Australian Stock Market Report - Afternoon 2/20/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket kicked off the new trading week strongly, with the All Ordinaries Index (XAO) rising by 1.4 pct or 59.5 pts to 4332.8. Almost all sectors improved with the exception of the telcos after Telstra (TLS) went ex-dividend today for its 14 cent a share distribution.

The miners were the best improvers of the day, with BHP Billiton (BHP) up 2.33 pct or 82 cents to $36.02 while the smaller RIO Tinto (RIO) rose 2.21 pct or $1.47 to $68.04

The major banks ended mostly higher with the exception of Commonwealth Bank of Australia (CBA) which fell 1.17 pct or 58 cents to $49.10 after going ex-dividend today. For those who do not know, when a company goes ex-dividend you are no longer eligible to receive the next dividend payment should you buy shares in the company on that day or any day thereafter. Westpac (WBC) rose 2.48 pct or 50 cents to $20.65, National Australia Bank (NAB) jumped 2.02 pct or 46 cents to $23.18, while ANZ Banking Group (ANZ) rose 1.86 pct or 40 cents to $21.95.

We have now entered week three of the earnings season, which is scheduled to be the busiest of this season to date.

Global packaging company, Amcor (AMC) delivered a $304.7 million profit in 1H12 (Jul to Dec 2011). This was slightly better than market forecasts; however an increase in restructuring charges, a higher Australian dollar and a rise in raw material costs hurt the company´s bottom line. AMC has a presence in each continent and manufactures rigid plastic containers to carry drinks, water, juices and sauces.

Its Flexibles division (the world´s largest of its kind) includes packaging for meat, fish and bread. It was the company´s standout performer, contributing around 50% to total revenue. AMC has announced a $0.18 a share interim dividend which was a little below market forecasts. The company has maintained its full-year guidance for its three main divisions. AMC shares have underperformed the broader market this calendar year and are down 4.5% since the start of January (not including today´s movement). Its shares have gained strongly immediately following today´s results

Property group, Lend Lease (LLC) rose by 0.27 pct or 2 cents to $7.31 today and reported a close to 4 pct fall in first half profit to $217.8 million.

Specialised engineering, maintenance and facilities management provider, UGL Limited (UGL) reported its half year result for the six months between July and December 2011. UGL's revenue was just ahead of market consensus and rose by 5 pct to $2.4 billion.

UGL's underlying net profit after tax improved by 6 pct to $72.2 million. The company has seen solid performance across all businesses particularly in its rail division. UGL is expected to pay a $0.34 a share dividend to eligible shareholders. UGL shares rose by 2.44 pct or 32 cents to $13.46.

Specialty Fashion Group's (SFH) half year profit for the six months between July and December last year was in line with company guidance of $6.2 million. SFH has said that trading conditions were tough over the half and that sales were disappointing over the Christmas period. SFH will not be paying a dividend to shareholders and has decided to keep the cash in reserves for a rainy day. SFH shares fell 4 pct or 2 cents to 48 cents today.

Community bank and finance firm, Bendigo and Adelaide Bank Limited (BEN) today, reported its first half year results to the end of December 2011 today. Net profit came in at $162.6 million before the $95 million goodwill write down on BEN's margin lending business that was flagged back in December. Margin pressure did increase over the last 6 months reflecting increased deposit funding costs. BEN´s acquisition of The Bank of Cyprus Australia (BOCAL) for $130 million is on track and due for completion by end of February 2012. BEN shares rose by 1.5 pct or 12 cents to $8.14.

Over the next few days, we will hear from David Jones (DJS), Flight Centre (FLG), Woodside Petroleum (WPL) and Insurance Australia Group (IAG) which is the owner of NRMA. Most companies so far this season have posted results mostly in-line with market expectations.

There was no major economic data released in Australia today, however the latest petrol price report was issued. The national average price of unleaded petrol fell by 0.2 cents to 142.2 cents a litre last week. Thanks in part to a stronger Australian Dollar (AUD); the price of petrol is expected to now only edge higher by between 1-2 cents a litre over the coming week.

Commsec's Chief Economist, Craig James said that "Mixed conditions exist across the nation's petrol markets. In Sydney, prices hit lows on February 14 and drifted, rather than spiked higher. Brisbane prices followed similar trends. But in Melbourne, prices appeared to hit lows on February 14 but a price war has kept prices down. On February 18, Sydney prices hit 149.3 cents a litre but Melbourne prices fell to 132.6 cents. Adelaide prices spiked 19 cents higher between February 13 and 16 after the discounting cycle ended. Simply, it is a lot harder to time your petrol purchases."

It will be a relatively quiet week on the economic front, with the latest Reserve Bank (RBA) Board Minutes out tomorrow while RBA Governor will be sitting on a panel at the ASIC Summer School.

On Wednesday, the latest Wage Price Index will be out for the December quarter (October to December 2011). On Thursday and Friday, a number of speeches will be delivered by RBA officials.

In the region this week, China's latest HSBC Flash Manufacturing PMI reading will give us an idea just how well China's manufacturing space is performing.

In Europe tonight, the European Finance ministers will be meeting to try and decide if Greece will be receiving its next bailout package or not. The result of the meeting is likely to have a substantial impact on markets over the short term.

Looking ahead, on Tuesday night the latest European consumer confidence reading will be released for January. The market is expecting another negative result.

U.S sharemarkets will be closed tonight due to the President's Day public holiday so Australian investors will be turning to the European markets for a lead tomorrow morning.

The volume of shares traded came in at 2.03 billion today, worth $4.81 billion. 637 shares were up, 386 finished weaker and 363 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 0.14 pct or 6 pts to 4239.

Due to daylight savings, most major European markets are now trading between 7pm (AEDT) and 3.30am (AEDT). Futures in Europe are pointing to a stronger start to trade tonight.

U.S markets are closed tonight to observe a public holiday. Due to the Americans going back an hour on November 5 last year, U.S markets usually trade between 1.30am (AEDT) and 8am (AEDT).

Turning to currencies, the Australian dollar (AUD) buys US107.7 cents and was trading at close to its highest level since June last year earlier in the session. The AUD is currently trading at £67.8 pence and €81.5 cents.

Steven Daghlian, CommSec Market Analyst

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