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Commonwealth Property Office Fund (CPA) reaffirmed previous distribution guidance of 5.3c per unit for FY10, based on a continuation of existing economic conditions. The fund said it expects to see an improvement in tenant demand for office space across Australia due to the resilience of the Australian economy, which should benefit its largest geographic holding in Sydney.

Head of Property, Darren Steinberg, said usually an improvement in office space market fundamentals lags an economic recovery, but the continuing strength of the Australian economy is expected to see the recovery in fundamentals brought forward.

“CPA remains well positioned with a strong balance sheet to capitalise on opportunities that may arise in the current market,” Mr Steinberg said.

As at 30 September 2009, CPA said its portfolio occupancy was 98.5%, while its gearing level stood at 26%.

The fund also said it achieved an average rental increase of 3.9% for space subject to rental review during the September quarter.

CPA fund manager, Charles Moore, said Australian economic indicators continue to demonstrate favourable improvement in the domestic market, which he said would have a direct flow-on effect to expected demand for office space as business confidence returns and tenant enquiry and tenant activity increases.

“This has resulted in a downward adjustment to our assumptions for peak vacancy levels,” M Moore said.

During the quarter CPA conducted rent reviews, which produced an average rental increase of 3.9% over the previous passing rentals for the reviewed space.

In addition the fund said 12 of its 25 office assets were independently revalued, resulting in a 4% or $45.5 million decline on prior book value.

As a result of these revaluations, it is estimated that the Fund’s Net Tangible Asset backing (NTA) per unit declined from $1.15 at 30 June 2009 to $1.13 at 30 September 2009,” CPA said.

“The portfolio weighted average capitalisation rate softened marginally from 7.7% at 30 June 2009 to 7.8% at 30 September 2009.”

As at 1050 AEDT, Commonwealth Property Office Fund shares were up 1c to 95c.

Commonwealth Property Office Fund (CPA) reaffirmed previous distribution guidance of 5.3c per unit for FY10, based on a continuation of existing economic conditions. The fund said it expects to see an improvement in tenant demand for office space across Australia due to the resilience of the Australian economy, which should benefit its largest geographic holding in Sydney.

Head of Property, Darren Steinberg, said usually an improvement in office space market fundamentals lags an economic recovery, but the continuing strength of the Australian economy is expected to see the recovery in fundamentals brought forward.

“CPA remains well positioned with a strong balance sheet to capitalise on opportunities that may arise in the current market,” Mr Steinberg said.

As at 30 September 2009, CPA said its portfolio occupancy was 98.5%, while its gearing level stood at 26%.

The fund also said it achieved an average rental increase of 3.9% for space subject to rental review during the September quarter.

CPA fund manager, Charles Moore, said Australian economic indicators continue to demonstrate favourable improvement in the domestic market, which he said would have a direct flow-on effect to expected demand for office space as business confidence returns and tenant enquiry and tenant activity increases.

“This has resulted in a downward adjustment to our assumptions for peak vacancy levels,” M Moore said.

During the quarter CPA conducted rent reviews, which produced an average rental increase of 3.9% over the previous passing rentals for the reviewed space.

In addition the fund said 12 of its 25 office assets were independently revalued, resulting in a 4% or $45.5 million decline on prior book value.

As a result of these revaluations, it is estimated that the Fund’s Net Tangible Asset backing (NTA) per unit declined from $1.15 at 30 June 2009 to $1.13 at 30 September 2009,” CPA said.

“The portfolio weighted average capitalisation rate softened marginally from 7.7% at 30 June 2009 to 7.8% at 30 September 2009.”

As at 1050 AEDT, Commonwealth Property Office Fund shares were up 1c to 95c.

Commonwealth Property Office Fund (CPA) reaffirmed previous distribution guidance of 5.3c per unit for FY10, based on a continuation of existing economic conditions. The fund said it expects to see an improvement in tenant demand for office space across Australia due to the resilience of the Australian economy, which should benefit its largest geographic holding in Sydney.

