Sunset Strip - Baillieu Holst Online

Transcription

Aussie Afternoon Institutional Market Wrap
19 October 2016
Mathan Somasundaram – Baillieu Holst Quant Strategy
mathan@baillieuholst.com.au – 612 9250 8947
Sunset Strip
Market Snapshot after close & Intraday S&P 200 Chart
Categories
S&P/ASX 200
US - DOW
US - S&P 500
Canada
UK
Germany
France
China
Japan
Hong Kong
NZ
Last
5435.40
18161.94
2139.6
14752.25
7000.06
10631.55
4508.91
3085.02
1356.77
23339.16
6976.536
Daily
Change
24.60
75.54
13.10
155.73
52.51
127.98
58.68
1.14
0.20
-55.23
3.45
% Daily
Change
0.45
0.42
0.62
1.07
0.76
1.22
1.32
0.04
0.01
-0.24
0.05
Gold
1261.37
Daily
Change
-1.18
US 10 Year T-Bond
US 30 Year T-Bond
1.7443
2.5013
-0.023
-0.019
-1.29
-0.77
$A/$US
$NZ/$A
STG/$A
Euro/$A
$US/YEN
$US/CAD
0.7671
0.9393
1.6002
1.4312
103.83
1.3112
0.0004
0.0014
-0.0036
-0.0009
-0.0320
0.0002
0.05
0.15
-0.23
-0.06
-0.03
0.02
Categories
Last
% Daily
Change
-0.09
GOING ON HOLIDAY > NEXT UPDATE ON WEDNESDAY 26TH
MARKET SUMMARY
MACRO/STOCK EVENTS:
Tonight – The third and last US presidential debate of 2016 between Democrat Hillary Clinton and Republican Donald Trump
takes place in Las Vegas. Overseas data: UK unemployment rate (Aug.); US housing starts (Sept.); US MBA mortgage
applications (weekly) and Federal Reserve Beige Book. Overseas earnings: Morgan Stanley and Svenska Handelsbanken. Fed
speaker: John Williams.
Tomorrow – AUS: Employment Market, NAB Business Confidence; EU: ECB Update; US: Existing Home Sales.
MARKET FUTURES AT 4:30PM:
CHART OF THE DAY:
The chart below shows the trend of Chinese GDP growth. China’s economic growth remained stable in the third quarter, all but
ensuring the government’s full-year growth target will be hit and paving the way for a policy switch toward reining in financial
risks. Gross domestic product rose 6.7 percent in the third quarter from a year earlier, matching the median projection by
economists surveyed by Bloomberg, and smack in the middle of the government’s 2016 goal of 6.5 percent to 7 percent growth.
Services industries paced the expansion in the first nine months of the year, expanding 7.6 percent. Releases for September
showed the continuing shift in China’s economy toward consumer spending, with retail sales gains outpacing the rise in
industrial production. Investment spending continues to be led by the public sector, the figures showed, with subdued private
business spending highlighting the problem of high levels of debt.
Page 1
19 October 2016
MARKET COMMENTARY:
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Aussie Market > Market popped up on the open with US positive sentiment and then traded
sideways and choppy for the rest of the day. There is a bit of macro data out todayF.China data
were solid while Canadian rates update, UK unemployment, US housing starts, US Fed beige book
and the third US Presidential “Jerry Springer Show” debate are due tonight. Tomorrow we have
local unemployment update, ECB rate update and US existing home sales. We are in a big macro
week....there is US, China, EU, UK, Canada and Australia to take part. The data continues to
support US Fed rate hike while US Fed commentary remains mixed between slightly hawkish to
slight dovish. US inflation is beginning to get support from higher energy prices. The markets
have run ahead of themselves again on US rate cycleF.no change in Nov coming. The Dec move
may be under threat from EU changes after Italian referendumF.that’s assuming US election does
not throw up new changes. AUDUSD continues to recover on solid China outlook and weakening
USD. RBA basically flagged no rate cuts in 2016 unless the inflation data falls apart. We had a rate
cut in 2Q17Fbut now that may be challenged with better inflation and rising bond yields. Local
economy on fiscal basis should look solid with better commodity prices while the credit outlook
on personal and business basis shows that consumer spending will struggle with low wages
growth and underemployment. Markets are likely to see how things pan out before the next leg.
US markets are in potential profit taking mode and that may be a catalyst to drag the rest of the
world down in the short term. The positive news is that China is likely to maintain the support for
their economy into mid to late 2017 to help their leadership changes.
ECB Debacle > Brexit in play, Italian referendum in early Dec and French election in 2017Fthere
is more road blocks for recovery than you can poke a stick at. US Fed may never get the chance to
raise rates in 2016 if Italy plays hard ballFand 2017 may be out if French protectionism breaks
down EU all together.
GOLD SECTOR > As we have been telling clients for a number of monthsF.Iron Ore became a
buy when it bounced above $50F.Oil became a buy when it went below $40 and bouncedF.now
Gold has fallen below $1300 and we expect it to bounce back above $1300 to confirm our positive
view!!! Now back over $1260 after 2 weeks between $1245 to $1260F.Don‘t look back in anger!!!
WOW Divestments > Petrol sheds on the chopping block is getting a number of
suitorsF.Caltex, BP et al. Caltex likely to run into ACCC, but if they get the dealFCaltex is in for
another leg up to new highsFbut low probabilityFif they don’t, they might lose the supply deal!!!
TAB/TTS Deal > The deal makes sense on cost out while the issues in casino stocks will drive
investors into safe yield offered by the merged entity. Global online betting agencies are biting at
their revenue modelsF.growth is lowFmerger, job cuts and cost cutting ahead.
Casino Sector > The Chinese crackdown in large scale VIP is not new as South Korean casinos
can prove. This shows that the AUNZ casinos are getting to that scale that the Chinese are now
paying real attention. As with any regulatory risk, the businesses will work through things with
governmentsF.but the revenue models are likely to be downgraded. Flow on collateral damage
from CWN will be an overhang on SGR, SKC, DNA and RCT etc.
US Reporting Season > The reporting season is at the early stages and will be in play for the
rest of October. Stretched multiples and mature global models with rising rates will test markets in
the short term. Financials have started well and likely to support the market.
AUDUSD > Higher currency will drive more global investors into our market and they will push
up our banks on better sentiment on financials as deflation worries subside. We continue to
expect the currency to trend higher as risk appetite returns with subsiding macro worries.
BANK SECTOR > Technical down trend is brokenFthree out of the big four will go ex div in
early NovFyield trade is back onFexpect Banks to run on dividend hunters and better rates
outlook from US.
M&A Mining Services > Services sector remains in playF.BKN has a bidFnow media articles
pointing to WTP plating defenceF.more to come in this sectorF.BKN substantial in ANGF.watch
this space!!!
M&A Retail > Discretionary retail sector has performed substantially well on the housing
cycleF.Fantastic Furniture takeover is another sign of global players coming into the local market
to bring down marginsFwe continue to remain negative on the sector with property bubble risks
rising!!!
Housing Bubble > We maintain our view from early 2014 that housing bubble will start to roll
over in late 2016 with oversupply in apartments and developer financing issues!!! RBA supports
our view and warned that the bank profits may be hit and yields may suffer.
Page 2
19 October 2016
Interesting moves of the dayF
(1)
(2)
(3)
(4)
(5)
(6)
AJX (+22%) on US$3m first multifunction single-formulation agreement
TTS (+15%) on TAH/TTS merger
WSA (+9%) on quarterly activity update
TRS (-7%) on AGM update
NEC (-5%) on negative sentiment remaining in the sector despite recent divestments
ACX (-5%) on market taking profit in high growth stocks on stretched multiples
Federal government is already in trouble in multiple policy areasFregulatory risk in number of
sectors are risingF.we have already seen banks, super, education, aged care, salary packaging take a
hitF.what more could be on the bash list > tourism, retail, supermarket, gambling, energy retailers,
asset managers and construction are a few areas to keep an eye on as cross bench takes charge from
weak government!!!
Financials > Buy call maintained with US Fed backtracking and bank sector back at fair value despite
premium yield. Property trust sector remains over valued on the yield to value outlook.
Resources > Buy call maintained with US Fed backtracking and stable China outlook. We see a buying
opportunity in the resources in the pullbackF.buy area (1) Iron Ore near $50 or lower (2) Oil near $40
or lower (3) Gold below $1300
Industrials Ex Financials > Selective buy category where stocks with global diversification, small cap
thematic and quality growth/yield to value outlook are preferred options after the US Fed meeting.
Overall sector is expensive with declining ROE outlook.
Gold macro risk trade ideas since May: Daily Double > Buy gold for Brexit and Trump winF.Spot gold going to
US$1500!!!Box Trifecta > Buy gold for Brexit, US inflation and Trump winF.Spot gold going to US$2000!!!
Main thematics > central banks, stimulus, rate cycle, yield, currency, safety, global diversification, demographic changes,
Asian middle class
Preferred Sectors > Banks, Miners, Energy, Gold, Infrastructure, Specialty Consumer, Tourism, Utilities, Small Cap
Industrials, MITCH (i.e. Media, Information, Telco, Consumer and Health)
Take Profit Sectors > Residential Property, Domestic Consumer Sectors, Discretionary Retail, Supermarkets
Best picks, stock level information, sector breakdown and performance analysis
starts on page 6. The stock ideas of the day are MTR for growth/tourism thematic,
SHV for growth/food thematic, EVT for growth/tourism thematic and COM for
growth/services thematic.
Page 3
19 October 2016
MARKET MACRO SUMMARY
We maintain our long term bull market view from 2012. It was based on weakness in interest rates, currency, economic growth,
commodities and government policy while asset prices and dividend yield thematic will be the key positive drivers. Global
investors looking for yield are likely to react in line with AUDUSD.
Currency to pull back to high 60’s in back end of 2017 with local economic slowdown, recovering US and China slowdown.
Tidal wave of unemployment to push it up to 6.5% in 2016H2 and remain above 6% into 2017.
Consumer sentiment expected to remain low till 2016 due to unemployment, property bubble, falling real wages and
government policy backflips.
Property bubble in the making in parts of Australia and that will eventually come back to bite margin loan unit investors.
Strong currency and economic woes will drive RBA to cut interest rates down to 1.25% in 2017Fnext cut in 2017H1
Investors after solid return to cover rising costs will chase equity dividend yield over fixed interest investments.
Global economy is expected to experience more growth downgrades, currency wars and stimulus plans.
Iron Ore and Oil price to average below $60 over the next 12mths.
For more customised service or further macro views, please contact Baillieu Holst or refer to the latest edition of “Equity
Market Engineer, Equity Resources Engineer, Equity Financial Engineer and Equity Industrial Engineer” publications.
INVESTMENT MOTTO: “Life is all about cycles. You evolve with the cycle or the cycle runs over you.”
Page 4
19 October 2016
AROUND THE GROUNDS
Source – www.money.cnn.com
US FEAR AND GREED INDEX
Source – www.money.cnn.com
Page 5
19 October 2016
TRADING IDEA OF THE DAY
Mantra Group (MTR) – Baillieu Holst Industrial Analyst Nick Caley has BUY rating and $4.95 price target. Investment view:
BUY call retained with revised DCF valuation of A$4.93 (prev. A$5.52) and price target of A$4.95 (prev. A$5.50) – the lower
valuation results from a reduction in long-term margin assumptions in line with our forecast adjustments. Although the FY16
result beat guidance it may not have been enough to justify an immediate re-rating. It should be enough to counter the negative
impact on the share price flowing from the resignation of the CFO. We continue to view MTR as one of the purer plays on the
boom in domestic tourism which we believe is still in an early phase. The demand supply imbalance in the Australian hotel
industry is unlikely to be addressed by new short to medium-term supply and will continue to support the MTR story. Further
growth through acquisition(s) or MTR itself becoming an acquisition target remain as wild cards.
CHART IDEA OF THE DAY
Select Harvests (SHV) – Baillieu Holst Industrial Analyst Josh Kannourakis has BUY rating and $7.15 price target.
Investment view: We upgrade to BUY based on supportive industry feedback and expectations of improved market dynamics.
Our target price increases to $7.15 (prev. $6.75). The stock is trading on an attractive FY17F PE of 11.6x with 34% EPS growth
and a dividend yield of 5.3%. We note earnings risks remain high due to almond price sensitivity.
Page 6
19 October 2016
WEDNESDAY’S QUALITY IDEA OF THE DAY
Event Hospitality (EVT) – Baillieu Holst Industrial Analyst Nick Caley has BUY rating and $17.05 price target. Investment
view: BUY retained with revised DCF valuation of A$17.06 (prev. A$16.91) and price target of A$17.05 (prev. A$16.90). Whilst the
temptation is that the FY16 result may be as good as it gets, our view is that there is more in store for what we view as a quality
story with significant option value through underlying real estate. Whilst a flagship property such as QT Melbourne will take
time to warm up this should be offset by the full period inclusion of acquired hotels.
MINI CAP HIGH RISK LONG TERM GROWTH IDEA OF THE DAY
ComOps Ltd (COM) – ComOps Limited (COM) is a provider of workforce management software and services for Australian
and international customers with market cap around $11m. ComOps, under the brand names e‐‐Tivity, Microster, Rostima and
Salvus, provides effective Workforce Management Solutions including Rostering & Scheduling, Award Interpretation, Labour
Cost Management, Fatigue Risk Management, Leave Management, Time & Attendance, Employee Self‐‐Service Portals, Risk
Management & Safety Compliance and Workforce Analytics. ComOps supports more than 180 customers in over 5,800
locations globally, including leading organisations within global ports, aviation, transportation, retail, hospitality and health.The
highlights from the recent quarterly are (1) Positive operating cashflows with cash balances continuing to remain strong (2)
Second quarter closing cash balances increase to over $1.6 million (3) Continued fast tracked investment in operating
capability and development of ComOps’ new WFM product (4) 3 new logo customers signed & the overall quality of the sales
pipeline continues to improve (5) Business continuing to gain positive momentum. ( Disclaimer – I own COM shares )
Page 7
19 October 2016
Stock Performance Breakdown
MARKET MOVERS AND SHAKERS
MAJOR SECTOR PERFORMANCES OVER THE DAY
Page 8
19 October 2016
TODAY’S TOP 30 WINNERS AND LOSERS IN S&P 300
Code
AJX
TTS
EWC
WSA
BDR
SSM
WHC
SAR
GXY
IGO
SXY
APO
PRU
S32
CDD
NXT
SBM
VOC
RSG
GNC
A2M
IPD
MLX
GMA
TAH
NCM
EVN
TGA
FLT
CL1
Company Name
Alexium International
Tatts Group Ltd
Energy World Corpor.
Western Areas Ltd
Beadell Resource Ltd
Service Stream
Whitehaven Coal
Saracen Mineral
Galaxy Resources
Independence Group
Senex Energy Limited
Apn Outdoor Grp
Perseus Mining Ltd
South32 Limited
Cardno Limited
Nextdc Limited
St Barbara Limited
Vocus Comms Ltd
Resolute Mining
GrainCorp Limited
The A2 Milk Company
Impedimed Limited
Metals X Limited
Genworth Mortgage
TABCORP Holdings Ltd
Newcrest Mining
Evolution Mining Ltd
Thorn Group Limited
Flight Centre Travel
Class Limited
Code
Company Name
TRS
NEC
ACX
PDN
CWN
CCV
SKC
SIV
DUE
DRM
CGF
SGR
AAC
CTX
AMC
RCG
BSL
CAB
WES
WOR
AMA
CKF
TEN
CPU
CCP
SDA
ALU
FAR
CHC
PGH
The Reject Shop
Nine Entertainment
Aconex Limited
Paladin Energy Ltd
Crown Resorts Ltd
Cash Converters
Skycity Ent Grp Ltd
Silver Chef Limited
Duet Group
Doray Minerals Ltd
Challenger Limited
Star Entertainment Group
Australian Agricult.
