By Anchor Capital
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South African Market Review South African markets closed in the green yesterday. Among retailers, JD Group, Truworths International and Foschini Group climbed 6.2%, 4.6% and 3.2%, respectively. Anglo American Platinum, Lonmin and Impala Platinum rose 1.8%, 1.5% and 1.3%, respectively. Barclays Africa Group, Standard Bank and FirstRand advanced 1.8%, 0.6% and 0.1%, respectively. Naspers added 0.5%, following the recent listing of its printing subsidiary, Novus, on the JSE. However, Harmony Gold, Gold Fields and AngloGold Ashanti retreated 5.4%, 4.3% and 2.2%, respectively, in line with a drop in gold prices. Discovery Limited fell 0.8%. The company announced a strategic partnership with John Hancock Insurance. The JSE All Share Index rose 0.4% to close at 52,806.00. |
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UK Market Review UK markets finished lower yesterday, with the FTSE 100 paring its gains towards the end of the session. Royal Dutch Shell dropped 5.3%, after agreeing to buy BG Group in a deal worth GBP47.00bn, one of the industry’s largest deals in at least a decade. Randgold Resources and Fresnillo fell 2.8% and 2.7%, respectively, amid lower gold and silver prices. On the higher side, BG Group climbed 26.7%, after soaring almost 40.0% earlier during the session. Sky rose 1.6%, as a report indicated that French media conglomerate Vivendi was looking to buy the company. However, the company refuted the speculation. The FTSE 100 Index declined 0.3% to close at 6,937.41. |
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US Market Review US markets ended higher yesterday. Meanwhile, the minutes of the US FOMC March meeting revealed that some officials thought a interest rate rise in June would be warranted. Perrigo jumped 18.4%, after Mylan made an offer to acquire the company for around $28.90bn.Mylan climbed 14.8%. Vertex Pharmaceuticals and Regeneron Pharmaceuticals gained 2.8% and 2.6%, respectively. American Airlines Group advanced 2.6%, after the airline received a single operating certificate from the Federal Aviation Administration. However, QEP Resources and Southwestern Energy retreated 3.2% and 3.0%, respectively. The S&P 500 Index rose 0.3% to settle at 2,081.90, while the DJIA Index advanced 0.2% to close at 17,902.51.The NASDAQ Index gained 0.8% to finish at 4,950.82. |
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Asia Market Review Markets in Asia are trading mostly in the green this morning, mirroring overnight gains on Wall Street. In Japan, a weaker yen led exporters to trade in positive territory, with Sony and Mitsubishi Electric rising 1.9% and 0.9%, respectively. FamilyMart advanced 5.2%, after the company projected a significant increase in its FY16 operating profit. In Hong Kong, market are trading sharply higher following robust buying from Chinese investors. Tencent Holdings and AIA Group climbed 7.4% and 6.3%, respectively. In South Korea, Hyundai Steel declined 1.7%, despite announcing its plans to acquire sister company, Hyundai Hysco. The Nikkei 225 Index is trading 0.7% firmer at 19,932.81, while the Kospi Index is trading 0.2% lower at 2,055.79. The Hang Seng Index is trading 3.7% in the green at 27,198.52. |
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Commodities At 06:00 SAST today, Brent crude oil rose 0.4% to trade at $55.47/bl. Yesterday, Brent crude oil fell 4.4% to settle at $55.27/bl, after the US Energy Information Administration (EIA) indicated that US crude oil inventories rose by 10.95mn bls in last week, marking the largest weekly gain since March 2001. Yesterday, the Illinois North Central No.2 Yellow corn spot prices fell 1.1% to $3.57/bushel. At 06:00 SAST today, gold prices declined 0.4% to trade at $1,198.11/oz. Yesterday, gold declined 0.5% to close at $1,202.57/oz. Meanwhile, the minutes from the US Federal Reserve’s recent meeting revealed that officials were divided on whether to raise interest rates in June. Yesterday, copper declined 0.9% to close at $6,027.75/mt. Aluminium closed 0.7% lower at $1,769.50/mt. |
