27/08/10 - 12:00
Ben Potter, Research Analyst
Market Update from the Trading Room – 12.00pm
Australia 200 CFD Index: 4344.4 (-0.3%)
| Top 3 Sectors | Bottom 3 Sectors | Information Technology | 1.2% | Materials | -0.6% |
|---|---|---|---|---|
| Telecommunications | 0.6% | Financials | -0.4% | |
| Utilities | 0.6% | Industrials | -0.3% |
Harvey Norman – The retailer’s shares are only modestly lower close to midday, down 0.9%. This was after the department store operator reported full-year net profit ($231.4 million) below analysts' expectations, but up 8% from a year ago ($214.4 million). The market was expecting the group to report a net profit of around $289.5 million. As for its outlook, the group said the acquisition of 29 Clive Peeters and Rick Hart branded stores in July will give a positive return in the current financial year. Management also said it has positive expectations for fiscal 2011. Whilst guidance was light, investors might be relieved the group grew the bottom line despite it being a tough year for retailers with higher interest rates, lower consumer confidence, and the absence of government stimulus that propped up spending last year.
Fairfax Media – Fairfax’s shares are up more than 5% close to midday after the group's better-than-expected FY profit. It booked an underlying profit of $278.7 million, up 23% on year and ahead of the average forecast of $262.1 million. The dividend of 1.4 cents a share was also slightly ahead of forecasts. In a comment from Goldman Sachs, it said the focus is likely to lie on the group's outlook comments, where Fairfax tipped high single digit earnings growth for 1H FY11 vs Goldman’s forecast for FY11 net profit growth of 20.6% prior to the result.
Sims Metal - Sims Metal this morning beat analysts’ expectations with a FY net profit of $126.7 million vs expectations of $117 million. The lack of guidance seeming isn’t worrying the market, with its shares higher by more than 6%. Sims said it saw improvements across many of its markets, but with its biggest, North America, it experienced a 21% drop in FY sales revenue, while Australasia and European sales were up modestly. Management said economic conditions are too uncertain to be able to provide specific 2011 guidance.
Ten Network - Ten has extended yesterday's slide this morning, down another 6.4% as brokers cut their recommendations and target prices on the stock. This followed yesterday’s announcement about its plans for a new, youth-orientated digital channel and an increased focus on evening news for its main channel, Ten. In a note from Commonwealth Bank, it downgraded the stock to sell from buy, with a $1.45 price target. The broker said it expects Ten's margins will be compressed by the launch of Eleven and the new, higher cost strategy of competing with Seven and Nine in the 6-7pm news slot. In a separate report from UBS, it downgraded Ten to neutral from buy on the back of the company’s new programming strategy. UBS said earnings growth now looks challenging with significant investment planned for FY11, and describes FY11 as a reinvestment year.
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