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Australian Equities Wrap

The S&P/ASX 200 index is down 14.5 points at 6,120.8. Commonwealth Bank was the market leader today although only up 1 per cent. NAB and Telstra were the market's biggest drags this morning, down 3.4 and 2.5 per cent respectively.

Accolade Wines, Murray Goulburn, Treasury Wine Estates (ASX:TWE)


Ari Mervis, the former chief executive of Carlton & United Breweries beer business in Australia, who then had a short stint running the stricken Murray Goulburn dairy business before it was sold to Canada’s Saputo for $1.3 billion, is now heading into the wine industry. Mr Mervis has been hired as executive chairman of Accolade Wines, the $1 billion business that makes wine brands including Hardys, Grant Burge, Banrock Station, Nottage Hill and Leasingham. In his new role at Accolade, Mr Mervis will be competing with Treasury Wines, which was split off from former parent Foster’s Group in May, 2011 into a stand-alone wine company. Treasury, since early 2014, has become a sharemarket darling under chief executive Mike Clarke who repositioned the group as a premium wine company and has quadrupled its share price as it tapped into booming demand in China, reports AFR.


Adairs Ltd (ASX:ADH)

Private equity firm Catalyst Investment Managers has promised not to sell any more shares in Adairs for at least three months after surprising the bedding retailer by dumping one quarter of its stake days after talking up its takeover potential. In a classic ‘‘pump and dump’’, Catalyst offloaded 12.5 million shares in Adairs after the market closed on Friday despite telling journalists two days earlier its preference was to sell its entire 31 per cent holding to a single party, triggering a takeover bid. Catalyst denied it had ‘‘pumped and dumped’’ the stock, saying the sell-down was in response to demand from institutional investors who, like Catalyst, believe the stock is undervalued. ‘‘It’s a small share of our position and we feel we need to get the question off the table for a while about ‘when are you selling?’’’ managing director Trent Peterson said, reports AFR.


Altura Mining Ltd (ASX:AJM), Galaxy Resources Ltd (ASX:GXY), Pilbara Minerals Ltd (ASX:PLS), Tawana Resources (ASX:TAW)

US company Albemarle, which owns 49 per cent of the lithium-rich Greenbushes spodumene mine in Western Australia, said battery makers are increasingly demanding 10-year contracts in a bid to secure supply. The comments came as the New York-listed company indicated first production on its $400 million lithium hydroxide plant in WA may come a year later than previously expected. The comments will be taken as positive news for the raft of Australian lithium producers, including Pilbara Minerals, Galaxy Resources, Altura Mining and Tawana Resources, which have come from obscurity three years ago to be market darlings, reports AFR.


AMP Ltd (ASX:AMP)

Maurice Blackburn has put its hat in the ring in the AMP class action race, offering a double-digit commission discount compared to its competitors. The plaintiff firm is the latest to announce a class action against beleaguered AMP, and will run the case on a no-win no-fee basis with funding from International Litigation Funding Partners. LFP will take a small 12.5 per cent cut. A litigation funder cut in a typical class action usually varies between 25 to 40 per cent. In more competitive cases, such as this one, the commission can be as low as 22.5 per cent, reports AFR.


Australia and New Zealand Banking Group (ASX:ANZ), Commonwealth Bank of Australia (ASX:CBA), National Australia Bank Ltd (ASX:NAB), Westpac Banking Corp (ASX:WBC), Volt Bank

In a significant milestone for the local fintech scene, the Australian Prudential Regulation Authority said last week volt bank would become the first recipient of a ‘‘restricted license’’ under its new regime, created after the federal government indicated it wants to see more competition in banking. In the UK, more than 30 ‘‘challenger’’ banks have been approved by its equivalent regulator since the licensing regime changed there in 2014. While the Australian Securities and Investments Commission decides who can lend via its credit licensing process, in order to become a bank – or an ‘‘authorised deposit-taking institution’’ (ADI) as they are known – APRA must provide its imprimatur. The arrival of digital-only, start-up banks – also known as ‘‘neobanks’’ – is being driven by three powerful, disruptive forces, reports AFR.


