Boston-based hedge fund Delta Partners is shaping up to be a key player in the boardroom spill after further upping its stake in Bellamy's Australia to just over 8 per cent.
Delta Partners has continued to bolster its stake in the beleaguered organic baby formula and food company increasing its holding to 8.02 per cent from 6.67 per cent, making it the second biggest shareholder, eclipsing BRW Rich Lister and initial Bellamy's investor Bruce Neill, who holds 7.4 per cent.
Its vote is even more important come February 28 when an extraordinary meting will be held by key shareholder Black Prince Private Foundation which is looking to dump four independent directors.
A source told the AFR that Delta Partner's owner and portfolio manager, Charlie Jobson, has previously bought into the dairy sector and is looking at Bellamy's as a turnaround story.
The turnaround specialist has investments ranging from Irish healthcare assets to a Brazilian entertainment group and a US-burger chain, according to Bloomberg. Its has a position in local mining services provider Bradken.
Shares are down 1.4 per cent today at $4.83, but the stock has been on a stunning rally over the past weeks that has seen it rise nearly 30 per cent since plunging to an 18-month low in mid-January.
Shares in Solomon Lew's Premier Investments soared more than 12 per cent to $14.03 after the retailer said it expected first-half retail earnings to rise as much as 10.6 per cent to $93 million.
While the timing of trading update was unexpected, the market's reaction not so much, with a sharp unwinding of sector negativity a familiar story for PMV, said Gary Huxtable, client adviser at Atlantic Pacific Securities.
"PMV regularly gets a dark shadow cast across it by way of negative sentiment towards Australian retailers, with many investors not really understanding the company's growth story," he said.
"The doom and gloom narratives towards Australian retail and Smiggle's UK exposure post-Brexit were overdone, with the stock reaching a state of being oversold over the last week."
Premier Investments, which owns Portmans, Dotti, Peter Alexander, Jacqui E, Just Jeans, Smiggle and Jay Jays, issued the trading update following recent speculation about earnings risks facing listed retailers after weaker than expected December and January trading.
It also follows a profit downgrade at OrotonGroup, a friendly takeover offer for struggling apparel retailer Specialty Fashion Group and the collapse of apparel chains Marcs, David Lawrence, Herringbone, Rhodes & Beckett and Pumpkin Patch.
The trading update suggests that despite subdued consumer confidence, widespread discounting and the rapid growth of global fashion chains H&M, Zara and Uniqlo, Premier Retail has fared better than some of its peers.
Motley Fool's James Mickleboro reckons a fairly high price-earnings ratio of 19 (before the update) is "more than fair" for a company growing earnings in the double-digits and which is expected to deliver a fully franked 4.1 per cent dividend over the next 12 months.
Mickleboro says the update didn't make it clear where the growth is coming from, but suspects that Premier's key Smiggle and Peter Alexander brands will have contributed strongly to the result.
"Smiggle's international expansion in particular is a big reason I am attracted to the company."
Point Piper resident Malcolm Turnbull says the $5.6 million salary of Australia Post boss Ahmed Fahour is "too high", a day after the Senate thwarted efforts to keep Australia's biggest public service pay packet secret.
Documents show one senior executive of the government owned company, understood to be Fahour, received a $4.4 million salary with bonuses and $1.2 million in superannuation, while five other executives received salaries of between $1.3 million to $1.8 million.
Turnbull, who is paid $507,338 a year, said he had told Australia Post chairman John Stanhope he believed the salary was too high.
"The Australia Post board in independent, it makes its own commercial decisions so this is not a decision of the government," he said. "As the Prime Minister and a taxpayer, I've spoken to the chairman today. I think that salary, that remuneration, is too high.
"I think it's too high, I know it's a big job, it's a big company. I know the company has been able to improve its position but in my view, and I say this as someone who spent most of his life in the business world before I came into politics, I think that is a very big salary for that job.
"I'm entitled to my opinion, just like every other Australian is, and I think many would agree with me."
House price growth across Australia will increase by a meagre one per cent this year as investor demand for housing cools and lenders tighten their lending practices.
