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13 March
Comments Off on BHP, analysts rebuffs Elliott’s reform plan

BHP, analysts rebuffs Elliott’s reform plan

Analysts have added their voices to BHP Billiton’s opposition to a plan put forward late Monday by activist shareholder Elliott Advisors to dump the global miner’s dual company structure as part of a series of moves which are intended to boosting shareholder returns.
Nanjing Night Net

In its rejection, BHP said the costs would outweigh any benefits.

Analysts with both Citi and RBC were quick to pan the idea, although both thought the US petroleum assets in particular to be ‘non-core’.

“The streamlining of BHP Billiton ownership structure to extract value from franking credits as well as a spin-out of the US onshore division are not novel ideas,” RBC Capital’s mining analyst Paul Hissey said.

“We do not necessarily see a collapsing of the [dual listed company] structure would unlock value as we think the only way to distribute franking is through dividends to the Australian shareholders or buyback which we think is currently available to [BHP] in the current format,” Citi analysts Clarke Williams and Trent Allen told clients.

In a letter sent to BHP following private meetings with the miner, Elliott outlined the proposals in detail. The investor has pushed for action to lift investor returns at a number of companies such as Samsung Electronics, Akzo Nobel and SABMiller.

BHP’s response prompted its London-listed stock to pare early gains of nearly 6 per cent . By 1500 GMT, it was 2.3 per cent higher.

“After reviewing the elements of Elliott’s proposal, we have concluded that the costs and associated risks of Elliott’s proposal would significantly outweigh any potential benefits,” BHP said in a statement.

Elliott’s plan would result in BHP remaining listed in both London and Australia, but would scrap its dual-company structure in favour of a single headquarters and tax residency in Australia.

The activist investor called for BHP to shift its US petroleum assets into an entity to be listed on the New York Stock Exchange and commit to returning excess cash to shareholders.

The Citi analysts described BHP’s US petroleum assets as ‘non-core’ with RBC agreeing the merits of BHP retaining its US petroleum sector assets as ‘uncertain’.

“We value the US petroleum business at $US13.5b ($18b) vs. Elliott’s $US22b valuation (although we do agree with the sentiment around the cumbersome nature of both the DLC and the uncertain benefits from petroleum diversification, especially regarding the mismatched pro-cyclical capital spend of the shale business)???,” RBC’s Hissey told clients.

In outlining its proposal, Elliott argued BHP has underperformed comparable mineral and petroleum companies and its plan could provide shareholders with an increase in value of up to 48.6 per cent for holders of Australian shares and 51 per cent for holders of UK shares.

BHP disagreed, however.

“There is no obvious discount in BHP Billiton’s trading multiples relative to the weighted average of relevant mining and oil and gas peers,” it said.

The miner also said it regularly reassessed how to create value and reviewed company structure. It had spoken with Elliott over many months and would consider a more detailed response, it added. It dismissed Elliott’s plan for buying back shares as “a formulaic approach without regard for the cyclical nature of the resources industry or the returns available from other uses of cash”.

Commodity prices crashed in 2015 and early 2016, but have since recovered strongly, helping to drive gains across the mining sector. Mixed views

Started in 1977, Elliott manages assets worth more than $US32.7 billion, according to the company.

It says it holds a “long economic interest” of about 4.1 per cent of the issued shares in London-listed BHP, without specifying the instruments used to build the stake. It also says it has rights with its affiliates to acquire up to 0.4 per cent of the issued shares in ASX -listed BHP.

Other big shareholders were cautious about Elliott’s plan.

“(The) principle is OK. Detail and resultant uplift to shareholders might be more complex/less obvious,” Aberdeen Asset Management’s Head of Equities Hugh Young said in emailed comments.

Aberdeen is the second-biggest investor in BHP’s London-listed shares, with a 4.9 per cent stake worth $US1.3 billion.

Representing another big shareholder, Standard Life Investments Director Frances Hudson said it was not clear the plan was “in the interest of long-term investors or the company”.

Over the past two years, BHP has underperformed relative to fellow miners Rio Tinto , Glencore and Anglo American. But over 15 years, it is ahead of them.

Since it was set up in 2001, BHP said it had returned approximately $US23 billion to shareholders in buybacks and about $US45 billion in cash dividends.

It said it had also taken many steps to increase shareholder value, cut the number of assets in its portfolio by $US7 billion since 2013 and cutting unit costs by more than 40 per cent .