Blue Sky Alternative Investments Ltd (BLA)

Blue Sky Alternative Investments’ plan to assemble a majority independent board has been dealt a blow after independent director Michael Gordon resigned citing health reasons. Mr Gordon is former Perpetual executive and has been an adviser to boutique fund managers. His exit is effective immediately. With the departure of Mr Gordon, Blue Sky’s board comprises Mr Kain, Mr Hennessy, Mr Morison and Mr Wilson (who is retiring in his capacity as director ‘‘in the coming months’’), reports AFR.



Commonwealth Bank of Australia (ASX:CBA), Microsoft, KPMG, MYOB, Xero Ltd (ASX:XRO)

Commonwealth Bank of Australia, Microsoft and KPMG have joined forces to create a new start-up called Wiise, which will challenge the ASX-listed cloud accounting players Xero and MYOB by expanding their software offering for small-to-medium sized businesses and integrating banking features. The software provides not only accounting and financial management, but job costing, workflow scheduling and inventory management; payroll; sales and marketing; and customer relationship management. The platform will provide SMEs with access to big-end-of-town technology, including Microsoft’s artificial intelligence and voice recognition services, and high-grade cyber security protection given with data to be stored in Microsoft data centres. Wiise executive board member John Munnelly says it will be more appealing than Xero or MYOB for companies that operate in more than one location, have complex supply chains, various legal entities and high transaction volumes, reports AFR.


Commonwealth Bank of Australia (ASX:CBA)

Commonwealth Bank of Australia chief financial officer Rob Jesudason has resigned and will join Hong-Kong based blockchain start-up Block.one as group president and chief operating officer. In a shock announcement on yesterday morning, CBA said it had appointed Alan Docherty acting CFO and Mr Jesudason had left the bank immediately. CBA’s full-year results will be presented to the market in 90 days. His departure comes less than two weeks after the prudential regulator tore into the bank’s senior management, criticising executives and the board for complacency, overconfidence and insularity, reports AFR.


Elders Ltd (ASX:ELD)

The chief executive of revitalised agribusiness group Elders, Mark Allison, said on Monday Elders was looking closely at PGG Wrightson, which analysts value at up to $600 million, but he emphasised there were several others under consideration and it would only proceed on any deal if it was earnings per share accretive. But there are other agribusiness targets under review as well. ‘‘There are a realm of others. We’ve been looking at all of the other players,’’ he said. Elders wanted to be on the front foot in an industry undergoing consolidation, reports AFR.


Evans Dixon (ASX:ED1)

Shares in wealth manager Evans Dixon made a solid debut on the Australian stock exchange, with investors pushing the stock up 8.4 per cent to close at $2.71. The shares listed at $2.50 and traded as high as $2.80 on light volumes. About 50,000 shares changed hands, or around $136,00 by value. The company, which was formed by the merger of Dixon Advisory and Evans & Partners, listed with a market capitalisation of about $535 million after raising $170 million from the initial public offering of shares, reports AFR.


Healthscope Ltd (ASX:HSO)

BGH’s proposal, in partnership with Healthscope’s largest investor AustralianSuper, was made at $2.36 a share. The $US40 billion Brookfield emerged as a suitor yesterday with a $2.50 a share offer valuing Healthscope’s equity at $4.35 billion and the company at about $6.3 billion including debt. That means it wants the target’s board to overlook a BGH agreement with AustralianSuper that stipulates it will vote its 14 per cent holding in favour of the initial BGH bid. But in a blow to the new bidder, BGH released a statement yesterday noting its arrangement with AustralianSuper and saying its consortium members would ‘‘reject, vote against or not accept any proposal’’ from a competing party. Brookfield wants an exclusivity deed between BGH and AustralianSuper, which has a 14 per cent pre-bid stake, torn up. The BGH camp says there is no chance of that happening, reports AFR.


