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Trading Research
Global EconomyJefferson’sPHB TelecomImperial Banking GroupChemika PharmaceuticalsStirlin Petroleum
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MacroRetailerTelecomBankPharmaOil & Gas
Contents:
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Macro economyAs the lAs the latest batch of economic news on both sides of the Atlanc disputes any doubt about the recovery of the US, stocks close up around the highs of the year. The Dow Jones Index put on 2% to 10,059 and the S&P gained 3.8 % to 1,310 this last week. Sovereign-debt worries and new polical regulaons caused a tempo-rarary setback three quarters previous. The strong upward momentum as witnessed in the last six months contradicts the weaker econom-ic data, parcularly in the areas of Equies, Currency and Commodies. Capital inflow into the market is becoming uncertain, suggesng companies might encounter weaker demand from abroad as global economic recovery slows.
Last weekend, a US smulus program pushed risky markets up and the UK government backed the US move by saying it would also support markets if need be. The overwhelming fear is that inflaonary pressures are just too high in the UK, with inflaon soaring at an an-nualised 4.8%. Risk assets have been decreas-ing in ing in volality, which reinforces some traders’ belief that the current rally will connue.
U.S. non-farm payrolls slipped by 147K last month amid forecasts of a 10K increase in em-ployment. As the labor market deteriorates, the Federal Reserve holds a dovish outlook for future policies, stang that the downturn in employment can lead to a prolonged recovery. Treasury Secretary Geithner ancipates the jobless jobless rate to peak in the next quarter of this year. The central bank is widely expected to keep the interest rate at the record-low over the coming months.
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Jefferson’s PLCWhile moWhile most rivals suffer from fundamental problems and heavy cost structure this quarter, Jefferson’s is expected to report good results this week. Despite the connuous deteriorang labour market, weakening consumer confi-dence and increasing operang expense, sales for the last quarter rose 20%. The retail giant’s turnturnover has improved by 7.5% to $70.6 billion. The recent hike in VAT in the UK from 17.5% to 20% will affect the retailer this year since the UK is its main source of income, however most costs are likely to be passed onto the consum-er.
This year Jefferson’s launched strategic inia-ves to strengthen its plaorm for growth and profitability. This includes upgrading its online shopping system, a joint venture with Sony and a new flagship store in London, featured with a never before seen design. The company grew the retail distribuon network by opening 46 didirectly managed retail stores in the world. Last quarter Jefferson’s e-shop plaorm in Europe extended its reach to Czech Republic, Poland, Ukraine and Turkey, where there is no directly managed retail stores at present. The launch of e-shop in these countries will facilitate Jefferson’s in reaching new customers in an effi-ciecient and cost-effecve way. Jefferson’s current market share stands at 16.3%, and is rapidly approaching that of its rival Asda. We expect this month’s market data on this ranking very soon.
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PHB TelecomFFor the past six months, PHB Telecom main-tained relavely good momentum in its busi-ness development. It has increased its operat-ing revenue by 1.1% over the same period last year to $20.4 bn. Its share price kept in line with the sector for the beginning quarter of the year to date, then outperformed aer a stream of broker upgrades, however recently we have seen some underperformance, possibly due to uncertainty about its current bid to exclusively host the next Android phone.
To further increase its compe veness and im-prove its customer’s experience, PHB Telecom connues to search for excellence, innovaon and allocates extra resources on its “value-added package”. Revenue from the “value-add-ed package” increased 15.6% compared to last financial year, contribung 29.5% to Telecom’s operang revenue. This is aributable to its faster mobile broadband connecon, enriched voice message system, addional 4G data tech-nology enhancements and more flexible usage plans to customers. PHB is currently in the middle of a bid for exclusive network rights to the newest Android 8G phone, which could sig-nificantly improve its revenues, not to menon its brand and image. However, press specula-on two months ago, that a competor will take the contract has caused a sell off in the share price. We expect an announcement on the closure of this deal this month.
PHB Telecom is set to release full year results immanently. Analysts expect a $7.70 to $7.80 EPS release in consensus.
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Imperial Banking GroupImperial Banking GImperial Banking Group (IBG) is a global retail bank with a strong and profitable private client’s franchise. Over the previous six months, IBG has been focusing on expanding its com-mercial banking facilies. It has been a period of challenge for the enre financial industry. However, with a disnguished history and clieclient-focused business, IBG has succeeded in the past few months through execung several important strategic iniaves.
Eight months ago, IBG shares dropped 9% aer a report fuelled speculaon that KPMG audi-tors were invesgang the Group’s CEO, Darren Young. Two months ago, he was asked to step down. The market expects the announcement of his replacement immanently.
RRelave to the wider market, IBG shares have underperformed over the last few months and have missed out on the rally that most stocks have seen fuelled by speculaon of more quan-tave easing. Gordon James, banks analyst at Evoluon Securies says “once the market has a clear percepon of who will replace Mr. YounYoung, there will of course be some volality, but we should see IBG shares catch up with the wider market”.
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Chemika PharmaceucalsChemiChemika’s Q3 profit beat analyst esmates aer a weaker Japanese Yen back over 6 months ago, and the products gained from its acquision of a competor boosted sales fur-ther. Q4 results are expected this week, with a consensus analyst esmate of a massive 8% revenue growth, anything under this should signifisignificantly disappoint the market.
Shares have recently dropped back below the levels they were trading six months previous and to lows of the year due to investor con-cerns over their recent bale with the US Food & Drug Associaon. The disputed new drug, Nerpodol, is designed to reduce affects of asthma but has been heavily opposed by indus-try professionals.
Chemika has 2,010 drugstores across Japan and plans to further expand its supply network in the US. It hired 25,500 health-care profession-als last year, up from 22,000 the previous year. The consensus esmate across the street is that Chemika will connue to expand (but not at such a rate) and hire 17,000 this year. It has also launched some home-also launched some home-care facilies and mail service pharmacies in rural areas. Chemika sold $24 billion worth of converble bonds to replenish its working capital to support the in-venon of new drugs and research in breast cancer.
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Srlin PetroleumSrlin claims Srlin claims to be one of the world’s largest oil producers in Europe. According to the Interna-onal Energy Agency, it has the ninth-largest reserves on the globe. A strengthening oil price has enabled global players like Srlin to massively improve their margins over the past few months, despite fears over weakening eco-nomic growth. This year Srlin’s net profit rose 3.7% due to higher oil prices and fuel sales in Germany and France. The Energy Department menoned that there would be a crude stock-pile falling nearly 10 million barrels to 401.0 million barrels, because of strong growth in emerging- market oil demand and declines in pproducon. Crude oil climbed 68 cents to $94 a barrel in the last trading session, the highest price since this month in 2008.
Srlin’s share price jumped a massive 25% about eight months ago, as a rival in the North Falkland Islands basin, Gulf Keystone Petro-leum, placed an offer to acquire Srlin for $35 per share. Originally the stock traded at a pre-mium to the bid price on speculaon that an-other competor could come in with a counter bid. Since then the price has been very volale and is currently trading below the offer price, with certain market parcipants commenng that the deal would be “structurally impos-sible”. However, there are a small number of market parcipants that sll believe the deal will go ahead and will have “significant ben-efits” for Srlin’s shareholders. Anyone owning the shares at this level would make a 3% return on their investment if the bid goes ahead, but if the bid falls through the shares could slump back to $27 per share, which represents a 20% loss of capital invested.
Srlin is due to finish several key projects this month. This includes its deepwater offshore oil development in its North Sea Casey B rig and exploring for oil 3 kilometres below the ocean surface.