By Anchor Capital
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South African Market ReviewSouth African markets closed lower on Friday. Banking sector stocks, Barclays Africa, Nedbank Group and Standard Bank lost 2.3%, 1.9% and 0.2%, respectively. Naspers dropped 2.1%, after rising sharply on Thursday. Investec declined 1.3%, after indicating that a weaker rand would affect group results. However, Sasol advanced 4.1%, tracking higher oil prices. Anglo American and BHP Billiton gained 2.2% and 1.4%, respectively. Redefine Properties, Growthpoint and Rockcastle Global rose 2.2%, 1.4% and 1.1%, respectively. The hotel chain company, Sun International added 2.1%, following its announcement that definitive agreements in relation to the acquisition of the Peermont Group have been concluded. The JSE All Share Index fell 0.2% to close at 52,631.78.
UK Market ReviewUK markets finished higher on Friday, with the FTSE 100 index crossing the 7,000 level for the first time. Mining sector stocks, Anglo American and BHP Billiton jumped 5.2% and 3.6%, respectively. CRH advanced 5.1%, after Lafarge and Holcim agreed upon the newterms for their planned merger. Tullow Oil climbed 3.5%, after the firm stated that it had successfully negotiated for access to $4500.00mn in fresh financing from existing lenders. Lloyds Banking Group, the largest investor in TSB Banking Group, rose 1.4%, after the latter agreed to Spain-based Banco de Sabadell’s GBP1.70bn takeover bid. Bucking the trend, Imperial Tobacco Group and British American Tobacco dropped 1.6% and 0.3%, respectively. The FTSE 100 Index advanced 0.9% to close at 7,022.51.
US Market ReviewUS markets ended higher on Friday. Biogen Idec climbed 9.8%, after the biotechnology company announced promising results of an early-stage study of its drug to treat Alzheimer’s. Transocean, National Oilwell Varco and Range Resources advanced 5.9%, 3.7% and 3.6%, respectively, in line with a rise in oil prices. Darden Restaurants gained 2.9%, after it posted better-than-expected 3Q15 profit and raised its FY15 earnings guidance. Simon Property rose 2.7%, after the firm raised its takeover offer for Macerich. However, Tiffany & Co. declined 4.0% after it issued a weak earnings outlook for FY16.The S&P 500 Index rose 0.9% to settle at 2,108.10, while the DJIA Index gained 0.9% to close at 18,127.65. The NASDAQ Index advanced 0.7% to finish at 5,026.42.
Asia Market ReviewMarkets in Asia are trading higher this morning, taking cues from Friday’s gains on Wall Street. In Japan, Aeon Company jumped 4.1%, even after reports indicated that the company might miss its FY15 profit outlook. Sharp Corporation gained 3.8%, amid news that Taiwanese company, Hon Hai Precision Industry, is mulling buying stake in the company. In Hong Kong, China Overseas Land & Investment and China Resources Land advanced 3.8% and 3.7%, respectively, after reports that China was set to unveil policies to encourage the housing market. In South Korea, KEPCO Engineering & Construction and Samsung Electronics gained 1.6% and 0.3%, respectively. The Nikkei 225 Index is trading 1.0% firmer at 19,759.15, while the Kospi Index is trading 0.1% higher at 2,039.50. The Hang Seng Index is trading 0.6% in the green at 24,515.28.
CommoditiesAt 06:00 SAST today, Brent crude oil fell 0.6% to trade at $52.88/bl, after Saudi Arabia’s oil Minister on Sunday stated that the Organisation of the Petroleum Exporting Countries (OPEC) would not take sole responsibility for propping up the oil price. On Friday, Brent crude oil rose 1.4% to settle at $53.19/bl, as the US dollar weakened against a basket of major currencies.On Friday, the Illinois North Central No.2 Yellow corn spot prices rose 3.7% to $3.63/bushel.At 06:00 SAST today, gold prices declined 0.1% to trade at $1,181.85/oz. On Friday, gold gained 1.0% to close at $1,182.54/oz, helped by the US dollar’s weakness.
On Friday, copper rose 3.3% to close at $6,073.50/mt. Aluminium closed 0.7% higher at $1,791.75/mt.
CurrenciesOn Friday, the South African rand strengthened against the US dollar, amid uncertainty about when the US Fed will begin to increase interest rates. Going forward, market participants will eye existing home sales data in US for February, scheduled later today, for further direction.The yield on benchmark government bonds fell on Friday. The yield on 2015 bond declined to 6.08% while that for the longer-dated 2026 issue fell to 7.77%.At 06:00 SAST, the US dollar is trading 0.2% higher against the South African rand at R12.0459, while the euro is trading 0.3% higher at R13.0413.
