Thanks Endless, Gttrain, Trees and to all regulars.
BBG Credit Suisse Report: if you’re reading this Burnett, still following this one up, hopefully something comes out soon. Will keep you posted.
It’s a short one today guys, been a bit flat stick today. Hope this is will suffice
The Australian share market has opened higher following Federal Reserve chairman Ben Bernanke's reassurances on the tapering of US stimulus measures.
Facts:
* At 10.10am AEST the benchmark S&P/ASX200 index was up 26.9 points, or 0.54 per cent, at 5008.6.
* The broader All Ordinaries index was up 26 points, or 0.52 per cent, at 4992.5.
* On the ASX 24, the September share price index futures contract was 28 points higher at 4968 with 6576 contracts traded.
* National turnover was 150 million securities worth $286 million.
Today’s Financial Calendar
(AU) - NAB business confidence, Q2 (CH) - property prices, Jun (NZ) - jobs ads, Jun (UK) - retail sales, Jun (US) - Bernanke testifies to Congress (US) - Philadelphia Fed mfg index, Jul (US) - Conference Board leading index, Jun (AZJ) - operational update (DUE) - EGM (MTA) - EGM (SFR) - investor presentation (SPN) - AGM (VES) - EGM (WPL) - quarterly production report
The Overnight Report: Bernanke Says The Same Thing, Again
The Dow closed up 18 points or 0.1% while the S&P gained 0.3% to 1680 and the Nasdaq added 0.3%.
Gee it’s been a white knuckle ride on Bridge Street this past week, hasn’t it? It’s as if everyone was so exhausted after the whiplash ride of a couple of weeks before they’re yet to regain the energy to even be bothered. Consolidation is nevertheless a healthy thing, and it’s no surprise that if the ASX 200 is to conquer 5000 once again it will take a bit of work. Production reports from the miners are in the frame at present, and in a couple of weeks it will all be about across-the-market earnings. With real numbers pending, it’s a good time to pause and reflect.
If Ben Bernanke’s pending testimony was behind the non-moves of the past couple of sessions, then the testimony itself is not likely to unleash any pent up energy either. Wall Street yawned, and yawned for a very simple reason. Nothing has changed.
Ever since his press conference following the last FOMC meeting. Ben Bernanke has been at pains to point out the difference between “tightening” and “tapering”, having realised that a stupid market had completely misinterpreted. Clearly he’s been particularly concerned about the sudden collapse of bond prices (spike in yields) which lends itself more to the former than the latter. As Bernanke told Congress last night, the US economy would “tank” were the Fed to tighten right now. Bond panic has been representative of a market assuming tightening.
“Tightening” means raising the Fed funds rate. The Fed has absolutely no intention of doing this soon; rather it intends to keep monetary policy “very accommodative” for the foreseeable future as long as inflation remains low. “Tapering” means, to use the analogy Bernanke must by now be sick of repeating, easing off the accelerator of bond purchases. Dropping quietly from 85 bill per month to maybe 65 bill in the first instance. The Fed still hopes to be able to begin tapering by year-end, but that will depend on the economic data. At that rate, bond purchases will take a long time to taper down to zero. At the point, QE is done. Then, and only then, can tightening be considered. An unemployment rate of 6.5% is a threshold for potential tightening, but by no means a trigger.
In other words, we are a long, long way from the Fed needing to put the brakes on US economic growth. And as Bernanke reiterated to Congress, there is no “pre-set plan”. And as I said above, everything Bernanke said to Congress last night underlines the fact that nothing has changed.
The gold market hasn’t figured it all out yet though. Last night gold shot up from 1285 to 1300 when Bernanke started talking, only to quickly reverse and fall to US$1276.10/oz, down US$16.20 over 24 hours. The bond market is getting the message nevertheless, with the ten-year yield down another 4 basis points to 2.49%.
Last night’s main data release -- housing starts -- would have also underpinned the fact the Fed is a long way from tightening. They fell 9.9% in June to an annual rate of 836,000 when economists were expecting 950,000. It’s the lowest rate since August last. These numbers are very volatile, given the impact of the apartment block subset, and starts are actually up 10.4% year on year which is pretty healthy. Australia would die for a number like that.
On the earnings front, Bank of America continued the solid bank result theme with a big profit jump and a 2.8% rise in share price. After the bell, IBM also surprised and its shares are up 2.5% in the aftermarket. American Express fared not quite so well, and its shares are down 1.3%, while Intel disappointed, and its shares have fallen 4%. All four are Dow stocks.
