By Anchor Capital
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South African Market Review South African markets closed in the red on Thursday, amid weakness in mining sector stocks. Among gold miners, Harmony Gold and AngloGold Ashanti declined 5.0% and 1.8%, respectively. Impala Platinum, Anglo American Platinum and Northam Platinum dropped 4.0%, 3.2% and 2.3%, respectively. Anglo American, Exxaro Resources and Kumba Iron Ore lost 3.9%, 3.7% and 3.2%, respectively. Redefine International shed 0.4%. The company announced the appointment of Donald Grant as its new Chief Financial Officer. However, retailers, Pick n Pay Stores and Shoprite Holdings climbed 1.8% and 1.3%, respectively. Standard Bank, FirstRand and Nedbank Group gained 1.2%, 0.6% and 0.1%, respectively. The JSE All Share Index fell 0.2% to close at 54,440.43. |
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UK Market Review UK markets closed firmer on Friday, following strong quarterly results from Lloyds Banking Group. Banking sector heavyweight, Lloyds Banking Group surged 7.1%, after the company posted robust 1Q15 underlying profit growth and revealed that it expects its net interest margin for FY15 to exceed original guidance of around 2.6%. Rentokil Initial climbed 1.6%. The company stated that it is on track to achieve its revenue, profit and cash expectations for FY15. Virgin Money Holdings added 1.3%, after the company stated that its gross mortgage lending grew by 34.0% in 1Q15. Mining sector stocks, Rio Tinto and BHP Billiton advanced 3.9% and 3.0%, respectively. The FTSE 100 Index climbed 0.4% to close at 6,985.95. |
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US Market Review US markets ended higher on Friday, as investors digested a string of economic reports and earnings results. American Airlines and Delta Air Lines rose 2.3% each. CVS Health Corporation climbed 1.2%, after it posted a 12.6% increase in its 1Q15 diluted EPS from the same period a year ago. Duke Energy Corporation gained 0.4%. The company stated that it is on track to achieve its FY15 adjusted diluted EPS guidance. On the flip side, Chevron Corporation fell 1.8%, after it announced a 35.1% drop in its 1Q15 total revenue and other income. The S&P 500 Index rose 1.1% to settle at 2,108.29, while the DJIA Index gained 1.0% to close at 18,024.06. The NASDAQ Index climbed 1.3% to finish at 5,005.39. |
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Asia Market Review Markets in Asia are trading firmer this morning, taking cues from Friday’s gains on Wall Street. On the data front, Chinese HSBC manufacturing PMI declined unexpectedly in April. In Hong Kong, property developers, Shimao Property Holdings, Evergrande Real Estate Group and Country Garden Holdings surged 8.3%, 8.0% and 7.6%, respectively. In South Korea, auto makers, Kia Motors and Hyundai Motor climbed 2.4% and 1.5%, respectively. On the contrary, SK Telecom declined 1.3%, ahead of the release of 1Q15 earnings results due later in the week. Japanese markets are closed today on account of a holiday. On Friday, the Nikkei 225 Index gained 0.1% to settle at 19,531.63, while the Kospi Index is trading 0.4% higher at 2,134.85. The Hang Seng Index is trading 0.4% higher at 28,238.74. |
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Commodities At 06:00 SAST today, Brent crude oil fell 0.2% to trade at $65.30/bl. On Friday, Brent crude oil rose 2.7% to settle at $65.40/bl, after the oil services firm, Baker Hughes, in its weekly report, indicated that the oil rig count in the US fell by 24 last week to 679, the lowest total since September, 2010. Meanwhile, investors noted a surge in supplies from Iraq and marginal rise in Libyan production despite unrest. On Friday, the Illinois North Central No.2 Yellow corn spot prices fell 1.0% to $3.42/bushel. At 06:00 SAST today, gold prices advanced 0.4% to trade at $1,183.51/oz. On Friday, gold declined 2.2% to close at $1,178.46/oz, despite a stronger US dollar. On Friday, copper rose 4.0% to close at $6,411.50/mt. Aluminium closed 0.6% higher at $1,902.25/mt. |
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Currencies On Friday, the South African rand weakened against the US dollar. On Thursday, producer prices in South Africa for March came in higher than market expectations and while its trade account swung back to a surplus for March, topping market estimates. In the US, the ISM manufacturing PMI and Reuters/ Michigan consumer sentiment index came in weaker than expected for April. Moving ahead, investors today will eye South Africa’s Kagiso manufacturing PMI and factory orders in the US, for further direction. The yield on benchmark government bonds rose on Friday. The yield on 2015 bond advanced to 6.05% while that for the longer-dated 2026 issue rose to 7.95%. At 06:00 SAST, the US dollar is trading marginally lower against the South African rand at R12.0689, while the euro is trading marginally lower at R13.5118. On Friday, the euro advanced against most of the major currencies. Media reports revealed that negotiation between Greece and its international lenders have made headway and might reach an agreement this month. Today, traders will keep a tab on the final print of April Markit manufacturing PMI across Europe. At 06:00 SAST, the euro slipped 0.1% against the US dollar to trade at $1.1188, while it has weakened 0.1% against the British pound to trade at GBP0.7381. |
