1. It’s Raining Yield – Halleluiah
2. Mining services: you are being served
3. Mining for Dividends: yield implications
4. The Asian Dividend Yield Curve
This leads neatly on to an issue we alluded to yesterday; Asian yield.
It is perhaps a little known fact that the dividend distribution of the HSI, HSCI and HSCEI are later in the half year than any of its ASPAC counterparts. The implications of this mean that one of the reasons these markets may have lagged in recent months could have been the relative cheapness of upside calls (given the dividend duration) reducing the physical need to directly own the market.
Given some of the biggest proponents of the above cost consolidation are RIO and BHP we have been speaking for a while about all the ways they may return excess capital to the market. This is particularly interesting in a period where yield has been so popular.
There is still further to go here in our opinion.
Aussie Government released their bi-annual Resources and Energy Major Projects report yesterday.
We hope that all our Hong Kong clients made safely through what sounded like a pretty chunky storm yesterday. The damp mood outside seemed to weigh on the delayed afternoon session also, so we thought you could do with some cheering up;
1. Bernanke and markets: no change in our view
2. You fix housing (cont…)
3. Cable: scarcity of inflation beating fixed returns
4. Liberty Global: another allied deal with former foe
5. COST (aviate BUY): the perfect place to hide…
6. Consumer Staples: a divergence building?
Within the Consumer Staples space we are becoming aware of some companies that have undergone substantial multiple expansion. There are some cases where the multiple has run ahead of fundamentals. While we still advocate the space, having both High Quality Growth and bond like characteristics, we now wonder whether we have to be a little more discerning with regard to the stocks within the sector we own.
All you have to do is look at COST performance yesterday versus the market as the selloff began. Simply put, COST is a sticky, well respected business that has a long runway for continued growth reinforced by strong customer loyalty. It is a business more people gravitate to during uncertain times and with the markets jittery again, COST could be a bright spot in a declining market.
BSkyB’s 5year fibre deal, confirmed today, with Virgin Media underpins the core of Sky’s broadband network. £49m looks like a very reasonable price, and is the closing of a deal discussed in Q1 2013. It will, essentially, bring faster speeds to Sky broadband customers.
1. Bernanke and markets: no change in our view
2. High Quality Growth: buy weakness
3. AUD: Ford quits Australia, a big change in sentiment
4. Cable: scarcity of inflation beating fixed returns
5. BSkyB vs BT ‘Sports TV War’? We agree with Liberty’s view
6. You fix housing (cont…)
7. SABMiller: high quality growth and delivered
8. United Utilities: solid, as it should be
United Utilities reported a solid set of numbers with FY sales in line at £1.64bn, PTP better at £354.3m vs. est. £351m. Div inline. Saw further customer service improvements and outperformed regulatory leakage target. On track to meet outperformance targets. Outlook was positive. On the call the company refused to be drawn on whether it had received an approach saying that it had adhered to its disclosure obligations (i.e. did not outright deny it).
SABMiller this morning reaffirmed its HQGB credentials. Profit rose 14% as Latin America and Africa continued to show strong growth. Despite numbers coming in slightly light (EBITA $6.42bn vs. est. $6.46bn) on an organic basis profits rose 9% YoY, in line with estimates. SABMiller stays in the basket. Remains a buy.
While preferring housing derivative stocks over the homebuilders themselves, evidence from the latter continues to validate the theme we have identified since October 2011. New orders, the key indicator for builders, at Toll yesterday reached a 7 year high, rising 33%. The most important economic driver, price, even more impressive. The value of these orders surged 57%.
Liberty Group (perhaps the most successful media company to stay ahead of the consumer and technology curves over the last 40 years) gave their own take on the perceived sports TV ‘war’ between BSkyB and BT last night. Given the portfolio of companies Liberty has interests in, and impending ownership of Virgin Media, their view has merit.
One of the biggest failings of the Digital Agenda and its failure to get anywhere close to meeting the 2020 broadband goals has been due to the onerous regulatory hurdles placed on the telco incumbents, as discussed ad nauseam. In contrast, Liberty reminded us last night that cable has an advantage over incumbents.
For Ford, this change is small beer, but for Australians this is hugely significant. The Ford vs. Holden (owned by GM) rivalry is as strong as Celtic vs. Rangers or Yankees vs. Rod Sox, you support one and hate the other, even though the core cars (Ford Falcon vs. Holden Commodore) are very similar.
Put together an overbought equity market (on RSI), a spike in AAIIBULL Index to 48 (only higher once in 2013) and Bernanke’s commentary yesterday and we have the excuse to take profits the market has been looking for. Let us be clear, the Fed said it “could” slow the pace of asset purchases “in the next few meetings” IF the labour market is strong enough. Bernanke also said asset purchases could increase IF the outlook is worse.
1. China Galaxy: in a Galaxy far, far from Japan
2. Japan: our list seems to be working
3. Banking Japan Profits: largest equity exposure in the TOPIX
4. Mining services: continuing to dig their hole
5. Lignight my fire: buy China Coal Energy
China’s proposed ban on lower quality coal imports could block at least 60-70 million tons of coal imports and had the Chinese IPP sector on its knees yesterday (down 5-10% in the H share market).
Low quality lignite coal is imported to blend with higher calorific thermal coal at a price on ave 20-30 Yuan pt cheaper than domestic spot.