Over in London, it was a case of tail wags dog for once. Typically Bridge Street looks to overnight commodity price moves before deciding whether to buy or sell the likes of BHP Billiton (BHP) or Rio Tinto (RIO) on the day, but last night copper fell 1.5% after BHP joined Rio in posting better than expected copper production. The other metals saw completely mixed moves.
Spot iron ore marched stoically on, rising another US$1.40 to US$130.40/t despite BHP/Rio production numbers. Weekly US oil inventories were reported to have dropped a lot more than expected, so West Texas rose US57c to US$106.57/bbl and Brent, which is now trading a September delivery front month, rose US47c to US$108.61/bbl. The SPI Overnight rose 23 points or 0.5%, which probably means we’ll be down 4 points today.
Bernanke’s testimony moves to Q&A tonight, but one doubts there’s anything new to be said. Woodside Petroleum (WPL) will release a production report today.
BROKER ALERTS (incl. 5 x BHP, 4 x ILU and SXY reports):
CIMB Securities rates BHP as Neutral (3) -
BHP's production report looked a lot like Rio's ((RIO)) with iron ore and copper production exceeding forecasts along with coking coal. Petroleum fell short but that was to do with maintenance and weather, the broker notes.
On balance it's a good outcome, the broker suggests, and with expansion projects costed in A$, the fall in the exchange rate will reduce cash costs some 10%.
Target little changed at $36.70 and Neutral retained, with the broker preferring Rio.
Target price is $36.70 Current Price is $34.19 Difference: $2.51
If BHP meets the CIMB Securities target it will return approximately 7% (excluding dividends, fees and charges).
The company's fiscal year ends in June. CIMB Securities forecasts a full year FY13 dividend of 113.53 cents and EPS of 243.69 cents. At the last closing share price the estimated dividend yield is 3.32%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.03.
Market Sentiment: 0.5
Citi rates BHP as Neutral (3) -
It was a solid BHP production result, the broker suggests, with iron ore and copper production the stand-out (although lower copper prices offset), increased coking coal matched by weaker thermal coal, and petroleum lower than expected. The broker has made no significant forecast changes and rating and $35 target remain intact.
Target price is $35.00 Current Price is $34.19 Difference: $0.81
If BHP meets the Citi target it will return approximately 2% (excluding dividends, fees and charges).
The company's fiscal year ends in June. Citi forecasts a full year FY13 dividend of 114.50 cents and EPS of 229.01 cents. At the last closing share price the estimated dividend yield is 3.35%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.93.
Market Sentiment: 0.5
JP Morgan rates BHP as Neutral (3) -
BHP delivered a strong June quarter production report. The highlight was iron ore with a significant increase in both shipments and mine production. Despite this, JP Morgan retains a Neutral rating and relative preference for Rio Tinto ((RIO)) based on valuation metrics. The price target is steady at $42.00.
Expanded JImblebar iron ore production is now expected in the fourth quarter this year, ahead of schedule. Escondida copper is expected to maintain a strong performance in FY14. Target price is $42.00 Current Price is $34.19 Difference: $7.81
If BHP meets the JP Morgan target it will return approximately 23% (excluding dividends, fees and charges). The company's fiscal year ends in June. JP Morgan forecasts a full year FY13 dividend of 113.53 cents and EPS of 231.94 cents. At the last closing share price the estimated dividend yield is 3.32%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.74.
Market Sentiment: 0.5
Macquarie rates BHP as Outperform (1) -
BHP's production exceeeded the broker's forecast by 2.4% on a net basis with iron ore and met coal exceeding and copper, while strong, falling short. Petroleum also disappointed but increased spending should result in a bounce-back in FY14, the broker suggests. Forecast earnings rise 2.9% largely on increased iron ore production at a lower cost. Target unchanged at $39 and Outperform retained.
Target price is $39.00 Current Price is $34.19 Difference: $4.81
If BHP meets the Macquarie target it will return approximately 14% (excluding dividends, fees and charges). The company's fiscal year ends in June. Macquarie forecasts a full year FY13 dividend of 113.53 cents and EPS of 228.23 cents. At the last closing share price the estimated dividend yield is 3.32%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.98.
Market Sentiment: 0.5
UBS rates BHP as Buy (1) -
The June quarter was better than expected and UBS has raised earnings expectations by 1.4% for FY13 on the back of higher iron ore sales, offset by provisional copper pricing and weaker petroleum volumes. Changes to iron ore and petroleum volumes affect FY14 and FY15 estimates.
The Buy rating and $40.00 price target are unchanged.