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Currencies Yesterday, the South African rand strengthened against the US dollar. Meanwhile, the minutes of the US FOMC March meeting indicated that the Fed officials were divided on the decision of the timing of raising interest rates in June. Later today, market participants will keep a tab on a string of releases in South Africa, including gross and net reserves, manufacturing production and SACCI business confidence. The yield on benchmark government bonds fell yesterday. The yield on 2015 bond declined to 6.01% while that for the longer-dated 2026 issue fell to 7.62%. At 06:00 SAST, the US dollar is trading 0.1% higher against the South African rand at R11.8303 , while the euro is trading 0.1% higher at R12.7544. Yesterday, the euro declined against major currencies. Data indicated that German factory orders dropped unexpectedly in February. Meanwhile, investors continue to track developments in Greece as the country is facing today’s deadline to make a EUR450.00mn payment to the International Monetary Fund (IMF). On the macro front, traders will eye German industrial production and trade balance data due later today. Additionally, the Bank of England’s interest rate decision will be closely tracked. At 06:00 SAST, the euro has remained almost unchanged against the US dollar to trade at $1.0780, while it has weakened 0.1% against the British pound to trade at GBP0.7243. |
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Economic Updates In March, on a monthly basis, the consumer price index (CPI) recorded a rise of 0.3% in Switzerland, more than market expectations for a rise of 0.1%. In the previous month, the CPI had registered a drop of 0.3%. According to Ministry of Economy and Finance, the trade deficit in France fell to EUR 3.45bn in February, compared with a revised trade deficit of EUR 3.71bn in the previous month. Markets were anticipating the nation to record a trade deficit of EUR 3.80bn. In February, on a monthly basis, the seasonally adjusted factory orders in Germany recorded an unexpected drop of 0.9%. In the prior month, factory orders had recorded a revised drop of 2.6%. In February, the seasonally adjusted retail sales recorded a drop of 0.2% on a monthly basis in the eurozone, in line with market expectations. Retail sales had registered a revised rise of 0.9% in the prior month. The Mortgage applications rose 0.4% in the US on a weekly basis, in the week ended 3 April 2015. In the prior week, mortgage applications had registered a rise of 4.6%. The recently released Federal Open Market Committee (FOMC) minutes indicated that some policy makers suggested that the economic data and outlook warrant a rate hike in June this year, while other Fed officials argued for a rate increase later in the year stating that a decline in energy prices and a strong dollar would continue to curb inflation. The New York Federal Reserve President, William Dudley, hinted that with payroll growth in the US remaining above trend for the past few months and outpacing the economy’s recovery pace, a downside surprise in March’s payroll numbers were less alarming. He further warned that a slowdown in the domestic wage growth could dissuade him from being “reasonably confident” that inflation in the US will rise to the 2.0% target, however, he stated that the central bank is anticipated to raise rates this year. The seasonally adjusted total consumer credit outstanding in the US advanced to $3,343.40bn in February, compared with a revised reading of $3,327.80bnin the previous month. The Eco Watchers Survey for the future outlook in Japan climbed to 53.40 in March, compared with market expectations of an advance to a level of 53.50. Eco Watchers Survey for the future outlook had registered a level of 53.20 in the previous month. |
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Corporate Updates South Africa Discovery Limited : The insurance and financial services company announced that it has entered into a strategic partnership with John Hancock Insurance, a division of the global financial services group Manulife, to introduce a comprehensive healthy living program for US consumers.Mpact Limited: The paper and plastic packaging company announced the appointment of Johan Stumpf as Managing Director of its corrugated business with effect from 1 January 2016, succeeding Ralph von Veh, who is approaching retirement. It stated that to facilitate an efficient handover Johan would join the company on 1 October 2015 as Director Operations – Mpact Corrugated. Delta International expands Mauritius Stock Exchange listings: Delta International, the first Africa-dedicated property fund listed on the JSE’s AltX bourse, has been given permission to list up to 29.00mn additional ordinary shares on the Stock Exchange of Mauritius as it looks to continue its growth across Morocco and Mozambique. Sygnia aims to raise R300m in offering: Money manager Sygnia Group plans to raise about R300m in an initial public offering and is scheduled to list on the JSE main board in October. Anglo American coal mine hit by wildcat strike: Workers have downed tools at a mine operated by Anglo American’s South African coal unit, a union and the company said on Wednesday. UK and US Northern Technologies International: