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.
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