BWX rallies 35% on proposed management buyout (BWX, JHX)
WHAT MATTERED TODAY
The Australian market continued to pullback from near 10-year highs today, underperforming the US market which rallied overnight (although we saw the bulk of it yesterday). Telcos, in particular Telstra, continued to head lower, the worst sector in the index again today while Real Estate was the top of the boards today which is unsurprising given the prevailing weakness. We also saw some divergence in the banks as CBA restored some of its premium to the other majors - the only big 4 that closed in the black with some BIG buy orders going through our desk today as the stock traded below $70. The stock closed up 16c or 0.23% to $70.25.
James Hardie was also strong following their full year results coming in higher than expected – more on this later. BWX, which we spoke about this morning was bid up strongly after coming back online post news of a proposed management buy-out. Healthscope walked away from both bids saying the they didn’t value the long term prospects of the business – the stock falling 2.44% following the news however the weakness was also a result of a profit downgrade. The stock was down sharply in early trade but recovered well from the lows– seems the market thinks their stonewalling of the bidders is simply a negotiating ploy – which it probably is.
Both APN Outdoor and Ohh!Media shares were sold off with a bidding war set to play out between the pair for outdoor advertising company Adshel, owned by another Aussie listed media company HT&E – falling -3.4% and -2.21% respectively, while HT&E shares jumped 5.26%.
Overall, the ASX 200 fell -42 points today, -0.70% to close at 6041 – the weakest day for a while.
ASX 200 Chart
ASX 200 Chart
CATCHING OUR EYE
Broker Moves; AMP caught a bid as Morgan Stanley tried to catch the falling knife, upgrading their rating to overweight – the other names in the space were weaker, PDL not helped by Morningstar’s downgrade, while the others tracked the market lower. MS saying AMPs $200m push into goals based strategies will guide them through the compliance storm that is brewing…
· AMP (AMP AU): Upgraded to Overweight at Morgan Stanley; PT A$4.50
· Comvita (CVT NZ): Downgraded to Underperform at Woodward Partners; PT NZ$6
· Pendal Group (PDL AU): Pendal Group Downgraded to Hold at Morningstar
AMP Chart
BWX Limited (BWX) $5.97 / +35.37%; The skin and hair care products company came back online today after the proposed management buy-out announced yesterday with the share unsurprisingly strong, although really, I would have thought they’d be stronger given the large short and the structure of the proposal being put forward. For those that missed it, the current CEO John Humble and the Finance Director Aaron Finlay with the support of private equity firm Bain Capital. The stock has had a tough run recently on the back of weak earnings and the shorts starting attaching post the recent downgrade – going from around 4% of the register in January to around 11% now….
BWX – Increase in Short Interest – 13m shares sold short
The key now will come from the major shareholders – the CEO owns around 11% from what I can tell while Bennelong Funds Management owns just shy of 20%, while Mark East who runs Bennelong also has 1m shares in his own name. The bid is either all cash ($6.60) or a combination of shares in an new entity and cash, however it seems an all cash bid is the more likely outcome given the composition of the register. I would have thought the number is closer to $7 but todays price action probably suggests otherwise…
Top 20 Share Holders
BWX (BWX) Chart
James Hardie (JHX) $23.35 / +4.01%; James Hardie printed a good set of numbers this morning and the stock rallied on the back of it. From an earnings perspective (adjusted operating profit) it was around a 4% beat to Bloomberg Consensus / $US291m versus $US276m expected however the top line (revenue) + margins etc were all pretty much inline with expectations. They had a tougher start to the year, and a better end (31st March year-end) with the US performing well. Interesting to compare James Hardie with Boral and clearly JHX doing a better job in the US at the moment.
James Hardie (JHX) Chart
OUR CALLS
No changes to the MM Portfolios today
Have a great night
James & the Market Matters Team
Disclosure
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