Head of Property, Darren Steinberg, said usually an improvement in office space market fundamentals lags an economic recovery, but the continuing strength of the Australian economy is expected to see the recovery in fundamentals brought forward.

“CPA remains well positioned with a strong balance sheet to capitalise on opportunities that may arise in the current market,” Mr Steinberg said.

As at 30 September 2009, CPA said its portfolio occupancy was 98.5%, while its gearing level stood at 26%.

The fund also said it achieved an average rental increase of 3.9% for space subject to rental review during the September quarter.

CPA fund manager, Charles Moore, said Australian economic indicators continue to demonstrate favourable improvement in the domestic market, which he said would have a direct flow-on effect to expected demand for office space as business confidence returns and tenant enquiry and tenant activity increases.

“This has resulted in a downward adjustment to our assumptions for peak vacancy levels,” M Moore said.

During the quarter CPA conducted rent reviews, which produced an average rental increase of 3.9% over the previous passing rentals for the reviewed space.

In addition the fund said 12 of its 25 office assets were independently revalued, resulting in a 4% or $45.5 million decline on prior book value.

As a result of these revaluations, it is estimated that the Fund’s Net Tangible Asset backing (NTA) per unit declined from $1.15 at 30 June 2009 to $1.13 at 30 September 2009,” CPA said.

“The portfolio weighted average capitalisation rate softened marginally from 7.7% at 30 June 2009 to 7.8% at 30 September 2009.”

As at 1050 AEDT, Commonwealth Property Office Fund shares were up 1c to 95c.

Mineral Resources Limited (MIN) has increased its offer for West Australian based iron ore explorer Polaris Metals NL (POL). The new offer would sees Mineral Resources offer one MIN share for 10 Polaris shares and 5c cash for every one Polaris share.

The increased offer values each Polaris share at around 74.7c.

Mineral Resources said the offer was also unconditional and represents a 147% premium to the 14 August 2009 closing price of 30c – the day before the offer was first made.

”The increased share offer also represents a substantial premium to the trading prices of Polaris Shares across a wide range of other time periods prior to the announcement date,” the company said.

Polaris shares are currently halted at 71.5c per share, while Mineral Resources shares are halted at $6.97.

Mineral Resources Limited (MIN) has increased its offer for West Australian based iron ore explorer Polaris Metals NL (POL). The new offer would sees Mineral Resources offer one MIN share for 10 Polaris shares and 5c cash for every one Polaris share.

The increased offer values each Polaris share at around 74.7c.

Mineral Resources said the offer was also unconditional and represents a 147% premium to the 14 August 2009 closing price of 30c – the day before the offer was first made.

”The increased share offer also represents a substantial premium to the trading prices of Polaris Shares across a wide range of other time periods prior to the announcement date,” the company said.

Polaris shares are currently halted at 71.5c per share, while Mineral Resources shares are halted at $6.97.

Australian telco Optus reported an increase in net profit of 22% to $152 million for the six months to 30 September 2009, from the previous corresponding period ("pcp"). Meanwhile Optus’s parent company, Singapore Telecommunications Limited (SGT) reported an 8.9% jump in net profit to $1.9 billion for the six months to 30 September 2009 from the pcp.

Optus CEO, Paul O’Sullivan, said Optus had recorded four quarters of double-digit mobile service revenue growth.

”In addition, it continued to build profitable scale across its fixed networks with the fixed on-net telephony customer base now exceeding one million,” Mr O’Sullivan said.

“Optus added further scale in the quarter with the opening of the 200th Optus ‘yes’ store and with the announcement by Woolworths Limited that they would use the Optus mobile network to offer a prepaid mobile service across Australia,” Mr O’Sullivan added.

Optus ‘Mobile’ operating revenue grew 12% to $1.38 billion, with business and wholesale fixed revenue up 2.2%.

Free cash flow increased 2.5% to $271 million.

