Oct. 16 (Bloomberg) -- India’s stocks are in a “sweet spot” as profits rebound and may drive the benchmark index 13 percent higher by the end of next year, Morgan Stanley said.
Earnings for companies in the Bombay Stock Exchange Sensitive Index will gain 15 percent in the financial year ending March 31, 2010, and 23 percent in the next 12 months, Morgan Stanley analysts Ridham Desai and Sheela Rathi wrote in a report yesterday, increasing earlier estimates of 10 percent and 20 percent. Profit growth may boost the Sensex to 19,400 by the end of 2010, from yesterday’s close of 17,195.20.
The Sensex, the 10th best performer among 90 benchmark indexes tracked by Bloomberg globally, has rallied 78 percent this year. Bajaj Auto Ltd., India’s second-largest motorcycle maker, said yesterday net income more than doubled to a record in the second quarter after it introduced new models and exports surged. HDFC Bank Ltd., India’s third-biggest bank by market value, said on Oct. 14 second-quarter profit rose 30 percent.
“Indian equities could be volatile in the near term, since a lot of the next six months’ projected growth is already in the price,” the analysts wrote. “Investors should use such volatility to buy Indian shares, since the growth outlook for the next 12 to 18 months remains firm and is still not priced into equities.”
Gross domestic product in the year to March may grow 6.4 percent, higher than an earlier estimate of 5.8 percent, Morgan Stanley said this week, citing a faster-than-expected recovery in industrial production.
“We reckon that Indian equities could be in a sweet spot with low institutional ownership, strong liquidity, prospects of growth and earnings upgrades, strong corporate balance sheets and stable politics,” the analysts said.
Thursday, October 15, 2009
Asia’s Richest Man Takes 66% Pay Cut in India Austerity Drive
Oct. 16 (Bloomberg) -- Mukesh Ambani, Asia’s richest man, took a 66 percent pay cut to “set a personal example of moderation” after India’s government called for austerity in salaries of executives.
Ambani, chairman of Reliance Industries Ltd., will take home 150 million rupees ($3.3 million) in salary and a share of profit for the year ended March 31, compared with 440.2 million rupees a year earlier, the company said in a statement in Mumbai yesterday. Reliance’s net income fell 22 percent to 152.9 billion rupees in the year ended March 31.
The 52-year-old Ambani’s move preempts any government attempt to enforce rules regarding pay. Corporate Affairs Minister Salman Khurshid this month asked companies to refrain from paying “vulgar” salaries to their chief executives, according to Press Trust of India. Leaders from the Group of 20 nations last month said they plan to take steps to curb pay of bankers whose risk-taking triggered a global recession.
“This is a gesture to show shareholders that the company is thinking about them,” said Asish Bhattacharyya, coordinator of the Centre for Corporate Governance at the Indian Institute of Management in Kolkata. “You are also appeasing the government and signaling to the market that you care about costs.”
The salary component of Ambani’s total pay increased 25 percent to 15.9 million rupees, according to yesterday’s statement.
India’s per capita gross domestic product rose to a record $724 last year, according to the World Bank.
Billionaire Brothers
Reliance Industries’ plan to pay shareholders dividend of 13 rupees a share means the Ambani family, which owns a 49 percent stake in India’s most valuable company, will get about 10 billion rupees, or 3.3 percent more payout than last year, according to Bloomberg calculations.
Mukesh’s estranged younger brother Anil Ambani on Sept. 22 said he will forego salary and commission from five of his group companies. Anil’s annual salary is about 300 million rupees, according to the Economic Times.
The Ambani brothers, India’s richest resident billionaires, split the business founded by their father Dhirubhai Ambani, in 2005.
Reliance Industries lowered the commission payable to Mukesh in accordance with limits set by shareholders, according to the statement. The Mumbai-based Reliance will also set the salaries of executives using a “capped structure method” instead of basing them on earnings, the company said.
Mukesh Ambani, a chemical engineer from the University of Bombay, is ranked seventh on Forbes’ 2009 ranking of the world’s billionaires with a net worth of $19.5 billion.
Ambani, chairman of Reliance Industries Ltd., will take home 150 million rupees ($3.3 million) in salary and a share of profit for the year ended March 31, compared with 440.2 million rupees a year earlier, the company said in a statement in Mumbai yesterday. Reliance’s net income fell 22 percent to 152.9 billion rupees in the year ended March 31.
The 52-year-old Ambani’s move preempts any government attempt to enforce rules regarding pay. Corporate Affairs Minister Salman Khurshid this month asked companies to refrain from paying “vulgar” salaries to their chief executives, according to Press Trust of India. Leaders from the Group of 20 nations last month said they plan to take steps to curb pay of bankers whose risk-taking triggered a global recession.
“This is a gesture to show shareholders that the company is thinking about them,” said Asish Bhattacharyya, coordinator of the Centre for Corporate Governance at the Indian Institute of Management in Kolkata. “You are also appeasing the government and signaling to the market that you care about costs.”
The salary component of Ambani’s total pay increased 25 percent to 15.9 million rupees, according to yesterday’s statement.
India’s per capita gross domestic product rose to a record $724 last year, according to the World Bank.
Billionaire Brothers
Reliance Industries’ plan to pay shareholders dividend of 13 rupees a share means the Ambani family, which owns a 49 percent stake in India’s most valuable company, will get about 10 billion rupees, or 3.3 percent more payout than last year, according to Bloomberg calculations.
Mukesh’s estranged younger brother Anil Ambani on Sept. 22 said he will forego salary and commission from five of his group companies. Anil’s annual salary is about 300 million rupees, according to the Economic Times.
The Ambani brothers, India’s richest resident billionaires, split the business founded by their father Dhirubhai Ambani, in 2005.
Reliance Industries lowered the commission payable to Mukesh in accordance with limits set by shareholders, according to the statement. The Mumbai-based Reliance will also set the salaries of executives using a “capped structure method” instead of basing them on earnings, the company said.
Mukesh Ambani, a chemical engineer from the University of Bombay, is ranked seventh on Forbes’ 2009 ranking of the world’s billionaires with a net worth of $19.5 billion.