“We have laid the foundations for the group to substantially grow the base value of its operations,” BHP said in its statement. “Elliott’s proposal would put this at risk.”

– with Reuters

This story Administrator ready to work first appeared on Nanjing Night Net.

13 March
Comments Off on Growthpoint, Cromwell increase tenant lists

Growthpoint, Cromwell increase tenant lists

The stronger leasing markets have led to an increase in landlords Growthpoint and Cromwell Corp’s tenants profiles across Melbourne and Sydney.
Nanjing Night Net

Growthpoint Properties Australia has undertaken 28,323 square metres of leasing since the release of its half-year results in February 2017, including a 26,517 sqm logistics warehouse at 120 Link Road, Melbourne Airport to The Workwear Group, part of the Wesfarmers empire, for 10 years.

The swathe of new deals, with asset sales in Queensland, has boosted Growthpoint’s total portfolio occupancy, as at March 31, to 98 per cent, with 2.5 per cent vacancy in the office portfolio and 0.3 per cent in industrial.

Growthpoint currently has only 7 per cent of its leases, by income, potentially expiring over the next 24 months.

Growthpoint’s head of property, Michael Green, said the company would continue to act with “immediacy, and in advance of potential expiries, to lease up vacant space within its portfolio”.

According to Cushman & Wakefield, with effective rents trading at a significant discount to Sydney, Melbourne stands as an attractive proposition for companies looking to enter Australia.

“In the year ahead, a decline in the vacancy rate is expected to support strong rental growth, however as the next development cycle draws closer this growth can be expected to slow,” C&W’s research says.

In Sydney, Cromwell Property Group has secured two big-name retailers as long-term anchor tenants at its flagship $130 million Northpoint redevelopment.

Woolworths and Olympus Medical Centre have been quick to sign on for space in the integrated three-level retail facade.

Due for completion in 2018, the precinct will create a shopping, dining and lifestyle hub on the North Shore.

Damian Horton, Cromwell head of property, said the recent leases were an “exciting milestone” for the Northpoint redevelopment project, which is considered a central catalyst for North Sydney’s rejuvenation.

“The tenants are a perfect fit for a building that will become a hub for office workers and local residents. We are excited to be making a significant contribution to the North Sydney Council’s vision for the area,” Mr Horton said.

Cromwell has signed a 10-year lease with Woolworths to commence in mid-2018, securing the supermarket’s first store in North Sydney, while Olympus Medical Centre has signed a 10-year lease for 724 sqm on the ground level.

“With landlord-favourable conditions firmly established, existing tenants are expected to prioritise lease extensions and those with the flexibility to hand back excess space are likely to do so. Service sector employment growth, and anticipated negative net supply in 2017 and 2018, are expected to maintain landlord-favourable market characteristics,” C&W research says.

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13 March
Comments Off on West Melbourne car park fetches $25m

West Melbourne car park fetches $25m

Chinese developer Holder East has paid about $25 million for a car park in West Melbourne near Cbus’ new police headquarters site.
Nanjing Night Net

The 1877 square metre site was billed as the first car park deal for 2017, but the property at 496-508 La Trobe Street is effectively a development site, held by Indonesian syndicate Regent Realty Australia for the past 15 years.

Colliers International agents David Sia, who negotiated the deal with Daniel Wolman, Oliver Hay and Matt Stagg, said the vendor had no plans to develop the unpermitted site, which is on the border of West Melbourne and the CBD.

“They saw the rising land tax bills and fear of over-supply as reasons to part ways with the asset,” Mr Sia said.

“Given the size of the site, it’s a strong indication of the strength of the market for land, achieving about $13,000 a square metre which represents the top end of land rates for this precinct,” he said.

The property was purchased in 2002 for $2.9 million. Some historic industrial buildings were demolished and permits for a residential project were issued but never executed. It is next door to the 1880s Spinks Tinsmiths Building at 488 La Trobe Street, where a16-storey apartment building has been proposed.

Thomson Geer partner Eu Ming Lim acted for the vendor. The purchaser has plans for a residential or office development, Mr Sia said. The site is close to the new Haileybury City campus and Far East Consortium’s massive West Side project.

The low-profile Holder East is an active trader in city property.

Late last year the developer bought 501-509 King Street for $6.02 million, one week ahead of its scheduled auction. The site adjoined another property at 511-525 King Street which Holder East had bought in 2014 for $10.05 million, giving the firm a 2000 square metre development site.