The company, in its 2Q15 results, indicated that total net sales increased 8.2% from the same period a year ago to $6.73mn. However, it reported a diluted net loss of $0.03/share, compared with diluted EPS of $0.22 recorded in the corresponding period of prior year. For FY15, the company continues to expect its net sales to be in the range of $32.00mn to $34.00mn. Alcoa Inc.: The aluminium producing company, in its 1Q15 results, stated that sales rose 6.7% from the corresponding period of previous year to $5.82bn. It reported diluted net EPS of $0.14, compared with a diluted loss of $0.16/share recorded in the same period a year ago. The company expects robust global aerospace sales growth of 9.0% to 10.0% in FY15, driven by strong deliveries across the large commercial aircraft, regional jet and business jet segments. Bed Bath & Beyond: The merchandise retail stores company, in its FY15 results, revealed that net sales increased 3.3% from the preceding year to $11.88bn. Its diluted net EPS stood at $5.07, compared with $4.79 recorded in the last year. The company is modelling a 2.0% to 3.0% increase for comparable sales for both 1Q16 and FY16, net diluted EPS to be between $0.90 and $0.95 for 1Q16, and to be between relatively flat and a mid-single digit percentage increase for FY16. Family Dollar Stores: The variety store chain company, in its 2Q15 results, indicated that net sales rose 3.0% from the same period of prior year to $2.80bn. However, its diluted net EPS was down to $0.67 from $0.80 recorded in the corresponding period of last year. The company stated that the completion of its merger agreement with Dollar Tree remains subject to Federal Trade Commission clearance under the HSR act. Apogee Enterprises: The window systems manufacturing company, in its FY15 results, stated that net sales increased 21.1% from the previous year to $993.94mn. Its diluted EPS stood at $1.72, compared with $0.95 reported in the preceding year. The company stated that it is confident that it would achieve strong growth in FY16 and expects revenue to grow in the range of 10.0% to 15.0% and EPS to increase to the range of $2.05 to $2.20. WD-40 Co.: The company, in its 2Q15 results, revealed that net sales increased to $97.33mn from $94.18mn recorded in the corresponding period of previous year. Its diluted EPS rose to $0.76 from $0.67 reported in the same period of prior year. For FY15, the company stated that net sales growth is projected to be between 1.0% and 4.0%, with net sales expected to be between $387.00mn and $400.00mn. Resources Connection: The professional services providing company, in its 3Q15 results, indicated that revenue rose10.6% from the same period of last year to $146.83mn. Its diluted EPS was $0.16, compared with $0.06 recorded in the corresponding period of previous year. Mylan NV: The global generic and specialty pharmaceuticals company announced that it has made a proposal to buy Perrigo for about $29.00bn in cash and stock, which would create a diversified, global pharmaceutical leader with an unmatched commercial and operating platform and a unique, one-of-a-kind profile. Apache Corporation: The oil and gas company announced it has agreed to sell its Australian subsidiary, Apache Energy Limited, to a consortium of private equity funds managed by Macquarie Capital Group Limited and Brookfield Asset Management Inc. for cash payment of $2.10bn. WS Atkins: The engineering services company, in its trading update, stated that the group has continued to trade well through 4Q15, with very good cash flow generation, and it expects to report underlying results for FY15 in line with expectations. It stated that following an excellent cash performance in 3Q15, it has raised its expectations for net funds of FY15 to around GBP175.00mn. Royal Dutch Shell: The company stated that it has agreed to acquire the oil and gas exploration firm, BG Group, in a deal that values the business at GBP47.00bn.The two companies announced that they have reached agreement on a cash and shares offer which gives investors a 50.0% premium on BG Group’s share price on 7 April. easyJet Plc: The airline company, in its passenger statistics for March, indicated that the number of passengers increased by 7.5%, with its load factor also increasing from 91.5% to 92.6%. Intermediate Capital Group: The asset management company announced that ICG Europe Fund VI, its European corporate investment fund, has raised EUR2.50bn to date, which includes a contribution from the company’s balance sheet of EUR500.00mn along with EUR2.00bn of third party subscriptions. Riverstone Energy Limited: Three Rivers Natural Resource Holdings III LLC, a newly-formed, Austin-based oil and gas company