By Anchor Capital
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South African Market Review South African markets closed higher on Friday. Gold miners, AngloGold Ashanti, Gold Fields and Harmony Gold climbed 5.4%, 3.6% and 3.4%, respectively, in line with a rise in gold prices. Pick N Pay Stores rose 3.1%, after it stated that its diluted EPS is anticipated to be in the range of 168.29c to 180.32c for FY15, compared with 120.21c posted in the previous year. PSG Group gained 2.3%, after the company, in its trading statement for FY15, indicated that it expects its headline EPS to be 47.1% and 48.8% higher than the previous year. Sasol advanced 2.1%, tracking higher oil prices. However, Royal Bafokeng Platinum and Northam Platinum fell 0.7% and 0.4%, respectively. The JSE All Share Index rose 0.8% to close at 53,420.78. |
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UK Market Review UK markets finished higher on Friday, as gains in Shire and property sector stocks pushed the FTSE 100 to a record close. Shire advanced 4.8%, after US regulators stated that they would consider the firm’s application for its ‘Lifitegrast’ dry-eye disease treatment under priority review. Home builders, Barratt Developments, Taylor Wimpey, and Persimmon gained 3.1%, 3.0% and 1.4%, respectively. Bucking the trend, Kingfisher led the fallers, declining 0.8%. Mining sector stocks, Rio Tinto and Anglo American dropped 0.5% and 0.2%, respectively. The FTSE 100 Index advanced1.1% to close at 7,089.77. |
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US Market Review US markets ended in the green on Friday. General Electric jumped 10.8%, after the company indicated that it would sell most of its real estate portfolio to various buyers, including Blackstone Group and Wells Fargo & Co. for around for $26.50bn.Moreover, the company’s board authorised a new share repurchase programme of around $50.00bn. Symantec advanced 5.6%, as reports indicated that the company was exploring a sale of its Veritas business. Marathon Oil and Exxon Mobil gained 1.4% and 1.1%, respectively. Boeing rose 0.6%, after it announced that it won a $6.60bn contract from Copa Holdings. The S&P 500 Index rose 0.5% to settle at 2,102.06, while the DJIA Index rose 0.6% to close at 18,057.65. The NASDAQ Index advanced 0.4% to finish at 4,995.98. |
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Asia Market Review Markets in Asia are trading mostly firmer this morning. In Japan, Honda Motor and Nissan Motor declined 2.6% and 1.1%, respectively. However, Nippon Electric Glass climbed 17.2%, after it posted better-than-expected preliminary FY15 net income and increased its FY15 dividend. In Hong Kong, China Merchants Bank jumped 19.2%, after it announced a huge employee stock-incentive plan which helped raise CNY6.00bn. In South Korea, Hotel Shilla and Hyundai Development Co-Engineering & Construction advanced 14.6% and 9.4%, respectively, following news that they are collaborating to open the biggest duty free store in Seoul. The Nikkei 225 Index is trading marginally lower at 19,900.76, while the Kospi Index is trading 0.3% higher at 2,093.10. The Hang Seng Index is trading 0.9% higher at 27,505.91. |
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Commodities At 06:00 SAST today, Brent crude oil fell 0.1% to trade at $57.28/bl. Meanwhile, the Chief Economist of International Energy Agency (IEA), Fatih Birol, stated that world oil markets would not see a significant rise in Iranian supplies for up to five years, even if the Organisation of the Petroleum Exporting Countries (OPEC) member and world powers ink a final nuclear deal by end-June. On Friday, Brent crude oil rose 2.7% to settle at $57.34/bl, following a report that the number of oil rigs in the US declined sharply over the last four weeks. On Friday, the Illinois North Central No.2 Yellow corn spot prices fell 0.3% to $3.55/bushel At 06:00 SAST today, gold prices declined 0.2% to trade at $1,204.65/oz. On Friday, gold gained 1.1% to close at $1,207.59/oz, despite a stronger US dollar. On Friday, copper rose 0.7% to close at $6,056.00/mt. Aluminium closed 0.3% higher at $1,770.00/mt. |
