BUSINESS FORECASTING – AUSTRALIA

Aussie gas spurs Shell’s $12bn hit

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Original article by Perry Williams
The Australian – Page: 13 & 19 : 1-Jul-20

Macquarie expects more companies in Australia’s energy sector to announce writedowns in the second half of 2020, in the wake of the sharp fall in the crude oil price. Global energy giant Shell has advised of impairment charges of up to $US22bn; this includes a writedown of between $US8bn and $US9bn on its gas business, primarily due to its gas projects in Australia. The price of Brent crude is trading at around $US40 a barrel, and Macquarie notes that Australian energy producers typically use a price of $US70 to $US75 a barrel for impairment testing purposes.

CORPORATES
ROYAL DUTCH SHELL PLC, SHELL COMPANY OF AUSTRALIA LIMITED, MACQUARIE GROUP LIMITED – ASX MQG

More may exit NW Shelf, Woodside warns

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Original article by Perry Williams
The Australian – Page: 13 & 17 : 25-Jun-20

Woodside Petroleum director Ann Pickard says the North West Shelf joint venture worked very well at first, but the competing interests of the six partners have progressively gotten in the way. She says other partners could opt to join Chevron in selling out of the LNG venture, given that the NWS plant is set to begin processing third-party gas as the project’s reserves run down. Former Woodside CEO Don Voelte says Shell and BP could potentially sell their NWS stakes.

CORPORATES
WOODSIDE PETROLEUM LIMITED – ASX WPL, NORTH WEST SHELF LNG PTY LTD, CHEVRON CORPORATION, BP PLC, ROYAL DUTCH SHELL PLC

Bad loans hit small banks hard: Citi

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Original article by Cliona O’Dowd
The Australian – Page: 16 : 16-Jun-20

Citigroup analysts note that Australia’s smaller mortgage lenders have actively pursued increased market share in recent years. However, Citi warns that they are set to be hardest hit by a coronavirus-induced rise in loan losses later in 2020, as such losses tend to be highest during the first 3-4 years of a loan. Citi contends that small lenders will need to focus on capital demands rather than further growing their market share, which in turn is likely to prompt a swing back to large lenders.

CORPORATES
CITIGROUP PTY LTD

Investors need to mind the looming earnings gap

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Original article by Luke Housego
The Australian Financial Review – Page: 29 : 16-Jun-20

The coronavirus pandemic is set to weigh on the financial results of Australian-listed companies, with Morgan Stanley noting that the consensus forecast is for earnings to fall by 15.2 per cent in 2020. The average 12-month forward price-earnings ratios for the S&P/ASX 200 was 18.1 times before the recent sell-off, compared with a long-term average of around 14 times. Jason Steed of Morgan Stanley says a relatively small shift in earnings expectations when P/E ratios are high can prompt a sharp fall in share prices.

CORPORATES
MORGAN STANLEY AUSTRALIA LIMITED, STANDARD AND POOR’S ASX 200 INDEX

Bidders spell out Virgin job cuts to unions

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Original article by Jemima Whyte,Lucas Baird
The Australian Financial Review – Page: 13 & 16 : 4-Jun-20

Bain Capital and Cyrus Capital Partners must submit binding offers for Virgin Australia by 22 June. The two final bidders for the failed airline are under growing pressure to outline their plans for Virgin, including the likely job losses. Unions held talks with Bain and Cyrus on 3 June, and some sources have suggested that more than 20 per cent of Virgin’s employees could be retrenched. BGH Capital is said to have been looking at cutting 2,000 jobs if it had acquired Virgin.

CORPORATES
VIRGIN AUSTRALIA HOLDINGS LIMITED – ASX VAH,BAIN CAPITAL LLC,CYRUS CAPITAL PARTNERS LP,DELOITTE TOUCHE TOHMATSU LIMITED,BGH CAPITAL PTY LTD

Super sector should shrink 80pc: report

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Original article by James Thomson
The Australian Financial Review – Page: 19 : 25-May-20

Management consulting firm Right Lane contends that a major rationalisation of Australia’s superannuation sector is necessary. Associate principal Abhishek Chhikara suggests that there is scope for 3-5 large "generalist" funds and 7-10 niche funds that are focused on specific industries or types of super products. Right Lane estimates that a super fund needs a minimum of 500,000 active members in order to operate efficiently, and ideally they should have between one and two million active members. The firm expects the pandemic to increase the pressure on smaller funds.

CORPORATES
RIGHT LANE CONSULTING

Towering infernos of cash

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Original article by Brad Norington, Ben Wilmot
The Australian – Page: 1 & 4 : 22-May-20

Citigroup has forecast that the value of office buildings in Australia’s major CBDs could fall by more than 15 per cent in the wake of the coronavirus pandemic. Demand for centralised office space is likely to fall if the shift to working from home is sustained once the crisis abates. This in turn could put downward pressure on office rents. Meanwhile, JLL has forecast that the total amount of vacant office space across the nation’s CBDs will rise from 1.46 million square metres prior to the pandemic to about 1.88 million square metres by the end of 2020.

CORPORATES
CITIGROUP PTY LTD, JONES LANG LASALLE AUSTRALIA PTY LTD

China pays more for iron ore

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Original article by Peter Ker
The Australian Financial Review – Page: 1 & 16 : 19-May-20

The iron ore price has risen by more than 13 per cent since the end of April, and futures pricing suggests that further gains are likely. The price of the steel input has been resilient during the coronavirus pandemic, due to factors such as continued strong demand for iron ore in China and the fact that major producer Brazil has been hit hard by the virus. Citigroup’s analysts expect the continued strong price of iron ore to result in the resources sector paying out $14.4bn in dividends for 2019-20. The banking sector in turn is tipped to pay out $14.7bn.

CORPORATES
CITIGROUP PTY LTD, RIO TINTO LIMITED – ASX RIO, BHP GROUP LIMITED – ASX BHP, FORTESCUE METALS GROUP LIMITED – ASX FMG

Beijing options limited to Australian iron ore

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Original article by Elouise Fowler
The Australian Financial Review – Page: 7 : 15-May-20

China imported 62 per cent of its iron ore from Australia in 2019, compared to only 21 per cent from Brazil. However, a report in a state-owned Chinese newspaper has raised the possibility that China could replace iron ore from Australia with iron ore from Brazil as part of the growing trade tensions. However, Glyn Lawcock of UBS notes that the global iron ore market is very tight at the moment. Fortescue Metals Group CEO Elizabeth Gaines expects Chinese demand for Australian iron ore to continue to rise.

CORPORATES
UBS HOLDINGS PTY LTD, FORTESCUE METALS GROUP LIMITED – ASX FMG

China unlikely to target iron ore in virus blame game

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Original article by Sarah Turner
The Australian Financial Review – Page: 27 : 13-May-20

Commonwealth Bank commodity strategist Vivek Dhar does not expect China to reduce imports of Australian iron ore despite the growing trade tensions between the two nations. He contends that China is too reliant on iron ore from Australia, noting that 85 per cent of its iron ore imports are sourced from Australia. Dhar adds that exports of commodities such as coal are at greater risk, as they can be sourced more easily from other countries. Analysts also expect any economic stimulus measures in China to boost demand for steel, and therefore iron ore.

CORPORATES
COMMONWEALTH BANK OF AUSTRALIA – ASX CBA