That is the prediction of the country's biggest lenders' mortgage insurer Genworth Mortgage Insurance Australia, which expects to write 20 per cent less new business this year amid a slowing property market.
GMA boss Georgette Nicholas is not alone in her view, with the latest National Australia Bank's residential property surveyed showing a drop in property investment and foreign buyer activity that is expected to curb house price growth to just 1 per cent in the next two years.
Her comments come after Genworth posted a 5 per cent dive in underlying net profits to $264.7 million for the year to December. Investors were not impressed, driving the stock down by as much as 8.6 per cent, before recovering to last trade 4.5 per cent lower at $3.22.
The LMI giant reported a statutory net profit of $228 million, or a 30 per cent fall from last year, due to mark-to-market losses during the period.
The company, which provides protection to lenders from borrowers defaulting on their home loans, will pay a 14¢ per share dividend to investors. Shareholders will also pocket a 5.3¢ per share special dividend for the period.
"High loan-to-value ratio lending as a proportion of total mortgage originations has reduced recently in response to tightened lender risk appetite. We expect this to lead to a lower level of new insurance written in 2016," Ms Nicholas said.
"Yet, this business is expected to be lower risk and less capital-intensive. Our focus is on maintaining our risk discipline in this changing market."
Genworth's new insurance written dropped 9.9 per cent in the past year from $36.2 billion to $32.6 billion. Gross written premium, or revenue, also fell 20 per cent to $507.6 million.
Shares are trading marginally higher, with gains in the banks offset by losses in the miners and energy stocks, following lacklustre leads from overseas.
The ASX is up 0.2 per cent at 5632.0, spearheaded by a 12 per cent rally in Premier Investments after the retailer said sales in the first half have hit a record $588.6 million.
Less well received were Genworth's earnings, sending the stock down nearly 6 per cent.
Otherwise the market is treading water a bit, as investors wait for earnings season to notch up a gear.
The big banks are all around 0.4 per cent higher, Telstra has added 0.2 per cent and CSL has gained 0.3 per cent.
In the red, BHP has dropped nearly 1 per cent following the overnight slide in oil prices, which has also sent Santos down 1 per cent and Woodside down 0.4 per cent.
US Treasury yields fell to their lowest in nearly three weeks, drifting past significant technical levels, as fixed-income investors worried that President Donald Trump's pro-growth policies could be hamstrung by his focus on other issues.
Traders have worried that Trump's promises to cut corporate taxes and boost infrastructure spending have yet to be fleshed out and could fade further into the background or face more significant resistance with time.
Benchmark 10-year note yields fell to 2.37 per cent, their lowest since January 18, with other Treasury yields falling broadly to their weakest levels since mid-January. Prices on the 10-year were last up 6/32 to yield 2.39 per cent.
Australian 10-year bond yields also fell to three-week lows below 2.7 per cent, but are still well above levels around 2.35 per cent they were trading at prior to the US election.
"The market is still giving the benefit of the doubt to the Trump administration, but the longer it takes for the market to see a real nexus on the policy front - those things that had expectations running high after the Republican sweep - the less convinced the market's going to be that Trump is going to really deliver on those," said Bruno Braizinha, interest rates strategist at Societe Generale.
Financial markets have also scaled back expectations of Fed rate rises this year.
The one-month Treasury rate, two years forward, is now at 1.97 per cent, implying fewer than six 25 basis-point increases over the next two years. It had touched 2.30 per cent the day before the central bank raised rates in December. While the Fed's dot plot forecasts three rate increases this year, in 2016 the Fed raised the rate just once after having signalled four hikes.
Federal Reserve Bank of Minneapolis president Neel Kashkari overnight justified his vote last week to leave interest rates unchanged by saying inflation is in check.
"While there are some signs of inflation slowly building toward our target, it isn't happening rapidly, and inflation expectations appear well-anchored," he wrote in an essay posted on the bank's website.
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It's all quiet on the Western Front, writes IG strategist Chris Weston:
Another night of very low volatility, highlighted with the S&P 500 and Dow Jones indices trading in a nine and 87-point range respectively. This is great for longer-term investors who don't like to look at daily market gyrations, but it is obviously frustrating for the short-term traders out there.