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Currencies On Friday, the South African rand weakened against the US dollar. Meanwhile, data indicated that import prices in the US fell more than market expectations in March. Separately, the President of Federal Reserve Bank of Richmond, Jeffrey Lacker, cited a strong case of a mid-year rate rise in the US. However, Narayana Kocherlakota, the President of the Minneapolis Federal Reserve Bank, suggested that the central bank should wait until 2H16 before it begins to tighten its policy stance. The yield on benchmark government bonds rose on Friday. The yield on 2015 bond advanced to 6.07% while that for the longer-dated 2026 issue rose to 7.70%. At 06:00 SAST, the US dollar is trading 0.4% higher against the South African rand at R12.0373, while the euro is trading 0.3% higher at R12.7575. On Friday, the euro declined against the US dollar and the South African rand, but advanced against the British pound. Meanwhile, data released on Friday showed that industrial production in France remained unchanged in February. Additionally, Spain recorded an unexpected rise in its calendar adjusted industrial output reading on an annual basis in February. Going forward, traders will eye the industrial output data in Italy, due today. At 06:00 SAST, the euro fell 0.1% against the US dollar to trade at $1.05965, while it has advanced marginally against the British pound to trade at GBP0.7251. |
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Economic Updates The National Institute of Economic and Social Research (NIESR) has reported that NIESR estimated gross domestic product (GDP) in the UK advanced 0.6% in the December-February 2015 period. In the October-December 2014 period, NIESR estimated GDP had registered a similar rise. On a monthly basis, industrial production rose 0.1% in the UK, in February, lower than market expectations for an advance of 0.3%. In the previous month, industrial production had recorded a drop of 0.1%. On a monthly basis, manufacturing production registered a rise of 0.4% in February, in the UK, in line with market expectations. Manufacturing production had registered a revised drop of 0.6% in the prior month. In Switzerland, the non-seasonally adjusted unemployment rate dropped to 3.4% in March, meeting market expectations. Unemployment rate had registered a level of 3.5% in the prior month. In February, the calendar adjusted industrial output recorded an unexpected rise of 0.6% in Spain on an annual basis. In the previous month, the calendar adjusted industrial output had advanced by a revised 0.1%. In February on a monthly basis, industrial production in France remained unchanged, more than market expectations for a drop of 0.1%. In the prior month, industrial production had recorded a revised rise of 0.3%. The manufacturing production in France remained steady in February on a monthly basis, less than market expectations for an advance of 0.6%. In the previous month, manufacturing production had registered a revised drop of 0.3%. The import price index eased 0.3% on a monthly basis in the US, in March, lower than market expectations for a drop of 0.4%. In the previous month, the import price index had risen by a revised 0.2%. The unemployment rate remained unchanged at a level of 6.8% in Canada, in March, compared with market expectations of a rise to a level of 6.9%. In February, machinery orders in Japan slid 0.4% on a monthly basis, less than market expectations for a fall of 2.3%. In the previous month, machinery orders had registered a drop of 1.7%. The minutes of the Bank of Japan’s (BoJ) latest monetary policy meeting indicated that the BoJ would continue with its asset purchase program with majority of the members feeling confident that the central bank’s aggressive monetary easing steps were having a positive effect on the nation’s economy. |
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Corporate Updates South Africa PSG Group Limited : The asset management company, in its trading statement for FY15, indicated that its recurring headline EPS is expected to be between R5.90 and R5.97, compared with R4.49 reported in the previous year. Its headline EPS is expected to be 47.1% and 48.8% higher than R5.53 recorded in the preceding year and its attributable EPS is anticipated to be between R8.06 and R8.16, compared with R5.79 posted in the prior year.Pick N Pay Stores Limited: The supermarket company, in its trading statement for FY15, revealed that its HEPS is expected to be between 166.21c and 180.06c, compared with 138.51c recorded in the previous year. It stated that the diluted HEPS is expected to increase between 20.0% and 30.0% from 136.46c reported in the prior year. The company further stated that its diluted EPS is anticipated to be in the range of 168.29c to 180.32c, compared with 120.21c posted in the previous year. Business Connexion Group: The information and communications technology company, in its trading statement for 1H15, stated that its EPS is expected to between R0.17 and