Australian Stock Market Report - Afternoon 2/23/2012

MARKET CLOSE
(4.30pm AEDT)

The Australian sharemarket lost ground for the first time in five sessions today, with the All Ordinaries Index (XAO) down 0.1 pct or 4.6 pts to 4367.5. The energy sector performed strongly; however weakness from both the miners and big banks dragged the market slightly into the red.

The world's largest miner, BHP Billiton (BHP) fell 0.49 pct or 178 cents to $36.23 while the smaller Rio Tinto (RIO) slumped by 1.49 pct or $1.02 to $67.51.

National Australia Bank (NAB) fell by 1.02 pct or $23.21, Westpac (WBC) eased by 0.53 pct or 11 cents to $20.66, ANZ Banking Group (ANZ) dropped 0.32 pct or 7 cents to $22.07 while Commonwealth Bank Australia (CBA) lost 0.24 pct or 12 cents to $49.52.

The reporting season continued and a number of big names posted their latest profit results.

Origin Energy (ORG) reported a better than expected 1H12 (July to December 2011) underlying profit result of $489 million. Underlying profit is the preferred measure of the company´s performance as it strips out the impact of certain one-off items. This result is used internally by its management to make business decisions.

Profit was driven by lower exploration costs, higher commodity prices and a solid performance from its NSW energy assets. ORG is a diversified energy company involved in gas exploration, production, power generation in addition to operating as an energy retailer. It has reiterated its earnings guidance (expectations) for the full year and expects a 30 pct increase in profit. A $0.25 a share dividend is scheduled to be paid to eligible shareholders on March 30. This is in-line with market forecasts. ORG shares have improved by 1.5% so far in 2012 (not including today´s price movements) and have
underperformed the broader market. ORG shares rose 1.89 pct or 26 cents to $14.05 today.

Ramsay Health Care (RHC), Australia´s largest private hospital operator delivered a 1H12 (July to December 2011) profit of $132 million, which was slightly better than market expectations. The result was driven in part by a strong performance across its Australian hospitals division, with activity from local hospitals making up close to 80% of the company´s total revenue.

The fact that 45.7% of the Australian population now has private health insurance (the highest level since the introduction of Medicare more than 28 years ago) has helped its bottom-line. RHC now owns 66 hospitals in Australia and 38 in the U.K with revenue from its British operations improving by 0.5% to £176.8 million. It has upgraded its earnings guidance for the full year and is scheduled to pay a $0.255 a share dividend to eligible shareholders on March 28, which is largely in-line with consensus. RHC´s share price has fallen by 2.8% this calendar year, underperforming the broader market. RHC's fell 1.17 pct or 22 cents to $18.52.

The country's second largest carrier, Virgin Australia (VAH) was one of the best performers today after more than doubling its first half profit to $51.8 million. The airline was helped by the Qantas strike action. VAH shares shot higher by 8.22 pct or 3 cents to 39.5 cents.

Insurance Australia Group Limited (IAG), the owner of NRMA said that its net profit after tax (NPAT) fell by over 10 pct to $144 million, but this result was still better than what the market had expected. IAG´s profit was hit by an increase in claim costs from numerous natural disasters in 2011, especially the Thailand floods and the Christmas Day storm in Melbourne.

The cost of these disasters totalled $396 million, slightly below the company´s guidance published last month of $400-$420 million. IAG said the cost of reinsurance increased by over 50 pct to $356 million from the previous corresponding period.

IAG reported an increase in its insurance margin of 10.7 pct and expects to meet its full year guidance of 10 pct to 12 pct growth. IAG announced an interim dividend for shareholders of $0.05 a share. IAG shares rose 8.28 pct or 24 cents to $3.14.

No major data was released in Asia today. South Korea's KOSPI index fell 1.03 pct or 20.85 pts to 2007.8, Hong Kong's Hang Seng dropped 0.75 pct or 160.76 pts to 21388.52 while Japan's Nikkei 225 index edged higher by 0.44 pct or 41.57 pts to 9595.57.

Last night, the European markets were put under pressure following some worse than expected economic data out of both Germany and the broader Eurozone.

Tonight, the latest report on German business confidence will be released. The market is expecting a reading of 108.6. A reading above 100.0 indicates business optimism.

In the U.S last night, a report showed that there were less homes sold in January than expected over January. Tonight, the latest weekly jobs report will be released and should continue to confirm an improved jobs market. The U.S home price index is also out and the market is expecting the U.S housing market to have close to bottomed.

The volume of shares traded came in at 2.03 billion today, worth $4.73 billion. 491 shares were up, 539 were weaker and 373 ended unchanged.

At 4.30pm AEDT on the Sydney Futures Exchange, the ASX24 futures contract is down 0.3 pct or 13 pts to 4260.

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 weaker start to trade tonight.

Dow Futures are currently unchanged; indicating that U.S stocks could open relatively flat. American markets open at 1.30am (AEDT). Due to the Americans going back an hour on November 5 last year, U.S markets will be trading between 1.30am (AEDT) and 8am (AEDT).

Turning to currencies, the Australian dollar (AUD) buys US106.4 cents and is weaker than this time yesterday. The AUD is currently trading at £67.9 pence and €80.3 cents.

Steven Daghlian, CommSec Market Analyst

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