announced an equity commitment of up to $500.00mn from funds managed by energy private equity firm, Riverstone Holdings LLC and additional amounts from the company’s management team. The Riverstone commitment comprises up to $333.00mn from Riverstone Global Energy and Power Fund VI and up to $167.00mn from Riverstone Energy Limited (REL). Centamin Plc: The mining company, in its production results for 1Q15 from its Sukari Gold Mine in Egypt, revealed that total gold production increased 45.8% from the same period a year ago to 108.23k oz. It stated that FY15 guidance for gold production remains at 420.00k oz. Financial Times Future oil sector mergers set to be more modest: The world’s largest oil and gas companies were slashing jobs and cutting spending. But their stock prices were sagging and Executives were under pressure to replenish reserves. Barclays brings anti-fraud jobs onshore with new Sunderland unit: Barclays has said it is setting up a new fraud detection centre in the northeast of England, creating 200 new jobs and bringing together a range of operations currently handled in various locations in the UK and overseas. HP claim against Autonomy among biggest in Britain: Hewlett-Packard’s fraud complaint against Autonomy founder Mike Lynch will be laid out in public for the first time within weeks, but the case is unlikely to be concluded for years. UK banks stem domestic loan losses: UK banks’ losses from domestic loans plummeted last year to “exceptionally low” levels, in a trend that is expected to continue as the economic recovery gathers pace, according to Standard & Poor’s. Fund boosts Wales biotech sector: A GBP100.00mn plan to build the UK’s first three proton beam therapy centres not only heralds a breakthrough in cancer care, but also marks another step forward in efforts to put Wales on the map for medical science. Russia and Greece pledge to ‘restart and revive’ relations: Russian president Vladimir Putin and Greek prime minister Alexis Tsipras have made a pledge to “restart and revive” bilateral relations in a meeting aimed at boosting each other’s political bargaining chips in their confrontations with the EU. Manulife signs $1.20bn distribution deal with DBS: Manulife has agreed a $1.20bn deal with Singapore’s DBS to exclusively distribute its products through the bank’s network in a mark of the Canadian insurer’s commitment to Asia and the value insurers are prepared to place on the region’s potential. IMF seeks stress tests for asset managers: The International Monetary Fund has called for a regulatory crackdown on asset managers, including the introduction of stress tests that would mirror those in place for the banking system. CVC returns EUR4.00bn to investors as it sells investments: CVC, the European buyout house which owns Formula One, returned EUR4.00bn to investors in the first three months of the year in another sign of the extent to which private equity has taken advantage of ebullient markets to offload investments. Bank of America Merrill Lynch names investment banking Chiefs: Bank of America Merrill Lynch has promoted Diego De Giorgi and Karim Assef to co-heads of global investment banking as the group looks to the US, Latin America and dormant product lines to fuel the next phase of growth in the division. Alcoa profit shine dulled by sales shortfall: Alcoa, one of the world’s biggest aluminium producers, produced the latest in a series of better than expected earnings figures for the first quarter but suffered a 3.3% share price fall as revenues disappointed. Eric Olsen set to be Chief of Holcim-Lafarge as cement groups mix: Eric Olsen is set to become the first Chief Executive of a combined Holcim and Lafarge, as the two cement groups attempt to draw a line under a turbulent few weeks in which their EUR41.00bn tie-up came close to collapse. Vivendi reaches deal with rebel shareholder: Vivendi has reached an agreement with a minority shareholder to increase dividend payments over the next two years, averting a showdown at this month’s annual general meeting. Blinkx seeks transformation as sales fall: Blinkx, the online advertising company that has suffered a near 80.0% decline in its share price in 15 months, reported a fall in annual revenues on Wednesday but claimed to have made “transformational moves” to turn its business around. Google prepares YouTube subscription plan: Google is preparing to launch a YouTube subscription service that will allow users to skip advertisements when watching online videos. India’s Snapdeal buys mobile payments platform FreeCharge: Snapdeal, one of India’s largest online retailers, has bought mobile-payments platform FreeCharge in a deal it hailed as “one of the biggest acquisitions