Emerging Fund Inflows Surge to 2009 High, EPFR Says
Oct. 16 (Bloomberg) -- Emerging-market equity fund inflows surged in the second week of October on optimism better U.S. corporate earnings signal increased demand for commodities, EPFR Global said.
Global Emerging Market equity funds received a net $2.1 billion and Emerging Europe, Middle East and Africa managers got $358 million, the biggest inflows this year, EPFR said in a statement e-mailed today. Asia ex-Japan funds received $823 million. China funds took in $130 million and Korea $128 million.
Fund purchases picked up on speculation U.S. and European demand for commodities and other emerging markets exports gained, “bolstered by a good start to the third-quarter earnings season and the latest Chinese trade numbers,” EPFR said.
China may report next week that its economic growth accelerated to 8.9 percent in the third quarter, a Bloomberg News survey of economists shows. Export declines slowed in September and the nation’s foreign-currency reserves swelled to a record $2.273 trillion, official reports showed Oct. 14.
The MSCI Emerging Markets Index of 22 developing nations rose 0.4 percent to 975.79 yesterday, a ninth-straight advance and the longest winning streak in four years. The MSCI index has gained 72 percent this year to the highest level in 14 months on speculation China will lead the global economy out of its first recession since World War II. China’s benchmark Shanghai Composite Index has climbed 64 percent this year.
Emerging-market stocks have room for further gains in the next one to two years because of earnings and economic growth prospects, Allan Conway, head of emerging-market equities at Schroder Investment Management, said Oct. 13 in Seoul.
Emerging Markets Bond Funds absorbed $967 million, the biggest weekly total since EPFR began tracking the data in 2001, the company said.
Global Emerging Market equity funds received a net $2.1 billion and Emerging Europe, Middle East and Africa managers got $358 million, the biggest inflows this year, EPFR said in a statement e-mailed today. Asia ex-Japan funds received $823 million. China funds took in $130 million and Korea $128 million.
Fund purchases picked up on speculation U.S. and European demand for commodities and other emerging markets exports gained, “bolstered by a good start to the third-quarter earnings season and the latest Chinese trade numbers,” EPFR said.
China may report next week that its economic growth accelerated to 8.9 percent in the third quarter, a Bloomberg News survey of economists shows. Export declines slowed in September and the nation’s foreign-currency reserves swelled to a record $2.273 trillion, official reports showed Oct. 14.
The MSCI Emerging Markets Index of 22 developing nations rose 0.4 percent to 975.79 yesterday, a ninth-straight advance and the longest winning streak in four years. The MSCI index has gained 72 percent this year to the highest level in 14 months on speculation China will lead the global economy out of its first recession since World War II. China’s benchmark Shanghai Composite Index has climbed 64 percent this year.
Emerging-market stocks have room for further gains in the next one to two years because of earnings and economic growth prospects, Allan Conway, head of emerging-market equities at Schroder Investment Management, said Oct. 13 in Seoul.
Emerging Markets Bond Funds absorbed $967 million, the biggest weekly total since EPFR began tracking the data in 2001, the company said.
Wednesday, October 14, 2009
HSBC Faces Madoff-Linked Claims in Dublin Case Over Repayments
Oct. 15 (Bloomberg) -- HSBC Holdings Plc, Europe’s largest bank, is facing lawsuits in Ireland by investors faulting the lender for how it performed as custodian for money lost in Bernard Madoff’s $65 billion Ponzi scheme.
A Dublin court will rule today on whether investors must wait to pursue claims against HSBC until suits by mutual funds that hired the bank as a custodian are resolved. Two Irish funds suspended redemptions because of exposure to Madoff.
Custodian banks, especially those serving European Union- regulated funds that are meant to be low-risk, face scrutiny as the European Commission seeks to increase their responsibilities after the Madoff scandal. Investors in Luxembourg and Ireland, Europe’s biggest and third-largest mutual fund markets respectively, have sued custodians, asking courts to break legal ground by ordering them to repay billions of dollars lost in Madoff’s fraud.
“One of the biggest concerns custodians have is they could be held liable,” said Jonathan Herbst, a London regulatory lawyer and former official at the U.K. Financial Services Authority. “If there was a decision by a court that the custodian was liable, it would be devastating.”
The funds are known as Undertakings for Collective Investment in Transferable Securities, or UCITS. Custodians manage cash inflows and payments to investors.
In Ireland, Thema International Fund Plc and dozens of investors filed complaints against HSBC, claiming the London- based bank failed in its duty as the custodian handling the fund’s money. The cases are similar to investor claims in Luxembourg and Paris.
Dublin-based Thema is seeking about 1 billion euros ($1.5 billion) to reimburse investors.
Closer to U.K.
“HSBC has custody clients who have invested with Madoff, but we don’t believe that these custodial arrangements should be a source of exposure” to the company, said Brendan McNamara, a spokesman for the bank. He declined to comment on the Irish lawsuits.
Ireland may be watched more by some of its neighbors because “it’s much, much closer jurisprudentially to a big economy, such as the U.K., than Luxembourg,” said Julian Randall, a lawyer at Barlow Lyde & Gilbert LLP in London.
HSBC is being sued in Luxembourg as custodian bank for the Herald (Lux) US Absolute Return Fund. In July, Irving Picard, the trustee liquidating Madoff’s business, sued the bank in New York, saying HSBC and Cayman Islands-based hedge fund Herald Fund Spc withdrew $578 million in “fake” profit from Madoff’s firm before its bankruptcy.
Other financial services companies, including UBS AG, have also been sued over their role as custodians for funds that invested with Bernard L. Madoff Investment Securities LLC.
Kalix Fund
Today’s case concerns a claim by Kalix Fund Ltd. against HSBC as custodian to Thema, where the fund placed about $35 million from Swiss investors. HSBC asked Judge Frank Clarke to freeze the investors’ case while Thema’s suit against HSBC proceeded, saying there would be duplication of efforts if they all went forward at once.
Madoff, 71, pleaded guilty in March and was sentenced on June 29 to 150 years in prison for using money from new clients to pay earlier investors. Prosecutors said the money manager told clients they had as much as $65 billion invested with him.