Caltex Australia
Amcor Limited
RCG Corporation Ltd
BlueScope Steel Ltd
Cabcharge Australia
Wesfarmers Limited
WorleyParsons Ltd
AMA Group Limited
Collins Foods Ltd
Ten Network Holdings
Computershare Ltd
Credit Corp Group
Speedcast Int Ltd
Altium Limited
FAR Ltd
Charter Hall Group
Pact Group Hldgs Ltd
Market Cap ($m) Price ($)
155.57
5270.18
390.19
666.97
460.04
427.27
3047.36
927.14
587.22
2264.66
317.45
791.42
512.17
13149.69
496.38
1022.15
1273.17
3521.84
1213.50
1817.11
1317.20
593.22
796.83
1370.19
4084.46
16403.33
3635.95
268.49
3462.80
398.36
0.64
4.16
0.26
2.67
0.47
1.25
3.17
1.23
0.35
4.08
0.29
4.99
0.53
2.59
1.09
3.77
2.68
5.94
1.73
8.30
1.92
1.65
1.37
2.79
5.06
22.10
2.24
1.77
35.38
3.51
272.72
792.95
1111.32
274.06
8259.99
164.89
2682.81
400.89
5912.30
192.68
6071.16
4532.94
1031.41
8572.84
17962.77
874.19
4482.11
435.96
51130.17
2264.79
499.22
481.28
523.84
5905.78
934.64
549.82
1057.35
365.85
2038.83
2001.88
8.80
0.86
5.42
0.16
11.00
0.33
3.99
10.84
2.37
0.61
10.38
5.37
1.90
32.23
15.21
1.59
7.68
3.56
44.60
9.05
1.04
4.95
1.42
10.66
19.63
3.81
8.02
0.08
4.88
6.61
Daily Price
Consensus
Change (%) Target Price ($)
22.12
1.20
15.88
4.01
13.33
0.80
8.98
2.44
6.90
0.47
6.84
1.13
6.73
2.24
6.52
1.57
6.15
0.51
5.70
3.65
5.45
0.29
5.05
6.19
5.00
0.77
4.86
2.34
4.83
0.65
4.72
4.78
4.69
3.11
4.58
8.62
4.55
2.05
4.53
8.41
4.35
2.24
4.10
2.55
3.80
2.50
3.72
3.37
3.48
4.96
3.27
22.72
3.23
2.74
3.21
1.69
3.15
37.20
2.93
3.88
Consensus
Rating
Strong Buy
Hold
Buy
Hold
Hold
Strong Buy
Hold
Hold
Buy
Hold
Buy
Hold
Buy
Hold
Hold
Buy
Hold
Hold
Buy
Hold
Buy
Strong Buy
Strong Buy
Buy
Hold
Hold
Buy
Hold
Hold
Buy
2016 EPS 2017 EPS 2016 Div 2017 Div
Newsflash
GROWTH GROWTH Yield
Yield
105.83
98.53
113.64
0.00
0.00
US$3m First Multifunction, Single-Formulation Agreements
22.25
0.64
2.85
4.13
4.28
Investor Snapshot - Tabcorp & Tatts Group announce merger
N/A
N/A
N/A
N/A
N/A
Response to ASX Price Query Letter
83.44
-135.13
140.78
0.03
0.34
Quarterly Activities Report
7.50
467.49
19.23
0.43
0.43
Investor Presentation - October 2016
18.94
20.33
13.91
1.97
2.64
Results of Meeting- AGM 2016
15.93
147.51
1392.50
0.00
0.06
N/A
8.81
-15.90
306.83
0.00
0.82
N/A
10.45
-233.33
760.00
0.00
0.00
Investor Presentation
52.31
-84.05
37.44
0.28
0.86
N/A
96.67
98.94
-55.32
0.00
0.00
N/A
14.72
27.99
13.76
3.37
3.93
N/A
-65.63 -110.75
33.17
0.00
0.00
N/A
20.37
-86.73
433.80
0.20
2.05
Securities Dealing Policy
43.40
123.54
14.99
0.00
0.00
N/A
71.13
138.63
227.92
0.00
0.00
Appendix 3B
8.25
243.75
18.18
0.00
0.00
Presentation on Q1 September 2016 quarter
15.23
66.69
30.46
2.75
3.40
N/A
6.07
97.65
55.62
0.29
1.10
N/A
19.58
1.16
100.95
1.35
2.59
N/A
27.37
N/A
68.28
0.08
0.90
N/A
-24.63
-70.94
-0.50
0.00
0.00
N/A
3.85
-64.91
983.97
2.20
11.21
N/A
7.14
-6.41
-8.43
16.49
11.79
N/A
21.44
0.67
9.06
4.69
4.90
20.38
-10.62
91.99
0.32
1.03
Names Craig Jones as Executive General Manager Wafi-Golpu
9.82
34.42
56.36
1.06
1.65
N/A
8.85
3.14
-5.21
6.89
6.78
N/A
14.17
-1.61
0.42
4.18
4.32
N/A
50.14
N/A
43.84
1.08
1.28
N/A
2016 PE 2017 PE
-14.43
22.88
N/A
-34.03
8.94
21.57
237.75
35.85
-69.00
71.89
43.19
16.74
-43.86
108.71
49.91
233.25
9.75
19.87
9.45
39.34
46.05
-24.75
41.68
6.53
23.38
39.12
15.36
8.39
14.23
72.12
Daily Price
Consensus
Consensus
2016 EPS 2017 EPS 2016 Div 2017 Div
2016 PE 2017 PE
Rating
GROWTH GROWTH Yield
Yield
-6.88
13.18
Hold
11.70
10.46
68.17
11.81
5.09
5.95
-5.49
1.08
Hold
6.56
7.29
-14.43
-9.92
13.36
12.33
-4.75
8.35
Buy
117.83 80.90
542.31
45.65
0.00
0.00
-3.13
0.23
Hold
-5.35 -13.04
58.19
58.95
0.00
0.00
-3.00
14.31
Hold
19.77
17.16
-23.96
15.18
5.24
5.26
-2.94
0.45
Hold
8.05
6.88
36.67
17.07
12.12
6.06
-2.92
4.89
Buy
16.23
15.12
27.23
7.35
4.89
5.29
-2.61
10.68
Hold
14.71
15.16
47.14
-2.98
3.58
3.98
-2.47
2.52
Hold
28.65
24.18
66.72
18.46
7.46
7.76
-2.42
0.89
Hold
12.22
6.65
-45.65
83.84
0.00
0.00
-2.26
9.78
Buy
16.95
15.70
10.37
7.93
3.09
3.33
-2.19
6.57
Buy
18.64
17.21
15.01
8.29
2.40
2.94
-2.07
2.40
Buy
21.66
37.16
N/A
-41.71
0.00
0.00
-1.95
35.82
Hold
16.37
15.03
-15.40
8.89
3.20
3.47
-1.93
16.59
Buy
21.49
19.13
-7.07
12.34
3.51
3.89
-1.86
1.94
Buy
23.57
18.01
74.68
30.86
3.39
4.29
-1.66
9.52
Buy
15.02
8.77
140.06
71.32
1.07
1.43
-1.66
3.43
Hold
9.06
11.37
-18.88
-20.31
5.44
5.42
-1.55
43.81
Hold
21.82
18.68
-4.52
16.82
4.29
4.58
-1.52
7.71
Hold
14.28
16.31
-21.87
-12.41
0.00
0.18
-1.42
1.34
Strong Buy
28.11
21.22
23.33
32.43
2.45
2.88
-1.39
4.92
Buy
15.15
13.90
32.31
8.94
2.67
3.47
-1.39
1.32
Hold
-37.37 59.17
66.68
163.16
0.00
0.00
-1.39
10.68
Hold
14.93
14.66
-8.44
1.82
3.07
3.25
-1.31
16.04
Buy
20.48
16.65
15.05
22.98
2.46
2.95
-1.30
4.78
Buy
18.25
14.41
17.35
26.58
2.66
3.36
-1.23
9.14
Hold
35.73
27.04
26.65
32.16
2.44
2.80
-1.22
0.17
Buy
-40.50 -40.50
-0.39
0.00
0.00
0.00
-1.21
5.11
Underperform 16.22
15.64
9.14
3.69
5.51
5.72
-1.20
6.62
Hold
20.80
18.26
7.85
13.93
3.15
3.62
Newsflash
Chairmans and Managing Directors AGM Address
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Annual Report Correction
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2016 Notice of General Meeting/Proxy Form - Amended
N/A
Charter Hall Abandons IPO of Long WALE REIT
N/A
Page 9
19 October 2016
CHECKING S&P 300 BY THE SECTOR
Energy stocks: OPEC supply deal driving sector higher. We moved to buy on the sector as oil bounced from
$40 as the market priced in supply/demand expectations to tighten in 2017/18!!!
News Snippet:
Code
WHC
SXY
KAR
BPT
SEH
LNG
OSH
STO
WPL
AWE
ORG
FAR
WOR
CTX
PDN
Caltex Australia – Caltex Australia has revealed it could lose its 3.5 billion litres per year contract to supply petrol
and diesel to Woolworths unless it is successful in beating off rivals to acquire the supermarket's circa $1.6 billion
fuels retailing network. Giving formal confirmation on Tuesday that it had made a bid for the Woolworths petrol station
network, Caltex noted its wholesale supply contract "is linked to Woolworths' continued ownership of the business".
The disclosure surprised some in the market, who had understood that the 10-year contract, which is thought still to
have about eight years to run, wouldn't necessarily be affected should Woolworths sell the business to one of Caltex's
rivals. Caltex shares shed 4.2 per cent to close at $32.87, a four-week low. The news comes just as rival BP is
understood to have edged in front of Caltex in its bid to buy the business. A third bidder, commodities trader Vitol,
which controls the Viva Energy business that owns the Shell branded stations, is thought to be some way behind in
the bidding race and in any case would be expected to face even more significant competition issues than the other
two. Caltex said it had made "a conditional and confidential proposal to Woolworths to acquire its fuel business and
continue the successful fuel alliance". The supermarket owner confirmed late last month it was evaluating proposals
for the business. AFR
Oil Outlook – Oil settled higher as expectations of OPEC output curbs lifted prices despite forecasts that data would
show a second straight weekly build in US crude stockpiles. US crude inventories likely rose by 2.4 million barrels in
the week to October 14, a Reuters poll of oil market analysts found. In the previous week to October 7, stocks grew
by 4.9 million barrels. The American Petroleum Institute (API), an industry group, will issue its report on domestic oil
stocks at 4.30pm New York time, after Tuesday's market settlement. The US Energy Information Administration (EIA)
will issue official numbers on Wednesday. Brent crude settled up 16, or 0.3 per cent, at $US51.68 a barrel. US West
Texas Intermediate (WTI) crude rose 35 cents, or 0.7 per cent, to settle at $US50.29. Crude prices have gained some
13 per cent since the Organisation of the Petroleum Exporting Countries proposed on September 27 its first output cut
or freeze in eight years to rein in a global crude glut. The group gathers on November 30 for its policy meeting.
Doubts on whether OPEC will reach a deal that satisfies all 14 members has stalled the rally at around $US50 a
barrel. Most in Saudi-led OPEC need higher prices to repair economic damage after crude fell to almost $US26 a
barrel this year from 2014 highs above $US100. Some members of the cartel, like Iran, prefer not to cut output. AFR
Company Name
Whitehaven Coal
Senex Energy Limited
Karoon Gas Australia
Beach Energy Limited
Sino Gas Energy
Liquefied Natural
Oil Search Ltd
Santos Ltd
Woodside Petroleum
AWE Limited
Origin Energy
FAR Ltd
WorleyParsons Ltd
Caltex Australia
Paladin Energy Ltd
3047.36
317.45
449.83
1398.82
197.07
286.14
10917.71
6499.63
24624.66
316.89
9943.15
365.85
2264.79
8572.84
274.06
3.17
0.29
1.88
0.76
0.10
0.57
7.23
3.67
29.30
0.60
5.62
0.08
9.05
32.23
0.16
Daily Price
Consensus
6.73
2.24
5.45
0.29
2.73
2.32
1.33
0.67
1.05
0.28
0.89
12.00
0.84
8.28
0.27
4.81
0.24
30.43
-0.83
0.70
-0.88
6.27
-1.22
0.17
-1.52
7.71
-1.95
35.82
-3.13
0.23
Consensus
Rating
Hold
Buy
Buy
Hold
Buy
Buy
Hold
Hold
Buy
Hold
Buy
Buy
Hold
Hold
Hold
2016 PE 2017 PE
237.75
43.19
-24.74
36.05
-24.00
-2.83
61.34
154.62
21.63
-3.99
23.47
-40.50
14.28
16.37
-5.35
15.93
96.67
-24.42
11.88
32.00
2.83
26.47
16.40
17.30
-29.75
18.92
-40.50
16.31
15.03
-13.04
2016 EPS 2017 EPS 2016 Div 2017 Div
GROWTH GROWTH Yield
Yield
147.51
1392.50
0.00
0.06
98.94
-55.32
0.00
0.00
54.33
-1.32
0.00
0.00
-71.01
203.56
0.66
1.58
-0.91
175.00
0.00
0.00
-168.46
200.00
0.00
0.00
-63.87
131.72
0.70
1.54
-68.16
842.93
0.47
1.79
-17.26
25.02
3.72
4.47
-344.17
86.58
0.00
0.00
-54.84
24.05
2.34
0.28
-0.39
0.00
0.00
0.00
-21.87
-12.41
0.00
0.18
-15.40
8.89
3.20
3.47
58.19
58.95
0.00
0.00
Newsflash
N/A
N/A
N/A
Citi Investment Conference Sydney
N/A
N/A
N/A
N/A
N/A
N/A
Origin Energy Annual General Meeting 2016 Results
N/A
N/A
N/A
N/A
Material (Ex Mining) stocks: Sector looks stretched with investors chasing safe yield, but the growth outlook in
chemicals are showing value after recent pullback. Sector back in “selective buy” area in chemical stocks.
News Snippet:
Code
AJX
ABC
NUF
BLD
IPL
JHX
ORI
DLX
BKW
HFR
CSR
ORA
FBU
TFC
PGH
AMC
None
Company Name
Alexium International
Adelaide Brighton
Nufarm Limited
Boral Limited
Incitec Pivot
James Hardie Indust
Orica Limited
Duluxgroup Limited
Brickworks Limited
Highfield Res Ltd
CSR Limited
Orora Limited
Fletcher Building
TFS Corporation Ltd
Pact Group Hldgs Ltd
Amcor Limited
155.57
3475.65
2364.21
4944.94
4690.33
8860.65
6152.59
2495.09
2060.64
351.74
1876.67
3620.05
6669.20
586.02
2001.88
17962.77
0.64
5.49
9.03
6.76
2.81
20.28
16.53
6.45
13.83
1.13
3.71
2.99
9.56
1.50
6.61
15.21
Daily Price
Consensus
22.12
1.20
2.62
5.26
1.80
9.20
1.65
6.91
1.08
3.42
0.85
21.56
0.73
14.54
0.62
6.28
0.07
15.05
0.00
1.95
-0.27
3.72
-0.33
3.13
-0.52
9.38
-0.99
3.01
-1.20
6.62
-1.93
16.59
Consensus
Rating
Strong Buy
Hold
Hold
Hold
Buy
Hold
Hold
Hold
Hold
Buy
Hold
Hold
Hold
Strong Buy
Hold
Buy
2016 EPS 2017 EPS 2016 Div 2017 Div
Newsflash
GROWTH GROWTH Yield
Yield
-14.43 105.83
98.53
113.64
0.00
0.00
US$3m First Multifunction, Single-Formulation Agreements
18.36
17.71
-2.83
3.68
4.86
5.05
N/A
24.03
17.37
-1.66
38.39
1.18
1.54
N/A
20.02
17.60
10.27
13.75
3.26
3.62
N/A
16.53
12.71
-28.15
30.00
3.17
4.38
Completion of ammonia plant performance test and handover
27.89
25.11
18.62
11.11
2.71
2.81
N/A
15.82
15.86
-10.98
-0.29
3.40
3.45
N/A
19.25
18.43
9.09
4.48
3.71
3.83
N/A
14.52
13.76
19.22
5.53
3.40
3.60
N/A
-154.09 -51.36
78.27
-200.00
0.00
0.00
N/A
11.57
11.17
23.34
3.50
6.22
6.15
N/A
22.94
20.62
18.84
11.25
3.03
3.34
N/A
17.72
15.59
7.41
13.65
3.86
4.14
N/A
27.86
22.65
-12.97
22.98
2.01
2.01
N/A
20.80
18.26
7.85
13.93
3.15
3.62
N/A
21.49
19.13
-7.07
12.34
3.51
3.89
N/A
2016 PE 2017 PE
Gold stocks: Global risks keeps Spot gold in play. Sector remains the best commodity pick with upgrade cycleFprofit taking
with US Fed updateFbut macro market issues will drive the next leg up!!!
