Current

(ORG)

FY10 - Retail Saves the Day

Adjusted FY10 NPAT rose 10% to $585m, marginally ahead of our $570m forecast. At the divisional level, a stronger than expected Retail performance offset weaker than anticipated E&P, Generation and Contact Energy results. Retail enjoyed a 9% jump in revenue on the back of higher sales volumes in natural gas and LPG and tariff increases for natural gas and electricity. The benefits of the Queensland Competition Authority decision in June 2009 were in evidence. Electricity sales were lower on weaker average demand and churn rates increased with a net loss of customers. But this proved only a partial drag. Growth in solar sales was also strong. All in all, a solid ORG result, close to expectations though at the lower end of long term financial objectives of 10-15% EPS growth. CEO Grant King guides a 35% increase in underlying group FY11 EBITDA and 15% increase in underlying EPS.
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Previous

(ANZ)

Trading update: Business growth remains the focus

The positive trading update for the nine months to June was underpinned by an unaudited underlying profit of $3.6bn, up 26% on pcp. Earnings for 3Q10 of $1.3bn beat our expectations of $1.2bn. Full-year FY10 earnings around $4.9bn look achievable and we increase our forecast fro $4.7bn to $4.9bn. Business performance was solid, with revenue growth just exceeding of cost growth, excluding the affect of acquisitions and lower Global Markets income. Lending growth of 3% and deposit growth of 8% benefited from acquisitions and a robust performance from the Australian retail business. A moderate improvement in interest margins was achieved despite higher funding costs. Term funding costs continue the upward trend with the marginal costs running significantly higher than the portfolio average. Stronger asset quality: Bad-debts continue to ease with a YTD charge of $1,440m and $342m for the quarter. Full year bad debts peaked in FY09 at $3.0bn. Credit concerns are now focused on middle market and SME exposures, and importantly the RBS asset acquisition has not produced any credit surprises. Credit quality continues to improve, but the rate of improvement in impaired assets is slowing. We were forecasting a full year FY10 expense of $2.2bn, and following the update we reduce our forecast to $1.96bn.
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(CBA)

FY10 result in line but bearish guidance weighs on the stock

CBA reported FY10 cash NPAT of $6,101m, up 42%. This will be the most widely reported figure. Underlying NPAT, or cash NPAT less investment experience, was 32% higher at $5,923m. This is the measure we prefer and on this measure EPS was 21% higher at 360.3c. The final dividend was 170c fully franked, 48% higher.
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(RIO)

Simmering Doubt Quenched

RIO has increased certainty for a multi billion dollar development of the Simandou iron ore project in southeastern Guinea. The project in its first stage would come on stream in 2015 at a rate of 70Mtpa. A second stage expansion could see output at more than 100Mtpa. RIO announced a non-binding tie-up with Chinalco on Simandou in March this year. Currently RIO holds 95% and the IFC 5%. Under a new agreement, Chinalco will earn a 47% interest in RIO's 95% share by spending US$1.35bn. This would give Chinalco an effective 44.65% interest in Simandou, RIO diluting to 50.35%. To put this in perspective, on a 100% basis RIO has produced an average 170Mtpa of iron ore over the last three years. Its equity share was 135Mtpa. All else being equal, Simandou would add around 35Mtpa equity tonnes or an extra one-quarter to RIO's current iron ore output.
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(WBC)

Home loan strategy to underpin long-term earnings growth

We believe the market is mispricing WBC's earnings upside potential and continues to focus too much attention on negative short-term issues. The stock has been sold down far too heavily in recent months, in a prime example of short-termism ignoring an excellent medium-to-long term strategy. The market considers WBC's successful home loan growth strategy a key weakness, but we argue it is the bank's core strength. Despite funding pressure, the rapid growth in home loans over the past 18 months puts WBC in a strong position to generate attractive earnings growth when global credit markets stabilise and funding costs ease from current elevated levels. The balance sheet foundations of WBC (and CBA) are built around consumer banking and provide the two Sydney-based, retail-orientated banks with earnings stability to complement the more volatile returns generated from business and wholesale banking activities.
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