The other Irish fund affected by Madoff, AA (Alternative Advantage) Plc, has also sued HSBC over its role as custodian.
Internationally Sold Funds
Luxembourg’s financial market regulator is yet to issue a report on HSBC’s liabilities as custodian of the Herald fund, which was dissolved April 2. Decisions by Irish and Luxembourgish courts are “very important” because they are the top European countries for internationally sold funds, said Charles Muller, deputy director general of the Luxembourg Fund Industry Association.
“Luxembourg holds about 75 percent of the cross-border business, Ireland about 15 percent, so both countries are constantly watching what’s going on in each other’s territories,” said Muller by telephone. France mainly sells the funds nationally, while Luxembourg and Ireland market funds internationally, he said.
Regulators in Luxembourg and France have said custodian banks have a duty to repay investors for losses. The Irish Financial Regulator is also investigating the issue, said Nicola Faulkner, a spokeswoman for the agency.
The cases are Kalix Fund Limited v. HSBC Institutional Trust Services (Ireland) Ltd, The High Court Commercial, 2009/3152P, Thema International Fund Plc v. HSBC Institutional Trust Services (Ireland) Ltd, 2008/10983P, and Thema International Fund Plc v. HSBC Securities Services (Ireland) Ltd, 2009/608P.
A Dublin court will rule today on whether investors must wait to pursue claims against HSBC until suits by mutual funds that hired the bank as a custodian are resolved. Two Irish funds suspended redemptions because of exposure to Madoff.
Custodian banks, especially those serving European Union- regulated funds that are meant to be low-risk, face scrutiny as the European Commission seeks to increase their responsibilities after the Madoff scandal. Investors in Luxembourg and Ireland, Europe’s biggest and third-largest mutual fund markets respectively, have sued custodians, asking courts to break legal ground by ordering them to repay billions of dollars lost in Madoff’s fraud.
“One of the biggest concerns custodians have is they could be held liable,” said Jonathan Herbst, a London regulatory lawyer and former official at the U.K. Financial Services Authority. “If there was a decision by a court that the custodian was liable, it would be devastating.”
The funds are known as Undertakings for Collective Investment in Transferable Securities, or UCITS. Custodians manage cash inflows and payments to investors.
In Ireland, Thema International Fund Plc and dozens of investors filed complaints against HSBC, claiming the London- based bank failed in its duty as the custodian handling the fund’s money. The cases are similar to investor claims in Luxembourg and Paris.
Dublin-based Thema is seeking about 1 billion euros ($1.5 billion) to reimburse investors.
Closer to U.K.
“HSBC has custody clients who have invested with Madoff, but we don’t believe that these custodial arrangements should be a source of exposure” to the company, said Brendan McNamara, a spokesman for the bank. He declined to comment on the Irish lawsuits.
Ireland may be watched more by some of its neighbors because “it’s much, much closer jurisprudentially to a big economy, such as the U.K., than Luxembourg,” said Julian Randall, a lawyer at Barlow Lyde & Gilbert LLP in London.
HSBC is being sued in Luxembourg as custodian bank for the Herald (Lux) US Absolute Return Fund. In July, Irving Picard, the trustee liquidating Madoff’s business, sued the bank in New York, saying HSBC and Cayman Islands-based hedge fund Herald Fund Spc withdrew $578 million in “fake” profit from Madoff’s firm before its bankruptcy.
Other financial services companies, including UBS AG, have also been sued over their role as custodians for funds that invested with Bernard L. Madoff Investment Securities LLC.
Kalix Fund
Today’s case concerns a claim by Kalix Fund Ltd. against HSBC as custodian to Thema, where the fund placed about $35 million from Swiss investors. HSBC asked Judge Frank Clarke to freeze the investors’ case while Thema’s suit against HSBC proceeded, saying there would be duplication of efforts if they all went forward at once.
Madoff, 71, pleaded guilty in March and was sentenced on June 29 to 150 years in prison for using money from new clients to pay earlier investors. Prosecutors said the money manager told clients they had as much as $65 billion invested with him.
The other Irish fund affected by Madoff, AA (Alternative Advantage) Plc, has also sued HSBC over its role as custodian.
Internationally Sold Funds
Luxembourg’s financial market regulator is yet to issue a report on HSBC’s liabilities as custodian of the Herald fund, which was dissolved April 2. Decisions by Irish and Luxembourgish courts are “very important” because they are the top European countries for internationally sold funds, said Charles Muller, deputy director general of the Luxembourg Fund Industry Association.
“Luxembourg holds about 75 percent of the cross-border business, Ireland about 15 percent, so both countries are constantly watching what’s going on in each other’s territories,” said Muller by telephone. France mainly sells the funds nationally, while Luxembourg and Ireland market funds internationally, he said.
Regulators in Luxembourg and France have said custodian banks have a duty to repay investors for losses. The Irish Financial Regulator is also investigating the issue, said Nicola Faulkner, a spokeswoman for the agency.
The cases are Kalix Fund Limited v. HSBC Institutional Trust Services (Ireland) Ltd, The High Court Commercial, 2009/3152P, Thema International Fund Plc v. HSBC Institutional Trust Services (Ireland) Ltd, 2008/10983P, and Thema International Fund Plc v. HSBC Securities Services (Ireland) Ltd, 2009/608P.
Wipro CEO to Hire U.S. Workers as Technology Spending Rebounds
Oct. 15 (Bloomberg) -- Wipro Ltd., India’s third-largest software-services provider, plans to hire more workers in the U.S. to take advantage of a rebounding technology market.
“We are seeing signs of stability, signs of decision making coming back,” Chairman and Chief Executive Officer Azim Premji, 64, said in an interview at Bloomberg headquarters in New York yesterday. “So overall positive, but still cautious.”
Premji is betting that U.S. employees will help the Bangalore-based company win local orders, including contracts with the federal government, as the world’s largest economy starts to recover from the worst recession since the 1930s. Wipro gets about half its revenue from the U.S.
The company plans to hire about 500 local employees for a new services center by June, he said. He declined to name possible locations, saying he is talking to different state governments. The company already has a center in Atlanta.
“Everybody wants employment,” said Premji, who attended Stanford University. “That’s the trump card today.”