Page 10
19 October 2016
News Snippet:
None
Code
Company Name
BDR
SAR
PRU
SBM
RSG
MLX
NCM
EVN
OGC
NST
AQG
RRL
DCN
GOR
DRM
Beadell Resource Ltd
Saracen Mineral
Perseus Mining Ltd
St Barbara Limited
Resolute Mining
Metals X Limited
Newcrest Mining
Evolution Mining Ltd
OceanaGold Corp.
Northern Star
Alacer Gold Corp.
Regis Resources
Dacian Gold Ltd
Gold Road Res Ltd
Doray Minerals Ltd
460.04
927.14
512.17
1273.17
1213.50
796.83
16403.33
3635.95
2395.01
2324.10
233.04
1648.22
447.77
499.61
192.68
0.47
1.23
0.53
2.68
1.73
1.37
22.10
2.24
4.03
3.97
3.00
3.31
3.31
0.58
0.61
Daily Price
Consensus
Consensus
2016 EPS 2017 EPS 2016 Div 2017 Div
2016 PE 2017 PE
Newsflash
Rating
GROWTH GROWTH Yield
Yield
6.90
0.47
Hold
8.94
7.50
467.49
19.23
0.43
0.43
Investor Presentation - October 2016
6.52
1.57
Hold
35.85
8.81
-15.90
306.83
0.00
0.82
N/A
5.00
0.77
Buy
-43.86 -65.63
-110.75
33.17
0.00
0.00
N/A
4.69
3.11
Hold
9.75
8.25
243.75
18.18
0.00
0.00
Presentation on Q1 September 2016 quarter
4.55
2.05
Buy
9.45
6.07
97.65
55.62
0.29
1.10
N/A
3.80
2.50
Strong Buy
41.68
3.85
-64.91
983.97
2.20
11.21
N/A
3.27
22.72
Hold
39.12
20.38
-10.62
91.99
0.32
1.03
Names Craig Jones as Executive General Manager Wafi-Golpu
3.23
2.74
Buy
15.36
9.82
34.42
56.36
1.06
1.65
N/A
2.81
5.58
Buy
14.89
9.06
22.58
64.37
1.13
1.20
N/A
2.58
4.32
Hold
14.19
9.25
21.19
53.35
1.69
3.10
N/A
1.69
4.67
Hold
17.64
99.80
-21.29
-82.33
0.00
0.00
N/A
0.61
3.43
Underperform 15.25
10.96
31.97
39.13
3.04
4.47
N/A
0.30
3.71
Buy
-50.46 -50.92
85.93
0.91
0.00
0.00
N/A
0.00
0.86
Buy
-63.95 -57.50
28.73
-11.21
0.00
0.00
N/A
-2.42
0.89
Hold
12.22
6.65
-45.65
83.84
0.00
0.00
N/A
Mining (Ex Gold) stocks: Miners to benefit from weaker USD and central bank stimulus. Sector now offering risky high
beta small caps and safer cash churning big miners!!!
News Snippet:
Arrium – Liberty House Group is among bidders to have submitted an offer for the steel and iron ore assets of
Arrium, according to people with knowledge of the process. The London-based steelmaker and metals trader made a
non-binding proposal, the people said, requesting anonymity as the details are private. Liberty House faces
competition, including from private equity groups and entities with interest only in specific assets, two of the people
said. Liberty House declined to comment in an emailed statement. A representative of KordaMentha also declined to
comment on details of the process. Arrium, which appointed the administrator in April, has steel-making capacity of
about 2.5 million metric tons a year. Operations include the Whyalla steelworks and port, the OneSteel steel
manufacturing, distribution and recycling unit and an iron ore mining division, according to company filings. Binding
offers are scheduled to be submitted in December and detailed due diligence materials are being prepared for
bidders, KordaMentha said in an October 5 filing. The administrator has "a strong preference for offers that will allow
for the sale of the business in one line as a going concern", it said. A separate process for a sale or an initial public
offering is underway for Arrium's mining consumables business, which has sites from Chile to Indonesia. Liberty
House was among bidders for Tata Steel's UK operations and in March agreed to buy two Tata Steel mills in
Scotland. The producer last month formally reopened the Dalzell works in Scotland and last year restarted operations
at a rolling mill in Wales. AFR
BHP Billiton – BHP Billiton has complained it gets a better reception from Chile's socialist government than some
Australian elected officials, with the resources giant admitting it needs to improve the "terrible" way it communicates
the amount of tax it pays in its home country. In a short speech at a drinks function on Monday night in London, chief
executive Andrew Mackenzie described "this continual questioning of our economic and social contribution" in
Australia as "chilling" when compared to countries such as Chile and the UK. BHP will hold its annual meeting in the
British capital on Thursday. Mr Mackenzie told those in attendance that he visited Chile, where BHP owns 57.5 per
cent of the massive Escondida copper mine, last week and enjoyed a positive conversation with the South American
country's leftist President Michelle Bachelet whose government received $US596.6 million in taxes, royalties and
other payments from the Melbourne-based company in 2015-16. "I asked the president if there was anything more we
could do for the country. And she said, 'not at all just keep doing what you are doing - it is great'," Mr Mackenzie said
on Monday evening. "But in our home country of Australia where we have contributed hugely to employment, and
through taxes and royalties, we still find ourselves blamed for problems that we didn't cause and the target, if you like,
of people who assume that we are the ones trying to avoid tax." Mr Mackenzie did not name any politicians he
believes have been unfairly criticised Australia's largest company but the comments were clearly directed at West
Australian Nationals leader Brendon Grylls, who wants to hike iron ore royalties paid by BHP and rival Rio Tinto, and
former Treasurer Wayne Swan, who last week used a fiery parliamentary speech to accuse BHP of "gaming" the
corporate tax system. AFR
Code
Company Name
WSA
GXY
IGO
S32
PLS
LYC
MIN
AWC
OZL
SGM
SYR
FMG
RIO
MNS
SFR
ILU
ORE
BHP
BSL
Western Areas Ltd
Galaxy Resources
Independence Group
South32 Limited
Pilbara Minerals Limited
Lynas Corporation
Mineral Resources.
Alumina Limited
OZ Minerals
Sims Metal Mgmt Ltd
Syrah Resources
Fortescue Metals Grp
Rio Tinto Limited
Magnis Resource Ltd
Sandfire Resources
Iluka Resources
Orocobre Limited
BHP Billiton Limited
BlueScope Steel Ltd
666.97
587.22
2264.66
13149.69
523.42
188.38
2042.44
4319.77
1751.02
1910.54
967.99
15973.78
21468.38
370.85
780.79
2348.91
668.24
72712.69
4482.11
2.67
0.35
4.08
2.59
0.47
0.06
11.12
1.53
5.86
9.73
3.69
5.15
50.74
0.84
4.94
5.59
3.17
22.47
7.68
Daily Price
Consensus
Consensus
2016 EPS 2017 EPS 2016 Div 2017 Div
2016 PE 2017 PE
Rating
GROWTH GROWTH Yield
Yield
8.98
2.44
Hold
-34.03 83.44
-135.13
140.78
0.03
0.34
6.15
0.51
Buy
-69.00 10.45
-233.33
760.00
0.00
0.00
5.70
3.65
Hold
71.89
52.31
-84.05
37.44
0.28
0.86
4.86
2.34
Hold
108.71 20.37
-86.73
433.80
0.20
2.05
2.20
0.84
Buy
-37.20 -51.67
N/A
28.00
0.00
0.00
1.85
0.09
Buy
-1.90
9.17
22.67
120.69
0.00
0.00
1.83
11.12
Hold
17.75
19.47
15.08
-8.84
1.92
2.43
1.67
1.54
Hold
47.96
23.57
-64.98
103.52
5.04
4.43
1.56
6.10
Buy
19.09
17.65
-28.94
8.14
2.10
2.32
0.72
9.42
Hold
52.88
20.14
-61.70
162.50
2.03
2.71
0.54
6.15
Buy
-61.24 -160.43
-10.23
61.83
0.00
0.22
0.39
4.20
Underperform 14.47
10.12
111.84
42.98
1.69
3.24
0.26
55.49
Buy
17.79
18.67
-17.39
-4.69
2.99
2.96
0.00
1.52
Buy
-43.95 -33.40
-17.30
-31.58
0.00
0.00
-0.20
5.68
Hold
13.70
13.21
-36.89
3.69
2.06
2.13
-0.36
6.72
Hold
133.10 24.30
-79.90
447.62
2.38
3.88
-0.63
4.53
Hold
-15.05 34.84
-191.82
143.21
0.00
0.00
-0.75
23.10
Hold
87.34
25.02
-86.83
249.11
1.81
2.36
-1.66
9.52
Buy
15.02
8.77
140.06
71.32
1.07
1.43
Newsflash
Quarterly Activities Report
Investor Presentation
N/A
Securities Dealing Policy
N/A
N/A
N/A
N/A
CZI: West Musgrave Work Program Commences
N/A
N/A
N/A
N/A
N/A
Notice of Annual General Meeting/Proxy Form
N/A
Change of Directors Interest Notice
Operational Review for the Quarter Ended 30 Sep 2016
N/A
Page 11
19 October 2016
Industrial stocks: Value beginning to show after recent pullback with selective exposures worth looking into. Sector in
selective buy in unique service sectors.
News Snippet:
CIMIC – CIMIC has elevated deputy chief executive Adolfo Valderas to CEO as the Spanish-run construction group
reported an 11 per cent rise in third quarter net profit to $148.5 million. Mr Valderas, a civil engineer, has been
CIMIC's chief operating officer since December 2013 and was named deputy CEO in October. He will replace
Marcelino Fernandez Verdes, who will remain CIMIC's executive chairman. Mr Fernandez Verdes is expected to
succeed Florentino Perez as CEO of Madrid-based Grupo ACS, CIMIC's parent company. CIMIC's shares rose 48¢
to $28.12 in midday trading after it reported third quarter results, including a 7 per cent rise in cash flow from
operating activities before interest, finance costs, taxes and dividends to $532.9 million. The construction group's
cash flow was questioned by Morgan Stanley in July after analyst Nicholas Robison said he could not reconcile cash
flows in CIMIC's first quarter financial accounts. CIMIC, which is pursuing a hostile takeover of contractor UGL,
reports results over the calendar year. CIMIC said 192 per cent of earnings before interest taxation depreciation and
amortisation (EBITDA) were converted to cash flow in the third quarter, and 107 per cent of earnings were converted
over the past 12 months. AFR
WestConnex – NSW Treasury is seeking an investment bank or advisory firm to advise on sale options for the $16.8
billion WestConnex roads project. Street Talk understands NSW Treasury has accelerated plans to consider
WestConnex's future ownership in recent weeks, calling investment banks and advisory firms to pitch for a coveted
scoping study mandate. It's understood NSW Treasury would like to see the scoping study completed in coming
months, so the government could consider its findings in time for the 2017-18 financial year budget. The scoping
study is expected to test potential buyer interest in all or part of the $16.8 billion WestConnex, and advise on the best
sale structures for the government as it seeks to recoup its capital cost and even profit from the infrastructure build.
Perhaps the biggest challenge will be finding an investor to take on ASX-listed giant Transurban Group, which owns
the rest of the Sydney tollroad network in partnership with local and offshore infrastructure investors and pension
funds. Transurban's incumbent position would give it a strong position should all or part of WestConnex be put up for
auction. The government has previously tried to court Spanish tollroad operators and investors from other parts of the
world, and would be expected to do so again when its newest infrastructure baby comes up for sale. While hiring
advisers and commissioning a scoping study does not mean WestConnex is on the block yet, it is a strong signal. It is
hard to think of a scoping study that has not resulted in a sale process in recent years. It means WestConnex stands
as one of the biggest deals in the 2017 mergers and acquisitions pipeline. Banks and/or advisory firms that miss out
on the NSW Treasury scoping study mandate are expected to cosy up to Transurban, seeking a buy-side mandate.