On Friday, the euro advanced against most of the major currencies, but it declined against the South African rand. The Euro was supported against most of the majors on fresh hopes that Greece would secure the additional international funds needed to avoid bankruptcy. Additionally, the EU revealed that it made $2.00bn of unused funds available to Greece to help the country avert a cash crunch. Meanwhile, data showed that Germany producer prices rose less than expected for February and the seasonally adjusted current account surplus widened in January.
At 06:00 SAST, the euro advanced 0.1% against the US dollar to trade at $1.0827, while it has advanced marginally against the British pound to trade at GBP0.7241.
Economic UpdatesThe public sector net borrowing in the UK has posted a surplus of GBP6.20bn in February, from a revised deficit of GBP8.90bn in the prior month. Market anticipations were for public sector net borrowing to announce a surplus of GBP7.70bn.The trade deficit in Spain widened to EUR2.60bn in January, from a trade deficit of EUR1.82bn in the prior month.Italy has registered current account surplus of EUR0.05bn in January, following a current account surplus of EUR5.18bn in the previous month.
The producer price index in Germany recorded a rise of 0.1% in February on a monthly basis, less than market expectations for a rise of 0.2%. The producer price index had registered a drop of 0.6% in the previous month.
The seasonally adjusted current account surplus in the eurozone expanded to EUR29.40bn in January. The eurozone had registered a revised current account surplus of EUR22.50bn in the previous month.
The Chicago Federal Reserve Bank President, Charles Evans, resorted to a dovish tone in his statement where he opined that a delay in the timing of an interest-rate rise in the US is unlikely to hamper the central bank’s ability to keep inflation in check.
The Atlanta Federal Reserve Bank President, Dennis Lockhart, stated that the US Fed might consider raising its key interest rate in its June’s, July’s or September’s policy meeting. He further hinted that the central bank’s recent downbeat US economic growth forecasts are unlikely to delay the timing of a rate rise in the nation.
On a monthly basis, the seasonally adjusted core consumer price index (CPI) in Canada registered a rise of 0.1% in February. Core CPI had risen 0.2% in the prior month.
On a monthly basis, in Canada, retail sales recorded a drop of 1.7% in January, more than market expectations for a fall of 0.8%. In the prior month, retail sales had fallen by a revised 1.8%.
The CPI rose 0.9% on a monthly basis in Canada, in February. In the prior month, the CPI had dropped 0.2%.
The Westpac consumer confidence index advanced to 117.40 in 1Q15, in New Zealand, compared with a level of 114.80 in the prior quarter.
Corporate UpdatesSouth AfricaInvestec Limited:
The asset management company indicated that its Wealth & Investment and Asset Management are expected to report results ahead of the prior year led by higher levels of average funds under management, supported by net inflows. Its overall global Specialist Banking business is also expected to report results ahead of the prior year, with the South African Specialist Banking business likely to report results substantially ahead of the prior year in Rands, while the UK Specialist Banking business is expected to report results behind the prior year. However, group results have been negatively impacted by the depreciation of the average Rand/Pounds Sterling exchange rate. Sun International Limited: The hotel chain company announced that through its wholly owned subsidiary, it would acquire 100.0% of the Peermont Group and that definitive agreements in relation to the acquisition have been concluded. To fund the acquisition, the company intends to roll over nearly R3.90bn of Peermont’s senior debt while taking on a fresh facility of about R575.00mn.In addition; it plans to issue 10.50mn shares of R120.00 each of Sun stock to Peermont shareholders and a rights offer for a further R3.75bn.
Advtech delays results as rumours swirl:
Speculation is growing that Advtech is on the radar of a potential foreign buyer, as mystery continues to surround the delay in the release of the school group’s year-end results.
Transfer window opens at SA’s big banks:
Sizwe Nxasana’s resignation as CEO of FirstRand may be the first of several changes in the banking sector’s leadership.
Amplats’ Zimbabwe unit says would take two years to build smelter:
Anglo American Platinum’s Zimbabwe unit said it would take two years to build a new smelter to comply with President Robert Mugabe’s demands for firms to process platinum locally.
UK and US
Tiffany & Co.:
The jewellery company, in its FY15 results, indicated that net sales increased 5.4% from the preceding year to $4.25bn. Its GAAP diluted net EPS stood at $3.73, compared with $1.41 recorded in the previous year. For FY16, the company expects minimal growth in non-GAAP diluted net EPS from the $4.20 (excluding charges) earned in FY15.
