Morning Market Report, Aug 27, 2007

Good start to the week, the market is up 102 this morning. The SFE Futures suggested a 97 point rise in the market this morning.

Good start to the week, the market is up 102 this morning. The SFE Futures suggested a 97 point rise in the market this morning.

The Dow Jones closed up 142 on Friday – It moved in a 172 point range and finished over 1% higher on low volume after encouraging economic figures and better-than-expected earnings results provided the market with some much needed confidence. Around 1.19 billion shares changed hands, 32% less than the 3-month daily average. Durable goods orders increased 5.9% for the month, well above the 1% gain economists predicted. Energy stocks finished higher on the back of a stronger oil price, Exxon Mobil put on 2.3%, and homebuilders gained after the Commerce Department announced purchases of new houses increased by a better-than-expected 2.8%. It was a good week for all three major indexes, the S&P 500 and the NASDAQ had their biggest weekly gains since March, both put on 2.3% and 2.8% respectively. The Dow Jones closed up 2.29%, its biggest weekly gain since April this year.

The VIX (volatility) index has fallen for 6 sessions on the trot. Down 8.4% on Friday. All Ords up 7.35% on the week. Its best 5 day performance since 1975. The All Ords fell 12.2% in the correction, rallied 7.4% and is still 6.1% off its highs.

Resources doing well today with the rest of the market…BHP up 93c to 3753c and RIO up 240c to 9152c. RIO was up a big 4.7% in the ADR on Friday after they received the all clear from the US anti-trust clearance to acquire Alcan…pretty much expected. Metals mixed on Friday, Copper up 0.9%, Aluminium up 1.4%, Nickel down 0.4% and Zinc down 0.6%.

For those of you interested in BHP….Chip Goodyear and Marius Kloppers appeared on Inside Business at the weekend.

We have a big week ahead of us, it’s the last week of the Australian results season (hooray!). Although there are quite a number of them this week the number of big company results is a lot less than last week. On the economic front we have some consumer sentiment numbers and housing numbers in the US….the state of the housing market and the consumer resilience is a big part of the market at the moment as we guess whether the credit crunch is developing into a growth risk for the US economy. We also have June Q balance of payments numbers on Thursday.

Results today:

Analysts were on the money with the Woolworths’ (WOW) profit result this morning. They announced a 28% increase in NPAT to A$1.29 billion, up from $1.01 billion last year. Analysts were looking for just that. $1.29bn. The result exceeded the company’s guidance of 25%-27% earnings growth for the year and revenue jumped to $42.59bn, up from $37.83bn in FY06. WOW really taking the sword to their competitors, increasing the reinvestment of earnings back into the business to further enhance their competitive advantage. Not the best news for Wesfarmers (WES) who are trying to takeover Coles. WOW up 58c to 2827c today and up 40% in the past 12 months. Coles Group (CGJ) up 2.7% in the same period. WOW say they are still interested in Coles assets.
Zinifex up 62c to 1737c, they announced a FY07 NPAT of $1.34bn, up from $1.08bn thanks to record prices for zinc and lead. The result slightly below analysts expectations of $1.36bn. They comment that Zinc stocks are building and whilst zinc prices are expected to remain above the long term average they are also expected to “ease”.
ABC Learning Centres (ABS) up 29c to 715c after announcing a 76% increase in FY07 NPAT to $143.1m, up from $81.5m last year and slightly above analysts’ expectations of $139.4m. Revenue more than doubled to $1.7bn, up from $790.8m, fuelled by acquisitions in the US and UK and management reaffirmed EPS guidance of 20% growth for FY08. ABS up 8% in the past week.
WorleyParsons (WOR) up 6$ or 205c to 3605c after they announced a 61.6% increase in FY07 NPAT to $224.7m, up from $139.1m last year, analysts expected $220m. WOR has been a solid performer since acquiring Colt Companies, up 50% since February and up 70% in the past 12 months.
Suncorp Metway (SUN) – SUN up 47c to 1972c after they announced a FY07 NPAT up 16% to $1.064bn, up from $916m last year helped by the $7.5bn acquisition of Promina Group, analysts had expected $1.053bn. Earnings were impacted the NSW storms and floods in June – estimated damage was $750m. SUN down 11% since the June floods and storms occurred.
Ramsay Health Care (RHC) announced solid result this morning, their FY07 NPAT came in 22% higher than last year to $107.1m and slightly better than the $99.1m analysts were expecting. RHC up 20c to 1091c.
Transfield Services (TSE) up a big 85c or 8.2% to 1116c after announcing a FY07 NPAT of $114.3m, up from $55.6m last year. The result was better-than-expected but included $26.3m from the IPO of their Transfield Services Infrastructure Fund (TSI).
Commander Communications (CDR) down 10c to 88c or 10% on their results. This comes despite having had a profit warning last month. Made a net loss of $5.3m compared to a profit of $23m last year. The stocks was 230c last November.
Austereo (AEO) up 4.6% or 9c to 204c on the back of their results. NPAT up 11.7%.

In other news

EQUINE FLU – Punters didn’t know what to do with themselves over the weekend – Tabcorp Holdings (TAH) announced this morning that the outbreak of equine influenza and the suspension of horse racing since Saturday has lead to a loss in wagering turnover of $65 million. Definitely what the company didn’t need after announcing poor results last week. It can get worse, if racing doesn’t resume until next weekend, TAH can expect a loss in turnover to be around $150m. To give you an idea how contagious the equine flu is….all but four of the 165 horses at Centennial Parklands Equestrian Centre in Sydney where it was first diagnosed…caught it.
JP Morgan upped their LNG price forecasts and as a result lifting their valuation on Oil Search (OSH), Woodside Petroleum (WPL), and Santos (STO). They say, “We see the PNG LNG project as the bigger prize for Oil Search” and maintained their OUTPERFORM recommendation on the stock and 485c target price.
Coates Hire (COA) up 4.4% after their CEO refused to comment on media speculation that they will be bid for by National Hire (NHR) and private equity group Carlyle Group. Their results are out Wednesday. Talk is that a bidding would start at 600c a share. COA currently at up 20c to 560c.
Anzon (AZA) up 24c or 20% to 145c after announcing they have received a number of approached that could lead to them being taken over. The offers they have received thus far are conditional and there are no guarantees at the moment.
Centro Retail Trust (CER) announced they would merge with Centro Shopping America Trust (CSF) to create Australia’s ninth-largest listed property trust. The merger will take the portfolio to 460 shopping centers, up from 228. The joint group will have a market capitalization of $4.1bn.
Just Group (JST) up 12c to 479c after announcing they have completed their acquisition of Smiggle, the fashion stationary chain