AFR
Code
Company Name
SSM
CDD
CIM
MLD
SYD
QAN
IPH
GWA
MQA
SIQ
QUB
AIA
RWC
SGF
MMS
TCL
AZJ
DOW
CWY
ALQ
ASB
PRG
BXB
SAI
MND
SVW
UGL
SEK
TOX
SPO
RCR
CAB
SIV
Service Stream
Cardno Limited
CIMIC Group
MACA Limited
SYD Airport
Qantas Airways
IPH Limited
GWA Group Ltd
Macq Atlas Roads Grp
Smartgrp Corporation
Qube Holdings Ltd
Auckland Internation
Reliance Worldwide Corp
SG Fleet Group Ltd
McMillan Shakespeare
Transurban Group
Aurizon Holdings Ltd
Downer EDI Limited
Cleanaway Waste Man
Als Ltd
Austal Limited
Programmed
Brambles Limited
SAI Global Limited
Monadelphous Group
Seven Group Holdings
UGL Limited
Seek Limited
Tox Free Solutions
Spotless Grp Hld Ltd
RCR Tomlinson
Cabcharge Australia
Silver Chef Limited
427.27
496.38
8978.60
408.69
14353.88
6475.94
1040.91
752.25
2385.59
813.96
3266.81
7263.63
1585.50
1103.63
948.53
21612.17
9827.86
2400.04
1765.93
3065.66
536.53
397.54
19199.54
994.59
905.60
2483.36
536.17
5397.95
349.35
1208.12
387.70
435.96
400.89
1.25
1.09
28.40
1.80
6.53
3.21
5.58
2.91
4.58
6.80
2.28
6.18
3.05
4.41
11.50
10.67
4.82
5.68
1.12
6.10
1.55
1.55
12.09
4.66
9.65
8.83
3.21
15.47
2.41
1.10
2.74
3.56
10.84
Daily Price
Consensus
6.84
1.13
4.83
0.65
2.56
26.71
2.56
1.79
2.35
7.46
2.23
4.39
2.20
7.20
2.11
2.70
1.78
5.89
1.49
6.43
1.33
2.54
1.31
4.18
0.99
3.15
0.92
4.71
0.88
14.27
0.85
11.95
0.63
4.70
0.53
4.55
0.45
1.03
0.33
4.82
0.32
1.56
0.32
2.34
0.00
14.02
0.00
4.30
0.00
7.55
0.00
6.60
-0.31
2.50
-0.32
15.85
-0.41
2.60
-0.45
1.32
-1.08
3.14
-1.66
3.43
-2.61
10.68
Consensus
2016 EPS 2017 EPS 2016 Div 2017 Div
2016 PE 2017 PE
Rating
GROWTH GROWTH Yield
Yield
Strong Buy
21.57
18.94
20.33
13.91
1.97
2.64
Hold
49.91
43.40
123.54
14.99
0.00
0.00
Underperform 18.60
17.22
2.87
7.99
3.48
3.67
Buy
17.31
14.63
-60.83
18.27
4.44
5.00
Buy
43.53
39.82
37.91
9.33
4.75
5.15
Buy
6.01
5.52
69.11
9.01
0.78
5.30
Buy
20.16
19.58
56.38
2.96
4.14
4.27
Hold
17.15
14.85
18.65
15.52
4.71
5.33
Hold
26.32
18.10
7.47
45.40
4.10
4.63
Buy
18.09
15.08
63.83
19.95
3.60
4.56
Hold
27.58
24.26
-17.83
13.70
2.27
2.63
Underperform 37.37
32.28
22.97
15.78
2.68
3.09
Hold
30.33
25.63
N/A
18.32
0.00
1.90
Buy
20.65
15.92
29.14
29.68
3.10
3.99
Hold
10.98
10.79
15.90
1.77
5.40
5.57
Hold
86.02
61.68
53.99
39.47
4.26
4.74
Hold
19.40
17.99
-12.45
7.85
5.05
5.31
Hold
14.51
15.31
-15.81
-5.24
4.15
3.87
Hold
30.14
25.34
33.20
18.92
1.69
1.79
Hold
24.37
27.98
-20.87
-12.90
2.24
1.98
Buy
21.31
17.76
-44.09
20.00
2.59
2.59
Buy
6.64
7.75
-6.06
-14.35
9.02
7.16
Hold
23.61
20.97
-0.74
12.59
2.75
2.96
Hold
17.18
15.43
2.14
11.36
3.53
3.91
Underperform 12.94
16.61
-35.02
-22.10
6.08
4.85
Hold
19.70
16.92
-28.90
16.47
4.51
4.53
Underperform 16.28
10.96
9.24
48.56
0.50
0.62
Hold
29.47
26.04
-7.96
13.16
2.29
2.67
Hold
13.37
14.18
-2.31
-5.66
3.83
3.78
Hold
8.69
9.20
-1.82
-5.56
7.67
7.67
Strong Buy
39.52
10.26
-75.06
285.10
1.78
3.03
Hold
9.06
11.37
-18.88
-20.31
5.44
5.42
Hold
14.71
15.16
47.14
-2.98
3.58
3.98
Newsflash
Results of Meeting- AGM 2016
N/A
Cimic announces new CEO and increased profit
N/A
N/A
Daily share buy-back notice - Appendix 3E
N/A
Extension of Syndicated Banking Facility
Becoming a substantial holder for MQA
N/A
Corporate Governance Statement and Appendix 4G
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Citi Investment Conference Sydney
Austal awarded $12M contract by US Navy
N/A
N/A
Change in substantial holding for SAI
N/A
N/A
Change of Directors Interest Notice x 6
N/A
N/A
N/A
N/A
N/A
N/A
Consumer stocks: We maintain our preference to entertainment, media and gambling while we see substantial risk in
discretionary retail sector. Media sector rule changes will drive M&A with smaller regional players becoming the target for
industry consolidation. Sector mainly stuck in “selective buy” category after recent selloff.
News Snippet:
Crown Resorts – The Crown Resorts staff detained for "gambling crimes" in China are facing around 16 months in
jail based on sentences in an earlier case against foreign casino operators. As the 18 Crown staff, including three
Page 12
19 October 2016
Australians, spent their fifth day in detention, lawyers said they were struggling to see their clients. It has also
emerged Chinese authorities have most likely gained access to an internal Crown database containing detailed
records of the casino's biggest-spending Chinese clients. The database, accessible on staff laptops seized by
Chinese police, is known to contain the names of high rollers, their approved credit limits, any debt they owe and how
many trips they have made to Australia in recent years. "The big winner out of all this will be Macau. They [high
rollers] are not going to Australia now," said one gaming industry source who noted all foreign casinos would be
affected. Shares in Crown recovered on Tuesday, closing 1.7 per cent higher, as major shareholder James Packer
said he was "deeply concerned" about the detentions of Crown staff. "Our No.1 priority is to be able to make contact
and to ensure they [the employees] are all safe," he said in a statement. But Trade Minister Steve Ciobo conceded
there was little the federal government could do to help the detained Australians. "There is limited scope for Australia
to intervene in relation to these matters," he said. "We want to work proactively to get a clearer picture about what's
happened here and get a better understanding about what Chinese authorities are focused on." Lawyers for the
detained staff said making contact with their clients was proving difficult. The lawyer for Dai Bin, also known as David,
was prevented from visiting his client on both Monday and Tuesday morning, after authorities requested additional
documents which he was unable to obtain. The husband of another detained employee, Jiang Ling, said his lawyer
had met with her on Monday and "she's not wonderful". Ms Jiang, also known by her English name Jenny, has
already made a "confession", but Mr Sikkema said she was not forced to make a false statement about her job, which
involves processing visas for high rollers. "I was very relieved to hear that," he said. AFR
Myer – With Myer's annual general meeting set for November 18 in Melbourne, the department store provided the
market with its Notice of Meeting on Monday. The lodgement has been highly anticipated in the market, as the stock's
watchers wondered which members of the board would be putting themselves up for re-election. Under Myer's
constitution, and based on the board's current composition, a minimum of two continuing (non-executive) directors
must either retire or renominate and face a shareholder vote at each AGM. But that's just the minimum. Historically,
all continuing directors have been re-elected on two-year cycles. In 2014, chairman Paul McClintock and NEDs Anne
Brennan, Ian Cornell and Robert Thorn faced the instos, and Ma and Pa Kettle. Last year, Christine Froggatt was the
only continuing director, and copped a 15.6 per cent vote against her re-election. The remuneration report copped a
negative vote of nearly 22 per cent, narrowly avoiding a first "strike". So imagine our surprise that the re-election
resolutions in the NOM are those of Thorn, the former CEO of Super Retail Group, and Cornell, a former Westfield
executive, both first appointed in February 2014 (and M&C Saatchi alumnus Dave Whittle, whose appointment by the
board just days after last year's AGM has yet to be endorsed by shareholders). Mysteriously, the board has resorted
to the constitutional minimum, sparing Brennan, the company's longest-serving director, during whose tenure 55 per
cent of its value has been wiped, the indignity of a popularity contest. And sparing McClintock the very same, after the
shareholder perception study he commissioned former CBA market whisperer Warwick Bryan to conduct, but then
buried. As the former director of John Howard's Cabinet office (McClintock, not Bryan), and thus a stickler, we're sure
none of this was an accident. AFR
Tabcorp and Tatts Group – Tabcorp will present Tatts Group shareholders with a scrip and cash takeover bid on
Wednesday morning, proposing to take full control of the wagering and lotteries company. Street Talk understands
Tabcorp and Tatts have done away with the previously proposed merger of equals deal structure - which failed to
satisfy both camps - and Tabcorp will offer a control premium for all of the shares in Tatts. Tabcorp's offer is expected
to be endorsed by Tatts' board and a number of the company's key shareholders. The offer will be heavily scripbased, with a small cash component which is likely to see Tatts' $100 million-odd in franking credits returned to its
existing investors. It is understood the takeover, to be done via a scheme of arrangement, was endorsed by both
companies' boards during meetings on Tuesday. The offer will require approval from 75 per cent of Tatts' voting
shareholders, with a scheme meeting likely to be scheduled for early in the new year. Tabcorp's move to pay for
control of Tatts - rather than pursue a messy merger of equals - also means the two sides did not have to spend any
time sorting out the "social" issues associated with a merger of equals. There is no question who will be the
company's chairman, chief executive, CFO or the like, with UBS-advised Tabcorp set to pay for the right to retain all
such titles. Goldman Sachs-advised Tatts' wagering and lotteries businesses would fold into Tabcorp. AFR
Page 13
19 October 2016
Code
Company Name
TTS
APO
TAH
TGA
FLT
RFG
CTD
BBN
MYR
PMV
AAD
DMP
SKT
AGI
WEB
BAP
ADH
KMD
BRG
AHG
GEM
SXL
HVN
MTR
SUL
IVC
ALL
GXL
NWS
ISU
REA
OML
VTG
VRL
GUD
ARB
JBH
DNA
NVT
APN
IEL
WPP
SWM
SLK
TME
FXJ
TEN
CKF
AMA
RCG
SGR
SKC
CCV
CWN
NEC
TRS
Tatts Group Ltd
Apn Outdoor Grp
TABCORP Holdings Ltd
Thorn Group Limited
Flight Centre Travel
Retail Food Group
Corp Travel Limited
Baby Bunting Grp Ltd
Myer Holdings Ltd
Premier Investments
Ardent Leisure Group
Domino Pizza Enterpr
Sky Network
Ainsworth Game Tech.
Webjet Limited
Bapcor Limited
Adairs Limited
Kathmandu Hold Ltd
Breville Group Ltd
Automotive Holdings
G8 Education Limited
Sthn Cross Media
Harvey Norman
Mantra Group Ltd
Super Ret Rep Ltd
InvoCare Limited
Aristocrat Leisure
Greencross Limited
News Corp..
Iselect Ltd
REA Group
Ooh!Media Limited
Vita Group Ltd
Village Roadshow Ltd
G.U.D. Holdings
ARB Corporation
JB Hi-Fi Limited
Donaco International
Navitas Limited
APN News & Media
Idp Education Limited
WPP Aunz Ltd
Seven West Media Ltd
Sealink Travel Grp
Trade Me Group
Fairfax Media Ltd
Ten Network Holdings
Collins Foods Ltd
AMA Group Limited
RCG Corporation Ltd
Star Entertainment Group
Skycity Ent Grp Ltd
Cash Converters
Crown Resorts Ltd
Nine Entertainment
The Reject Shop
5270.18
791.42
4084.46
268.49
3462.80
1202.45
1738.61
348.25
981.43
2387.33
1228.30
5948.16
1712.22
684.93
1148.69
1499.87
434.59
364.69
1209.89
1323.18
1174.31
1180.44
5729.66
989.70
2023.68
1519.52
10066.49
785.07
913.65
437.00
6996.68
765.06
729.45
830.51
910.55
1389.40
3292.50
340.80
1962.66
672.32
1151.36
801.02
1123.49
439.01
1929.87
2023.54
523.84
481.28
499.22
874.19
4532.94
2682.81
164.89
8259.99
792.95
272.72
4.16
4.99
5.06
1.77
35.38
6.99
17.85
2.83
1.22
15.50
2.67
68.10
4.47
2.12
11.92
5.53
2.65
1.83
9.40
4.03
3.10
1.55
5.20
3.36
10.35
13.92
15.92
6.81
18.05
1.87
53.38
4.72
4.81
5.15
10.64
17.57
28.79
0.41
5.33
3.42
4.58
0.94
0.74
4.31
4.82
0.87
1.42
4.95
1.04
1.59
5.37
3.99
0.33
11.00
0.86
8.80
Daily Price
Consensus
Consensus
2016 EPS 2017 EPS 2016 Div 2017 Div
2016 PE 2017 PE
Rating
GROWTH GROWTH Yield
Yield
15.88
4.01
Hold
22.88
22.25
0.64
2.85
4.13
4.28
5.05
6.19
Hold
16.74
14.72
27.99
13.76
3.37
3.93
3.48
4.96
Hold
23.38
21.44
0.67
9.06
4.69
4.90
3.21
1.69
Hold
8.39
8.85
3.14
-5.21
6.89
6.78
3.15
37.20
Hold
14.23
14.17
-1.61
0.42
4.18
4.32
2.34
6.80
Hold
17.32
14.81
10.07
16.93
3.81
4.41
2.18
18.40
Buy
38.86
31.54
46.00
23.22
1.36
1.73
2.17
3.11
Hold
34.30
26.45
N/A
29.70
1.98
2.86
2.09
1.32
Hold
13.39
13.12
-22.86
2.09
4.27
4.84
2.04
15.96
Hold
22.87
20.89
17.88
9.49
3.02
3.44
1.91
3.04
Buy
21.89
20.86
-11.24
4.92
4.72
4.68
1.70
71.73
Hold
67.35
49.17
41.36
36.97
0.99
1.37
1.59
4.49
Hold
12.03
13.65
-15.99
-11.85
6.40
6.37
1.44
2.67
Hold
13.21
11.65
-6.38
13.40
4.87
5.24
1.36
10.25
Buy
46.77
30.03
12.38
55.76
1.15
1.71
1.28
6.52
Hold
31.24
23.43
31.57
33.33
1.98
2.64
1.15
3.09
Buy
16.49
14.72
24.55
12.03
4.03
4.83
1.10
2.03
Buy
11.81
10.81
56.33
9.31
4.80
6.03
1.08
8.44
Buy
24.62
22.76
0.81
8.19
3.02
3.23
1.00
4.97
Buy
12.79
12.21
6.22
4.76
5.67
5.88
0.98
3.63
Hold
12.35
11.31
1.54
9.16
7.68
7.77
0.98
1.32
Hold
15.31
13.36
10.27
14.57
4.31
4.90
0.97
5.09
Hold
17.81
15.76
18.77
13.05
4.62
5.69
0.90
3.89
Buy
20.45
18.46
13.12
10.77
3.09
3.66
0.88
11.08
Buy
19.01
15.66
1.72
21.39
3.94
4.56
0.80
12.76
Hold
28.70
26.36
10.67
8.87
2.84
3.13
0.76
16.25
Buy
26.53
22.84
60.99
16.17
1.56
2.02
0.74
7.73
Hold
18.32
16.77
8.62
9.22
2.80
3.02
0.73
22.90
Hold
31.40
27.47
-10.53
14.34
1.36
1.57
0.54
1.44
Buy
41.10
21.25
-36.36
93.41
0.94
0.86
0.49
61.22
Hold
31.78
27.49
17.42
15.62
1.64
1.84
0.43
5.83
Buy
19.75
16.22
36.57
21.76
2.48
3.22
0.21
5.30
Buy
22.20
18.22
74.26
21.85
2.88
3.51
0.19
5.83
Buy
15.73
14.55
10.49
8.13
5.41
5.59
0.19
9.73
Hold
19.22
17.22
12.63
11.62
4.25
4.65
0.11
17.03
Hold
29.14
26.99
6.21
7.96
1.81
1.98
0.00
29.63
Hold
19.80
16.72
12.23
18.42
3.30
3.82
0.00
0.99
Strong Buy
5.32
4.36
333.80
22.08
2.76
6.59
-0.19
5.11
Underperform 21.94
21.93
-2.65
0.05
3.68
3.73
-0.29
4.48
Buy
14.49
11.75
-45.87
23.31
1.78
4.06
-0.43
4.67
Buy
31.16
27.10
N/A
14.97
1.89
2.93
-0.53
1.35
Buy
9.35
8.42
4.17
11.00
6.52
7.81
-0.67
0.80
Hold
5.32
7.05
-12.56
-24.46
10.21
9.19
-0.69
4.85
Buy
19.79
17.74
72.43
11.55
2.62
3.18
-0.82
3.73
Underperform 23.79
22.15
11.87
7.40
3.29
3.62
-1.14
1.05
Buy
14.17
14.03
-0.68
0.98
4.67
4.71
-1.39
1.32
Hold
-37.37 59.17
66.68
163.16
0.00
0.00
-1.39
4.92
Buy
15.15
13.90
32.31
8.94
2.67
3.47
-1.42
1.34
Strong Buy
28.11
21.22
23.33
32.43
2.45
2.88
-1.86
1.94
Buy
23.57
18.01
74.68
30.86
3.39
4.29
-2.19
6.57
Buy
18.64
17.21
15.01
8.29
2.40
2.94
-2.92
34.21
Buy
16.23
15.12
27.23
7.35
4.89
5.29
-2.94
0.45
Hold
8.05
6.88
36.67
17.07
12.12
6.06
-3.00
14.31
Hold
19.77
17.16
-23.96
15.18
5.24
5.26
-5.49
1.08
Hold
6.56
7.29
-14.43
-9.92
13.36
12.33
-6.88
13.18
Hold
11.70
10.46
68.17
11.81
5.09
5.95
Newsflash
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
G8 Education Company Secretary
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Change in substantial holding
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Appendix 3B
Appendix 3Y x 5
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Chairmans and Managing Directors AGM Address
Staple stocks: Food related stocks with overseas exposure will continue to trade at high multiples and worth acquiring in
any pullback. All Supermarket stocks are going to struggle to hold margins with the race to the bottom on prices. Sector back in
favour as money moves from discretionary retailers to specialty food retailers with global model.