Darden Restaurants:
The restaurant company, in its 3Q15 results, stated that sales were up 6.9% to $1.73bn, compared with the same period of previous year. Its diluted EPS from continuing operations was $1.01, compared with $0.65 posted in the corresponding period of last year. The company projects 4Q15 diluted EPS to be in the range of $0.91 to $0.94, an increase of between 69.0% and 74.0% from the 4Q14 and have increased expectations for FY15.
American Electric Technologies:
The custom designed power delivery solutions company, in its FY14 results, stated that total revenue dropped 3.4% from the prior year to $57.25mn. It incurred a net diluted loss from continuing operations of $0.29/share, compared with diluted EPS of $0.56 reported in the previous year.
Apple Inc.:
Media reports revealed that within 24 hours of the technology company launching its platform for health research this month, tens of thousands of iPhone users had signed up to take part in five inaugural studies involving some of the US’s most respected medical institutions.
Biogen Idec:
The biotechnology firm revealed data from a pre-specified interim analysis of PRIME, the Phase 1b study of aducanumab (BIIB037), in which aducanumab demonstrated an acceptable safety profile and positive results on radiologic and clinical measurements in patients with prodromal or mild Alzheimer’s disease (AD).
Simon Property Group:
The real estate company announced that it has sent a letter to the Macerich company outlining its best and final offer to acquire all of the outstanding shares of Macerich for $95.50/share in cash and Simon shares.
Viggle Inc.:
The media company’s founder, Executive Chairman and Chief Executive Officer, Robert F.X. Sillerman, has proposed to acquire, either individually or through his affiliates, 25.0% of the company’s Wetpaint business for $10.00mn in cash. In addition, as part of his proposal, he would receive an option to acquire the remaining 75.0% of Wetpaint within 24 months for $40.00mn.
Amec Foster Wheeler:
The energy company announced that Neil Carson, a non-Executive Director since 31 August 2010, would assume the roles of senior independent Director and Chairman of the remuneration committee with effect from the close of the annual general meeting to be held on 14 May 2015.
CSR Plc:
The semiconductors company announced that it would cease reporting 1Q and 3Q results, following removal of the requirement for companies to publish an Interim Management Statement, as announced by the FCA in November 2014. Furthermore, it would provide a trading update at its AGM on 20 May 2015.
F&C Commercial Property Trust Limited:
The real estate company stated a monthly interim dividend of 0.50p/share to be paid on 30 April 2015.
Financial Times
Dyson helps launch design engineering school at Imperial College:
Sir James Dyson is helping to tackle the huge shortfall of engineers in Britain by donating GBP12.00mn to set up a design engineering school in London.
FCA inundated with claims of possible market abuse:
The number of reports that flag possible market abuse sent to the UK financial watchdog for scrutiny have soared by 24 % in the past year, continuing its sharp upward trajectory since the financial crisis.
Liberty Global wants to take ITV programmes to Europe:
US cable group Liberty Global wants to distribute ITV’s best programmes across Europe, but sees the British broadcaster as too “pricey” to acquire outright, its Chief financial officer has suggested.
Samsung steps up digital health drive:
Samsung’s efforts in digital health are being led by its Strategy and Innovation Center, based in Palo Alto, California.
CNCC closes in on Pirelli takeover:
China National Chemical Corporation has reached an agreement with the controlling shareholders of tyremaker Pirelli with the aim of undertaking a EUR7.00bn takeover of the Italian group and delisting it from the Milan stock exchange.
Bolloré faces activist challenge at Vivendi:
Vincent Bolloré, the French financier who chairs Vivendi, is facing a challenge to his strategy for the media giant from a dissident shareholder concerned about his outsize influence at the company.
Uber in tie-up with Times of India digital arm:
Uber is set to announce its first investment tie-up in India, striking a deal with the Times of India media group as the taxi-hailing app tries to fend off fierce competition from local rivals and leave behind a rash of recent bad publicity in its second-largest market by users.
Myanmar social media platform to float on UK’s Aim:
Myanmar’s only social media platform in the local language is planning an initial public offering on London’s Aim, as it seeks to exploit the investment that is pouring into the country’s telecommunications infrastructure and bringing millions of people online.
CityFibre raises concern about impact of BT-EE merger:
CityFibre, the UK-listed fibre telecoms group, has complained to the British antitrust watchdog about the potential impact of BT’s acquisition of EE on the UK broadband market.