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Economic Updates The trade surplus in South Africa swung to a surplus of R0.50bn in March, from a trade deficit of R8.50bn in the prior month. Markets were expecting the nation to register a trade deficit of R6.50bn. The producer price index in South Africa registered a rise of 3.1% on a annual basis in March, compared to an advance of 2.6% in the prior month. Market were expecting the producer price index to advance 2.7%. The manufacturing PMI registered an unexpected drop to 51.90 in the UK, in April. In the prior month, the manufacturing PMI had registered a revised level of 54.00. In March, number of mortgage approvals for house purchases registered an unexpected drop to a level of 61.30k in the UK. In the prior month, number of mortgage approvals for house purchases had registered a revised level of 61.50k. The net consumer credit advanced GBP1.20bn in the UK, in March, more than market expectations for a rise of GBP0.80bn. Net consumer credit had registered a revised rise of GBP0.80bn in the previous month. In April, the ISM manufacturing activity index in the US remained unchanged at a level of 51.50, lower than market expectations of an advance to a level of 52.00. The Reuters/University of Michigan indicated that, in April, the final Reuters/Michigan consumer sentiment index in the US climbed to 95.90, lower than market expectations of an advance to a level of 96.00. The preliminary figures had also indicated a rise to 95.90. In the previous month, the Reuters/Michigan consumer sentiment index had registered a level of 93.00. The final Markit manufacturing PMI eased to 54.10 in the US, in April, compared with market expectations of a fall to a level of 54.20. The preliminary figures had recorded a drop to 54.20. In the previous month, the Markit manufacturing PMI had registered a reading of 55.70. The US Federal Reserve (Fed) Bank of San Francisco President, John Williams, stated that the US central bank can raise interest rates at any of its upcoming monetary policy meetings, if the US economy shows signs of further improvement. The final HSBC/Markit manufacturing PMI index in China recorded a drop to 48.90 in April, lower than market expectations of a fall to a level of 49.40. The preliminary figures had indicated a drop to 49.20. In the previous month, HSBC/Markit manufacturing PMI index had recorded a level of 49.60. |
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Corporate Updates South Africa Transaction Capital Limited : The financial services company, in its trading statement for the six months ended 31 March 2015, indicated that it expects its basic and headline EPS from continuing operations to increase by 17.0% to 22.0% from R0.26 recorded in the same period a year ago.Steinhoff International Holdings: The retailing company announced that it has, through its wholly owned subsidiary, Ainsley Holdings Proprietary, acquired 898,541 JD Group ordinary shares in the open market at a price not greater than the proposed offer consideration of R34.00/JD Group ordinary share. The Bidvest Group: The investment holding company stated that through its wholly-owned subsidiary, it has acquired Adcock ordinary shares representing 1.12% of Adcock’s total voting rights in the open market at an average price of R51.90/share. Anglo American Platinum: The platinum mining company announced the resignation of its Chief Executive Officer of Business Unity South Africa, Ms Khanyisile Kweyama, from the board with effect from 29 April 2015. Redefine International Plc: The property investment company announced the appointment of Donald Grant as the new Chief Financial Officer, following the announcement last year that Andrew Rowell intended to resign. It stated that Donald is expected to join the company on 3 August 2015. Dangote Cement 1Q15 profit advances as revenue gains: Dangote Cement Plc, Africa’s biggest producer of the building material by sales, said net income rose 45.0% in 1Q15. BASF challenged on suppliers after miner killings: BASF SE faced questions about its sourcing of platinum from a South African mine where strikers were shot dead by police, highlighting the challenge of controlling suppliers while promoting humanitarian credentials. UK and US Chevron Corporation: The energy company, in its 1Q15 results, indicated that its total revenue and other income dropped 35.1% to $34.56bn from the same period a year ago. Its net diluted EPS stood at $1.37, compared with $2.36 recorded in the corresponding period of the previous year. CVS Health Corporation: The company, in its 1Q15 results, stated that its net revenue increased 11.1% to $36.33bn from the corresponding period of prior year. Its diluted net EPS was $1.07, compared with $0.95 posted in the same period of preceding year. The company indicated that for FY15, it currently expects to deliver adjusted EPS in the range of $5.08 to $5.19, and GAAP diluted EPS from continuing operations in the range of $4.80 to $4.91. Duke Energy Corporation: The electric power holding company, in its 1Q15 results, revealed that its total operating revenue decreased 3.2% to $6.07bn from the same period of last year. However, its diluted EPS from continuing operations was up to $1.09 from $1.05 posted in the corresponding period of previous year. The company stated that it is on track to achieve its FY15 adjusted diluted EPS guidance range of $4.55 to $4.75. VF Corporation: The clothing company, in its 1Q15 results, indicated that its total