Morning Market Report, May 29, 2007

The market is up 32. The SFE Futures suggest a 7 point fall in the market this morning.

A bit of a skinny report today with the US exchanges being closed overnight for the Memorial Day holiday. London market also closed including the LME markets.

Resources up again today … BHP up 41c to 3154c and RIO up 160c to 9575c. Zinifex up 31c to 1728c, Woodside down 5c to 4433c and Newcrest down 13c to 2176c. Property trusts are also doing well. Goldman Sachs JBWere upped their recommendation in Westfield Group to “Outperform” from “Market Perform” after 13% fall in its share price since February. Adding some spice to the property trust sector is the news that the $7.75bn US private equity firm the Blackstone Group and Morgan Stanley real estate funds are raising capital and are interested in the Australian REIT sector with firepower of 2-300m dollars. In February the Blackstone Group paid $US39bn to acquire the Equity Offices Properties Trust in the US…the biggest private equity deal to date.

Credit Suisse has research out this morning saying BHP is too cheap on a forward PE of 6x using earnings based on forward commodity price forecasts. On this criteria alone…to make a long story short….they suggest BHP could go up 70% to trade at $54 is it traded at the top of its historic band of 8x to 12x.
KKR have joined CVC Asia Pacific and pulled out of the bidding for Coles Group having “done the numbers”. That suggests the rest of the consortium (Blackstone/Bain/Woolworths/TPG) may pull out leaving Wesfarmers in the box seat with its 1647c bid. They may need do little more than up that bid to the rumoured 1725c, get the Coles Board approval and its all over. Very good news for Wesfarmers sentiment in the long term although a lot of brokers are bagging them for paying too much in the short term and for not having the management expertise to run Coles. WES up 20c to 3799c on the expectation they will get Coles at a reasonable instead of a premium contested price. Coles is down 71c to 1667c this morning.
There is a mixed/flat response to James Hardie (JHX) after their results yesterday. There are small downgrades around offset by lower expected asbestosis compensation payments (as calculated by KPMG estimates). Talk among the brokers talk about the company “re-gearing the balance sheet” by returning US$1.2bn to shareholders over the next 3-4 years. JHX up 11c to 936c.
Pan Australian (PNA) had its AGM yesterday. General tone was positive. First production from the Phu Kham project in development will be ahead of schedule in Mid 2008. For a second line resources company (market cap $800m) Pan Australian (PNA) have been written up as a BUY by a number of large brokers. PNA up 0.5c to 56.5c.
There is a pretty good broker response to the concept of Publishing & Broadcasting (PBL) selling out another 25% of PBL Media. One broker said they would reduce the PBL Media earnings to less than 17% of the whole Consolidated Media Holdings earnings number (the media company after the PBL split) leaving the majority of the media earnings to company from more monopoly media businesses like Foxtel, Fox Sports and Seek and less traditional media. PBL up 5c to 2127c.
Healthscope (HSP) announced it will acquire Symbion Health (SYB) for cash and Healthscope shares for an implied value of between $4.30 and $4.50 per SYB share inclusive of any Symbion Health 2007 final dividend.
ABC Learning (ABS) in a trading halt this morning after it announced plans to raise up to $600m in subordinated, unsecured convertible reset notes to sophisticated and professional investors. It is also placing $401m of ordinary shares to a single investor, subject to shareholders approval.
Boom Logistics (BOL) down 1c to 369c. It announced the appointment of Iona MacPherson to the role of Chief Financial Officer and Company Secretary, effective 25 June 2007.