance sheet holes: Britain’s biggest housebuilders have constructed record profits on the back of rising property prices and government incentive schemes – but their rise has left smaller rivals having to fill widening cracks in their balance sheets.

Billionaire Fridman targets US and Europe in $16.00bn telecoms spree: Russian billionaire Mikhail Fridman is drawing up plans for a $16.00bn investment spree in telecoms and technology businesses in Europe and the US boosted by the appointment of a heavyweight advisory board of industry entrepreneurs.

HMRC closes buyout firms’ use of partnership tax loophole: HM Revenue & Customs has moved to close a loophole that allowed buyout firm Executives to avoid paying income tax on investor fees by using limited partnerships, in legislation whose details could make greater change possible after May’s general election.

Mongolia PM confirms agreement in principle on Rio Tinto mine: Mongolia says it has broken the deadlock in negotiations about phase two of Rio Tinto’s $12.60bn Oyu Tolgoi gold and copper mine, as the resource-rich country seeks to woo back foreign investors.

Israel calls for changes to international nuclear deal with Iran: Israel stepped up its lobbying campaign against the agreement on Iran’s nuclear programme on Monday, listing the changes it regards as essential in the framework accord that Tehran reached last week with world powers.

BlackRock Chief Larry Fink warns on strong US dollar: The steep rise in the US dollar risks undermining business confidence in the US and sending the country’s economy into a slowdown, the head of the world’s largest asset management firm is warning.

Fundraising and dealmaking activity boost N+1 Singer profits: N+1 Singer has become the latest City stockbroker to report a boost in profits last year as fundraising and dealmaking activity picked up, although the group warned there is still too much capacity in the small and mid-cap market because of falling secondary commissions.

Lotus pins its hopes on rising sales and a new model to shift up a gear: The Norfolk sports car maker has released its sales figures for the year to the end of March 2015, and the number is strangely appropriate: 2015.

PCCW ends talks with Orange over Dailymotion purchase: Hong Kong’s PCCW has ended discussions with Orange about buying the telecoms group’s Dailymotion video platform, just days after the French government intervened to seek alternative acquirers.

Vivendi offers to buy majority stake in Dailymotion from Orange: Vivendi has offered to buy a majority stake in Dailymotion from Orange, in a deal that would value the video-sharing site at €250m, according to people familiar with the situation.

Vox buys data science start-up OpBandit to track readers better: Vox Media, the US digital publisher, has bought a data science start-up as it looks to track more closely how readers view, share and interact with content across the internet.

Samsung earnings point to smartphones pickup: Samsung Electronics’ earnings beat analyst forecasts in the first quarter, bolstering the South Korean company’s turnaround hopes after a sharp fall in profits last year.

Fuel costs remain big concern for transport company Chiefs: The price of oil may have more than halved in the past year but fuel costs remain one of the biggest concerns for the bosses of transport companies.

BHP Billiton: Fell 2.6% to GBP14.31 as iron ore sank below $50.00/t to its lowest level since price assessments were first published by The Steel Index in 2008.

Dunelm Group: Added 1.9% to 869.50p after reporting a 10.7% rise in third-quarter total revenues.

Bank profits: tangible benefits: You cannot turn a sow’s ear into a silk purse. But with a little effort you might make it vaguely presentable. And so banks, whose plain old returns on equity are far from silky, are turning to returns on tangible equity as they lay out their targets. ROTE typically excludes goodwill built up through acquisitions. UBS is the latest to make the switch. A year ago it pulled back from its earlier aim of a FY15 return on equity of 15.0%. Its latest target is a FY16 adjusted ROTE of 15.0%. On that basis it returned 8.9% in FY14, so there is a way to go. Other banks, including JPMorgan and Santander, also use ROTE targets. It makes some sense to use a variety of measures when reporting progress to shareholders. But it pays to be suspicious of metrics that tend to produce rosier results. By using the same profit figure but a lower equity base, ROTE can render higher numbers than ROE. A 9.0% ROE looks weak. An 11.0% ROTE seems somehow healthier. Balance sheet valuations reflect management’s more or less educated guesses at the value of the business. So the use of ROTE raises the question of what belongs on the balance sheet in the first place. If the directors think that tangible equity is a better measure of what shareholders really own, then they ought to be considering writing off intangible assets and taking impairment charges.