Markets Live: Ruralco up 45pc on takeover

Shares in SEEK are still up a whopping 7 per cent to $18.58, one of the biggest gains among the S&P/ASX 200 today (there are far greater gains among the all ordinaries).

This morning the it reported the classifieds site’s revenue for the six months to December 31 increased 21 per cent to $757.2 million compared to the same period in 2018 despite difficult economic conditions. Weakness in the Australian economy did not stop job listings website Seek from posting strong results on Wednesday, with chief executive Andrew Bassat expecting a federal election in May will bring greater stability for the business.

Earnings (before interest, tax, depreciation and amortisation) increased 6 per cent to $238.5 million, while net profit after tax fell 5 per cent to $99.3 million. When excluding factors such as additional investment spending on early-stage new business ventures, net profit increased 6 per cent to $123.8 million.

He said the business was «very solid and going strong» but the economy meant it was a «bit harder» than expected.

The Australia and New Zealand arm showed some of the strongest growth in the Seek group with an 11 per cent revenue jump and 13 per cent earnings growth. Revenue from Seek Asia increased 11 per cent with earnings up 10 per cent.

Read the full story from Jennifer Duke here

Shares in Ruralco are up 45.4 per cent today to $4.45 after it announced Nutrien, owner of Landmark, will buy out the company for $4.40 per share, a 44 per cent premium on Monday’s closing price of $3.06 (Ruralco did not trade yesterday). This gives the company an enterprise value of $615 million. The board expects to receive cash and pay a fully franked special dividend of 90 cents per share. The board has also decided to pay a fully franked interim dividend of 10 cents per share.

«The directors or Ruralco believe the scheme consideration, inclusive of the special dividend, represents compelling value for Ruralco shareholders and would create a robust rural services provider, with significant benefits for farmers, businesses and communities across regional and rural Australia».

Chairman Rick Lee said there is a «strong logic» in bringing together Ruralco and Nutrien’s subsidiary Landmark.

The deal is still subject to approval from the competition watchdog and the Foreign Investment Review Board. The biggest shareholders are Neal Edwards Pty Ltd (a company linked to former director John Edwards) and investment house Perpetual. Mr Edwards stands to make about $120 million from the sale and Perpetual will make about $69 million.

Next week myself and Stephen Bartholomeusz will be holding a online discussion about earnings season and answering questions. The event is for subscribers and more details can be found here.

Meanwhile, the S&P/ASX 200 remains higher at 6150 points boosted by a 14 point contribution from the financials sector. Communications is dragging (Telstra went ex-dividend today), and so is real estate.

ANZ Felicity Emmett has commented on the latest construction data:

«The construction sector has been a key support for the economy over the last few years, both in terms of growth and employment. While there is still a considerable amount of work in the pipeline for public engineering construction and residential construction, the weakness in second half of 2018 has been more marked than we expected, and if this points to an earlier and sharper turn in the cycle than we expected, it would suggest downside risks to our outlook.»

The Bureau of Statistics has just published construction data for the December quarter. Seasonally adjusted the total value of construction is down 3.1 per cent over the three months and down 2.6 per cent compared to December 2017.

The worst affected is engineering, down 5 per cent over the three months and down 7.8 per cent compared to December 2017. The value of work done for non-residential building was the only sector to increase, it grew 1.9 per cent during the December quarter.

A block of 1.9 million shares in Beach Energy traded for $2.075 at 11.48 am after someone spotted the stock was trading at five month highs. It also goes ex-dividend today. It looks like Deutsche Securities conducted an internal crossing.

Meanwhile over at JP Morgan Securities they are putting through block trades in Healthscope shares — so far 3 million shares have changed hands at $2.475.

Shares in Costa Group are on a bit of a ride today. Shares dropped on opening to $5.09 from a closing price of $5.20 the night before, then leapt up to $5.40 at 10.15am. Things settled down around $5.25 while analysts and journalists were on a conference call with management regarding today’s results, and now shares are back up with a leap to $5.53 at 11.15am.

Management must have been able to answer their questions because shares in the fruit and vegetable grower currently have a one-day gain of 29 cents to $5.49, or a rise of 5.2 per cent.

This morning Costa Group reported a half year statutory net profit of $4.3 million, down $70 million on the prior corresponding period thanks to a range of factors including a smaller citrus harvest and «subdued» buying of tomatoes, berries and other produce in December. The story is available here.

The S&P/ASX 200 is taking a turn upwards and is now at 6149.6, a rise of 21.21 points. It is being helped by minor gains in market heavyweights BHP, ANZ Bank, CSL, Commonwealth Bank, and Westpac.

SEEK is up 5.7 per cent to $18.34.

On the downside Telstra has gone ex-dividend and is dragging with a 2.2 per cent decline to $3.10, while Reliance Worldwide is down 4.8 per cent to $4.65 after announcing founding chairman Jonathan Munz is stepping away from the company and has just off loaded $367 million worth of shares, his last 10 per cent of stock, at a 4 per cent discount.

Bell Potter analyst Lafitani Sotiriou maintains a ‘buy’ rating on Afterpay Touch with a massive target price of $28, and was impressed with yesterday’s results. Afterpay shares are trading flat at $18.24 after an 11.5 per cent decline yesterday.

«Afterpay Touch has delivered one of its most important results,» Mr Sotiriou writes. «It has shown that it can expand overseas while maintaining a lid on bad debts, and a stable overall net-margin. It was able to absorb late fee caps, and invest heavily into establishing the U.S. business. The model looks like it is working, in Australia Afterpay EBITDA jumped from ~$17 million in first half of 2017-18 to ~$35.7 million in first half 2018-19. This improvement was hidden by investment in the international expansion.»

He is upgrading active customer estimates but downgraded earnings per share for the full financial year from positive 3.7 cents per share to -4.0 cents per share, due to an extra $10 million being investment to accelerate growth. Earnings per share for 2019-20 have also been downgraded. But, «there is an increase in our 2020-21 underlying earnings per share as the customer growth kicks in».

The price of depository receipts on the ASX for US-based listed investment group Janus Henderson have recovered in the past month from historical lows of $27.03 in mid-December to $34.46 today.

The group’s 179-page half year results reveal assets under management dropped 11 per cent between December 2017 and December 2018 to $US328.5 billion «due to net outflows, adverse market movements and unfavorable foreign currency translation». Janus Henderson had $89 billion in redemptions during the year.

Management fees increased 31.5 per cent, but performance fees dropped 93 per cent to $US7.1 million. The group conducted $US100 million of share buy backs and has set aside $US200 million for further buy backs.




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