Larger rival Infosys Technologies Ltd. reported second- quarter profit that beat analysts’ estimates last week after winning more business from current customers.
Wipro designs and builds software programs, maintains computers, and provides product-engineering services and back- office support to General Electric Co., Cisco Systems Inc., Citigroup Inc. and other customers. It will report results on Oct. 27 for the three months ended Sept. 30.
Wipro rose 1.4 percent to 581.70 rupees yesterday in Mumbai trading. The stock has more than doubled this year, compared with a 79 percent increase for the benchmark Sensitive Index on the Bombay Stock Exchange.
U.S. Universities
The company has been working with schools such as the Georgia Institute of Technology to help bolster engineering education, which is subpar in the U.S., Premji said. U.S. graduates have become more affordable in the recession, he said.
Premji said he was worried about President Barack Obama limiting H-1B visas in a bid to fight unemployment. The visas allow foreign workers to come to the U.S.
“In the emotion of unemployment, he should not get carried away,” he said.
“We are seeing signs of stability, signs of decision making coming back,” Chairman and Chief Executive Officer Azim Premji, 64, said in an interview at Bloomberg headquarters in New York yesterday. “So overall positive, but still cautious.”
Premji is betting that U.S. employees will help the Bangalore-based company win local orders, including contracts with the federal government, as the world’s largest economy starts to recover from the worst recession since the 1930s. Wipro gets about half its revenue from the U.S.
The company plans to hire about 500 local employees for a new services center by June, he said. He declined to name possible locations, saying he is talking to different state governments. The company already has a center in Atlanta.
“Everybody wants employment,” said Premji, who attended Stanford University. “That’s the trump card today.”
Larger rival Infosys Technologies Ltd. reported second- quarter profit that beat analysts’ estimates last week after winning more business from current customers.
Wipro designs and builds software programs, maintains computers, and provides product-engineering services and back- office support to General Electric Co., Cisco Systems Inc., Citigroup Inc. and other customers. It will report results on Oct. 27 for the three months ended Sept. 30.
Wipro rose 1.4 percent to 581.70 rupees yesterday in Mumbai trading. The stock has more than doubled this year, compared with a 79 percent increase for the benchmark Sensitive Index on the Bombay Stock Exchange.
U.S. Universities
The company has been working with schools such as the Georgia Institute of Technology to help bolster engineering education, which is subpar in the U.S., Premji said. U.S. graduates have become more affordable in the recession, he said.
Premji said he was worried about President Barack Obama limiting H-1B visas in a bid to fight unemployment. The visas allow foreign workers to come to the U.S.
“In the emotion of unemployment, he should not get carried away,” he said.
Tuesday, October 13, 2009
Packer Raises Stakes in Casino Bet That Has Cost $1 Billion
Oct. 14 (Bloomberg) -- James Packer, Australia’s richest man, has raised the stakes in a bet that has so far lost at least $1 billion.
Packer paid A$205 million ($186 million) to increase his stake in Crown Ltd., Australia’s largest casino owner, to more than 40 percent, according to a filing yesterday. The purchase of 3 percent of Crown’s shares is the most he can make for six months without making a full bid, according to Australian stock exchange rules.
Since inheriting Australia’s largest fortune four years ago, James Packer has used the A$5 billion sale of his father Kerry’s media empire to underwrite a A$1.4 billion international expansion in gambling in North America. While writedowns on the investment have led to a net loss for Crown, investors such as Theo Maas expect the 42-year-old to boost spending on gambling.
“Gaming and casinos are especially high on his list of priorities,” said Maas, who helps manage $3.5 billion at Fortis Investment Partners in Sydney, including Crown shares. “There aren’t many in the gaming industry at the moment who have that sort of money.”
Melbourne-based Crown turned to a A$1.2 billion loss in the 12 months ended June after slashing the value of investments in operators such as Station Casinos Inc., Harrah’s Entertainment Inc, Cannery Casino Resorts LLC and Fontainebleau Resorts LLC.
Crown’s A$1.377 billion of equity investments in the overseas operators, which Chief Executive Officer Rowen Craigie described as “ill-timed,” are now worth A$50 million in the company’s books, or 3.6 percent of their original value.
Gambling Revenue
Gambling revenue has fallen for 20 straight months on the Las Vegas Strip while it’s declined 13 months in Atlantic City, the second-largest U.S. market.
Crown fell 0.7 percent to A$9.13 as of 10:05 a.m. in Sydney trading. The stock has gained 53 percent this year.
Packer’s increased investment comes after the publication of an unauthorized biography this week. The book, “Who wants to be a billionaire? The James Packer Story”, was written by journalist Paul Barry, who also wrote a 1993 best-seller on Packer’s father, “The Rise and Rise of Kerry Packer.”
The Packer family raised A$396 million last month selling their 21 percent stake in investment manager Challenger Financial Services Group. In March, Packer sold the family’s Australian cattle ranches to U.K. buyout company Terra Firma Capital Partners Ltd. for about A$425 million.
Crown didn’t respond to requests from Bloomberg News to interview Packer, its chairman. Bloomberg has made four requests to interview him in the past year.
Packer’s asset sales give him the flexibility to increase his Crown stake after six months, while the company’s balance sheet enables it to seek acquisitions, said Cameron Peacock, an analyst at IG Markets in Melbourne.
Personal Wealth
Packer’s personal wealth has halved since taking over the family business after Kerry Packer died, according to BRW Magazine, which compiles an annual list of Australia’s richest people. Packer was ranked Australia’s richest man by Forbes Magazine in May, with a fortune of $3.1 billion.
Among U.S. gambling companies to file for bankruptcy are Station, Trump Entertainment Resorts Inc., Fontainebleau Las Vegas and Herbst Gaming Inc., which operates 12 casinos in Nevada.
Cosmopolitan Resort & Casino is now owned by Deutsche Bank AG after the lender foreclosed while Harrah’s, the world’s largest casino company, is reducing long-term debt of more than $20 billion from when it was acquired by buyout firms Apollo Management LP and TPG Inc.
Distressed Assets
“There are a hell of a lot of companies in trouble and someone like Crown can do well out of it,” Peacock said. “They have recapitalized themselves and could be looking to buy some distressed casino assets at distressed prices.”