The US volatility index ('VIX') at 11.35 per cent really tells you only so much about how the market views future volatility, but then we can also look out at forward VIX futures contracts and see the 'curve' is about as flat as we will ever see.
The fact is implied volatility is super low and traders don't see much to derail that at present.
With the dust settling on yesterday's RBA meeting the focus clearly shifts to Dr Lowe's speech in Sydney tomorrow night (8pm) and then Friday's Statement on Monetary Policy (SoMP), where the view is we are going to see some fairly brutal cuts to the banks GDP forecasts for end-2016 and June 2017.
The wash-up of yesterday's RBA statement though is the market has priced in a slightly higher degree of tightening, with eight basis points (bp) of hikes priced in over the coming 12 months (this stood at 4bp just before the release).
Online classifieds business Carsales is expecting a "solid uplift" in its Latin American businesses in the second half after posting a 5 per cent increase in underlying interim earnings to $54 million, in line with analysts expectations.
The result, the last for outgoing chief executive and company founder Greg Roebuck, showed revenue rose 7 per cent to $178.6 million.
But the performance of the company's finance division weighed on the business.
Carsales said "issues at a major lender" caused volumes in the finance unit to fall. Excluding that part of the business, group operating revenue rose 14 per cent.
The company will boost its interim dividend by 5 per cent to 18.7¢.
"This creates a platform for long term shareholder returns and is a pleasing way for me to deliver my last results as CEO," Mr Roebuck said.
Carsales posted a statutory net profit of $47.2 million, down 8 per cent.
Mr Roebuck said the second half had started well in Australia, with January "again proving to be an attractive month for car buyers in the domestic business".
While the company expects to see growth in Latin American and Korean businesses, Carsales said the Brazilian economy "remains challenging".
Carsales declined to provide specific guidance, and said that it expects revenue and profit growth "will remain solid in the domestic core business".
Mr Roebuck said: "To once again deliver record revenue and EBITDA performance whilst consolidating our domestic market leading position, growing our international presence and responding to short term challenges in our finance business is very pleasing and is a testament to the strength of our strategy and the quality of the Carsales team."
Solomon Lew's Premier Investments' expects first-half retail earnings to rise as much as 10.6 per cent to $93 million, eclipsing growth at rival retailers but falling short of consensus forecasts of around $99.3 million.
Premier Investments, which owns Portmans, Dotti, Peter Alexander, Jacqui E, Just Jeans, Smiggle and Jay Jays, issued a trading update this morning following recent speculation about earnings risks facing listed retailers after weaker than expected December and January trading.
It also follows a profit downgrade at OrotonGroup, the friendly takeover offer for struggling apparel retailer Specialty Fashion Group and the collapse of apparel chains Marcs, David Lawrence, Herringbone, Rhodes & Beckett and Pumpkin Patch.
Premier said its retail sales for the 26 weeks ended January 28 rose 7.1 per cent to $588.6 million.
While this is healthy in the context of weak sector-wide apparel sales and pricing, it falls well short of consensus forecasts of around $642 million and follows the rapid rollout of new Smiggle stores in the United Kingdom.
Premier expects underlying EBIT (before legal costs) to rise at least 9.4 per cent and as much as 10.6 per cent to between $92.0 million and $93.0 million. This compares with consensus forecasts of $99.3 million.
Premier shares have fallen 13 per cent this year to $12.52.
Specialty Fashion Group is in advanced discussions with an offshore suitor, lender sources told The Australian Financial Review's Street Talk column on Tuesday night.
Street Talk can reveal the value fashion retailer has received a $165 million [including through-the-cycle debt] takeover offer from a Middle Eastern financial conglomerate with a South African link.
The offer price of 70¢ a share has been pegged at a 35 per cent premium to the last close of 52¢.
It is understood the suitor is advised by SLM Corporate principal Barry Lewin, Baker McKenzie and PwC Australia.