revenue rose 2.0% to $2.84bn from the corresponding period of prior year. However, its diluted EPS remained unchanged at $0.67 from the same period of previous year. For FY15, the company, on a currency neutral basis, presently expects its EPS to increase by 14.0%, compared with adjusted EPS of $3.08 posted in FY14. Aon Plc: The financial services company, in its 1Q15 results, stated that its total revenue dropped to $2.84bn from $2.94bn recorded in the same period of preceding year. However, its diluted net EPS was up to $1.14 from $1.06 posted in the corresponding period of last year. Moody’s Corporation: The financial services company, in its 1Q15 results, revealed that its revenue increased 12.8% to $865.60mn from the corresponding period of prior year. Its diluted EPS stood at $1.11, compared with $1.00 reported in the same period of previous year. The company stated that its FY15 GAAP EPS guidance remains unchanged in the range of $4.55 to $4.65. Public Service Enterprise Group: The electric services company, in its 1Q15 results, indicated that its operating earnings rose to$529.00mn from$515.00mn recorded in the same period of preceding year. Its net diluted EPS increased to $1.15 from $0.76 posted in the corresponding period of last year. Tesla Motors Inc.: The company announced that it is offering a home battery product which people can use to store energy from their solar panels or to backstop their homes against blackouts, and also larger scale versions that could perform similar roles for companies or even parts of the grid. Furthermore, EnerNOC announced that it will collaborate with the electric car company on the deployment and management of energy storage systems in commercial and industrial buildings. Lloyds Banking Group: The financial services company, in its 1Q15 results, indicated that on an underlying basis, its total income increased 2.5% to GBP4.64bn from the same period a year ago. However, its EPS was down to 1.20p from 1.60p recorded in the corresponding period of previous year. The company stated that it expects net interest margin for FY15 to exceed original guidance of around 2.6%. Capital & Counties Properties: The real estate investment trust, in its trading update for the period from 1 January 2015 to 1 May 2015, indicated that it is on track to achieve ERV target of GBP100.00mn by FY17, representing an underlying annualised growth rate of around10.0%. It indicated that its net debt as at 31 March 2015 stood at GBP397.00mn, compared with GBP352.00mn as on 31 December 2014. Rentokil Initial Plc: The company, in its trading update for 1Q15, revealed that its revenue from ongoing operations increased by 6.2% of which 2.5% was organic growth and 3.7% was from acquisitions. It stated that it is on track to achieve its revenue, profit and cash expectations for FY15. Virgin Money Holdings UK: The company, in its 1Q15 trading update, stated that its gross mortgage lending grew by 34.0% to GBP1.60bn, compared with the same period of previous year. It revealed that the asset spreads were moderately below the group’s FY15 target of around 200.00bps and indicated that it has taken action to change the business mix within its prudent risk appetite. Colt Group SA: The telecommunications company, in its interim management statement for 1Q15, stated that its revenue dropped 1.3% to EUR394.60mn from the corresponding period of prior year. Its EBITDA stood at EUR76.40mn, compared with EUR74.10mn reported in the same period of last year. The company stated that it believes the group would deliver modestly positive cash flows for FY15. GlaxoSmithKline Plc: The pharmaceutical company and Theravance announced that the US Food and Drug Administration has approved BREO® ELLIPTA® for the once-daily treatment of asthma in patients aged 18 years and older. Smiths Group Plc: The company announced the appointment of Chris O’Shea as its new Finance Director, effective from 18 September 2015. Financial Times Curtis Banks votes for IPO as Britain heads to polls: Curtis Banks Group, which is the UK’s third-largest provider of Sipps, plans to raise GBP7.50mn by issuing new equity with a share price of 190.00p on the Aim junior stock market. This implies a market capitalisation of about GBP85.00mn. Catastrophe bonds pioneer hits back at book: A pioneer of catastrophe bonds has hit back at claims that the instruments could jeopardise the stability of the global insurance industry, accusing the academics behind the highly critical research of “stoking unfounded fears”. O2 sale to break up telecom advertising partnership: A high profile three-year shared attempt by British telecoms groups to break into the lucrative mobile advertising market will come to an end with the buyout by O2, one of its founding partners. Lithuania accuses Russia of disrupting work on Baltic power cable: Lithuania has accused Russian warships of interfering with work on an undersea power cable linking it to Sweden that is intended to reduce its dependence on energy from Russia. Petronas offers C$1.00bn to native community to approve gas project: A Petronas-led natural gas partnership in British Columbia is offering a Canadian aboriginal community C$1.00bn to approve a new energy project. Warren Buffett forced to defend relationship with Brazil’s 3G Capital: Berkshire Hathaway shareholders are expressing unease at the company’s deepening relationship with private equity group 3G Capital, ahead of an expected wave of job losses