Harry Theodore, an analyst at Royal Bank of Scotland Group Plc, said Crown’s low borrowings, coupled with earnings from Australian casinos, means the company may lead other operators in making acquisitions.
The company’s net debt is 0.9 times earnings before interest, tax deprecation and amortization, compared with 4.6 times at Wynn Resorts Ltd., 8.4 times for MGM Mirage and 9.9 times at Las Vegas Sands Corp, the company said Aug. 27.
“We see Crown’s strong balance sheet as a significant advantage in the current environment and believe it has the potential to provide substantial growth opportunities,” Theodore, who recommends buying the stock, said in an Oct. 12 report.
RBS expects acquisitions to focus on the Australian and Asian regions, including Macau, where Melco Crown Entertainment Ltd., 33.5 percent owned by Crown, has two casinos.
“While Crown’s track record on acquisitions in North America has been poor, the most influential factor in the failed acquisitions was poor timing,” Theodore said.
Packer paid A$205 million ($186 million) to increase his stake in Crown Ltd., Australia’s largest casino owner, to more than 40 percent, according to a filing yesterday. The purchase of 3 percent of Crown’s shares is the most he can make for six months without making a full bid, according to Australian stock exchange rules.
Since inheriting Australia’s largest fortune four years ago, James Packer has used the A$5 billion sale of his father Kerry’s media empire to underwrite a A$1.4 billion international expansion in gambling in North America. While writedowns on the investment have led to a net loss for Crown, investors such as Theo Maas expect the 42-year-old to boost spending on gambling.
“Gaming and casinos are especially high on his list of priorities,” said Maas, who helps manage $3.5 billion at Fortis Investment Partners in Sydney, including Crown shares. “There aren’t many in the gaming industry at the moment who have that sort of money.”
Melbourne-based Crown turned to a A$1.2 billion loss in the 12 months ended June after slashing the value of investments in operators such as Station Casinos Inc., Harrah’s Entertainment Inc, Cannery Casino Resorts LLC and Fontainebleau Resorts LLC.
Crown’s A$1.377 billion of equity investments in the overseas operators, which Chief Executive Officer Rowen Craigie described as “ill-timed,” are now worth A$50 million in the company’s books, or 3.6 percent of their original value.
Gambling Revenue
Gambling revenue has fallen for 20 straight months on the Las Vegas Strip while it’s declined 13 months in Atlantic City, the second-largest U.S. market.
Crown fell 0.7 percent to A$9.13 as of 10:05 a.m. in Sydney trading. The stock has gained 53 percent this year.
Packer’s increased investment comes after the publication of an unauthorized biography this week. The book, “Who wants to be a billionaire? The James Packer Story”, was written by journalist Paul Barry, who also wrote a 1993 best-seller on Packer’s father, “The Rise and Rise of Kerry Packer.”
The Packer family raised A$396 million last month selling their 21 percent stake in investment manager Challenger Financial Services Group. In March, Packer sold the family’s Australian cattle ranches to U.K. buyout company Terra Firma Capital Partners Ltd. for about A$425 million.
Crown didn’t respond to requests from Bloomberg News to interview Packer, its chairman. Bloomberg has made four requests to interview him in the past year.
Packer’s asset sales give him the flexibility to increase his Crown stake after six months, while the company’s balance sheet enables it to seek acquisitions, said Cameron Peacock, an analyst at IG Markets in Melbourne.
Personal Wealth
Packer’s personal wealth has halved since taking over the family business after Kerry Packer died, according to BRW Magazine, which compiles an annual list of Australia’s richest people. Packer was ranked Australia’s richest man by Forbes Magazine in May, with a fortune of $3.1 billion.
Among U.S. gambling companies to file for bankruptcy are Station, Trump Entertainment Resorts Inc., Fontainebleau Las Vegas and Herbst Gaming Inc., which operates 12 casinos in Nevada.
Cosmopolitan Resort & Casino is now owned by Deutsche Bank AG after the lender foreclosed while Harrah’s, the world’s largest casino company, is reducing long-term debt of more than $20 billion from when it was acquired by buyout firms Apollo Management LP and TPG Inc.
Distressed Assets
“There are a hell of a lot of companies in trouble and someone like Crown can do well out of it,” Peacock said. “They have recapitalized themselves and could be looking to buy some distressed casino assets at distressed prices.”
Harry Theodore, an analyst at Royal Bank of Scotland Group Plc, said Crown’s low borrowings, coupled with earnings from Australian casinos, means the company may lead other operators in making acquisitions.
The company’s net debt is 0.9 times earnings before interest, tax deprecation and amortization, compared with 4.6 times at Wynn Resorts Ltd., 8.4 times for MGM Mirage and 9.9 times at Las Vegas Sands Corp, the company said Aug. 27.
“We see Crown’s strong balance sheet as a significant advantage in the current environment and believe it has the potential to provide substantial growth opportunities,” Theodore, who recommends buying the stock, said in an Oct. 12 report.
RBS expects acquisitions to focus on the Australian and Asian regions, including Macau, where Melco Crown Entertainment Ltd., 33.5 percent owned by Crown, has two casinos.
“While Crown’s track record on acquisitions in North America has been poor, the most influential factor in the failed acquisitions was poor timing,” Theodore said.
Ranbaxy, Indian Drugmakers’ Estimates Raised at Goldman Sachs
Oct. 14 (Bloomberg) -- Ranbaxy Laboratories Ltd. and eight Indian health-care companies have had their share-price estimates raised by Goldman, Sachs & Co., which cited declining risk from U.S. regulators and the industry’s “stable” outlook.
Ranbaxy’s target price was raised 22 percent to 240 rupees and the stock was removed from Goldman Sachs’s “Conviction Sell” list, according to a report today by analysts including Balaji V. Prasad.
Concerns that the U.S. Food and Drug Administration will impose further curbs on Indian drugmakers have weighed on their share prices this year. The measure of health-care shares on the BSE 500 Index has gained 50 percent this year, lagging behind an 82 percent rally in the broader index.