Trafigura says European trading rules have ‘little justification’:
In a report published on Monday, Trafigura, one of the world’s leading commodity traders, said there was “little justification” for proposals that would impose substantial requirements but not reduce risk in the financial system.
Sydney seeks to become Asia finance hub with Barangaroo project:
The first of seven skyscrapers at the Barangaroo development on Sydney’s waterfront is almost complete, bringing a two-decade-old dream to create a financial services hub to rival the best in Asia closer to fruition.
Hardline New York regulator Lawsky targets Deutsche Bank over Libor:
Benjamin Lawsky, the New York regulator known for taking a hard line against overseas banks, has shouldered his way into the long-running Libor scandal, investigating Deutsche Bank for alleged manipulation of the benchmark borrowing rate, according to people familiar with the matter.
Thor bets on French economy with Paris nightclub purchase:
The home of one of France’s best-known nightclubs, Le Queen in Paris, has been bought by New York real estate investor Thor Equities.
Global fund managers warn of a bond bubble:
A growing number of professional investors are warning that bonds are overvalued as fears grow that a fixed income bubble will collapse in a disorderly sell-off.
Tullow Oil:
Rallied 3.5% to 320.30p after it agreed a $450.00mn extension to its debt facilities and relaxed a debt covenant.
Next:
Lost 0.5% to GBP72.75 after Thursday’s cut to FY16 sales guidance.
LexUS fitness clubs: spinning out of control:
Fitness “studios”- featuring spinning, boot camps, ballet training, and other pricey tortures – have become an important way for Americans to get into shape. The studios business model is just as revolutionary as its classes, leaving traditional gyms out of breath. Town Sports, which operates a chain of well-known gyms in the northeast, is in a bigger hole. Since FY12 its membership is down a 10th to around 500,000 members, while earnings before interest, tax, depreciation and amortisation have halved to around $50.00mn. With its shares down a third in the past two years, it may also sell itself. The traditional fitness chain model can be attractive. Revenue is derived from a joining fee (say $200.00) and monthly dues ($50.00 to $100.00), with personal training sold on top. The trick is managing attrition, which can run to 35.0% – 50.0% a year. Town Sports has responded by rolling out both its own studio concept and a low commitment/monthly fee tier. Like pharmacy chains, Lifetime believes it can rebrand itself as a total health/wellness centre that appeals to corporations. Regardless, any fitness enterprise that charges money seems like a fad that will die once Americans realise jogging around the block is free.
Auto Trader: deals on wheels:
For Auto Trader, the UK’s top online advertiser for used vehicles that should mean more business. Its shares, which debuted on the London market on Thursday, were well received, jumping 9.0% above the IPO price of 235.00p. The dip in new car sales after the financial crisis held back the supply of used cars. Sales of the latter collapsed over a 10th between FY06 and FY12. Last year sales ramped up nearly 3.0%, however. Pendragon, the UK car dealer, expects the trend to continue. Already, Auto Trader’s operating profits in the nine months to December have grown by a quarter from a year earlier. Not those new car sales have halted. Low finance rates means more people buy new cars in the UK with monthly payments via leasing schemes, handing the car back at the end of the period, usually three years. Eventually the added supply from these leased vehicles will weigh on prices, but probably not for another year at least, thinks the used car auction group Manheim. Auto Trader has most of the road to itself. But it will have to keep its pedal to the metal to stay ahead.
Holcim/Lafarge: start the mixer:
Management, in many industries, is just not that important. This is hard to accept. That said, the most important thing about the compromise that appears to have salvaged the deal between Holcim and Lafarge is that the leadership of the new company was shuffled around. How it was shuffled around is not important for investors in the companies (as it happens, Lafarge boss Bruno Lafont, who was to be Chief Executive of the combined company, will instead be co-non-Executive chairman, and Lafarge will propose an alternative Chief). But that it was shuffled around suggests that one of the two boards managed to grasp that the deal, not the people, mattered. The changed share exchange ratio is also rational. Giving Lafarge shareholders 0.9 shares in the new company for each one of their current shares, rather than the previous 1, means they will own about 44.0% of the new company, down from 47.0%. Given the lower earnings Lafarge is bringing to the combination, its weaker cash generation, and huge exposure to oil-dependent regions in the Middle East, this still looks like a decent deal for the smaller company. Some Lafarge shareholders may grouse that, given the leadership changes and lower ratio, this is a takeover without a premium. They are missing the point
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