By Anchor Capital
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South African Market Review South African markets closed higher on Friday, as global markets rebounded following a win for the Conservative party in the UK parliamentary election. Niveus Investments surged 5.3%, after it announced that it expects its FY15 headline EPS to be between 20.0% and 30.0% higher from the prior year. Among gold miners, Harmony Gold climbed 2.6%, despite reporting a diluted headline loss in 3Q15. However, peers, Gold Fields and Sibanye Gold eased 1.0% and 0.1%, respectively. Financial sector stocks, Old Mutual and Sanlam gained 2.3% and 1.9%, respectively. On the flip side, Kumba Iron Ore dropped 3.5%. The JSE All Share Index rose 1.0% to close at 53,790.57. |
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UK Market Review UK markets surged on Friday, as investors welcomed news that Prime Minister, David Cameron’s Conservative Party would remain in power in the UK Parliament. Babcock International Group topped the gainers, rising 9.4%. Centrica rallied 8.1%, as the Labour Party’s defeat removed the prospect of an energy price freeze and tighter regulations. Property sector stocks finished sharply higher, with Barratt Developments and Persimmon advancing 7.1% and 5.6%, respectively. Royal Bank of Scotland Group and Lloyds Banking Group climbed 6.1% and 5.8%, respectively. InterContinental Hotels Group added 2.1%, after reporting a 5.9% growth in revenues per available room in 1Q15.The FTSE 100 Index advanced 2.3% to close at 7,046.82. |
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US Market Review US markets ended in the green on Friday, following a rebound in US jobs growth and a drop in the unemployment rate to a near seven-year low. Visa Inc climbed 4.3%, following reports that it is in initial talks to buy former subsidiary, Visa Europe, valued at about $20.00bn. The e-commerce company, JD.com Inc advanced 2.0%, after it revealed that its 1Q15 net revenue increased substantially from the same period a year ago. However, Nvidia Corporation slumped 7.4%, after it provided a weak 2Q15 sales outlook. The S&P 500 Index advanced 1.3% to settle at 2,116.10, while the DJIA Index climbed 1.5% to close at 18,191.11. The NASDAQ Index gained 1.2% to finish at 5,003.55. |
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Asia Market Review Markets in Asia are trading firmer this morning, after the People’s Bank of China announced a third interest rate cut in six months over the weekend. In Japan, Minebea surged 7.8%, after it offered a better-than-expected full-year profit guidance. Mitsubishi advanced 3.1%, after it stated that it will repurchase as much as 2.8% of its shares. In Hong Kong, Wynn Macau added 0.4%, despite reporting a significant decline in its 1Q15 net revenue. In South Korea, Daewoo Securities and Mirae Asset Securities climbed 4.0% and 2.3%, respectively. The Nikkei 225 Index is trading 1.2% firmer at 19,608.87, while the Kospi Index is trading 1.0% higher at 2,106.11. The Hang Seng Index is trading 0.5% in the green at 27,714.63. |
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Commodities At 06:00 SAST today, Brent crude oil fell 0.4% to trade at $64.08/bl. In a noteworthy development over the weekend, China’s central bank cut its benchmark interest rate by 0.25% to boost economic growth in the nation. On Friday, Brent crude oil rose 0.2% to settle at $64.31/bl. On Friday, the Illinois North Central No.2 Yellow corn spot prices rose 0.7% to $3.47/bushel. At 06:00 SAST today, gold prices marginally declined to trade at $1,188.36/oz. On Friday, gold gained 0.3% to close at $1,188.39/oz, recovering from two days of losses. On Friday, copper declined 0.2% to close at $6,391.50/mt. Aluminium closed 0.2% higher at $1,859.50/mt. |
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Currencies On Friday, the South African rand strengthened against the US dollar. Data showed that the US economy added less than expected jobs in April, while the unemployment rate declined in line with market estimates. With little on the economic calendar today, investors will keep a tab on the US monthly budget statement and manufacturing production data in South Africa, scheduled tomorrow, for further direction. The yield on benchmark government bonds fell on Friday. The yield on 2015 bond declined to 6.02% while that for the longer-dated 2026 issue fell to 8.08%. At 06:00 SAST, the US dollar is trading 0.4% higher against the South African rand at R11.9697, while the euro is trading 0.1% lower at R13.3429. At 06:00 SAST, the British pound has gained 0.1% against the South African rand to trade at R18.4573. On Friday, the Pound strengthened against the major currencies, after the Conservative party won more than half the seats in the Parliament election held on Thursday, easing concerns about political instability in the UK. Moving ahead today, the Bank of England’s interest rate decision and eurozone finance ministers meeting to discuss the reform deal with Greek officials will attract market attention. At 06:00 SAST, the euro slipped 0.5% against the US dollar to trade at $1.1144, while it has weakened 0.3% against the British pound to trade at GBP0.7228. |