The company was cashed up after selling a 2000 square metre site at 97 Franklin Street to Scape Student Living for $56 million.

Meanwhile on the other side of the city, six parties including a major Chinese investor and some active Southbank players, are understood to be competing for a key site behind Crown Casino.

Prices offered for the three-storey building at 190-196 City Road are understood to be more than $20 million, a substantial premium on the price paid by Datacom, a New Zealand technology company, in 2005. Datacom bought the property for $7.15 million after it passed in at auction.

It is selling the property with a newly signed four-year lease in place with three three-year options.

The 4307 square metre building is on a 1597 square metre site surrounded by towers, which makes it an attractive future development target.

CBRE agent Josh Rutman, who is marketing the building with Lewis Tong and Mark Wizel, declined to comment on the deal.

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13 March
Comments Off on To get the answer, investors must ask the right question

To get the answer, investors must ask the right question

Ask the right question and maybe you will get the correct answer.
Nanjing Night Net

And if you are a local shareholder in BHP Billiton, figuring out whether the shares you hold trade at a premium, or a discount, to their London traded counterpart is fundamental to deciding whether you should back any push to collapse the dual-listed company structure, with separate shares listed in the Australian and London markets.

Late on Monday, investment funds associated with US activist investor Paul Singer went public with a proposal to prod global miner BHP Billiton to collapse its dual company structure as well as spin-out its US petroleum assets.

BHP immediately ruled it out, saying it has looked at making the move but costs would outweigh the benefits, and the idea was greeted coolly by analysts, who mostly doubted just how much better off shareholders would be if the reorganisation was implemented.

Dubbed the “value unlock plan”, Elliott Advisors which claims to speak for as much as 4.1 per cent of the capital of BHP’s British-listed arm, would collapse the miner’s dual company structure into a single Australian-headquartered entity with its primary listing on the London Stock Exchange with Australian investors to receive a CHESS depositary interest.

The proposal is aimed at retaining index inclusion in the two markets, which is important to retaining sharemarket valuations.

But if the proposal was implemented, would offshore investors gain access to the premium BHP shares trade in Australia or would Australian investors end up seeing the shares trade at the discount BHP shares are accorded in London?

Or as Macquarie asked in a research note: Does the British stock trade at a discount or the Australian stock trade at a premium?

The common view is that the premium accorded BHP shares traded on the ASX stems from the benefit of franking credits.

“There is the real risk in our view that a combined single listed entity could trade towards the UK multiples rather than maintain the Australian multiples,” the broker warned clients.

Over the past two years, BHP shares traded in Britain have traded at a 15 per cent discount to the Australian-traded shares. The ASX200 trades on a price-earnings multiple of around 16.3 times, analysts said, which is significantly higher than the multiple of 14.5 times shares included in the FTSE100 index trade at.

The limited spread of investible assets available through the ASX, with a bias towards financial services and mining stocks, along with the broadly higher dividends paid by public companies in Australia when compared with offshore markets due to their maturer status are often mentioned as reasons why multiples are higher on the main ASX indices.

The other element of the Elliott Advisors proposal, BHP spinning out its US petroleum assets into a separate entity to be listed on the New York stock exchange, won broader support from analysts, although whether this would be beneficial to shareholders would depend on the level of debt the entity would be loaded up with if the plan were to proceed.

Group-wide, BHP’s net debt stood at around $US20 billion at the end of December which is expected to decline to around $US15 billion by mid-year, thanks to strong commodity prices, iron ore and coal in particular.

“The level of debt ascribed to the petroleum division is critical in valuing a demerger option, particularly given we only expect the US petroleum assets to consume all cash generated for the next eight years,” Macquarie told clients.

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13 March
Comments Off on Supermarkets set to pass rising costs on to customers: Citi

Supermarkets set to pass rising costs on to customers: Citi

AFR – WOOLWORTHS CEO. Reporter: Sue Mitchell. Woolworths Leichhardt supermarket, Leichhardt Marketplace Photo shows, Woolworths CEO Brad Banducci pictured at their Leichhardt store as he points out what woolies is doing to win back customers and restore sales growth . Photo by, Peter Rae Thursday 20 October, 2016 Photo: Peter RaeShoppers should kiss goodbye steady prices in the supermarket.
Nanjing Night Net

Supermarkets are paying more for electricity, meat and fruit and vegetables, and will soon pass these price rises on to customers, said investment bank Citi.