R0.19, compared with R0.52 reported in the corresponding period of previous year. It indicated that its headline EPS is expected to be in the range of R0.17 to R0.19, representing an increase of between 8.3% and 21.0% from the same period a year ago. The company stated that its normalised diluted HEPS, excluding transaction costs related to the proposed Telkom SA SOC Limited transaction and amortisation of intangible assets, is expectedto be between R0.25 and R0.27, compared with R0.21 recorded in the previous corresponding period. Growthpoint Properties Limited: Further to the announcement of the declaration of the special cash dividend and dividend re-investment alternative in respect of the three-month financial period ended 31 March 2015, the real estate company stated that the price applicable to its shareholders electing the dividend re-investment alternative and recorded in the register on 24 April 2015 is R27.25. Gold Fields Limited: The gold mining company announced that it has reached a three-year wage and other conditions of employment agreement with its registered trade unions at its South Deep mine in South Africa. Northam Platinum Limited: The mining company announced that Mr JAK Cochrane has resigned as Director, with effect from 15 April 2015. Acucap Properties Limited: The property holding company announced that a dividend of 172.63c/share has been approved in respect of the period 1 October 2014 to31 March 2015. Emira Property Fund: The company stated that Old Mutual Plc has notified the Fund that accounts under its management have increased their holdings in the Fund to 5.1%. Power crisis could swell pensioners’ returns, says Sanlam CEO: Sanlam CEO, Johan van Zyl says he sees “opportunity” in South Africa’s power crisis, as the private sector steps in to fill the gap left by a flailing Eskom. Nicolau tears into Carroll: Former Anglo Platinum CEO, Neville Nicolau, says he might have been able to save the world’s biggest platinum miner from last year’s crippling five-month strike if he had not been given the cold shoulder by Cynthia Carroll. Armed attack alarms Sibanye: About 70 armed men attacked Sibanye Gold’s gold plant in Westonaria on Friday night last week, fired on police and made off with gold. Tsogo’s bid for Sun International assets in play: Casino heavyweight Tsogo Sun locked horns with the Competition Commission this week, with ownership of two lucrative Cape casinos at stake. UK and US Apple Inc.: According to reports, Apple began accepting pre-orders for its line of smartwatches, ahead of the official 24 April release date of the device.Apple Watch received an estimated 957,000 pre-orders in the US on April 10. Google Inc.: The internet company stated that it is exploring next-generation battery technology at its Google X lab. General Electric Co.: Following the announcement that the company would sell most of its real estate portfolio worth around $26.50bnas part of a plan to cut off most of its GE Capital unit over the next 24 months, it also announced plans to buy back about $50.00bn worth of shares. Symantec Corporation: The IT security company revealed that it is considering the sale of Veritas data-storage and recovery unit, which could be valued at over $8.00bn in a sale. Boeing Co.: The aircraft manufacturing company announced that it has received an order for 61737 MAX 8 and MAX 9 airplanes from Copa Airlines of Panama which is worth $6.60bn at list prices. PG&E Corporation: The natural gas company disclosed that on 9 April 2015, the California Public Utilities Commission (CPUC) approved final decisions in the three investigations pending against it, relating to (1) the utility’s safety recordkeeping for its natural gas transmission system, (2) the utility’s operation of its natural gas transmission pipeline system in or near locations of higher population density, and (3) the utility’s pipeline installation, integrity management, recordkeeping and other operational practices, and events or courses of conduct that could have led to or contributed to the natural gas explosion that occurred in the City of San Bruno, California on 9 September 2010.The CPUC also approved a fourth decision, which imposes penalties on the utility totalling $1.60bn. GoPro Inc.: Media reports revealed that Wellington Management has increased its stake to 12.0% in the company. Tekmira Pharmaceuticals Corporation: The biopharmaceutical company announced that the US FDA has notified that the partial clinical hold on the company’s Investigational New Drug application for TKM-Ebola has been modified to permit repeat dosing of healthy