“Recent developments demonstrate that FDA issues can be resolved, allowing the focus to shift back to a longer-term view for the sector,” the Goldman Sachs analysts wrote. “We continue to believe that the sector can grow at mid-teen rates, sustain its operating margins at 18 percent to 19 percent and generate consistent cash returns.”
Sun Pharmaceutical Industries Ltd., India’s largest drugmaker by market value, had its share-price estimate raised 23 percent to 1,099 rupees at Goldman Sachs. The brokerage also boosted its target for Dr. Reddy’s Laboratories Ltd. by 17 percent to 1,060 rupees. Dr. Reddy’s, Cadila Healthcare Ltd. and Piramal Healthcare Ltd. are the analysts’ top picks, they added.
Easing Restrictions
Goldman Sachs said U.S. regulatory risks for Indian drugmakers have been “reduced” after Cipla Ltd.’s Bangalore plant was cleared of observations by the FDA and Sun Pharmaceutical’s U.S. unit agreed to accept similar monitoring. Cipla is the second-largest Indian pharmaceutical company by market value.
The FDA also barred the import of more than 30 generic medicines from Ranbaxy because of manufacturing deficiencies at the Dewas plant in central Madhya Pradesh state and at its Paonta Sahib factory in the northern province of Himachal Pradesh. Ranbaxy needed to have the ban lifted to stem four straight quarters of sales declines in the U.S., the company’s biggest market last year.
Ranbaxy said in July it expects the U.S. regulator to start inspection of its Dewas plant.
Ranbaxy’s target price was raised 22 percent to 240 rupees and the stock was removed from Goldman Sachs’s “Conviction Sell” list, according to a report today by analysts including Balaji V. Prasad.
Concerns that the U.S. Food and Drug Administration will impose further curbs on Indian drugmakers have weighed on their share prices this year. The measure of health-care shares on the BSE 500 Index has gained 50 percent this year, lagging behind an 82 percent rally in the broader index.
“Recent developments demonstrate that FDA issues can be resolved, allowing the focus to shift back to a longer-term view for the sector,” the Goldman Sachs analysts wrote. “We continue to believe that the sector can grow at mid-teen rates, sustain its operating margins at 18 percent to 19 percent and generate consistent cash returns.”
Sun Pharmaceutical Industries Ltd., India’s largest drugmaker by market value, had its share-price estimate raised 23 percent to 1,099 rupees at Goldman Sachs. The brokerage also boosted its target for Dr. Reddy’s Laboratories Ltd. by 17 percent to 1,060 rupees. Dr. Reddy’s, Cadila Healthcare Ltd. and Piramal Healthcare Ltd. are the analysts’ top picks, they added.
Easing Restrictions
Goldman Sachs said U.S. regulatory risks for Indian drugmakers have been “reduced” after Cipla Ltd.’s Bangalore plant was cleared of observations by the FDA and Sun Pharmaceutical’s U.S. unit agreed to accept similar monitoring. Cipla is the second-largest Indian pharmaceutical company by market value.
The FDA also barred the import of more than 30 generic medicines from Ranbaxy because of manufacturing deficiencies at the Dewas plant in central Madhya Pradesh state and at its Paonta Sahib factory in the northern province of Himachal Pradesh. Ranbaxy needed to have the ban lifted to stem four straight quarters of sales declines in the U.S., the company’s biggest market last year.
Ranbaxy said in July it expects the U.S. regulator to start inspection of its Dewas plant.
Intel Jumps After Forecast Tops Estimates, Bolstering Rally
Oct. 14 (Bloomberg) -- Intel Corp. rose as much as 6.9 percent in late trading after its sales forecast beat estimates by as much as $1 billion, setting the stage for a broader recovery in technology earnings.
Intel, the world’s biggest chipmaker, predicted fourth- quarter revenue of as much as $10.5 billion this quarter, topping the $9.5 billion average estimate in a Bloomberg survey. The company’s gross margin -- a measure of profitability -- may reach the highest level this decade.
“This is an incredibly important report for the market,” said Michael Shinnick, who helps manage $6 billion in assets at South Bend, Indiana-based Wasatch Advisors Inc. His firm owns both Intel and Microsoft Corp. shares. “Tech has been the area of leadership for the overall equity market this year.”
The Nasdaq Composite Index, which gets most of its value from technology and phone companies, has climbed 36 percent this year, almost double the gain of the Standard & Poor’s 500 Index. Investors are betting that sales of computers, software and communications will rebound faster than other products. Intel may help prolong the rally as International Business Machines Corp. and Google Inc. prepare to report their earnings tomorrow.
Intel climbed as much as $1.41 to $21.90 in extended trading yesterday. The shares, which reached a 52-week high yesterday, are up 40 percent this year on the Nasdaq Stock Market.
Growth Forecast
Chief Executive Officer Paul Otellini reiterated that the personal-computer industry may grow this year, countering the predictions of analysts. Asian shoppers are helping lead the rebound, Intel said. Gartner Inc., a research firm in Stamford, Connecticut, has projected a decline in global PC shipments of 2 percent to 285 million.
Intel, whose chips power more than 80 percent of the world’s PCs, kicked off two weeks of earnings by big U.S. technology companies. The use of Intel’s chips in everything from laptops to supercomputers makes it a bellwether for the industry.
Intel’s gross margin, the percentage of sales remaining after the costs of production, was 58 percent in the third quarter. That compared with a prediction of about 53 percent.
This quarter, the margin will widen to 62 percent, give or take 3 percentage points, the company said. The top end of that range would be Intel’s highest level of profitability this decade. The previous peak was 63.9 percent in the fourth quarter of 2000, according to Bloomberg data.
‘Healthy Sales’
“What we saw in the third quarter was healthy sales in the back-to-school season, healthy sales in China, and we saw the worldwide supply chain putting in place what I term is a healthy level of inventory,” Chief Financial Officer Stacy Smith said yesterday in an interview. “We saw the market cooperating. We started to see a recovering PC market.”
Intel, based in Santa Clara, California, isn’t seeing any excessive buildup of inventory and wants to increase its stockpiles of unused parts to handle fourth-quarter demand, Smith said.