Target price is $40.00 Current Price is $34.19 Difference: $5.81
If BHP meets the UBS target it will return approximately 17% (excluding dividends, fees and charges). The company's fiscal year ends in June. UBS forecasts a full year FY13 dividend of 112.55 cents and EPS of 225.09 cents. At the last closing share price the estimated dividend yield is 3.29%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 15.19.
Market Sentiment: 0.5
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CIMB Securities rates ILU as Upgrade to Outperform from Neutral (1) -
Zircon appears to have turned the corner, the broker suggests, with Iluka increasing sales by 143% in the first half over last year's first half. Rutile and syn-rutile sales were weak, but on a net basis the broker has lifted its forecast earnings by 56% and 31% for 2013-14. Zircon prices have risen slightly while rutile continues to fall. There is likley also more downside for TiO2 prices but Iluka and follow producer Rio ((RIO)) are reducing production, the broker notes.
The earnings upgrades increase the target to $12.65 from $10.45, leading to a rating upgrade.
Target price is $12.65 Current Price is $10.91 Difference: $1.74
If ILU meets the CIMB Securities target it will return approximately 16% (excluding dividends, fees and charges). The company's fiscal year ends in December. CIMB Securities forecasts a full year FY13 dividend of 20.00 cents and EPS of 30.00 cents. At the last closing share price the estimated dividend yield is 1.83%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 36.37.
Market Sentiment: 0.4
JP Morgan rates ILU as Overweight (1) -
The June quarter production report provided evidence of improving conditions and total production increased 15% from the March quarter. JP Morgan notes the recovery in zircon appears to be ahead of expectations with full year production guidance increasing 25%. Nevertheless, Iluka downgraded sales guidance for feedstock and reported that rutile prices have softened by 40% since the end of last year.
The Overweight rating is maintained and the stock is one of the broker's preferred in the Australian resources sector. The price target is raised to $12.85 from $12.50.
Target price is $12.85 Current Price is $10.91 Difference: $1.94
If ILU meets the JP Morgan target it will return approximately 18% (excluding dividends, fees and charges). The company's fiscal year ends in December. JP Morgan forecasts a full year FY13 dividend of 14.00 cents and EPS of 16.00 cents. At the last closing share price the estimated dividend yield is 1.28%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 68.19.
Market Sentiment: 0.4
Macquarie rates ILU as Underperform (5) -
Iluka's zircon sales were much improved in the period on inventory drawdowns but net revenues fell by 42% year on year on weaker prices and lower TiO2 sales, the broker notes. On lower prices the broker has cut forecast earnings by 42% and 60% in 2013-14 but target has increased to $9.30 from $8.90.
Management expects better zircon prices on improved sales but the market is a bit over-enthusiastic as far as the broker is concerned. Underperform retained.
Target price is $9.30 Current Price is $10.91 Difference: minus $1.61 (current price is over target).
If ILU meets the Macquarie target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).
The company's fiscal year ends in December. Macquarie forecasts a full year FY13 dividend of 19.50 cents and EPS of 5.40 cents. At the last closing share price the estimated dividend yield is 1.79%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 202.04.
Market Sentiment: 0.4
UBS rates ILU as Buy (1) -
Iluka's June quarter zircon and rutile sales were well ahead of UBS estimates. Zircon production guidance for 2013 as raised to 280,000 tonnes with sales expected to exceed production. UBS has raised 2013 earnings estimates by 7% and adjusted 2014 down 5% because of lower volumes and price.
The price target is raised to $12.00 from $10.50 and the Buy rating is retained.
Target price is $12.00 Current Price is $10.91 Difference: $1.09
If ILU meets the UBS target it will return approximately 10% (excluding dividends, fees and charges). The company's fiscal year ends in December. UBS forecasts a full year FY13 dividend of 10.00 cents and EPS of 27.00 cents. At the last closing share price the estimated dividend yield is 0.92%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 40.41.
Market Sentiment: 0.4
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JP Morgan rates SXY as Overweight (1) -
The company has published guidance for FY14. There are no real surprises for JP Morgan and a solid year of production growth is envisaged. The decision to minimise further expenditure on the Cooper unconventional program is welcomed, given the risk.
The Overweight rating is retained and the price target is reduced to 82c from 83c.
Target price is $0.82 Current Price is $0.72 Difference: $0.105
If SXY meets the JP Morgan target it will return approximately 15% (excluding dividends, fees and charges). The company's fiscal year ends in June. JP Morgan forecasts a full year FY13 dividend of 0.00 cents and EPS of 3.00 cents.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 23.83.
Market Sentiment: 0.8
QBE looking bullish - here's a quick chart:
Daily Trend: Up Weekly Trend: Down Monthly Trend: Up