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Economic Updates In South Africa, the net gold & forex reserves rose to a level of $41.93bn in April. In the prior month, the net gold & forex reserves had registered a level of $41.28bn. The UK posted a total trade deficit of GBP2.82bn in March, following a revised total trade deficit of GBP3.32bn in the previous month. Market anticipation was for the nation to record a total trade deficit of GBP2.40bn. The non-seasonally adjusted unemployment rate recorded a drop to 3.3% in April, in Switzerland, compared with a level of 3.4% in the previous month. Market anticipation was for unemployment rate to fall to a level of 3.3%. The consumer price index in Switzerland unexpectedly eased 0.2% in April on a monthly basis. In the previous month, the consumer price index had advanced 0.3%. In March, on a monthly basis, the seasonally adjusted industrial production climbed 0.4% in Italy, compared with a revised rise of 0.7% in the previous month. Markets were expecting industrial production to advance 0.2%. On a monthly basis in Germany, the seasonally adjusted industrial production unexpectedly dropped 0.5% in March. In the prior month, industrial production had registered a revised unchanged reading. Germany reported the seasonally adjusted trade surplus of EUR23.00bn in March, from a revised trade surplus of EUR19.50bn in the prior month. Markets were anticipating the nation to post a trade surplus of EUR20.00bn. Average hourly earnings of all employees in the US advanced 0.1% in April on a monthly basis, less than market expectations for a rise of 0.2%. In the previous month, average hourly earnings of all employees had registered a revised rise of 0.2%. The unemployment rate fell to a level of 5.4% in the US, in April, compared with a reading of 5.5% in the previous month. Market expectation was for unemployment rate to drop to 5.4%. Non-farm payrolls advanced by 223.00k in the US, in April, compared with a revised advance of 85.00k in the prior month. Markets were expecting non-farm payrolls to rise 230.00k. On a monthly basis, the consumer price index registered an unexpected drop of 0.2% in April, in China. In the previous month, the consumer price index had fallen 0.5%. |
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Corporate Updates South Africa AngloGold Ashanti : The gold mining company, in its 1Q15 results, indicated that it adjusted headline earnings was $35.00mn, compared with a loss of $117.00mn in the previous quarter. Its production was 969,000oz, more than the company’s guidance of between 900,000oz and 940,000oz. The company stated that it would continue to focus on delivering real operational efficiencies and tight cost management, while ensuring it benefits from weaker producer currencies and lower oil prices. The company also maintained its FY15 guidance for production, costs and capital expenditure.Kumba Iron Ore Limited: The mining company, in its trading statement for six months ended 30 June 2015, revealed that both headline earnings and basic earnings are likely to be at least R1,302 million (around 20%) lower than the same period of preceding year due to the significant decrease in export iron ore prices during the period. Harmony Gold Mining: The gold mining company, in its 3Q15 results, indicated that its revenue dropped 10.5% to R3.43bn from the same period a year ago. It reported a diluted loss of R0.61/share, compared with diluted EPS of R0.07 posted in the corresponding period of previous year. The company revealed that it recorded a diluted headline loss of R0.60/share, compared with diluted headline EPS of R0.12 reported in the same period of last year. Furthermore, its gold production was down 9.7% to 7,642kg from 2Q15 due to slow start-ups after the December 2014 holidays and safety stoppages. Niveus Investments Limited: The investment holding company, in its trading statement for FY15, indicated that its headline EPS is expected to be between R0.69 and R0.74, compared with R0.57 reported in the previous corresponding period. Net 1 UEPS Technologies: The payment solutions and transaction processing services company, in its 3Q15 results, stated that its revenue increased 9.4% to $151.12mn from the corresponding period of prior year. Its diluted headline EPS stood at $0.52, compared with $0.37 posted in the same period of preceding year. Steinhoff International Holdings: The retailing company announced that through its wholly owned subsidiary, Ainsley Holdings Proprietary Limited, it has acquired a further 221,460 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. Following the acquisition, the company’s indirect beneficial interest in JD Group ordinary shares has increased from 87.12% to 87.21%. Adcorp