“Australian supermarket industry growth is near 30-year lows of 2.5 per cent,” said Citi analysts led by Craig Woolford. “The reason is a simple one. Price inflation is absent in this market.

“Cost pressures are building around raw materials and energy prices, which is likely to trigger higher inflation in our view.”

The analysts point out that sugar, palm oil, coffee, dairy and oil prices are all up by double digits in the past year, and raw material ingredients and packaging in grocery items accounted for about 20 per cent of retail prices.

Furthermore, the analysts note that meat prices are on the rise due to export demand, and fresh produce inflation will rise by between 5 and 10 per cent in the next three months given flood and cyclone damage.

Woolworths chief executive Brad Banducci recently warned that soaring electricity prices were a “material issue” and would lead to higher prices on the shelves. At $360 million a year, electricity is Woolworths’ third largest cost, behind labour and rent.

“We manage what we can manage with energy efficiency. But given the cost increases that are coming through right now, we are trying to outrun a bear, but I am not sure we can,” Mr Banducci said in late March.

“We will have to in some way, very cautiously and carefully, pass those through to our customers, unfortunately.”

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13 February
Comments Off on Hardware disaster continues to haunt Woolies

Hardware disaster continues to haunt Woolies

Woolworths’ disastrous foray into hardware continues to haunt the retail giant after law firm Maurice Blackburn revealed plans for a $100 million class action against Australia’s biggest supermarket chain.
Nanjing Night Net

Despite closing the doors on its loss-making Masters Home Improvement business last year, the proposed class action relates to alleged breaches of the Corporations Act dating back to Woolworths’ shock profit downgrade in early 2015 and attempts to stem big losses from its hardware operation.

By late 2014, analysts were reporting Woolworths was putting up margins at the supermarket chain, cutting staffing levels and leaning on suppliers in an attempt to make up burgeoning losses at its failed Masters Home Improvement chain and Big W.

Shopper backlash to price increases and a broader deterioration across the supermarket chain gained momentum between December 2014 and January 2015, eventually forcing the retailer’s management to cut its full-year earnings outlook in February 2015. Woolworths’ shares dived 13.7 per cent in the wake of the profit downgrade.

One analyst said Woolworths eventually confessed to being too focused on meeting short-term earnings targets but the insight came too late to prevent many shoppers abandoning the chain, creating an opening for Wesfarmers’ Coles business to exploit.

“They just kept on trying to meet earnings targets by going back to the milking cow that was the supermarkets business,” one analyst said.

The proposed class action could exceed $100 million, Maurice Blackburn said on Tuesday. It has opened a registration portal for shareholders to sign up to the claim.

While Maurice Blackburn’s investigation continues, the law firm alleged Woolworths knew that it was significantly behind its profit projections as early as October 2014 but continued to maintain its profit guidance until the publication of its half-year accounts in February 2015.

“When corporations don’t abide by the laws requiring they make timely and accurate market disclosures, these aren’t mere technical breaches – it causes loss to shareholders, undermines the integrity of the market and distorts the efficient allocation of capital that could go to more deserving companies,” Maurice Blackburn principal Andrew Watson said.

“The end result is that shareholders, both individual everyday Australians and large institutional investors entrusted with members’ savings such as large superannuation funds, unwittingly suffer the consequences and lose out in a major way.”

Fears the poor performance of Masters was hurting Woolworths’ core supermarket business surfaced after the supermarket chain reported soft first-quarter sales in late 2014, prompting a number of analysts to question whether the retail giant would meet its full-year net profit guidance.

In a research note from December 3, less than a week after Woolworths reaffirmed its full-year guidance, Bank of America Merrill Lynch analyst David Errington slashed the earnings outlook for the retailer by 5 per cent for fiscal 2016 and 13 per cent for fiscal 2017.

Merrill Lynch forecast the 2015 full-year net profit after tax would grow by 4.5 per cent, at the bottom end of the retail giant’s guidance of between 4 and 7 per cent growth.

“The key reason for our earnings downgrade are our view of the continued deterioration of Woolworths’ non-supermarket business, notably Masters and Big W and the reduced ability in our view of Woolworths supermarkets to continue increasing margins,” Mr Errington said.