Third-quarter sales and earnings trounced estimates, even though the company raised its forecast for the period two months ago. Net income fell 7.8 percent to $1.86 billion, or 33 cents a share, from $2.01 billion, or 35 cents, a year earlier. Sales dropped 8.1 percent to $9.39 billion. Analysts had estimated earnings of 27 cents a share and revenue of $9.05 billion.
“The market had set very high expectations for this quarter, and the company delivered,” said Bill Kreher, an analyst at Edward Jones & Co. in St. Louis. He doesn’t own the stock and rates it a buy. “As demand comes back, the factories can start running at higher capacity levels. And this flows straight to the gross margin line.”
Intel, the world’s biggest chipmaker, predicted fourth- quarter revenue of as much as $10.5 billion this quarter, topping the $9.5 billion average estimate in a Bloomberg survey. The company’s gross margin -- a measure of profitability -- may reach the highest level this decade.
“This is an incredibly important report for the market,” said Michael Shinnick, who helps manage $6 billion in assets at South Bend, Indiana-based Wasatch Advisors Inc. His firm owns both Intel and Microsoft Corp. shares. “Tech has been the area of leadership for the overall equity market this year.”
The Nasdaq Composite Index, which gets most of its value from technology and phone companies, has climbed 36 percent this year, almost double the gain of the Standard & Poor’s 500 Index. Investors are betting that sales of computers, software and communications will rebound faster than other products. Intel may help prolong the rally as International Business Machines Corp. and Google Inc. prepare to report their earnings tomorrow.
Intel climbed as much as $1.41 to $21.90 in extended trading yesterday. The shares, which reached a 52-week high yesterday, are up 40 percent this year on the Nasdaq Stock Market.
Growth Forecast
Chief Executive Officer Paul Otellini reiterated that the personal-computer industry may grow this year, countering the predictions of analysts. Asian shoppers are helping lead the rebound, Intel said. Gartner Inc., a research firm in Stamford, Connecticut, has projected a decline in global PC shipments of 2 percent to 285 million.
Intel, whose chips power more than 80 percent of the world’s PCs, kicked off two weeks of earnings by big U.S. technology companies. The use of Intel’s chips in everything from laptops to supercomputers makes it a bellwether for the industry.
Intel’s gross margin, the percentage of sales remaining after the costs of production, was 58 percent in the third quarter. That compared with a prediction of about 53 percent.
This quarter, the margin will widen to 62 percent, give or take 3 percentage points, the company said. The top end of that range would be Intel’s highest level of profitability this decade. The previous peak was 63.9 percent in the fourth quarter of 2000, according to Bloomberg data.
‘Healthy Sales’
“What we saw in the third quarter was healthy sales in the back-to-school season, healthy sales in China, and we saw the worldwide supply chain putting in place what I term is a healthy level of inventory,” Chief Financial Officer Stacy Smith said yesterday in an interview. “We saw the market cooperating. We started to see a recovering PC market.”
Intel, based in Santa Clara, California, isn’t seeing any excessive buildup of inventory and wants to increase its stockpiles of unused parts to handle fourth-quarter demand, Smith said.
Third-quarter sales and earnings trounced estimates, even though the company raised its forecast for the period two months ago. Net income fell 7.8 percent to $1.86 billion, or 33 cents a share, from $2.01 billion, or 35 cents, a year earlier. Sales dropped 8.1 percent to $9.39 billion. Analysts had estimated earnings of 27 cents a share and revenue of $9.05 billion.
“The market had set very high expectations for this quarter, and the company delivered,” said Bill Kreher, an analyst at Edward Jones & Co. in St. Louis. He doesn’t own the stock and rates it a buy. “As demand comes back, the factories can start running at higher capacity levels. And this flows straight to the gross margin line.”
Sunday, October 11, 2009
GI Partners Raises $1.9 Billion Fund to Buy Distressed Assets
Oct. 12 (Bloomberg) -- GI Partners LLC, the private equity firm that owns U.K. caravan-parks operator Park Resorts, said it raised a $1.9 billion fund to buy distressed companies in the U.S. and western Europe after the worst recession in 70 years.
The fund, GI Partners’ third, is about a third larger than the $1.5 billion pool the Menlo Park, California-based private equity firm raised in 2006. Backers of the new pool include Florida Retirement System Trust Fund, GI said in a statement.
“GI Partners’ successful investment strategy of focusing on distressed situations is expected to provide attractive investment opportunities,” the company said in the statement.
Investment firms such as New York-based Apollo Management LP and Los Angeles-based Oaktree Capital Management LLC are buying debt or equity of distressed companies at a discount with the aim of taking control and turning them around. Moody’s expects the global speculative default rate to peak at 12.5 percent this quarter as the U.S. and European economies struggle to recover from the worst recession in 70 years.
The rate rose to 12 percent at the end of the third quarter, up from 2.8 percent a year earlier, the ratings company said in an Oct. 6 report.
GI’s founder, Rick Magnuson, is a former deputy partner in Nomura International Plc’s private equity group in London, where he worked with financier Guy Hands, now Chairman of Terra Firma Capital Partners Ltd., according to the firm’s Web site.
The fund, GI Partners’ third, is about a third larger than the $1.5 billion pool the Menlo Park, California-based private equity firm raised in 2006. Backers of the new pool include Florida Retirement System Trust Fund, GI said in a statement.
“GI Partners’ successful investment strategy of focusing on distressed situations is expected to provide attractive investment opportunities,” the company said in the statement.
Investment firms such as New York-based Apollo Management LP and Los Angeles-based Oaktree Capital Management LLC are buying debt or equity of distressed companies at a discount with the aim of taking control and turning them around. Moody’s expects the global speculative default rate to peak at 12.5 percent this quarter as the U.S. and European economies struggle to recover from the worst recession in 70 years.
The rate rose to 12 percent at the end of the third quarter, up from 2.8 percent a year earlier, the ratings company said in an Oct. 6 report.
GI’s founder, Rick Magnuson, is a former deputy partner in Nomura International Plc’s private equity group in London, where he worked with financier Guy Hands, now Chairman of Terra Firma Capital Partners Ltd., according to the firm’s Web site.