in the history of the internet industry in India”. SingTel buys US cyber security group for $810.00mn: Singapore Telecommunications is broadening its cyber security footprint with the $810.00mn purchase of Trustwave, a US cloud-based service, in the latest sign of the scramble for high-tech security assets. AT&T fined $25.00mn over string of data breaches: The US telecoms watchdog has fined AT&T $25.00mn for failing to prevent a string of data breaches affecting 280,000 of its customers, whose confidential data were used to facilitate the trafficking of stolen mobile phones. Brussels to probe proposed TeliaSonera and Telenor joint venture: The European Commission has launched an in-depth investigation into a proposed joint venture between TeliaSonera and Telenor in Denmark over concerns the deal between the two telecoms companies could lead to increased prices and reduced innovation. Slovak Telekom set for flotation as Deutsche Telekom talks end:Â Slovak Telekom is heading for a public flotation after the government decided to sell its 49.0% shareholding in Slovakia’s largest telecom company. |
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Lex VMware: looking up to the cloud: Add VMware to the list of once-dominant software companies struggling to adapt to the cloud era. VMware mainly sells software to run data centres efficiently, but most of these are on-premises private-data centres, whereas most of the growth in computing is in shared-data centres – the “public cloud.” One promising area is data centre management software, which VMware sells to one in seven of its vSphere customers. The company has also developed hybrid cloud software that helps companies with on-premises data centres to bridge the gap to the public cloud. But VMware lacks a great product in the public cloud, where the market is dominated by competitors such as Amazon Web Services. The firm’s core technology – virtualisation – is also under pressure from competing technologies. A Nomura survey found that one in four respondents had seen vSphere lose business because of competing “container” technology. For now, VMware will still be able to grow, thanks to its dominant position in on-premises data centres. But the world may be changing faster than VMware can keep up. Biosimilar drugs: spot the difference: Big pharma groups crushed by patent expirations in the first decade of this century spent the second rushing into biotech. Biotech medicines – proteins grown from live cells – had effectively infinite patents. There was no regulatory route to market for copies of drugs with expired patents. In the US, the Affordable Care Act of 2010 set up a path. And finally, last month, the US authorities approved a biosimilar of Amgen’s Neupogen, a drug with more than $1.00bn in annual sales. Given these ambiguities – and the fact that biosimilars are tricky and expensive to become approved and to produce – the market has been sanguine about the impact of biosimilar competition on originators’ profits. Shares in groups reliant on biomedicines with patents near expiry (AbbVie and Roche, say) appear unperturbed. This relaxed view may be mistaken. Big companies with lots of biotech experience – Amgen, Roche, Biogen Idec – are committing piles of capital to biosimilars. In Europe (where these have been taking hold, slowly, since FY07) a biosimilar for Merck’s blockbuster Remicade is starting to hit sales hard. Biosimilars will grow gradually, but the issue is less about market share than how a cheap alternative affects the original’s price. Renault reform: hostage to government: This week it temporarily lifted its equity stake in Renault to 20.0%, from 15.0%, purely to block an annual meeting resolution by Renault that would curb Paris’s sway over the carmaker. The Florange law echoes proposed changes to the EU’s shareholder rights directive. But far from rewarding investor loyalty it comes across as protectionism, and can entrench the grip of dominant shareholders at the expense of minority investors. Paris will sell the extra stake after it has blocked the resolution – never mind what is right for Renault’s wider investment case. Yet for all its defence of progressive, long-term capitalism, the French state’s action sends a negative signal to would-be investors. By contrast, Italy’s reformist Matteo Renzi-led government in February heeded the calls of investors and abandoned a provision that would have allowed companies to award double voting rights on the say-so of an (easily mustered) 50.0% majority, from two-thirds previously. It has also tackled another aspect of Italy’s anachronistic governance with its reform of Italy’s popolari mutual banks – so sending an investor-friendly sign. |