News Snippet:
Liquor Wars – Coles has thrown down the gauntlet to Woolworths' Dan Murphy's, launching a new liquor store
format that promises to take the guesswork out of buying cheap booze while beating advertised prices at rival chains.
Coles opened the first trial store under the no-nonsense LiquorMarket banner in the Melbourne suburb of Ringwood
last week, repainting and rebadging a former First Choice store. The new format, which is more akin to a Kmart or
Bunnings than Coles' more upmarket Vintage Cellars or Woolworths' Dan Murphy's, was developed after extensive
research into what customers want from a liquor retailer. The range has been simplified and products such as beer
and spirits are sorted by variety, style or "flavour maps" rather than by brand, encouraging customers to explore new
brands. Products are tested and rated by Coles' liquor team and characteristics displayed on shelf "talkers", making it
easier for customers to choose. Coles has cut handling and labour costs by using shelf-ready packaging and stacking
cartons on pallets, and says it has passed on the cost savings to customers with an everyday low prices strategy
similar to that at Kmart. The range features gold medal-winning wines under $20 and wines rated over 90 points for
less than $15. AFR
Page 14
19 October 2016
Code
GNC
A2M
CGC
MTS
WOW
SHV
FSF
MGC
ELD
CCL
BGA
TWE
BWX
AHY
FNP
WBA
TGR
RIC
VIT
BKL
BAL
WES
AAC
Company Name
GrainCorp Limited
The A2 Milk Company
Costa Group Holdings
Metcash Limited
Woolworths Limited
Select Harvests
Fonterra Share Fund
Mg Unit Trust
Elders Limited
Coca-Cola Amatil
Bega Cheese Ltd
Treasury Wine Estate
BWX Limited
Asaleo Care Limited
Freedom Food Ltd
Webster Ltd
Tassal Group Limited
Ridley Corporation
Vitaco Holdings Limited
Blackmores Limited
Bellamy'S Australia
Wesfarmers Limited
Australian Agricult.
Daily Price
Consensus
8.30
4.53
8.41
1.92
4.35
2.24
3.00
2.74
3.20
2.16
1.89
2.09
24.76
1.64
23.50
6.35
1.60
6.93
5.60
1.45
6.38
1.19
0.85
1.39
3.94
0.77
4.51
10.03
0.50
9.23
6.50
0.31
6.72
11.49
0.09
10.83
5.10
0.00
5.30
1.50
0.00
1.69
4.75
0.00
5.20
1.15
0.00
1.35
3.90
0.00
4.58
1.27
-0.39
1.57
2.07
-0.48
2.12
111.98
-0.81
134.20
12.03
-1.07
14.62
44.60
-1.55
43.81
1.90
-2.07
2.40
1817.11
1317.20
931.71
2068.36
31379.65
459.29
666.27
241.39
445.19
7620.63
988.87
8473.79
470.71
837.92
862.87
398.12
586.10
392.47
289.42
1944.62
1175.71
51130.17
1031.41
Consensus
Rating
Hold
Buy
Buy
Hold
Hold
Hold
Buy
Buy
Buy
Hold
Hold
Hold
Hold
Buy
Hold
Buy
Buy
Buy
Buy
Hold
Buy
Hold
Buy
2016 PE 2017 PE
39.34
46.05
20.62
11.60
20.29
14.63
11.50
16.36
9.63
18.57
34.81
36.84
33.72
13.04
84.82
45.80
14.00
15.94
22.45
18.93
32.46
21.82
21.66
19.58
27.37
17.96
11.74
20.08
15.56
10.81
15.06
10.03
18.01
26.42
30.00
26.84
12.50
53.37
19.41
13.98
14.27
19.90
18.86
19.22
18.68
37.16
2016 EPS 2017 EPS 2016 Div 2017 Div
GROWTH GROWTH Yield
Yield
1.16
100.95
1.35
2.59
N/A
68.28
0.08
0.90
N/A
14.78
3.00
3.60
-10.87
-1.22
0.45
1.71
-36.51
1.03
3.36
3.39
-48.68
-5.99
5.57
4.27
82.75
6.32
6.77
6.78
N/A
8.59
6.11
6.64
14.35
-3.91
0.00
2.28
7.30
3.15
4.49
4.65
29.15
31.73
1.44
1.83
55.19
22.80
1.69
2.22
N/A
25.62
0.92
1.67
-9.92
4.35
6.27
6.53
-31.29
58.93
0.74
1.16
-56.14
136.00
0.48
1.75
-1.55
0.14
3.92
4.10
14.63
11.72
2.91
3.46
N/A
12.80
2.37
2.71
141.01
0.36
3.93
3.95
321.21
68.88
0.88
1.63
-4.52
16.82
4.29
4.58
N/A
-41.71
0.00
0.00
Newsflash
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
FNP Appendix 3B Exercise of Employee Share Options
N/A
N/A
N/A
N/A
N/A
Statement on AGM resolution 2
N/A
N/A
Healthcare stocks: The ever increasing older demographic locally and globally will continue to support this sector with
governments cutting back their health care spending. Falling currency will be another free kick to the sector valuation. Sector
stuck in “must have” basket with macro, growth and currency in favour.
News Snippet:
Code
IPD
MVF
NAN
VRT
HSO
ANN
COH
JHC
API
RMD
SIP
CSL
FPH
MYX
SPL
RHC
REG
MSB
SHL
PRY
EHE
SRX
GenesisCare – The Foreign Investment Review Board has waved through the $1.7 billion sale of the country's
largest provider of radiation oncology and cardiac services GenesisCare to China Resources and Macquarie Group,
paving the way for the group to take Australian health expertise into the growing Chinese market. The consortium has
had a long wait since the sale by former owner private equity giant KKR was announced in July, given the
government spurned Chinese-backed bids for power company Ausgrid in August and landholder S Kidman & Co in
April. But GenesisCare has not been idle in the meantime. The company, led by Dan Collins, opened new centres in
Rockhampton and Brisbane, and after extending its footprint in Spain, now has more cancer centres overseas than in
Australia. While Collins and his team have substantial expansion plans in place for Australia and Europe, it is clear
that Asia is the main game for the business and its new investors, Macquarie and China Resources. The latter will be
particularly crucial in helping to open up the Chinese market, and with a push into parts of south-east Asia. There's
been no break for its advisory teams either, led by Michael Stock at Credit Suisse and Stephen Dobbs at Freehills.
Street Talk can reveal the company has completed the syndication of a five-year, $800 million debt facility [with the
option to upsize] from 21 local and international banks, which will support its expansion plans. AFR
Company Name
Impedimed Limited
Monash Ivf Group Ltd
Nanosonics Limited
Virtus Health Ltd
Healthscope Limited
Ansell Limited
Cochlear Limited
Japara Healthcare Lt
Australian Pharm.
ResMed Inc.
Sigma Pharmaceutical
CSL Limited
Fisher & Paykel H.
Mayne Pharma Ltd
Starpharma Holdings
Ramsay Health Care
Regis Healthcare Ltd
Mesoblast Limited
Sonic Healthcare
Primary Health Care
Estia Health Ltd
Sirtex Medical
593.22
539.06
928.83
574.69
5083.82
3369.18
7859.80
495.74
929.28
11885.85
1552.36
47999.29
4907.93
2715.43
224.75
15871.46
1201.43
427.45
9077.44
2096.16
496.81
1701.75
1.65
2.33
3.16
7.24
2.96
23.08
138.00
1.90
1.92
8.51
1.45
105.87
8.69
1.83
0.61
78.54
4.00
1.12
21.79
4.01
2.63
29.38
Daily Price
Consensus
Consensus
2016 PE
Rating
4.10
2.55
Strong Buy
-24.75
1.75
2.34
Hold
19.95
1.28
3.06
Buy
-4213.33
1.26
8.43
Hold
17.35
1.02
3.24
Buy
26.85
1.01
23.21
Hold
17.51
0.80
122.98
Hold
41.41
0.80
2.23
Hold
15.64
0.79
2.00
Hold
18.77
0.71
9.84
Buy
24.37
0.69
1.26
Hold
27.19
0.56
112.72
Hold
30.31
0.35
2.23
Hold
36.92
0.27
1.93
Hold
35.50
0.00
0.92
Buy
-10.99
0.00
79.86
Buy
33.92
0.00
4.62
Hold
23.26
0.00
6.16
Hold
-4.99
-0.18
22.01
Hold
20.95
-0.25
3.95
Hold
19.70
-0.38
3.20
Underperform 8.73
-0.41
35.65
Buy
31.16
2017 PE
-24.63
17.52
77.07
16.45
24.46
16.33
35.56
15.16
16.65
22.64
23.39
28.68
29.92
21.73
-33.89
30.14
19.70
-5.19
20.03
18.48
11.39
25.93
2016 EPS 2017 EPS 2016 Div 2017 Div
GROWTH GROWTH Yield
Yield
-70.94
-0.50
0.00
0.00
18.22
13.87
3.43
3.99
96.54
5566.67
0.00
0.00
3.93
5.44
3.92
4.25
14.42
9.75
2.51
2.84
-19.88
7.22
2.44
2.64
21.64
16.45
1.67
1.94
9.36
3.18
6.12
6.33
20.35
12.75
2.87
3.39
3.01
7.64
1.87
3.89
10.42
16.25
2.88
3.59
-13.72
5.66
1.54
1.69
26.42
23.38
1.78
2.32
163.29
63.42
0.00
0.00
-43.23
67.57
0.00
0.00
15.28
12.55
1.52
1.80
0.58
18.02
4.29
4.98
22.70
3.77
0.00
0.00
10.74
4.60
3.41
3.57
-16.04
6.60
3.15
3.52
27.74
-23.33
11.39
8.21
49.06
20.16
0.89
1.15
Newsflash
N/A
N/A
N/A
N/A
N/A
Chairmans Address to Shareholders
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Notice of Annual General Meeting/Proxy Form
N/A
N/A
Bank stocks: Regulatory and macro worries hang over the sector. Regionals should see more support with financial sector
recommendation favouring them. Potential new bank levy will cut into the margins as will capital requirements, APRA lending
restrictions and property bubble driven bad provisions. Sector stuck in “core holding” basket with global banking sector
despite local housing bubble worries.
Stocks in play: We maintain our preference in ANZ and NAB in the big four and smaller players ABA and MYS.
News Snippet:
Banks and Super – Australia's bank treasurers say they'll be forced to increase their reliance on wholesale funding
markets to meet new stable funding rules if they are penalised for taking deposits from superannuation funds. From
January 2018, Australia's banks will be required to meet a minimum net stable funding ratio, or NSFR, which requires
them to match long-term loans with stable long-term financing. To comply, Australia's banks are favouring household
deposits and longer-term wholesale debt for incremental funding. That is creating intense competition for household
deposits. But deposits raised from superannuation funds are considered wholesale funding and therefore seen as
less stable. As such the deposits are penalised in stable funding ratio calculations. "It doesn't give due credit to cash
Page 15
19 October 2016
that comes in from superannuation-style accounts that are incredibly stable," said ANZ treasurer Rick Moscati at the
Citi investment conference on Tuesday. Westpac's group treasurer Curt Zuber also raised the treatment of
superannuation deposits as being an important factor in determining the stability of the bank's funding books. "The
regulation is not considering the details of an Australian-based superannuation system. At the moment it is trying to
put a round peg in a square hole," he said. "We are trying to figure out how we as a system can get better funding
value through the regulation for our deposits – specifically superannuation cash deposits." AFR
Code
GMA
MOC
BEN
BOQ
NAB
CYB
CBA
ANZ
WBC
Goldman Sachs – Goldman Sachs Group's commitment to fixed-income trading through a seven-year slump paid off
in the third quarter, as revenue from the business surged 49 per cent to propel the firm past analysts' earnings
estimates. The rebound in bond trading added to the second quarter's 33 per cent advance, giving chief executive
officer Lloyd Blankfein more time to prove the merits of his strategy after some competitors pulled back. The gains
helped fuel a 47 per cent increase in earnings for the three months ended September 30, New York-based Goldman
Sachs said on Tuesday in a statement. Blankfein, 62, has been cutting jobs, giving more responsibility to junior
employees and lowering compensation to prepare for when activity rebounds from the downturn, which saw
industrywide revenue from fixed income fall by half last year compared with 2009. First-quarter revenue was the
lowest for the start of a year in Blankfein's decade-long tenure as CEO. "You started in such a deep hole and that
impaired sentiment dramatically and created a lot of questions around viability of the business," Devin Ryan, an
analyst at JMP Securities, said in an interview. "You get a couple good quarters and that pendulum around sentiment
swings back to the middle. People say, 'Maybe I shouldn't be so dire about the outlook."' AFR
Home Loans and Defaults – Credit rating agency Moody's has reported a rise in home loan arrears across Australia
as the end of the mining boom weighs on economic growth. The agency, which tracks the performance of loans that
have been packaged up into mortgage bonds said that 30-day arrears had reached 1.5 per cent in May 2016, up from
1.35 per cent a year earlier. The rise was seen in all eight states. In Western Australia, Tasmania and the Northern
Territory, arrears rates reached the highest level since the agency began keeping records. The agency's release
showed a clear disparity between struggling resource dependant states and the booming Eastern states that are
benefiting rising real estate prices. "Overall, regions and postcodes exposed to the resource and mining sectors
dominated the list of areas with the highest mortgage delinquencies," Moody's said. Sydney, where housing market
and economic conditions were the most supportive for mortgage borrowers, accounted for the majority of regions and
postcodes with the lowest delinquencies, Moody's said. The report analysed mortgage performance by region and
showed that the outbacks of Western Australia and Queensland were the worst performing regions, with those states
accounting for nine of the ten worst performing regions with arrears of between 2.34 per cent and 4.72 per cent. AFR
Company Name
Genworth Mortgage
Mortgage Choice Ltd
Bendigo and Adelaide
Bank of Queensland.
National Aust. Bank
Cybg PLC
Commonwealth Bank.
ANZ Banking Grp Ltd
Westpac Banking Corp
1370.19
255.14
5090.25
4210.00
73598.23
3141.70
128531.88
81471.68
101623.09
2.79
2.10
11.00
11.11
27.79
4.22
74.74
27.87
30.35
Daily Price
Consensus
3.72
3.37
2.44
2.59
0.82
10.35
0.54
11.51
0.32
28.60
0.24
4.64
0.20
76.68
0.14
27.83
-0.07
31.54
Consensus
Rating
Buy
Hold
Hold
Hold
Buy
Hold
Hold
Buy
Hold
2016 PE 2017 PE
6.53
12.96
12.25
11.82
11.46
19.07
13.50
13.40
13.01
7.14
12.35
12.76
11.82
11.62
15.26
13.47
11.84
12.58
2016 EPS 2017 EPS 2016 Div 2017 Div
GROWTH GROWTH Yield
Yield
-6.41
-8.43
16.49
11.79
0.62
4.94
7.90
8.19
-2.78
-4.00
6.17
6.16
-0.83
0.00
6.86
6.86
-3.58
-1.44
6.97
6.68
N/A
25.00
0.00
1.05
0.73
0.23
5.62
5.65
-19.95
13.13
5.74
5.78
-4.83
3.43
6.17
6.17
Newsflash
N/A
N/A
N/A
N/A
N/A
Becoming a substantial holder
N/A
N/A
N/A
Diversified Financials / Insurance stocks: Asset managers offer the best way to get exposure to market locally and
globally while unique financial companies like EQT, FXL and IMF are worth looking at when value emerges. Global players have
another free kick with government trading super rise for mining tax repeal. Sector is in “core holding” basket while market
selloff will see pullback in this sector and offer a good long term buying opportunity. MQG, MFG, PTM, CYB, HGG and BTT are
under pressure with Brexit worryF.but central bank action to reduce risk after pullback.