Holdings Limited: The investment holding company announced the appointment of Ms N Sihlangu as an alternative Director, following Ms LM Mojela’s resignation effective from 11 May 2015. Comair requests time to consider banks’ arguments: Comair’s legal challenge against R5.00bn government guarantee granted to South African Airways continued on Friday, with the JSE-listed aviation company requesting to be given until next week to consider late arguments presented by four banks in the High Court in Pretoria. UK and US JD.com Inc.: The company, in its 1Q15 results, indicated that its total net revenues increased 61.7% to RMB36.64bn from the same period a year ago. However, it reported a non-GAAP diluted loss of RMB0.15/share, compared with loss of RMB0.09/share posted in the corresponding period of previous year. For 2Q15, the company expects net revenues to be between RMB43.50bn and RMB44.50bn, representing a growth rate of between 52.0% and 56.0% compared with 2Q14. Health Care REIT Inc.: The real estate investment trust, in its 1Q15 results, indicated that its gross revenues climbed 11.5% to $894.18mn from the corresponding period of prior year. Its diluted net EPS stood at $0.56, compared with $0.17 recorded in the same period of preceding year. The company generated normalized diluted funds from operations (FFO) and funds available for distribution (FAD) of $1.04/share and $0.92/share, respectively, and also stated that it expects to report normalized diluted FFO in a range of $4.25/share to $4.35/share, and normalized diluted FAD between $3.83/share and $3.93/share in FY15. Liberty Interactive Corporation: The company, in its 1Q15 results, indicated that its net retail sales dropped 9.0% to $2.21bn from the same period of last year. However, it reported net earnings of $152.00mn, compared with $110.00mn posted in the corresponding period of previous year. Liberty Media Corporation: The mass media company, in its 1Q15 results, indicated that its total revenue was up to $1.08bn from $1.01bn recorded in the corresponding period of prior year. However, its net earnings dropped 73.6% to $19.00mn from $72.00mn posted in the same period of previous year. NRG Energy Inc.: The energy company, in its 1Q15 results, indicated that its total operating revenue stood at $180.00mn, compared with $140.00mn recorded in the same period of preceding year. However, it posted a basic and diluted loss of $0.15/share, compared with EPS of $0.18 reported in the corresponding period of last year. For FY15, the company updated its guidance for adjusted EBITDA to $690.00mn while maintaining cash available for distribution guidance of $195.00mn. Sirona Dental Systems Inc.: The dental equipment manufacturing company, in its 2Q15 results, indicated that its revenue was down to $257.30mn from $282.70mn recorded in the corresponding period of last year. Its diluted GAAP EPS was $0.64, compared with $0.66 posted in the same period of prior year. The company reiterated guidance of FY15 local currency revenue growth of 6.0% to 8.0% and non-GAAP adjusted EPS in the range of $3.95 to $4.05. Visa Inc.: Media reports revealed that the financial services company is in preliminary talks to buy former subsidiary, Visa Europe, in a deal that could be valued at up to $20.00bn. Monsanto Co.: Media reports indicated that the company has not given up on a proposed takeover of Swiss rival, Syngenta, after its $45.00bn offer was reportedly rejected. Mylan NV: The generic and specialty pharmaceuticals company stated that it is not interested in selling its business to Israel-based, Teva, and would instead consider buying out Teva sometime in the future. BG Group Plc: The oil and gas company, in its 1Q15 results, revealed that its group revenue dropped 23.3% to $3.82bn from the same period a year ago. Its diluted EPS from continuing operations stood at 6.80¢, compared with 32.20¢ recorded in the corresponding period of previous year. Rolls-Royce Holdings Plc: The company, in its interim management statement for FY15, stated that exchange-rate movements could reduce its sales by GBP350.00mn, though it maintained its full-year earnings outlook excluding such impacts. It also indicated that as previously announced, it has reduced the headcount by approximately 1,300 as part of efforts to boost profitability of the company. InterContinental Hotels Group: The hotel company, in its 1Q15 interim management statement, indicated that it made a strong start to the year, delivering RevPAR growth of 5.9% in all regions. It stated that its gross capital expenditure guidance for FY15 is unchanged at up to $350.00mn. Man Group Plc: The investment management company, in its trading statement for the quarter ended 31 March 2015, indicated that its funds under management was up 7.1% to $78.10bn from the corresponding period of prior year. It stated the completion of the Silvermine, NewSmith and BAML fund of funds acquisitions which has helped to broaden its product offering and US footprint. The