Crown Shares Surge in Sydney After 3% of Stock Traded
Oct. 12 (Bloomberg) -- Crown Ltd., Australia’s biggest casino owner, rose the most in seven months in Sydney trading after the purchase of 3 percent of its stock in a single block stoked expectations of a takeover bid.
Crown shares rose 11 percent to A$9.39 as of 10:53 a.m., the largest gain on an intraday basis since March 13.
Shares worth A$205 million ($186 million) changed hands after the market closed on Oct. 9 at a 6 percent premium to the share price at the time, according to stock exchange data. Chairman James Packer, who owns 37 percent of Crown, was the buyer, the Australian Financial Review reported, without saying where it got the information.
“The stake certainly is fuelling expectations of a bid,” said Cameron Peacock, an analyst at IG Markets in Melbourne. “There has been speculation Packer wants to privatize Crown and that the purchase was his.”
Packer, 42, has raised almost A$900 million this year selling private assets. Last month he sold his 21 percent stake in investment manager Challenger Financial Services Group and a 13 percent holding in property developer Sunland Group Ltd. for about A$30 million.
Creep Rules
Under Australia’s so-called creep rules, an investor that exceeds a 20 percent holding can’t buy more than 3 percent every six months without making a full takeover offer.
Anthony Klok, a spokesman for Melbourne-based Crown, declined to comment to Bloomberg News today.
In March, Packer sold the family’s Australian cattle ranches to U.K. buyout firm Terra Firma Capital Partners Ltd. for about A$425 million. Packer also owns a 41 percent holding in Consolidated Media Holdings Ltd.
Packer used the creep provisions to increase his stake in Consolidated Media after rival billionaire Kerry Stokes of Seven Network Ltd. built up a 19.9 percent holding.
Crown shares rose 11 percent to A$9.39 as of 10:53 a.m., the largest gain on an intraday basis since March 13.
Shares worth A$205 million ($186 million) changed hands after the market closed on Oct. 9 at a 6 percent premium to the share price at the time, according to stock exchange data. Chairman James Packer, who owns 37 percent of Crown, was the buyer, the Australian Financial Review reported, without saying where it got the information.
“The stake certainly is fuelling expectations of a bid,” said Cameron Peacock, an analyst at IG Markets in Melbourne. “There has been speculation Packer wants to privatize Crown and that the purchase was his.”
Packer, 42, has raised almost A$900 million this year selling private assets. Last month he sold his 21 percent stake in investment manager Challenger Financial Services Group and a 13 percent holding in property developer Sunland Group Ltd. for about A$30 million.
Creep Rules
Under Australia’s so-called creep rules, an investor that exceeds a 20 percent holding can’t buy more than 3 percent every six months without making a full takeover offer.
Anthony Klok, a spokesman for Melbourne-based Crown, declined to comment to Bloomberg News today.
In March, Packer sold the family’s Australian cattle ranches to U.K. buyout firm Terra Firma Capital Partners Ltd. for about A$425 million. Packer also owns a 41 percent holding in Consolidated Media Holdings Ltd.
Packer used the creep provisions to increase his stake in Consolidated Media after rival billionaire Kerry Stokes of Seven Network Ltd. built up a 19.9 percent holding.
N.Z. Will Begin Raising Rates in July, JPMorgan Says
Oct. 12 (Bloomberg) -- New Zealand’s central bank will wait until July before starting an “aggressive” series of increases in the benchmark interest rate, said JPMorgan Chase & Co.
Governor Alan Bollard is likely to hold the official cash rate at 2.5 percent until July, then raise it to 4 percent by the end of 2010, Sydney-based economist Helen Kevans said in an e-mailed report. She expects a 50 basis point increases in July and September to start the tightening cycle. A basis point is 0.01 percentage points.
“The Reserve Bank will avoid stunting recovery with a premature tightening,” Kevans said. “Delaying the first rate hike will mean the bank will have to be more aggressive when the tightening cycle begins.”
Bollard on Sept. 10 said he doesn’t plan to raise borrowing costs until the “latter part” of 2010 because the recovering economy needs further stimulus. Since that statement, reports have shown business confidence reached a 10-year high in September and third-quarter consumer confidence was the highest since 2005, bolstering domestic demand, Kevans said.
“The Reserve Bank will shift to a neutral policy stance early in 2010, paving the way for the first hike to be delivered in July,” she said. “By then, the Reserve Bank should be confident that the withdrawal of policy stimulus will not stunt the recovery.”
Seven of 11 economists surveyed by Bloomberg News last week expect Bollard will raise the cash rate by at least a quarter point before June 30. Traders expect the rate will be 4 percent by October next year, according to an index calculated by Credit Suisse based on swaps trading.
JPMorgan said New Zealand’s economy will grow 2.8 percent next year, faster than the 2.3 percent it previously forecast.
Governor Alan Bollard is likely to hold the official cash rate at 2.5 percent until July, then raise it to 4 percent by the end of 2010, Sydney-based economist Helen Kevans said in an e-mailed report. She expects a 50 basis point increases in July and September to start the tightening cycle. A basis point is 0.01 percentage points.
“The Reserve Bank will avoid stunting recovery with a premature tightening,” Kevans said. “Delaying the first rate hike will mean the bank will have to be more aggressive when the tightening cycle begins.”
Bollard on Sept. 10 said he doesn’t plan to raise borrowing costs until the “latter part” of 2010 because the recovering economy needs further stimulus. Since that statement, reports have shown business confidence reached a 10-year high in September and third-quarter consumer confidence was the highest since 2005, bolstering domestic demand, Kevans said.
“The Reserve Bank will shift to a neutral policy stance early in 2010, paving the way for the first hike to be delivered in July,” she said. “By then, the Reserve Bank should be confident that the withdrawal of policy stimulus will not stunt the recovery.”
Seven of 11 economists surveyed by Bloomberg News last week expect Bollard will raise the cash rate by at least a quarter point before June 30. Traders expect the rate will be 4 percent by October next year, according to an index calculated by Credit Suisse based on swaps trading.
JPMorgan said New Zealand’s economy will grow 2.8 percent next year, faster than the 2.3 percent it previously forecast.
Subscribe to:
Posts (Atom)
Posts