volunteers at a dose of 0.24 mg/kg/day. It stated that its plans to resume the TKM-Ebola Phase I clinical trial in the coming weeks. Friends Life Group Limited: Further to the announcement of the recommended all-share acquisition of the entire issued and to be issued ordinary share capital of the company by Aviva on 2 December 2014, and following an application to the UK Listing Authority and the London Stock Exchange, the company announced that the trading of its shares on the London Stock Exchange’s main market for listed securities and the listing of its shares on the Premium Listing segment of the Official List of the UK Listing Authority, have each been suspended with effect from 10 April 2015. Vedanta Resources: The metals and mining company, in its production update, highlighted that the 4Q15 oil and gas production was at normalised level, while the FY15 production was lower due to the planned maintenance shutdown in 2Q15. It indicated that production at Zinc International was impacted by unplanned interruptions. It added that iron ore production at Karnataka has commenced, while final approval is awaited at Goa. The company stated that continued strong production in 4Q15 at Copper India has led to record annual copper cathode production. Acacia Mining: The gold mining company announced that it has continued to expand its footprint in the prospective Houndé Belt in Burkina Faso through the signing of two further earn-in agreements with Canyon Resources and Thor Explorations. Londonmetric Property: The property management company announced that it has exchanged the sale of the 268,000 sq ft Brake Bros Limited distribution facility in Harlow to Tritax Big Box REIT for GBP37.20mn. Riverstone Energy Limited: The energy investment company stated that it has committed $33.00mn from the total initial commitment of Riverstone Holdings of $100.00mn to Meritage Midstream Services III, so that Meritage III can pursue midstream opportunities in Western Canada’s emerging resource plays. Riverstone has the option to commit an additional $200.00mn to Meritage III bringing total commitments to $300.00mn. Financial Times Crystal Amber eyes new stake in Pinewood Studios: Michael Grade, the 72-year-old Chairman of Pinewood, faces the spectre of another attack from Crystal Amber after the activist investor bought enough shares in a new placement to give it a 4.0% stake in the Aim-listed studio. Most European business Chiefs back Britain in EU, study shows: More than four-fifths of business Executives in Europe wants Britain to stay in the EU, while three-quarters say an exit would hurt the UK economy, according to a new survey. Shell expected to maintain top dividend yield: Royal Dutch Shell is expected to maintain its status as the UK-listed company with the highest dividend yield this year as it seeks to finalise its GBP47.00bn takeover of smaller rival BG Group, according to Markit, the data provider. Copper market divided as industry gathers in Chile: The world’s top copper conference opens in Chile, the largest producer, on Monday as prices for the metal hover near five-year lows and miners grapple with waning demand from their most important customer, China. North Americans lead chase to buy AngloGold mine: North American gold producers are leading the chase to buy an AngloGold Ashanti mine in the US, underlining their desire to retreat to home turf and cut exposure to riskier jurisdictions. Gilead combats wider distribution of cheap drugs from EM: Under fire over the high price of its hepatitis C treatment Sovaldi, Gilead decided last year to make the drug available in 91 developing countries for $300.00 per bottle, or $900.00 per 12-week course – just 1.0% of the medicine’s $1,000 per pill US sticker price. Wallenbergs prove worthy ally for Wärtsilä: The head of Wärtsilä, a leader in land and sea power systems, has gained an important ally since rival Rolls-Royce came knocking on his door to suggest a takeover. Volkswagen power struggle deepens as Porsche weighs in: The power struggle at Volkswagen escalated over the weekend, as a rift emerged between the Porsche and Piëch families that control the carmaker and its Chief Executive signalled he does not intend to surrender his position. Beijing warns Sina to ‘improve’ censorship: China’s government has warned it will shut down one of the country’s largest and most popular online news services if it does not “improve censorship”. Asda kicks off hunt for new Chief operating officer: Asda has kicked off the hunt for a Chief operating officer to bolster its board and eventually succeed Chief Executive Andy Clarke. The UK grocer said it had begun the search after Mark Ibbotson, retail director, who was also responsible for IT and distribution, moved to US parent Walmart to become senior vice-president for innovation. European Commission decision ‘very soon’ in Google antitrust case: The European Commission will decide “very soon” whether to issue antitrust charges against Google, its digital commissioner has said, in what would be the most politically charged case undertaken by the EU against a US company. Shire: Edged up 4.8% to GBP57.00 after upbeat news on its pipeline of upcoming drugs. |