company announced that Jon Aisbitt intends to step down as Chairman and Director in May 2016. BBA Aviation Plc: The aviation services company, in its trading statement for the period from 1 January to 25 April 2015, stated that trading was in line with expectations, with revenue 5.0% lower than the same period of previous year, reflecting the fall in fuel prices and up 3.0% on an organic basis. Just Eat Plc: The takeaway food company announced the proposed acquisition of the entire issued and outstanding capital stock of Menulog Group for a total cash consideration of A$855.00mn (GBP445.00mn). Ladbrokes Plc: The betting and gaming company stated that further to the appointment of Jim Mullen as Chief Executive Officer, he has now been appointed as a Director with immediate effect. PayPoint Plc: The company announced that Warren Tucker, Chairman, has decided to step down from the board with immediate effect. It further indicated that Nick Wiles, a board member, would take up the role of Chairman immediately. Financial Times UK Treasury sells down stake in Lloyds after poll boost: The UK government has capitalised on a recent rally in Lloyds Banking Group shares to sell down its stake in the bank to below 20.0% in a move likely to be announced this week. Pru and Woodford funds to accelerate rural broadband rollout: Funds run by Prudential and Neil Woodford have agreed to back a rapid rollout of ultrafast broadband networks in rural areas of the UK. Banks plot to withdraw repo trading from London: Foreign banks operating from the City of London are plotting a managed retreat from operations that expose them to the UK bank levy, according to senior figures within the industry. Orcel’s ambitions focus on leadership beyond UBS role: Andrea Orcel has his sights set on becoming Chief Executive of a bank some day, dismissing suggestions that the grand plan of the head of UBS’s investment banking operations is to restore the investment bank to its former size or spin it off as a standalone company. Vale to divide and conquer by lifting high-grade iron ore output: Vale is keen to build up its supply of higher-quality iron ore in a move that could increase pressure on some rival producers in the global market for the steelmaking commodity. Royal Enfield roars back into global contention with sales rise: Royal Enfield’s sales accelerated like a Bullet motorcycle in the first three months of the year, with the Indian-owned bike manufacturer recording its best quarterly sales yet. Huawei Chief calls for treatment like European company: Chinese telecommunications group Huawei would invest more in Europe if it were treated like a European company by regulators, according to its Chief Executive. AT&T Mexico Chief outlines long-term plan to take on Carlos Slim: AT&T is going head-to-head with Carlos Slim in Mexico after a $4.30bn spending spree to snap up competitors, with plans for further investment in the next three years as it vies to become the market leader within a decade. Call for probe into Benetton duty-free sale: Italian regulators have been urged to investigate the auction that led to the Benetton family agreeing to sell World Duty Free group for EUR3.60bn to a Swiss buyer, amid allegations that the family holding ignored a substantially higher offer from a Chinese bidder. Just Eat: Dropped 12.0% to 436.70p after setting out plans to buy Australian peer Menulog, funded entirely by a share sale that will not be backed by its three main pre-flotation investors. Taylor Wimpey: Edged up 5.8% to 175.70p on expectations that funding will remain for the Help to Buy scheme, which assists 40.0% to 50.0% of their sales. |
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Lex Whole Foods: Youth will be served: The organic and healthy foods grocer is to introduce a new store format specifically tailored to American youngsters. Details will be filled in by late summer but expect a smaller store format with cheaper foods (and fewer types of kale salad). An Executive on the company’s conference call said the cryptic disclosure was intended to “tantalise” investors and analysts. Whole Foods shares dipped a tenth, however, so a more appropriate verb may have been “horrify”. However, since reaching $65.00 in FY13, Whole Foods shares have fallen to $43.00 (and a PE of 25.00). It is not that fresh and healthy food has fallen out of favour. Precisely the opposite has happened. But now consumers have much more choice. So Whole Foods has had to pursue initiatives it might have preferred to eschew – including hosting its first investor day in February. It has decided to cut some produce prices. This will hurt profitability but should bring customers through the doors. It is also introducing a loyalty card and has bought more national advertising. And the company still believes there is plenty of firepower left from building new stores, even as existing stores are become less productive. Whole Foods has just over 400 outlets but is aiming for 1,200. |