News Snippet:
Code
QBE
ECX
EML
IAG
IMF
MQG
BLA
AMP
IFL
OFX
HGG
MFG
SUN
MPL
EQT
CVO
PPT
ASX
PTM
NHF
BTT
SDF
HFA
FXL
CCP
CGF
None
Company Name
QBE Insurance Group
Eclipx Group Limited
Emerchants Ltd
Insurance Australia
IMF Bentham Ltd
Macquarie Group Ltd
Blue Sky Limited
AMP Limited
IOOF Holdings Ltd
Ozforex Group Ltd
Henderson Group
Magellan Fin Grp Ltd
Suncorp Group Ltd
Medibank Private Ltd
Equity Trustees
Cover-More Grp Ltd
Perpetual Limited
ASX Limited
Platinum Asset
NIB Holdings Limited
BT Investment Mngmnt
Steadfast Group Ltd
HFA Holdings Limited
FlexiGroup Limited
Credit Corp Group
Challenger Limited
13715.90
1050.00
454.43
13518.50
304.17
27883.93
476.46
15616.86
2512.12
402.00
2856.16
3528.45
15946.84
7077.79
387.07
513.17
2143.82
9230.62
2939.26
2067.71
2957.48
1761.92
369.70
841.51
934.64
6071.16
10.19
4.04
1.88
5.61
1.81
82.55
7.12
5.31
8.41
1.68
4.00
21.86
12.38
2.57
19.30
1.39
46.02
47.62
5.00
4.70
9.58
2.34
2.27
2.25
19.63
10.38
Daily Price
Consensus
Consensus
2016 EPS 2017 EPS 2016 Div 2017 Div
2016 PE 2017 PE
Rating
GROWTH GROWTH Yield
Yield
1.90
11.62
Hold
15.12
11.78
-21.98
28.29
4.82
5.52
1.76
3.98
Buy
18.20
15.66
12.12
16.22
3.51
4.01
1.08
2.44
Buy
98.68
40.76
-15.56
142.11
0.00
0.00
0.90
5.54
Hold
15.02
16.07
-10.52
-6.59
7.32
4.94
0.84
2.05
Buy
11.55
10.90
339.25
5.96
3.68
5.08
0.76
83.00
Buy
13.95
13.58
29.60
2.68
4.67
5.04
0.71
8.72
Buy
28.62
18.94
27.55
51.16
2.28
3.40
0.57
5.71
Hold
15.00
14.20
-6.49
5.65
5.42
5.80
0.48
9.03
Hold
14.44
14.68
0.54
-1.64
6.39
6.25
0.30
2.25
Hold
16.31
16.47
1.15
-0.97
4.55
4.29
0.25
4.86
Buy
16.06
14.48
-28.32
10.92
4.37
4.57
0.18
26.34
Buy
19.12
19.45
27.83
-1.69
4.18
3.92
0.16
13.48
Hold
14.23
12.82
-3.52
11.00
5.68
6.22
0.00
2.82
Hold
17.29
17.36
51.70
-0.45
4.22
4.47
0.00
18.50
Hold
19.53
18.92
-9.07
3.24
3.45
3.99
0.00
1.70
Buy
18.71
16.35
-21.42
14.43
3.99
4.10
-0.02
48.35
Hold
16.94
16.50
-2.63
2.67
5.39
5.54
-0.13
45.66
Underperform 21.76
21.26
4.76
2.37
4.13
4.22
-0.20
5.72
Hold
13.68
16.18
5.22
-15.45
6.73
5.90
-0.21
4.84
Hold
21.57
19.42
32.00
11.05
2.96
3.43
-0.42
10.01
Hold
19.63
18.67
10.91
5.12
4.13
4.50
-0.43
2.37
Buy
21.33
20.53
18.76
3.91
2.51
2.74
-0.44
3.10
Buy
11.20
10.00
0.52
12.02
6.53
11.01
-0.44
2.63
Buy
8.04
8.89
-2.37
-9.56
6.63
6.49
-1.31
16.04
Buy
20.48
16.65
15.05
22.98
2.46
2.95
-2.26
9.78
Buy
16.95
15.70
10.37
7.93
3.09
3.33
Newsflash
N/A
N/A
N/A
N/A
Confidential Settlement
N/A
N/A
N/A
Initial Directors Interest Notice
N/A
Change in substantial holding for HGG
N/A
N/A
N/A
N/A
N/A
Ceasing to be a substantial holder for TGH
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Page 16
19 October 2016
Property stocks: We see house prices flattening with most of the positive optimism already priced in the housing stocks.
The construction and commercial property stocks still offer improving outlook on new projects, M&A and consolidation. Rising
bond yield will put pressure on yield stocks. Sector stuck in “high risk” basket due to housing bubble worries.
News Snippet:
None
Code
Company Name
ABP
GTY
TIX
FET
AOG
BWP
HPI
SCP
NSR
DXS
SGP
INA
ARF
MGR
IOF
SCG
AVN
GMG
CQR
VCX
GOZ
RFF
CMW
GHC
GDI
GPT
VLW
AJA
LLC
CWP
INM
IDR
WFD
CHC
Abacus Property Grp.
Gateway Lifestyle Group
360 Cap Indust Fund
Folkestone Edu Trust
Aveo Group
BWP Trust
Hotel Property
Sca Property Group
National Storage
Dexus Property Group
Stockland
Ingenia Group
Arena REIT.
Mirvac Group
Investa Office Fund
Scentre Grp
Aventus Retail Fund
Goodman Group
Charter Hall Retail
Vicinity Centres
Growthpoint Property
Rural Funds Group
Cromwell Prop
Gen Healthcare REIT
GDI Property Grp
GPT Group
Villa World Ltd.
Astro Jap Prop Group
Lend Lease Group
Cedar Woods Prop.
Iron Mountain Inc
Industria REIT
Westfield Corp
Charter Hall Group
1573.89
688.61
527.77
629.25
1886.03
1959.27
412.02
1629.76
754.79
8459.86
10942.92
486.89
465.46
7891.89
2615.84
23533.39
935.48
12344.94
1705.99
11796.78
2050.68
336.26
1588.65
419.94
522.65
8594.23
254.45
412.44
8173.51
363.69
2155.02
340.91
19534.04
2038.83
2.82
2.35
2.54
2.58
3.31
3.10
2.86
2.25
1.52
8.85
4.60
2.78
2.02
2.15
4.30
4.46
2.39
6.95
4.23
3.00
3.23
1.64
0.91
1.93
0.98
4.78
2.24
6.80
14.01
4.60
44.52
2.08
9.35
4.88
Daily Price
Consensus
2.55
3.10
2.17
2.59
2.01
2.82
1.98
2.78
1.85
3.85
1.64
2.97
1.42
3.17
1.35
2.15
1.33
1.67
1.26
9.17
1.10
4.90
1.09
3.33
1.00
2.22
0.94
2.24
0.94
4.40
0.90
4.79
0.84
2.44
0.72
7.58
0.71
4.27
0.67
3.26
0.62
3.27
0.62
1.78
0.55
1.00
0.52
1.99
0.52
1.05
0.00
5.25
0.00
2.68
0.00
7.40
-0.07
15.76
-0.22
5.69
-0.29
54.83
-0.48
2.16
-0.53
10.65
-1.21
5.11
Consensus
2016 EPS 2017 EPS 2016 Div 2017 Div
2016 PE 2017 PE
Rating
GROWTH GROWTH Yield
Yield
Hold
12.75
12.65
-6.37
0.79
6.03
6.10
Hold
13.73
14.24
67.09
-3.60
4.89
5.15
Hold
13.84
9.62
-20.22
43.87
8.58
8.58
Hold
18.40
17.09
7.06
7.66
5.16
5.47
Buy
19.76
18.39
56.54
7.46
2.43
2.69
Underperform 18.55
18.02
5.86
2.92
5.42
5.55
Buy
15.32
14.09
9.80
8.75
6.29
6.92
Hold
16.20
15.85
7.66
2.25
5.38
5.69
Hold
17.36
16.52
10.69
5.07
5.73
5.99
Hold
15.65
15.58
1.21
0.41
4.91
5.07
Hold
16.47
15.49
7.61
6.36
5.35
5.57
Strong Buy
20.19
15.80
14.72
27.84
3.29
4.35
Hold
18.25
16.83
-11.47
8.43
5.41
5.84
Buy
16.52
15.14
6.47
9.08
4.62
4.79
Hold
16.43
16.04
1.94
2.38
4.59
4.65
Underperform 19.56
18.66
1.84
4.82
4.75
4.96
Buy
19.75
13.13
N/A
50.37
4.21
6.65
Hold
17.35
16.28
7.81
6.57
3.45
3.67
Underperform 13.95
13.96
1.88
-0.10
6.65
6.64
Hold
15.99
16.22
1.77
-1.39
5.94
5.83
Hold
14.95
14.10
3.02
6.02
6.38
6.69
Strong Buy
7.18
12.67
150.40
-43.32
5.26
5.69
Underperform 10.24
10.83
6.10
-5.47
8.89
9.01
Hold
19.35
19.25
9.09
0.50
4.59
4.68
Buy
10.96
10.60
8.54
3.37
7.95
8.00
Hold
16.43
15.99
3.79
2.75
4.90
5.13
Buy
7.40
7.02
23.22
5.45
8.04
8.39
Buy
12.32
11.62
34.31
5.98
5.29
6.18
Buy
11.54
10.84
13.85
6.40
4.28
4.65
Buy
8.41
8.19
3.39
2.80
6.12
6.37
Buy
29.67
26.00
-10.49
14.12
5.53
6.36
Hold
10.18
11.75
24.70
-13.39
7.48
7.64
Hold
20.95
20.46
-13.46
2.37
3.70
3.71
Underperform 16.22
15.64
9.14
3.69
5.51
5.72
Newsflash
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
NSR Undertakes Portfolio Recycling
N/A
N/A
N/A
N/A
Mirvac signs up Deloitte as key Melbourne tenant - Video
N/A
N/A
N/A
N/A
Proxy Form
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Results of Meeting
N/A
Charter Hall Abandons IPO of Long WALE REIT
IT stocks: IT sector offers a number of different business models and we see good growth in the sector despite the low global
growth outlook. The continued online transition from number of sectors will continue to favour this sector. Sector stuck in
“high growth potential” basket but carries execution risk in global/local growth plans.
Stocks in play: We remain big fan of ACX, ALU, CAR, GBT, HSN, ICQ, IFM and NTC in the long term. Beaten up IT stocks are
showing signs of recovery with growth in the market continuing to head south. GBT under pressure on UK worries.
News Snippet:
Netflix – Netflix added 3.6 million subscribers in the third quarter, buoyed by the hit series Stranger Things and
Narcos, hushing sceptics of its strategy to globally dominate online TV viewing. The world's largest online TV network
rebounded from a weak second quarter, adding about 370,000 customers in the US, more than forecasts of 304,000.
Netflix, based in Los Gatos, California, had blamed a price increase for slower growth earlier this year. The company
added 3.2 million customers outside the US, better than analysts' average projection of 2 million. The shares surged
20 per cent in late trading to as high as $US121.28 ($159). If those gains hold on Tuesday, the stock could reach its
highest point in regular trading since January. Investors have made Netflix one of the hottest stocks in recent years,
believing the company would spur the adoption of on-demand TV outside the US while continuing to revolutionise the
TV business at home. The company, which will spend $US6 billion in cash on programming this year, credited original
series Stranger Things and Narcos with attracting new customers. AFR
Code
Company Name
NXT
CL1
WTC
NTC
TNE
HSN
MYO
IRE
LNK
CSV
ISD
IFM
GBT
CAR
ALU
CPU
ACX
Nextdc Limited
Class Limited
WiseTech Global Ltd
Netcomm Wireless
Technology One
Hansen Technologies
MYOB Group Limited
IRESS Limited
Link Administration
CSG Limited
Isentia Group Ltd
Infomedia Ltd
GBST Holdings..
Carsales.Com Ltd.
Altium Limited
Computershare Ltd
Aconex Limited
1022.15
398.36
1592.64
355.58
1745.05
775.11
2211.72
1938.69
2759.65
441.00
724.00
242.02
266.01
2901.29
1057.35
5905.78
1111.32
3.77
3.51
5.58
2.47
5.64
4.32
3.72
11.56
7.70
1.40
3.62
0.78
3.89
11.92
8.02
10.66
5.42
Daily Price
Consensus
4.72
4.78
2.93
3.88
1.82
5.41
1.65
3.63
1.26
5.08
1.17
4.31
0.81
3.95
0.52
12.42
0.39
8.44
0.00
1.50
0.00
4.18
-0.64
0.81
-0.77
4.82
-0.91
12.96
-1.23
9.14
-1.39
10.68
-4.75
8.35
Consensus
Rating
Buy
Buy
Buy
Buy
Hold
Buy
Buy
Hold
Hold
Hold
Buy
Buy
Buy
Hold
Hold
Hold
Buy
2016 EPS 2017 EPS 2016 Div 2017 Div
GROWTH GROWTH Yield
Yield
71.13
138.63
227.92
0.00
0.00
50.14
N/A
43.84
1.08
1.28
58.74
N/A
93.09
0.00
0.39
617.50
-17.86
-65.22
0.00
0.00
37.85
15.04
14.62
1.67
1.93
26.34
32.42
13.10
1.57
1.60
21.26
13.87
12.18
3.01
3.31
21.98
14.42
12.63
3.88
4.29
23.55
N/A
17.71
0.98
2.30
15.73
10.00
15.58
6.43
6.43
19.46
13.60
16.61
2.21
2.60
19.38
-23.46
16.79
3.77
3.87
16.70
-22.03
13.88
2.78
2.96
23.51
4.72
11.95
3.12
3.47
27.04
26.65
32.16
2.44
2.80
14.66
-8.44
1.82
3.07
3.25
80.90
542.31
45.65
0.00
0.00
2016 PE 2017 PE
233.25
72.12
113.41
214.78
43.38
29.79
23.85
24.75
27.72
18.18
22.70
22.63
19.01
26.32
35.73
14.93
117.83
Newsflash
Appendix 3B
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Ceasing to be a substantial holder
N/A
N/A
N/A
2016 Notice of General Meeting/Proxy Form - Amended
N/A
N/A
Telco stocks: This sector will benefit from industry consolidation via M&A while the big telco in Australia and NZ continue to
deliver stable yield in low growth environment. The transition to online models and smart phone take up will continue to drive
the usage of data from record levels to new record levels. Sector stuck in “core holding” basket with sector consolidation and
economy in transition to online models.
Page 17
19 October 2016
Stocks in play: We maintain our preference in TLS, SPK and SDA while remain big fan of merged entities of VOC and TPG
after recent selloff.
News Snippet:
Vodafone Hutchison Australia – Vodafone Hutchison Australia will launch its own fixed-line services on the national
broadband network now that the rollout is nearing a scale that makes sense for the telco to enter the market.