“In our view, continuing to drive margins higher in Australian supermarkets is seeing a loss in competitive position, leading to deteriorating sales and ultimately a fall in margins.”

Woolworths cut its full-year net profit after tax guidance to the “lower end” of analyst forecasts as part of its half-year results in February 2015.

The retailer’s 2015 full-year net profit before one-off costs inched up by just 0.1 per cent to $2.45 billion, while its full-year net profit slumped 12.5 per cent to $2.15 billion, thanks to big losses at the Masters chain.

IMF Bentham has proposed to fund the class action, which would deal with claims of alleged misleading or deceptive conduct and alleged breaches of continuous disclosure laws between November 27, 2014 and February 26, 2015.

Senior investment manager at IMF Bentham, Wayne Attrill, said like all shareholder class actions, it would proceed only if enough shareholders signed up.

“This is a chance for investors who believe they were deprived of information on the true state of affairs of the company standing up and being able to access a meaningful redress,” Mr Attrill said.

Woolworths on Tuesday said it had not been served with proceedings and would defend any action.

“Woolworths considers that it has, at all times, complied with its continuous disclosure obligations,” the company said in a statement.

The class action follows failed action against Woolworths by the Australian Competition and Consumer Commission.

According to Maurice Blackburn, Woolworths said in its defence to the ACCC proceedings that it had forecast in October 2014 that there would be a variance in its gross profit before freight of $53 million.

The competition watchdog’s case was launched in December 2015 and related to the company’s dealings with suppliers to plug a profit shortfall after discovering a $50 million hole in its books. The Federal Court last year ruled the conduct towards suppliers was not unconscionable.

Australian Shareholders’ Association director Allan Goldin said he would watch the case closely. “If continuous disclosure didn’t happen, then we are obviously very concerned,” he said.

Class actions need seven or more people to run, but their financial viability depends on the size of shareholder losses.

Maurice Blackburn would not say whether any institutional shareholders were behind the action.

This story Administrator ready to work first appeared on Nanjing Night Net.

13 February
Comments Off on Oroton CEO follows Rose Byrne out the door

Oroton CEO follows Rose Byrne out the door

Struggling boutique handbag retailer OrotonGroup has appointed its major shareholder as interim chief executive after its boss resigned fresh from a disappointing half-year result.
Nanjing Night Net

Mark Newman, who has held the top job for four years, will be replaced temporarily by director Ross Lane, who is the company’s biggest shareholder with a 21 per cent stake.

Combined with fund manager Will Vicars, the pair own 38.5 per cent of the company, which has a market capitalisation of just $68 million.

The stock is not broadly covered by the market. A privatisation would depend on the major shareholders’ appetite for further investment. It’s understood Oroton has not been shopping its brands around.

Dean Fergie, director and portfolio manager at Cyan Investment Management, said Oroton’s recent first-year sales were “poor to say the least, with negative like-for-like sales and an earnings before interest and tax margin that halved.” Oroton also halted dividends.

Chairman John Schmoll said Mr Lane’s “intimate knowledge” of OrotonGroup and his “broad retail experience” meant he was “ideally qualified to lead the company during this important period of transition.” Mr Schmoll is a former chief financial officer of Coles Group.

In early trade, OrotonGroup shares closed up 1??, to $1.62.

Oroton recently blamed its disappointing first-half result – when net profit dived 52 per cent to $1.8 million for the six months ending January 28 – on its unprofitable GAP brand, unseasonable weather, “a structural change in shopping habits,” the exit of discontinued categories, lower factory outlet sales at Oroton, lower foot traffic and foreign exchange problems.

It is seeking to target a younger and broader customer, through using “influencers” to promote its products, putting more money into social media, and promotions such as its “Great Barrier Reef Collection.”

OrotonGroup recently dumped Bridesmaid actress Rose Byrne as its model, and paid $4.5 million for a 30 per cent stake in accessories brand The Daily Edited.???

This story Administrator ready to work first appeared on Nanjing Night Net.

13 February
Comments Off on Cbus offers affordable housing at Newmarket Randwick

Cbus offers affordable housing at Newmarket Randwick

Cbus Property has entered into an agreement with Randwick City Council to construct a minimum of 10 apartments for affordable housing on the site of the Newmarket Big Stable area, near Randwick Racecourse, which has been designated for community use.
Nanjing Night Net

The plan to offer the more affordable units comes from negotiations with Randwick City Council for Cbus Property to dedicate the community facilities under a voluntary planning agreement.