Specialty Fashion, which operates almost 1100 stores under brands such as Millers, Katies, Crossroads, Rivers and City Chic, is taking its counsel from Luminis Partners and Arnold Bloch Leibler.
Specialty Fashion's total sales have climbed steadily over the last 10 years from $510 million to $826 million, but the company is earning a fraction of what it was before global chains such as Zara, H&M and Uniqlo appeared on the scene.
The company earned $4 million before interest and tax in 2016 compared with $76 million in 2006 and margins have fallen to a fraction of those at other apparel retailers. Its earnings have been weighed down by losses in its Rivers brand in recent years, and unseasonably warm weather.
Cotton On is Specialty Fashion's largest shareholder with 20 per cent stake.
Specialty Fashion's market capitalisation was $100 million based on its Tuesday closing price.
Here are the overnight market highlights:
- SPI futures up 3 points or 0.1% to 5575
- AUD -0.4% to 76.28 US cents (overnight range 76.06 - 76.81)
- On Wall St, Dow +0.2%, S&P 500 flat, Nasdaq +0.2%
- In New York, BHP -0.3%, Rio +0.6%
- In Europe, Stoxx 50 -0.1%, FTSE +0.2%, CAC -0.5%, DAX +0.3%
- Spot gold flat at $US1235.73 an ounce
- Brent crude -1.6% to $US54.81 a barrel
- Iron ore +3.3% to $US83.29 a tonne
- Steam coal -1.1% to $US80.40, Met coal -1.2% to $US167.00
- LME aluminium -0.2% to $US1831
- LME copper -0.9% to $US5795 a tonne
- 10-year bond yield: US 2.38%, Germany 0.35%, Greece 7.6%, Australia 2.69%
Stocks to watch:
- Rio Tinto reports FY earnings after market close
- CIMIC and Genworth report full-year profits
- BWP Trust releases interim earnings
- Transurban cut to hold at Morgans Financial
- SCA Property cut to neutral at JP Morgan
- Seven Group raised to buy at Goldman
- Oil Search raised to outperform at Credit Suisse
Wall Street managed to edge higher overnight, boosted by corporate earnings, while the US dollar climbed to a more than one-week high amid political uncertainty in Europe.
The Dow Jones surged to an all-time high on speculation the White House would deliver details on spending and tax plans before the rally faded as oil majors slumped, pressured by growing gasoline stockpiles in the United States and evidence of a revival in US shale production.
"US shale is coming back, and it's coming back strong," said Societe Generale oil analyst Michael Wittner. Brent crude fell 1.9 per cent, at $US54.67 a barrel.
Treasuries reversed losses, sending the 10-year yield below 2.4 per cent. Central bank commentary set the tone on currency markets, with a Federal Reserve official's signal that rates may rise in March boosting the dollar before Bank of England figure's remark that inflation could exceed expectations sent the pound surging.
"The story is a pretty good one for stocks in terms of it looks like the economy is continuing to grow, I think corporate profits have been pretty good, certainly enough to support higher prices," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.
Fourth-quarter US earnings are estimated to have risen 8.2 per cent, the best in nine quarters.
The US dollar gained for a fifth straight session, climbing to a more than one-week high in part because of "buying by bargain-hunters looking to pick up the greenback following its worst start to the year in 30 years," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
The euro zone common currency struggled on renewed concern about Greece's debt problems and signs far-right candidate Marine Le Pen is gaining momentum before France's presidential election.
The political uncertainty weighed on French stocks, which slipped as election jitters dampened the country's sovereign bonds.
Even so, European shares still closed higher overall, with the pan-European STOXX 600 index rising 0.3 per cent, helped by corporate results.
Investors also fled French government bonds. Though opinion polls suggested that Le Pen will not win the second round of the presidential election in May, such polls have been wrong before, Rabobank analysts said on Tuesday.
Le Pen has vowed to fight globalisation and take France out of the euro zone.
Good morning and welcome to the Markets Live blog for Wednesday.
Your editors today are Jens Meyer and Patrick Commins.
This blog is not intended as investment advice.
Fairfax Media with wires.
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