Noni B Ltd (ASX:NBL), Specialty Fashion Group Ltd (ASX:SFH) 

After coming close to collapse in 2014, Noni B is set to become Australia’s largest women’s wear retailer after outlaying $31 million for Specialty Fashion Group’s loss-making Millers, Katies, Crossroads, Autograph and Rivers brands. The deal, will boost Noni B’s sales from $311 million to about $1 billion, lift volumes of garments sold by 30 million to 43 million and expand its store network from 645 to more than 1350 – exceeding clothing sales and stores at Solomon Lew’s Premier Investments, reports AFR.


Rio Tinto Ltd (ASX:RIO)

Rio Tinto’s long-delayed autonomous train program could cut 20 per cent off the time required to carry iron ore from the company’s Western Australian mines to port. Dubbed ‘‘Autohaul’’, the autonomous train program was first announced in 2008 before falling victim to spending cuts triggered by the global financial crisis. It was relaunched in 2011 with a promise to be operational by 2015, but technical issues delayed its arrival. Rio’s growth and innovation boss Steve McIntosh said yesterday that Autohaul was expected to be ‘‘fully operational with full regulator signoff’’ before the end of 2018, reports AFR.


Seven Group Holdings Ltd (ASX:SVW) 

Seven Group said its key operating business was performing ahead of expectations following company redefining deals involving Coates Hire, WesTrac and Beach Energy over the past 12 months. It expects underlying earnings before interest and tax for fiscal 2018 to be about 20 per cent to 25 per cent above pro-forma earnings before interest and tax (EBIT) of $376.9 million last year, reports AFR.


Tabcorp Holdings Ltd (ASX:TAH) 

Victoria will raise $30 million annually from a new gambling point of consumption tax, but foreign-owned corporate bookmakers are delighted to have been spared from paying the significantly higher rates imposed in other states. The new tax, to be introduced on January 1 next year, will see bookmakers pay an 8 per cent tax on net wagering revenue from bets placed by Victorian punters, less than the 15 per cent rate in place in South Australia and set for Western Australia and potentially other states. Tabcorp, which has a joint venture with the racing industry in Victoria in exchange for an exclusive retail betting shop licence, will also take a hit from the new tax with a slight increase in the rate of consumption tax it pays from an existing 6 per cent to 8 per cent, according to Victorian Treasurer Tim Pallas, reports AFR.


Telstra Corporation Ltd (ASX:TLS) 

Telstra warned its earnings before interest, tax, depreciation and amortisation would come in at the bottom end of its guidance of between $10.1 billion and $10.6 billion, while free cashflow would be at the top end or above its guidance of $4.2 billion to $4.7 billion. Faith in Mr Penn’s strategy plumbed a new low as the telco’s share price slumped 5 per cent to a near seven-year low of $3.04 yesterday. The company warned investors they would have to wait until the second half of June for a clearer strategy to offset well-flagged margin pressures. The stock traded above $6 just three years ago. Telstra is under assault as its competitors ramp up the war for mobile market share with more generous data offerings, which is cutting into the telco’s revenue, reports AFR.


Wesfarmers Ltd (ASX:WES) 

Wesfarmers is reviewing exit options for Kmart Tyre & Auto Service. The Perth-based conglomerate has hired boutique firm Record Point to test buyer interest for the tyre retailer and automotive repairs division, which has 251 outlets across Australia. The review will include testing appetite among potential private equity and industry buyers, who may be interested in taking the division off Wesfarmers’ hands. It’s the fourth-biggest tyre retailer in Australia, with an estimated $405 million in annual revenue from the sale of tyres alone. Wesfarmers is reviewing exit options for Kmart Tyre & Auto Service, reports AFR.
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