Vodafone has been mulling over whether it would enter the super-fast broadband market for some time. Industry
sources said the telco had made a decision to launch NBN services and Vodafone is expected to confirm with an
announcement in the coming days. Retail services providers (RSP) Telstra, TPG, Optus and Vocus now account for
close to 90 per cent of NBN connections. However, as NBN ramps up the rollout of the network into metropolitan
areas, there will be an opportunity for retail services providers to take market share as consumers transfer from older
technology, such as ADSL, to super-fast broadband. There have been concerns among telcos and investors about
NBN wholesale pricing after TPG warned of shrinking margins. However, Vodafone has not offered fixed-line services
and does not have a margin to protect. At present, Vodafone does not offer fixed-line services, but does offer mobile
broadband. Offering NBN services will allow Vodafone to offer bundles with mobile phone and business services,
making its consumer and business subscribers much stickier, or less likely to leave to leave the telco and sign up with
a competitor. AFR
Code
Company Name
VOC
AYS
CNU
TPM
TLS
SPK
SDA
Vocus Comms Ltd
Amaysim Australia
Chorus Limited
Tpg Telecom Limited
Telstra Corporation.
Spark New Zealand
Speedcast Int Ltd
3521.84
405.50
1383.77
6389.00
61495.05
5915.82
549.82
5.94
2.27
3.45
7.63
5.09
3.24
3.81
Daily Price
Consensus
4.58
8.62
2.71
2.54
1.47
2.76
1.33
10.49
1.19
5.37
0.31
2.87
-1.30
4.78
Consensus
Rating
Hold
Buy
Buy
Hold
Hold
Buy
Buy
2016 PE 2017 PE
19.87
20.09
14.66
18.41
14.62
17.59
18.25
15.23
14.55
11.70
16.66
14.67
16.16
14.41
2016 EPS 2017 EPS 2016 Div 2017 Div
GROWTH GROWTH Yield
Yield
66.69
30.46
2.75
3.40
121.57
38.05
3.54
4.85
-1.77
25.31
5.53
5.83
39.13
10.52
2.04
2.12
1.75
-0.30
6.20
6.23
10.51
8.85
7.29
7.31
17.35
26.58
2.66
3.36
Newsflash
N/A
N/A
Chorus notes issue under its EMTN programme
N/A
N/A
N/A
N/A
Utility stocks: We see risks to the sector with falling commodity prices, rising renewables with battery technology and
potential interest rate rises in US. Sector now back in favour due to very low risk of interest rate riseFworth looking at quality
growing yield above 6%.
Stocks in play: Valuations in the stocks are full despite the low growth as the market is willing to pay for safety of yield.
Rising bond yields will put pressure on valuations.
News Snippet:
Code
EWC
IFN
AGL
SKI
AST
APA
EPW
DUE
None
Company Name
Energy World Corpor.
Infigen Energy
AGL Energy Limited.
Spark Infrastructure
AusNet Services
APA Group
ERM Power Limited
Duet Group
390.19
679.10
12907.25
3767.70
5383.84
8936.75
283.99
5912.30
0.26
0.90
19.30
2.25
1.52
8.03
1.13
2.37
Daily Price
Consensus
13.33
0.80
2.87
1.16
0.89
19.98
0.45
2.61
0.33
1.66
0.12
9.56
-0.44
1.18
-2.47
2.52
Consensus
Rating
Buy
Buy
Buy
Buy
Hold
Hold
Buy
Hold
2016 PE 2017 PE
N/A
119.33
18.37
21.84
14.63
43.97
13.45
28.65
N/A
34.42
16.89
21.43
19.93
37.18
21.23
24.18
2016 EPS 2017 EPS 2016 Div 2017 Div
GROWTH GROWTH Yield
Yield
N/A
N/A
N/A
N/A
115.96
246.67
0.00
0.00
10.15
8.78
3.52
4.32
-9.59
1.94
6.40
6.84
24.59
-26.60
5.72
5.81
-20.26
18.28
5.21
5.49
-36.38
-36.65
10.67
9.51
66.72
18.46
7.46
7.76
Newsflash
Response to ASX Price Query Letter
N/A
Appendix 3E - Share Buy Back Notice
N/A
N/A
N/A
N/A
Annual Report Correction
Page 18
19 October 2016
Macro Charts
Market (S&P 200) – Central banks and US election worries are subsidingFmarket waiting for optimism while US
reporting season and week of macro overload remains an overhang!!!
XJO.ASX@AUX: 5435.4
MA (XJO.ASX@AUX): 200 5240.8376, 100 5393.6198, 50 5430.4367
6000
5800
5600
5400
5200
5000
4800
MktVol (XJO.ASX@AUX): 0
0
MACD [L 26, S 12, M 9] (XJO.ASX@AUX):
7.2635, Sig 11.7304
100
0
-100
RSI (100.000000): 14 51.2659
90
60
30
October
2014
December
January
2015
February
March
April
May
June
July
August
September
October
November
December
January
2016
February
March
April
May
June
July
August
September
October
Volatility Index (XVI) – Back to the lows and susceptible for profit taking on macro risk.
XVI.ASX@AUX: 13.274
MA (XVI.ASX@AUX): 200 17.5352, 100 15.5262, 50 13.7725
32
30
28
26
24
22
20
18
16
14
12
MktVol (XVI.ASX@AUX): 0
0
MACD [L 26, S 12, M 9] (XVI.ASX@AUX):
-0.0515, Sig -0.0273
2
0
-2
RSI (100.000000): 14 45.782
80
60
40
20
October
2014
December
January
2015
February
March
April
May
June
July
August
September
October
November
December
January
2016
February
March
April
May
June
July
August
September
October
Page 19
19 October 2016
Currency (AUDUSD) – Market macro worries pulled back AUDUSDFnow that is subsidingF.AUDUSD likely to start to
move up on risk trade with weakening USD.
AUDUSD.FX@SFX: 4:28:14:
0.767
MA (AUDUSD.FX@SFX): 4:28:14:
200 0.7452, 100 0.7551, 50 0.7606
0.93
0.9
0.87
0.84
0.81
0.78
0.75
0.72
0.69
MktVol (AUDUSD.FX@SFX): 4:28:14:
0
0
MACD [L 26, S 12, M 9] (AUDUSD.FX@SFX): 4:28:14:
0.001, Sig 0.0005
0.01
0
-0.01
RSI (100.000000): 4:28:14: 14 58.2159
80
60
40
20
Oct Nov
2014
Dec
Jan
2015
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
2016
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
GOLD (Spot Gold in AUD) – Strong USD drove commodities lowerF.opens up another buying opportunity!!!
SPTGLDAUD.IF@IF: 1644.2587
MA (SPTGLDAUD.IF@IF): 200 1699.4042, 100 1739.6532, 50 1724.5139
1800
1750
1700
1650
1600
1550
1500
1450
1400
1350
MktVol (SPTGLDAUD.IF@IF):
0
0
MACD [L 26, S 12, M 9] (SPTGLDAUD.IF@IF):
-26.073, Sig -23.8786
40
0
-40
RSI (100.000000): 14 26.5574
90
60
30
Oct Nov
2014
Dec
Jan
2015
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
2016
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Page 20
19 October 2016
Bond Yield (10 year Bond) – Another bounce on the yield squeezeFpopped over 2% on central bank worry...likely to
stay around 2.40-2.70% range (i.e. early 2016 level) while US Fed rate hike in Dec remains in play.
BOND10.IR@IR: 0.023
MA (BOND10.IR@IR): 200 0.0224, 100 0.02, 50 0.02
0.038
0.036
0.034
0.032
0.03
0.028
0.026
0.024
0.022
0.02
0.018
MktVol (BOND10.IR@IR): 0
0
MACD [L 26, S 12, M 9] (BOND10.IR@IR):
0.0009, Sig 0.0006
0.002
0
-0.002
RSI (100.000000): 14 70.1854
90
60
30
October
2014
December
January
2015
February
March
April
May
June
July
August
September
October
November
December
January
2016
February
March
April
May
June
July
August
September
October
WTI Oil (West Texas Intermediate Oil) – We turned positive on energy after the from US$40 in AugustFOPEC deal
hope and US stockpile usage pushing it higher.
WTIS.ID@ID: 1:28:58: 50.74
MA (WTIS.ID@ID): 1:28:58: 200 42.4262, 100 46.4826, 50 46.9224
95
90
85
80
75
70
65
60
55
50
45
40
35
30
25
MktVol (WTIS.ID@ID): 1:28:58: 40710
150T
100T
50000
0
MACD [L 26, S 12, M 9] (WTIS.ID@ID): 1:28:58:
1.3324, Sig 1.2631
4
0
-4
RSI (100.000000): 1:28:58: 14 62.6769
60
30
Oct Nov
2014
Dec
Jan
2015
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
2016
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Page 21
19 October 2016
Quant Strategy Product Suite
Baillieu Holst offers an extensive range of top-down monthly reports that provide
comprehensive macro insights to enhance the investment process. The product suite
covers everything from the global economic cycles to preferred thematics and stock ideas.
Equity Engineer
Provides a comprehensive view of the Australian equity market with global perspective on the
Australian economy. The report analyses the overall market and the major sectors, such as
Resources, Industrials and Financials, through the main growth, value, yield and risk measures.
Key macro thematics identified in the global and local economic cycle enables investors to finetune their sector/stock selection process. There are sector specific reports that offer detailed
analysis of the breakdown of the major sectors. The reports in this category are:
Equity Market Engineer
Equity Resource Engineer
Equity Industrial Engineer
Equity Financial Engineer
SHIELD (Sustainable High Yield)
Sifts through the market for the best sustainable high yield stocks using a weighted multi-factor
proprietary model. It arms the reader with the new ideas and risk/return expectations to improve
the yield outlook of their investment portfolio.
GARY (Growth At Reasonable Yield)
Sifts through the market for optimal balanced outlook, by picking stock ideas with growth and yield
at reasonable value through a proprietary model. The report exposes the reader to new potential
stock ideas that can improve their portfolio balance by enhancing growth and yield aspect at
relatively good value.
Market Manager
Provides the market outlook and thematic changes through the quant strategy model portfolio. The
report allows readers to compare and contrast their portfolio mix and risk/return outlook against
the quant strategy model portfolio. The quant strategy model portfolio aims to take get a balanced
exposure to all the preferred thematics in the market.
Page 22
19 October 2016
Quant Strategy Model Portfolio
September update – Adding growth before AGM season
Last Published – 28th September 2016
Energy – large (WPL), small (KAR)
Metals and Mining – large (BHP, RIO)
Gold – large (NCM), mid (NST), small (EVN)
Capital Goods – small (RCR, UGL), micro (GNG, ANG)
Transport – large (SYD, TCL)
Consumer Services – small (AGI, IPH, MTR)
Media – small (VRL), micro (EVT, ICQ)
Health Care – large (CSL, RHC), mid (RMD), micro (MVP)
Banks – large (ANZ, NAB)
Diversified Financials – small (IMF)
Information Technology – small (ALU, HSN, IFM)
Telecommunications – micro (SDA)
Model Portfolio Performance
500.00
Benchmark Index
450.00
Portfolio Market Cap Weighted Index
400.00
Portfolio Equal Weighted Index
350.00
300.00
250.00
200.00
150.00
100.00
Page 23
19 October 2016
SHIELD – Sustainable High Yield
Yield trade outperforming through
market volatility
Last Update – 07th October 2016
Note: This report is a Quantitative Strategy product. The report uses consensus rating and
forecast data from Thomson/IBES to get coverage of the whole market and avoid a house skew,
and as such sometimes the highlighted themes, sectors and stocks will not match our analysts
view.
Macro Outlook: Global market volatility is being driven by US Fed interest rate cycle worries and
ECB tapering worries. We maintain our view that the US Fed had been preparing the markets for a
move in December, while any major macro risk may derail that outcome. Election uncertainty and
the related economic slowdown remain the two key domestic catalysts for inaction from the US
Fed. ECB is unlikely to taper in 2017 with Brexit negotiations and the Italian referendum raising
risks for the overall EU model. We continue to see global growth remaining weak while easing bias
from most central banks remains the key support for weak economies. The yield trade will
continue to see support as interest rates remain low for longer. Small cap SHIELD stocks continue
to outperform the large caps and the overall market over the last year.
Cheap Picks: DNA, VLW and PRG are the low growth cheap yield picks from the SHIELD screen
that have average earnings and cash flow per share growth of below 10%; an average of priceearnings and price-cash flow below 10x; a dividend yield above 5% and; a BUY rating.
SHIELD Top 20 picks are: large cap – CBA, WBC and ANZ; mid cap – NST and MFG; small cap
– IMF, MLD, DNA, OFX, PTM, VLW, MLX, NEC, AYS, PRG and EQT; and micro cap – NCK, DTL,
GNG and PEP.
Page 24
19 October 2016
GARY – Growth At Reasonable Yield
Small Cap Industrials continue to dominate
Last Update – 14th October 2016
Note: This report is a Quantitative Strategy product. The report uses consensus rating and
forecast data from Thomson/IBES to get coverage of the whole market and avoid a house skew,
and as such sometimes the highlighted themes, sectors and stocks will not match our analysts
view.
Macro Outlook: Global markets are moving past US Fed and US election worries as the US
reporting season starts to test stretched multiples. We continue to see global growth remaining
weak, while an easing bias stance from most central banks will support equity markets. We
maintain the view that the US Fed will only move in December; a move that continues to remain
under threat from economic weakness from election and global uncertainties (such as the Italian
referendum). A recent bond squeeze has delivered a bounce in yields, whilst a medium to long
term outlook suggests that bond yields will settle in the slightly higher range from early 2016. The
yield trade will continue to see support in Australia as interest rates remain low for longer. Small
cap industrial stocks continue to dominate the GARY screen.
The GARY (Growth At Reasonable Yield) screen allows us to pick stocks with strong yield, solid
growth and cheap valuation multiples compared to the overall historical market trend. Resources
and related service stocks carry higher risk due to global growth worries, while property related
stocks carry the bubble risk.
GARY Industrial picks are: mid-cap (SKI), small-cap (CWP, HFA, WPP, VLW, FXL, FSF, AJA
and GDI).
GARY Resource and related picks are: small-cap (PRG).
Page 25
19 October 2016
Global growth continues to get
knocked around by currency wars!!!
US Reporting Season Outlook!!!
Page 26
19 October 2016
News Wrap
OVERNIGHT MARKET PERSPECTIVE
Global Market Round Up – Local shares are poised to lift amid a rally on Wall Street. Key data on China is set for
release. The next focal point for the markets will be Chinese economic data on industrial production, retail sales and gross
domestic product that are all due on Wednesday after a report last week showed the nation's exports unexpectedly
dropped in September. GDP probably expanded 6.7 per cent from a year earlier in the three months through September,
the same pace as the previous two quarters and smack in the middle of the government's full-year target pace, according
to a Bloomberg survey of economists. Industrial output, fixed-asset investment and retail sales all likely picked up last
month, surveys show. Stocks rallied around the world and the US dollar fell on speculation the Federal Reserve will stick
with a gradual tightening of monetary policy. Equities headed toward their biggest gain in almost four weeks as investors
parsed earnings reports. The greenback extended its drop from a seven-month high as data showed consumer prices
excluding food and fuel costs rose less than forecast. Oil traded near $US50 a barrel as investors ponder the likelihood of
OPEC following through with production cuts agreed on last month. AFR
US – The S&P 500 Index ended higher, rising from a one-month low. Netflix surged after reporting a jump in subscribers
that alleviated concern about slowing growth. International Business Machines slipped after saying that profit margins
shrank for the fourth quarter in a row. Alphabet shares hit a record high after mostly positive reviews for its new Pixel
phones, the first line of phones designed in-house by its Google unit. The Mountain View, California-based company's
stock touched $828.81. "We've been selling off for the better part of a week at this point, and earnings have been good
enough to get us into this bounce," said Michael Antonelli, an institutional equity sales trader and managing director at
Robert W. Baird & Co in Milwaukee. Goldman Sachs profit rises 47pc: Goldman's commitment to fixed-income trading
through a seven-year slump has finally paid off. According to a review by Credit Suisse Group, in the second quarter,
Microsoft, Apple and Google parent Alphabet formed investors' three favourite large-cap holdings for the second quarter in
a row. Other names that make appearances on the list of 25 this quarter include JPMorgan Chase & Co, Facebook,
Amazon.com and The Walt Disney Company. US consumer prices recorded their biggest gain in five months in
September as the cost of gasoline and rents surged. The Labor Department said its Consumer Price Index increased 0.3
per cent last month after rising 0.2 per cent in August. In the 12 months through September, the CPI accelerated 1.5 per
cent, the biggest year-on-year increase since October 2014. The CPI rose 1.1 per cent in the year to August. AFR
Europe – A broad-based rally pushed European stocks to the biggest advance in almost a month on optimism monetary
policy will remain supportive of growth. Miners traded near a 14-month high as commodities climbed, with the dollar
extending a drop on speculation the Federal Reserve will raise rates gradually even amid a pick-up in the global inflation
outlook. Italian and Spanish firms led an advance in lenders, pushing a gauge tracking them to its biggest jump in almost
two months. Earnings are also in focus, with Remy Cointreau up 1.5 per cent and Domino's Pizza Group jumping 6.5 per
cent on better-than-estimated sales. The Stoxx Europe 600 Index added 1.5 per cent at the close, climbing for the second
time in three days. Speculation about central-bank policies have hindered equity gains after the Stoxx 600 reached a fourmonth high in September. The European Central Bank will give an update on Thursday. Most economists in a Bloomberg
survey predict it will prolong the bond-buying program at its December meeting. "The strongest argument to buy into
European equities is not the earnings story, but that the ECB may extend its quantitative easing program and support risky
assets," said Jasper Lawler, an analyst at CMC Markets in London. "Valuations are relatively lower than the US."
