Tuesday, September 24, 2013

Saved by the bell ( banking stocks; RIO, WPL, SWM, h/care and RE sector reports.)

Saved by the bell ( banking stocks; RIO, WPL, SWM, h/care and RE sector reports.)

Morning Some Observations US- ADP employment report showed August payrolls were boosted with 176,000 new workers added. Tonight's Nonfarm payrolls report is forecast to have added 180,000 jobs with the unemployment rate forecast to be steady at 7.4%. Additional data showed the ISM Non-manufacturing index rose to 58.6 in August from the prior reading of 56 and better than forecasts at 55. Factory Orders fell 2.4% which was less than theforecast weakness of -3.4%. China - Chinese steel makers are producing at record levels with the production of steel reinforcement bars rising by 14% in the first seven months but still not enough to meet demand with inventories falling 35%, according to date produced by Bloomberg. Chinese authorities have authorised the reintroduction of bond futures trading from today after a lapse of 18 years in a move to allow bond investors to hedge Chinese bond holdings. The move is seen as another step in freeing up capital flows Europe - Monetary policy meetings by the ECB and the BoE left settings unchanged with the ECB saying rate will remain low for an extended period and the BoE announcing their bond buying program will remain unchanged and that they will also keep rates low amid a strengthening economy. … a bit surprised the Euro market were up so much. From the morning meeting TS Lim… ran us through his bank sector summary . June reporting season was in good health; better NIM in the 3%-7% band; repricing asset mix better and FUM leading income recovery; the average change in BDD was about -20 basis points; sustainable yields seem intact; and productivity gains still at the forefront; RIO- firstly the iron ore tour is finishing today…89% of RIO EBIT comes from iron ore; Analyst has upgraded eps by 6% in cal 13 and 5% in cal 14… So, in CY 13 epsg 11.5%, P/E 11.3x, 3.2% yield CY14, epsg 30%, 8.7x, 3.4%; the price to NPV ratio is 0.765 ; …what is also noteworthy is that the rehashed report has his unit costs too high and volumes too low … so, we envisage a further upgrade upon the analyst’s return. Bal sheet excellent with NDSF 39% and int cover 12.5x. Buy. WPL _ This is another revisit situation post results, allowing time to scrutinize . Bell Potter has a divergent BUY on this stock vis a vis UBS; C13, 8% epsg, 14.9x, 7.1% (yield inc special); CY13, 8% epsg, 13.8x, 5.7% ff yield 80% franked.. Positive attributes, (1) big ff yield; strong demand pricing outlook for LNG in Asia Pac…and in fact that looks the case out to 2020/25 (3) strong balance sheet. SWM Again Bell Potter have a divergent BUY - UBS neutral. FY13, NPAT down 1%; eps down 31% but that was due to the highly dilutive issue); NOTE NOCF was 59% (342m); and the ff yield was cut from 25 to 12 cents; FY13 bad for TV, newspaper and mag advertising; but they managed to hold the profit steady in woeful times; They reduced cost base by 1.6% over pcp; ..overall EBIT down 11%; Balance sheet NDSF 43%; int cover 4.0x; they are still cutting the guts out of costs; .. and for FY14 we forecast 11% epsg, 9.2x, 5.4% yield ff.. questionable why UBS analyst has virtually a flat eps in FY15… when the crystal ball points to a pick up…we expect an upward revision by UBS down the track. Also 2 large sector reports on healthcare and Real Estate Have a pleasant weekend Regs Al.

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