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Lex Private equity in Asia: opportunity drops: Last year brought a bumper crop for private equity in Asia. Figures from consultant Bain & Co. show that after three years of downturn, private equity exits – that is to say, the harvesting of investments – more than doubled to $111.00bn. Better yet, assets bought in the go-go years of FY05 to FY08 dropped from one-third to one-quarter of funds’ holdings. Stale investments are gradually being offloaded. And a new crop is being planted: the value of new assets bought in Asia by PE funds rose from $50.00bn in FY13 to $81.00bn. Only $40.00bn of deals were consummated worldwide. Asia was weaker still. The value of the deals done in that region dropped by two-fifths, to a measly $5.00bn. Asian exits, too, show a discouraging trend. At $7.00bn, PE firms and friends offloaded less than a third of the $23.00bn of assets they sold last year. Part of the problem is cheap money. Quantitative easing has released lots of dollars (and indeed many other currencies) to chase increasingly scarce returns. More significantly, cashed up companies are also on the hunt for the quick hit provided by an acquisition. In the first quarter of this year, for instance, Chinese and Japanese companies bought more than $60.00bn of overseas assets, a rise of nearly two-thirds from FY14. GE/JPMorgan: legends of the fall: On Wednesday, Jamie Dimon’s letter to shareholders once again defended JPMorgan’s universal banking model. That defence took on new interest when shares in another legendary US company, General Electric, rallied a tenth on Friday on news that it would largely exit financial services. The first step is a $26.00bn property sale to a Blackstone-led consortium. In FY13 GE Capital was designated as a systemically important financial institution, subjecting it to greater oversight and capital requirements. The 9:1 leverage ratio that once juiced its returns has fallen by two-thirds. At the same time, GE’s industrial businesses have suffered from weak global economies and, recently, the slump in energy prices. GE shares traded at $40.00 in FY07. They have not risen above $30.00 since. GE’s divestment process – simply getting out of finance – does not provide a template for financial supermarket JPMorgan. But a January report from Goldman Sachs said the bank could boost its value a quarter if it split its commercial, investment, and consumer units. Mr. Dimon thinks that even if JPMorgan’s price performance “has not been particularly good” and its price to book ratio is only 1, its parts are complementary. LinkedIn: learning to grow: How does this translate into a business strategy? LinkedIn users will be able to take Lynda courses to fill their skill gaps to do their job better, or to get a more interesting one. LinkedIn’s professional network holds the CVs and job details of almost 350.00mn people, along with users’ web of professional connections and data on their job searches. Lynda’s online classes would increase a user’s time on LinkedIn, and bring in more revenues from sales of its courses. Harnessing its user and company network, LinkedIn wants to become the market leader in online education, a $30.00bn addressable market, according to CFO Steven Sordello. The company has to find sources of substantial long-term growth from somewhere to justify a share price of at 60 times its FY16 earnings. LinkedIn makes money from selling data to recruiters, premium user memberships and advertising (two-thirds, one-fifth and one-fifth of revenues respectively). While it has had strong growth – 25.0% in users and 45.0% in net revenues last year – maintaining this will be a challenge. Lynda’s price tag was 10 times last year’s sales, roughly a 50.0% premium to its latest private market valuation of around $1.00bn. Lynda’s adjusted earnings margins are slender. Its courses need to succeed in engaging users the way LinkedIn hopes for it to have been money well spent. Shareholders are watching. |