Cbus, as part of the agreement, will also offer the council, what is known as the stable area, being a 5000-square-metre public park and six new roads. It is all part of the redevelopment of the William Inglis & Sons property, to be marketed as Newmarket Randwick.

The five-hectare Newmarket property in Randwick was sold to Cbus Property for $250 million in 2015, and there are plans to build more than 750 apartments on the site.

The Inglis group will move its headquarters to new premises at Warwick Farm, in Sydney’s west.

Cbus Property chief executive Adrian Pozzo said the planning agreement was a “great step forward for its Newmarket Randwick project and the wider community”.

“Housing affordability is a significant issue in our society and we know how crucial it is for housing to be accessible for all so it was important for us to include these affordable housing apartments as part of this voluntary planning agreement,” he said.

“We have worked closely with council during the thorough planning and assessment process for our Stage 1 Masterplan DA to arrive at a development proposal that will create a new sustainable and sensitive redevelopment of this iconic property whilst retaining and celebrating its remarkable heritage.”

Cbus also plans to pay tribute to the past by including the restoration and adaptive reuse of Newmarket House and retention of historically significant vegetation on the site including Moreton Bay Fig, Norfolk Island Pine and Port Jackson Fig trees.

Newmarket Randwick will be developed in three stages, with completion expected in early 2021.

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13 February
Comments Off on Banks lift ASX to another high

Banks lift ASX to another high

The Australian sharemarket defied weak offshore leads and falling iron ore prices to push higher again on Tuesday, with strength in the major banks helping keep the benchmark index at its highest level since early 2015.
Nanjing Night Net

The S&P/ASX 200 rose 0.3 per cent to 5929.3, while the broader All Ordinaries Index added 0.3 per cent to 5964.6.

“The highlight was a bit of support for the banks, which have been toing and froing between believers and disbelievers for a while,” said Paterson’s Securities economist Tony Farnham.

The big four banks rose between 0.4 and 0.7 per cent, with the exception of Westpac, which soared 1.2 per cent. With all other sectors trading in the red or narrowly in the black, the financials sector as a whole made up almost all the index’s upward movement, rising 0.8 per cent as a whole.

Meanwhile, the materials sector was the major drag on the market, largely due to BHP Billiton giving up some of yesterday’s outsized gains. On Monday, BHP shares soared 4.6 per cent to their highest levels in two years after a hedge fund that owns 4.1 per cent of the company’s London-listed stock urged the board to separate its petroleum arm and collapse its dual listing.

On Tuesday, BHP shed 1.2 per cent, which Mr Farnham put down to “a bit of profit-taking after the run-up yesterday”.

Rio Tinto, however, closed up 2.0 per cent. Fortescue Metals dipped 1.5 per cent. Most gold miners were up, though Saracen Mineral Holdings plunged 4.2 per cent after informing the market its March quarter gold production fell short of guidance due to heavy rainfall.

Shares in Asaleo Care plunged 8.4 per cent, their biggest fall in 9 months, after a Credit Suisse note cut the toiletries manufacturer to ‘neutral’.

Ardent Leisure also had a bad day, down 1.0 per cent, after it revealed on Monday a 34.3 per cent fall in revenue at its parks due to the impact of Cyclone Debbie. UBS downgraded the stock on Tuesday, which may have played into its fall. ???

Woolworths was 0.7 per cent lower after news broke of a $100 million class action being brought against it by Maurice Blackburn over its shock 2015 profit downgrade. Wesfarmers was also dragged lower, closing down 0.3 per cent.

While market turnover was “reasonable” on Tuesday, “you’d expect to see it thinning out towards the end of the week because of the Easter holidays”.

Stock watch: Costa Group

Shares in horticultural company Costa Group hit an all-time high on Tuesday, soaring 7.1 per cent to $4.69, after Goldman Sachs lifted its price target for the stock. Goldman reiterated its ‘buy’ rating and raised its price target by 27 per cent to $5.10, saying Costa’s move into the avocado market last year and the positive outlook for blackberries will lift earnings. “The avocado market has experienced robust growth over the past decade. We expect steady volume and value growth driven by increased consumption and potential expansion into the export markets over the medium term,” the analysts write. Three analysts have a ‘buy’ rating on the stock and one a ‘hold’, with an average price target of $4.44, according to Bloomberg. Market movers

Coking Coal

Premium coking coal prices surged above $US300 a tonne as the damage from Cyclone Debbie continued to sideline Queensland coking coal exports. Aurizon’s share price surged 3.6 per cent on Tuesday as the first shipment of coal reached Gladstone port via Aurizon’s Blackwater rail line, which transports 15???20 per cent of cross border coking coal. But other lines remain damaged. Aurizon estimates it will take another four weeks to repair its Goonyella rail line, which transports 35???40 per cent of global coking coal exports.