at newly acquired food group Kraft. Gentrification in London exposes lenders to risky mortgages: Britain’s most overextended property owners are increasingly found in newly gentrified areas of Greater London that have seen rapid price inflation, posing a potential problem for lenders if prices fall. Ford scraps plan to build car seat that detects heart attack: Ford has quietly abandoned a project to develop driving seats that can detect heart attacks, blaming cheaper and more accurate wearable technology on a move that underlines the rapid pace of innovation carmakers need to maintain in the era of the connected car. Sainsbury set to report first full-year loss since FY05: J Sainsbury is expected to report its first full-year loss in a decade on Wednesday, as the once high-flying supermarket chain suffers from the price competition and property writedowns that afflict much of the food retailing sector. Icahn calls Apple a rare 50-year success: Apple is the sort of company that only comes along twice in a century, activist investor Carl Icahn said, adding that he was still pushing the group to use its cash to buy back more shares. BT to put case for EE acquisition to regulators: BT is preparing to submit the GBP12.50bn acquisition of the UK’s largest mobile operator to competition authorities as early as this week, triggering a deep analysis of the market position of the British telecoms company. European airlines plan new trade alliance: European airlines are drawing up plans for a new trade body after a row over the growing strength of the Gulf carriers fractured their previous alliance and prompted members, including International Airlines Group, to pull out. Lloyds Banking: Climbed 7.1% to 82.90p, after better-than-expected results helped bolster hopes of shareholder cash returns starting within the next 12 months. Aberdeen Asset Management: Edged down 2.5% to 463.10p, ahead of results due May 5. |
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Lex Walmart De Mexico: not growing pains: Mexico has many charms. Economic growth is not one of them. The IMF recently trimmed its 2015 output forecast for the country to 3.0% – an acceleration from last year, but miles short of the boom times. Oil is a key export and contributes almost a third to the government’s budget. But oil prices are down at the same time as Mexico’s production is falling in the Gulf. The result is that government spending is expected to contract for the next year or two. And despite the current administration’s effort to reform the economy, real wages remain stagnant. So why are shares in Walmart de Mexico so expensive? After they rallied sharply along with the rest of the Mexican market in the early months of the year, they trade at a sporty 24 times forward earnings estimates. This for a company that grew sales 4.0% last year, and 3.0% the year before. Profits are only growing a little faster. Sales growth accelerated in 1Q15 – but gross margins fell. Is the company itself excited about its growth prospects? Well, capital investment fell last year; its store count grew at the same middling rate as sales. Charmless combinations of growth and earnings are found at food retailers across the globe. Mexico, it appears, is not an exception. Fiat Chrysler: exhausted: Fiat Chrysler Chief Executive, Sergio Marchionne, complained this week about the auto industry’s addiction to capital spending, and called for consolidation. The message is hardly new. He has been calling for consolidation since before Fiat acquired Chrysler over six years ago. Mr Marchionne wants investors to force the industry to consolidate. That is one solution, but outsourcing basic engine design and manufacture is also an option – most customers would not know the difference. Joint ventures (such as Renault Nissan) might also be useful, but they are not always easy to pull off. Mergers and acquisitions are unlikely now that car companies are making money again. In any case, large state and family shareholdings in the sector make deal making difficult. However much Fiat Chrysler may need a deal (it burnt EUR1.00bn of cash last quarter) Mr Marchionne’s familiar message is likely to fall on deaf ears. Tesla: battery powered: Elon Musk, founder and Chief Executive of Tesla, likes dreaming up utopian visions of the future. Imagine a world with zero carbon emissions. Imagine colonising Mars. But, as Tesla shareholders know by now, execution is another matter. The company sold a respectable 10,000 electric cars in the first quarter of this year, up 50.0% from a year ago. But rising costs and a string of delays have been a problem; JPMorgan recently slashed its first-quarter earnings forecast from a loss of 31.00c/share to a loss of 38.00c. The results will be released next week. It could go wrong in several ways though. First, Tesla’s batteries are based on lithium ion technology, which powers most of today’s cell phones and electric vehicles. But other materials could eventually take its place. Second, as with electric vehicles, lots of work will be needed to generate demand in a nascent market. Some promising partnerships are under way – Tesla is getting together with utility companies, and with big energy consumers such as Target and Amazon Web Services. In Tesla’s native California, an energy storage law will also help create battery demand. But until signs of revenues and earnings are firm, Tesla’s battery business will stay in the category of utopian dreams. |