European equities have scope to rally through the end of the year, and their valuations will help cushion the impact of
potential risks, Barclays says. After a slump of 6.4 per cent this year, members of the Stoxx 600 trade at an average 14.8
times estimated earnings, or about 11 per cent cheaper than those on the S&P 500 Index. AFR
Asia – Asian stocks headed for the biggest advance in almost a month, led by commodity shares. The MSCI Asia Pacific
Index rose 0.9 per cent to 139.37 as of 4.10pm in Hong Kong. Philippine equities paced gains, while Hong Kong shares
rose the most in six weeks. Japan's Topix index finished 0.3 per cent higher, erasing an earlier loss, as the yen hovered
around 104 versus the dollar. Hong Kong stocks climbed, led by financial companies and casino operators. The Hang
Seng Index gained 1.6 per cent, after touching its lowest level since September 1 on Monday. The Shanghai Composite
Index rose 1.4 per cent, while the Shanghai B-share index jumped 2.6 per cent after plunging the most in nine months in
the previous session. A measure of Macau's gambling companies bounced back after sliding the most since August in the
previous session as Chinese authorities detained employees from billionaire James Packer's Crown Resorts. MGM China
Holdings added 3.4 per cent, while Galaxy Entertainment Group and Wynn Macau rose at least 2.7 per cent. AFR
Currencies – The Bloomberg Dollar Spot Index, which measures the US currency against 10 major counterparts, fell 0.3
per cent. It touched the highest level since March last week. The greenback was little changed at $US1.0993 per euro and
103.79 yen. The US dollar has fallen this year on speculation that mixed economic data would limit the Fed's ability to
tighten monetary policy. The losses had narrowed in recent weeks on wagers that the central bank is getting closer to a
hike, prompting hedge funds and money managers to boost net bullish bets. Futures pricing indicates a gradual pace of
rate increases, with traders seeing a 64 per cent probability of a move by December. "The market has clearly come to a
stronger view that they'll raise rates in December, but that has very little influence on where rates are perceived to go in
the longer term," said Adam Cole, head of global foreign-exchange strategy at Royal Bank of Canada in London. The
pound advanced versus the dollar as signs of quickening inflation suggested the Bank of England may have limited scope
to ease monetary policy further. AFR
Page 27
19 October 2016
Commodities – Oil advanced as much as 1.2 per cent in New York. Speculators have bolstered bullish bets since the
OPEC accord was reached on September 28 in Algiers. Fractures have emerged within the group that threaten to derail a
final agreement on quotas, expected in Vienna on November 30. US crude inventories probably rose last week, according
to analysts surveyed by Bloomberg. Brent crude settled up 16 cents, or 0.3 per cent, at $US51.68 a barrel. US West
Texas Intermediate (WTI) crude rose 35 cents, or 0.7 per cent, to settle at $US50.29. Zinc and other metals prices rose,
boosted by strong credit data in China and a weaker US dollar, while tin gained on falling output in key producer Myanmar.
Benchmark zinc prices on the London Metal Exchange closed up 0.5 per cent at $US2285 a tonne, off an earlier session
high of $US2313. Zinc has been the best LME performer this year, climbing by 42 per cent on concerns about shortages
developing after mine closures and suspensions. "Zinc appears to have seen stops triggered through yesterday's high,"
Dee Perera at broker Marex Spectron said, adding that Commodity Trading Advisors (CTAs) were leading the buying
interest. By the close, zinc came off its intra-day high and some other metals went into negative territory after oil erased its
early gains, she added. Tin was one of the top LME performers, ending 1 per cent higher at $US19,625, after senior mine
officials in Myanmar, China's top supplier of ore, told Reuters that production at key operations was falling sharply and
deposits could be depleted in two to three years. LME copper finished 0.1 per cent firmer at $US4681 after ending flat in
the previous session, not far from Friday's one-month trough of $US4623.25. "Copper supply is still very plentiful if you
look at Chinese copper concentrate imports. Our sense is that copper prices will struggle to play catch-up with the rest of
the LME complex," Fu said. LME nickel closed 1.2 per cent stronger at $US10,410 after data showed the global nickel
market was in deficit for the first eight months amid strong Chinese demand and a crackdown on Philippine mine supply.
"Certainly the demand environment has improved drastically over the course of 2016," said Daniel Hynes, analyst at ANZ
in Sydney. LME aluminium was the worst performer, dropping 1.1 per cent to end at $US1642, while lead slipped 0.8 per
cent to $US1973. Both metals touched the lowest levels since September 28. AFR
MACRO PERSPECTIVE
US Inflation and Energy Costs – The cost of living in the US rose at the fastest pace in five months on energy and
shelter prices, a sign inflation is getting closer to the Federal Reserve's goal. The consumer-price index increased 0.3 per
cent in September from the previous month, matching the median forecast of economists, after a 0.2 per cent gain in
August, a Labor Department report showed on Tuesday. The year-on-year rise was 1.5 per cent, the most since October
2014. Excluding volatile food and fuel costs, prices were up 0.1 per cent. Prices have shown a gradual pickup as housing
costs continue to climb and the drop in energy prices abates. The data, along with a still-strong labour market, may keep
policy makers on course for a quarter-point interest-rate increase in December after holding off on hikes so far this year.
"This is still consistent with a December rate hike and a gradual pace over the next year," said Scott Brown, chief
economist at Raymond James Financial in St. Petersburg, Florida. Projections for the advance in consumer prices
including all categories ranged from 0.2 per cent to 0.4 per cent. Estimates for core consumer prices in the Bloomberg
survey ranged from a 0.1 per cent drop to a 0.3 per cent advance, with a median of a 0.2 per cent rise. At a year-over-year
rate, core prices rose 2.2 per cent in September after climbing 2.3 per cent the prior month. Energy costs increased 2.9
per cent in September after being little changed a month earlier, the report showed. Food costs were little changed in
September. AFR
US Election Cycle – Hillary Clinton holds a decisive advantage over Donald Trump in the competition for votes in the
electoral college, leading in enough states to put her comfortably over the 270 majority needed to win the presidential
election in November, according to a new SurveyMonkey poll of 15 battleground states conducted with The Washington
Post. Based on the results from the 15 state surveys, along with assumptions of the likely outcomes in other states that
have consistently voted for one party or the other, Clinton, the Democratic nominee, holds leads of four percentage points
or more among likely voters in states that add up to 304 electoral votes. Trump, the GOP nominee, has the advantage in
states with an estimated electoral vote total of 138. Arizona, Florida, Ohio and Texas, which account for 96 electoral votes,
remain as toss-ups. All results in the 15 state surveys are based on ballot tests that include Libertarian Party nominee
Gary Johnson and Green Party nominee Jill Stein. The results underscore the importance for Trump of Wednesday's final
presidential debate, in Las Vegas. National polls have moved in Clinton's direction since the exchanges began in late
September. Her current average margin is seven points in polling averages from the Huffington Post Pollster and
RealClearPolitics. The most recent Washington Post-ABC News poll put her national lead over Trump at four points. AFR
China Growth Outlook – China's economy grew 6.7 per cent year-on-year in the September quarter, matching the pace
of the previous two quarters, as the economy stabilised despite concerns about rising debts and an overheated property
market. Growth in gross domestic product (GDP) was in line with expectations and puts the economy on-track to meet the
government's 6.5 to 7 per cent growth target. The outlook has also improved as fixed asset investment and retail sales
picked up in September, although industrial production was slightly weaker than expected, according to figures released
from the National Bureau of Statistics on Wednesday. "The economy is stable and making progress," said the bureau's
spokesman Sheng Laiyun in a press conference. "The growth is better than expected." China's economy has stabilised
this year after growing at the slowest annual pace in a quarter of a century in 2015. The government said in March it was
committed to maintaining growth of 6.5 per cent over the next five years. To achieve this, Beijing has been pumping credit
into the economy, which has resulted in a pick-up in manufacturing and housing sales, ensuring steady demand for
Australia's iron ore and coal. However, stimulatory policies have heightened concerns about China's debt levels and led to
surging house prices across major cities, prompting fears of a property bubble. AFR
China, Gambling and Corruption – As Chinese police were preparing for Thursday's late night raid on the homes of
Crown Resorts employees, Premier Li Keqiang had just returned from the gambling hub of Macau. His three-day visit was
billed as a rapprochement tour, after two years during which the Chinese government's anti-corruption campaign had
wiped more than $10 billion from the city-state's economy. And Mr Li was full of praise. Macau was a "treasured lotus land,
a beautiful and special place" he declared, while flagging "new measures and policies" to support its economy. Macau,
which like Hong Kong is a self-governed "special administrative region", is the only place in greater China where gambling
Page 28
19 October 2016
is legal and it had built itself into the biggest casino hub in the world, with gaming revenues of a whopping US$45 billion
($58.55 billion) in 2013. But the world changed for Macau after President Xi Jinping and Mr Li took power, launching an
unprecedented austerity drive, which explicitly prohibited government officials from "taking part in any gambling activities."
Revenues began tumbling in Macau – last year gaming revenue was just under US$29 billion, down more than a third
from 2013, while casinos in places like Australia, South Korea and the Philippines cleaned up as high rollers looked
elsewhere to place their bets. Crown was one of the beneficiaries; the group's head of Australian Resorts Barry Felstead
said a highlight from the most recent financial results was the "marked rise" in visitors from China. Macau has been
complaining for years the anti-corruption campaign had only affected its gaming industry while foreign jurisdictions have
been thriving. Now it seems Beijing is looking to level the playing field. As the fallout from the Crown detentions
reverberates around the industry, many expect Macau to emerge the winner. "We view this positively for Macau, and at
the same time slightly more negatively for other overseas jurisdictions that rely on Chinese for VIP play," said Grant
Govertsen, an analyst at Union Gaming Group. "Ultimately we believe that Beijing would rather be able to monitor VIP
play, and that means they'd prefer for the business to be in Macau." AFR
War in Iraq – Iraqi and Kurdish forces encountered moderate resistance from Islamic State fighters but achieved their
objectives on the first day of a massive operation to clear the militants from Mosul, Iraq's second-largest city, US defence
officials said on Tuesday (AEDT). The forces have not yet reached the inside of the city, where they will face formidable
defences, including deadly booby traps and hardened fighters who can seek cover in tunnel complexes and fight from
buildings and alleys. Several thousand militants are attempting to defend the city, according to the Pentagon. The Mosul
offensive is the largest and most complex operation launched by Iraqi forces since Islamic State militants swept into their
country two years ago. It is also fraught with potential dangers. The long-awaited operation was launched at dawn on
Monday (local time). Iraqi forces "encountered significant small arms and indirect fire", such as rockets and mortars, Air
Force Colonel John Dorrian, a military spokesman in Baghdad, said. The initial resistance did not stop Iraqi and Kurdish
forces, who seized towns and villages and moved closer to the edge of the city. Kurdish forces said they had cleared nine
villages and extended control of the road between Irbil and Mosul in the first day of fighting. "Day One so far has gone
according to plan," Pentagon Press Secretary Peter Cook said. AFR
Chinese Gamblers and Special Visas – The federal government facilitated the flow of big spending Chinese gamblers to
Australia by introducing an "express visa" seven months ago, after lobbying from Crown Resorts and other casino
operators. The service for "high value visitors" costs 6062 yuan ($1212) and is understood to have been used to organise
trips to Australia by at least one of the 18 Crown staff detained in China last week. The express visa was regarded as a
"special lane" for Chinese gamblers by some in the industry and viewed as tacit government support for bringing highrollers to Australia. The visa guaranteed applicants a response within 48 hours and was ideal for big gamblers wanting to
make a last minute trip to Australia. The Department of Immigration and Border Protection said it had "fast tracked" 242
visas since the initiative was launched in mid-March. "This model is broadly consistent with those of other competitor
countries, and supports Australia's competitive advantage in the international tourist market," the Department said in a
statement. The timing of the new visa was particularly good for Australian casinos as many Chinese high rollers were wary
of going to Macau, believing it could make them a target for President Xi Jinping's anti-corruption campaign. In a
submission to the Productivity Commission, Crown said streamlining the visa application process was crucial if Australia
was to remain a competitive tourism destination. AFR
Company Tax Reform – The Turnbull government's plan to deliver a 25 per cent company tax rate within a decade
appears doomed, with South Australian Senator Nick Xenophon confirming his team will not be supporting a reduction for
any firm with an annual turnover of more than $10 million. The government needs nine of the 11 Senate crossbenchers to
pass its 10-year enterprise tax plan but with the Nick Xenophon Team comprising three of those votes, there can be no
deal. The Greens oppose the cuts outright and Labor will support a tax reduction for a company with a turnover capped at
only $2 million. While Treasurer Scott Morrison is still negotiating with the crossbenchers, Senator Xenophon told The
Australian Financial Review his mind was made up and the party would not budge. He also confirmed he would seek
money for the government to assist redundant car industry workers and keep alive the Arrium steelworks in Whyalla. His
determination came as former Liberal treasurer Peter Costello launched a broadside at the policy and its Business of
Council of Australia backers, saying the policy lacked funding, balance and coherence. AFR
Property Bubble – Apartment prices are headed for a major shakeout that will almost certainly create contagion into the
broader property market, says Stephen Walters, one of Australia's most experienced economists. Prices of apartments will
fall 10 per cent to 15 per cent over the next one to two years, he predicts, squeezing buy-to-let investors who have
borrowed to negative gear and are heavily relying on capital gains. "I think it's going to get ugly, particularly in some parts
of the market and for some lower-income cohorts who have borrowed," Mr Walters said in an interview on Tuesday. The
warning echoes a sharp escalation in concern from the Reserve Bank of Australia over a potential oversupply of
apartments. For the third time in four days the central bank noted on Tuesday that a "considerable supply" of units would
arrive over the next few years, adding to the need to closely watch the property market. Officials at the bank on Friday
warned that risks were coming to the "fore", while Philip Lowe cautioned in his first speech as governor on Tuesday that
growth in rents was "very low and there is a big increase in housing supply still to come". AFR
SOURCE – AUSTRALIAN FINANCIAL REVIEW (www.afr.com), THE AUSTRALIAN (www.theaustralian.com.au), THE SYDNEY MORNING
HERALD (www.smh.com.au) , BLOOMBERG (www.bloomberg.com) , MARKET WATCH (www.marketwatch.com)
Page 29
BAILLIEU HOLST
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