Markets Live: AFIC reveals special dividend


Listed investment companyLondon City Equities revealed an $18,000 lossfor the six months ending in December, with the value of itsinvestment portfolio dropping from $10.8 million to $8.5 millionover the past year. Former chairmanJohn Plummeris still the biggest shareholder with 47 per cent of shares, which are trading at 41 cents today. Chief operating officers isPeter Murray, who owns 35 per cent of shares, according to Bloomberg data.

“London City’s investments have fallen in market value over the period, mainly due to extensive negative reporting of some financial services operators. The company is comfortable with its present holdings, especially as dividend income is rising.”

It’s major investments are a 20 per cent stake in Prudential Investment Company of Australia, which owns Body Corporate Services, a 16 per cent stake in CCI Holdings, and a 7 per cent stake in Fiducian Group.

Directors note they still have legal action proceeding against Ernst and Young in the NSW Supreme Court and are examining capital raising alternatives.

Treasury Wines Estates hassacked its chief operating officerfor an unspecified breach of internal policies. Its shares are outperforming today, up 1.4 per cent to a two-month high of $15.40.

The wine maker said on Monday thatRobert Foyehad left the company effective immediately “due to a breach of TWE’s internal policies unrelated to the company’s trading performance”. He was appointed COO in early 2017 and had been considered a likely internal candidate for CEO.

Deputy COO,Tim Ford, will take over Mr Foye’s role reporting directly toCEO Michael Clarke.

Meanwhile the company said it was heading forabove-consensus first-half earnings of between $335 million and $340 million. The market was expecting around $332 million. That result will represent earnings growth of 25 per cent.

Software providerObjective Corporationreleased a trading update this morning revealinglower revenue for the first halfof the current financial year at about $29.2 million, compared to $33.3 million for the same period last financial year. This revenue is expected to translate to earnings of about $5.6 million.

The decline is because a one-off consulting project with IBM and Defence was not repeated in 2018. Objective noted their entire business is being migrated to a subscription model, which boosts cash. Recurring revenue for the six-month period was $20.8 million.

TheS&P/ASX 200 reached a peak of 5911.8 just after opening this morning, but has since retreated to 5901, a gain of 0.37 per cent.

Currently consumer discretionary, energy, information technology and communication sectors are outperforming. Utilities and materials are lagging.

Commonwealth Bank could cut its highly-prized dividendafter it spins off its wealth management and mortgage broking arms, under one scenario being discussed by analysts.
As most of the big banks retreat from the wealth sector, CBA is this year planning to de-merge the Colonial First State superannuation and financial advice business, as well as Aussie Home Loans and advice businesses Count Financial and Financial Wisdom.
The spun-out business, dubbed NewCo, would be split off from CBA late this year, and could be worth as much as $3.2 billion, Morgan Stanley analysts say.
In a note to clients, the analysts say the deal is likely to further boost CBA’s capital (on top of CBA’s plan to sell its funds management arm) above a “conservative” level, but also create an“earnings hole”which could lead to a re-think on CBA dividends.

They say the deal will leave CBA will “excess” capital, which could lead to share buyback or 85c a share special dividend by June this year.But they add that CBA’s board could review its dividend policy in the 2020 financial year. They put forward three scenarios: a flat CBA dividend; a flat combined CBA/NewCo dividend; or a flat CBA dividend payout ratio.

The first two scenarios would result in a “New CBA” dividend payout ratio about 80 per cent – while the third would lead to a dividend cut.

Sims Metal Management shares are divingfollowing a profit warning,down 14 per cent this morning to $9.39.

Sims’ management expects underlying earnings to be about $110 million, compared to $125 million in the first half of the previous financial year.

Chief executive Alistair Field said the period had been challenging for all recycling companies “and will continue to be so for the near future”.

The biggest decline was an88 per cent drop in earnings from Europe metals, down to $1.4 million from $11.6 millionthe previous year. Sims said challenges in the Turkish economy and requirements for higher quality ferrous scrap created headwinds. Earnings from the SA Recycling division dropped 33 per cent from $25.1 million to $16.8 million.


SPI futures up 43 points or 0.7% to 5864

AUD -0.4% to US71.68¢

On Wall St: Dow +1.4% S&P 500 +1.3% Nasdaq +1%

In New York, BHP +0.4% Rio flat Atlassian -2.4%

In Europe: Stoxx 50 +2.1% FTSE +2% CAC +1.7% DAX +2.6%

Spot gold -0.8% to $US1282.11 an ounce on Friday in New York

Brent crude +2.5% to $US62.70 a barrel

US oil +3.3% to $US53.80 a barrel

Iron ore +1.5% to $US75.70 a tonne

Dalian iron ore +3% to 537 yuan

LME aluminium + 0.7% to $US1870 a tonne

LME copper +1% to $US6052 a tonne

2-year yield: US 2.61% Australia 1.84%

5-year yield: US 2.62% Australia 1.96%

10-year yield: US 2.78% Australia 2.31% Germany 0.26%

US-Australia 10-year yield gap as of 5pm Friday New York time: 47 basis points


Traders received the greenlightto jump into risk assets on Friday. It culminated in a substantial jump across global equities and a certain “risk-on” attitude to trading. The impetus was arguably more technical than fundamental.The boost in sentiment in being attributed mostly the leaked news that Treasury Secretary Stephen Mnuchin was planning to lift US tariffs on China. Whatever the motive, nefarious or simply untrue, that story was quickly denied by the White House. However, it signalled enough to the market that progress was being made in trade war negotiations. That extra fuel to this recovery’s fire supported a push above very significant technical levels in Wall Street indices, attracting buyers and further validating the view that the December sell-off is behind us.

For now, at least, the direction for US, and therefore global stocks, is up.The recovery has scarcely taken a breath to start the new year. Indications are now too that the market (as a whole) is starting to believe that 2019’s early rally is for real. Technical indicators for Wall Street’s benchmark S&P500 were as solid as they have been all year on Friday.

The ASX enjoyed its own strong performance on Friday, though it lacked the substance of its US counterparts. Like Wall Street, every sector gained ground on the day. But breadth and volume weren’t a shadow of US markets – in line with the trend of recent weeks. IT stocks were the only sector to attract meaningful interest, largely by way of virtue of a 11 per cent rally from Afterpay Touch Group, after it updated its underlying sales numbers.

TheS&P/ASX 200 has jumped 21 points to 5900on opening, a rise of 0.36 per cent.

Early leaders includeAusdrill, up 7.7 per cent to $1.40, andPact Group, up 4.7 per cent to $3.79, andAfterpay Touch is up 4.5 per cent to $16.83. Outside the top 200,Freedom Oil and Gas is up 8.7 per cent to 12.5 is up 6.5 per cent to $4.87.

Early laggers includeRegis Resources, down 2.5 per cent to $4.78andNewcrest Mining is down 2 per cent to $23.12.

Good news for shareholders inAustralian Foundation Investment Companywith revenues for for the half year ending December 31up 62.5 per cent. The investment group was a big beneficiary of the Coles demerger, and Rio Tinto and BHP off-market buy backs.Revenue for the six months was $250.3 million, compared to $96.3 million in the same period in 2017.

Post-tax profit was $239.8 million and AFIC is paying aninterim dividend of 10 cents per share, fully franked payable February 25. It is also payinga special dividend of 8 cents per shareto distribute the proceeds of the mining company buy-backs. AFIC also announced a dividend reinvestment plan with a 2.5 per cent discount.

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