Iron ore

Iron ore’s descent into bear-market territory may herald further weakness. Barclays pinned the blame for the slide on lower steel demand in China driving a shift from mills toward lower-quality ore, and raised the prospect of a drop into the $US50s. Ore with 62 per cent content in Qingdao fell 1 per cent to $US74.71 a tonne overnight, following a 6.8 per cent drop on Friday that pushed the commodity into a bear market from a February peak. Iron ore futures in Dalian are trading flat at 523 yuan


Short Aussie against the Loonie: that’s the way currency traders are playing the contrasting fortunes of two key commodities – iron ore and oil. While the price of the latter, Canada’s main export, has been boosted by Middle Eastern tensions, iron ore has dropped into a bear market. The Australian dollar dropped below parity against the Canadian dollar on Monday night for the first time in two months, and was fetching 99.95 Canadian cents. in late trade on Tuesday, having declined 2.2 per cent in the past two weeks.

NAB survey

Business conditions jumped in March to highs not seen since before the global financial crisis with sales, profits and employment all at levels that bode well for a pick up in economic growth in coming months. NAB’s monthly survey of more than 400 firms showed its index of business conditions climbed 6 points to +14 in March, well above the long-run average of +5. The survey’s measure of business confidence, however, dipped a point to +6 which was in line with its long-run average. The major services sectors and wholesale reported the strongest conditions.

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13 February
Comments Off on Australia should consider Republicans’ tax plan: Garnaut

Australia should consider Republicans’ tax plan: Garnaut

Australia should consider a tax plan being pushed by Donald Trump’s Republican Party which could stop multinational corporations avoiding tax, prominent economist Ross Garnaut says.
Nanjing Night Net

Professor Garnaut said that while it was difficult to know what President Trump intended to with corporate tax rates, despite campaign promises of a cut to 15 per cent, there was merit to the Republican Party leadership’s proposal to fund rates cut of between 15 and 25 per cent by scrapping deductions.

“Our existing tax base for the corporate income tax is in deep trouble,” Professor Garnaut told the Melbourne Economic Forum on Tuesday.

“It’s subject to egregious avoidance or evasions, with two of the main instruments of avoidance being arbitrary use of interest on debt to reduce taxable income and, more importantly, arbitrary use of payment for import of services as deductions.

“You have a lot of what must be fundamentally some of the most profitable enterprises in Australia paying no corporate income tax.

“Google and Microsoft and Uber, they manage to generate very large sales in Australia … but somehow make no profit from it because of payment for intellectual property, payments for services.”

Professor Garnaut said opportunities for international tax avoidance had prompted a “race to the bottom” on tax rates between nations, which had compounded the issue and led to greater erosion of tax bases in all jurisdictions.

“So I wouldn’t be frightened by the possibility that Trump will take up the Republican proposals,” he said. “In fact I think we should look very carefully at whether we should be looking at it for ourselves.”

Miranda Stewart, director of the Tax and Transfer Policy Institute at Australian National University, said the extent to which the corporate tax base had been eroded had been understated.

She said Australia was not competing with havens like the Bahamas, and it had to be assumed multinationals were already structuring their businesses so as much as possible was in low-tax jurisdictions.

“Us reducing the rate will have an effect on base erosion because it reduces the value of the expenditure deductions,” Professor Stewart said.

She said there was a “win-win” scenario where the base was broadened while rates were cut by reducing deductions.

“We estimate you could fund a cut to 25 per cent by denying interest deductibility. Potentially if you go a bit further you could fund an investment allowance.”

The Turnbull government last month secured a cut to the corporate tax rate from 30 per cent to 25 per cent for businesses with turnover under $50 million a year, at a cost of $24 billion over the medium term. The government has not been able to pass similar cuts for businesses of all sizes.

This story Administrator ready to work first appeared on Nanjing Night Net.