Looking to the Singapore based parent company, Singtel CEO, Ms Chua Sock Koong, said the company, not including one-off items and hedging expenses, posted a 14.4% increase in underlying profit to $1.658 billion.

”We had another quarter of double-digit growth in the group’s underlying net profit and this reflects the continued strength of the group to innovate with differentiated products and services and our agility in responding to challenging market conditions,” Ms Koong said.

”Our strong financial results were achieved amid a cautious economic climate and despite the negative currency impact.”

Looking ahead, Ms Koong said that taking into account the results of the group to date and the general improved economic outlook, the telco was now expecting that for the current financial year, the operating revenue of each of the Singapore and Australia businesses to grow at single-digit levels and EBITDA of the respective businesses to grow at low single-digit levels.

As at 1025 AEDT, Singtel shares had gained 4c to $2.30.

Ausenco Limited (AAX) downgraded its full year sales revenue guidance for 2009 to between $435 million and $465 million and underlying net profit after tax of between $26 and $30 million as a result of delays in the awarding of contracts. The company said large-scale EPCM projects that it anticipated would be awarded in the fourth quarter of 2009 are now more likely to be awarded early in 2010.

CEO, Zimi Meka, said the guidance followed a review of significant contracts currently underway and those expected to be awarded during the remainder of the year.

“While we have optimised our cost base, project award delays combined with factors such as a strengthening Australian dollar and client defaults have contributed to stable financial performance in October, rather than the increase we were expecting,” MR Meka said.

However, Mr Meka said the company was still well positioned for future growth and strong earnings potential.

“There is still a lot of activity in the sectors in which we operate, resulting in increased tendering for more work than in previous years,” Mr Meka said.

“Clients, while cautious, are increasingly more confident about improving business conditions into 2010 and 2011.”

The company said its Process Infrastructure business has won a number of new feasibility studies contracts, including a $10 million of new port evaluation work to assess the viability of more than $1 billion of new port capital developments in Peru, Brazil, Mozambique and Australia, where construction is expected to commence in 2011.

“We are seeing the continued improvement in business conditions from the first half of 2009 with $40 million of new early engineering works programs commencing last month on US$1.2 billion of new coal, copper and gold projects in South America, Africa and Asia,” Mr Meka said.

“Our third quarter results have improved operating earnings, with some of our offices commencing the re-hiring of personnel to meet new study and engineering demands.”

Ausenco expects to see strong growth in 2010 as a result of an increase in the levels of new FES/FEED and EPCM project opportunities in Canada, Africa and South America.

“We have continued to build upon our longer term strategies to establish a permanent presence in Jeddah and North America in response to expected increases in demand in the Middle East North Africa and our Energy business,” Mr Meka said.

“Despite these positive signs, clients are taking more time to make decisions on when to proceed with the on-site procurement and construction activities for their projects.”

As at 1022 AEDT, Ausenco shares were down 15c to $4.23.

Fletcher Building Limited (FBU) said it remains cautious with respect to trading conditions for the balance of 2010. At its AGM in Dunedin, New Zealand, the company said current analysts’ forecasts for net earnings after tax, excluding unusual items, for the full year are in the range from $261 million to $340 million.

Fletcher said without a sustained recovery in volumes, net earnings would likely be at the lower end of the range mentioned above.

In FY09 the company reported operating earnings before unusual items were $ 558 million, down from $768 million in the prior year.

Chairman Dr Roderick Deane said while volumes in most markets have been relatively stable over the past few months, the company had yet to see any significant signs of a recovery in any of our markets.

“We have felt the impact through all parts of our operations in some shape or form. In particular, we have seen new housing markets fall significantly around the world, and much commercial activity has similarly declined sharply,” Dr Deane said.

“Coupled with a constrained banking system, the effect has been a severely constricted construction sector.”

CEO, Jonathan Ling, said while the downturn in new residential housing has been clearly highlighted the company has greater concerns over the slowdown in the commercial building sector.

”We are starting to see new housing consents pick up from the current low level, particularly in markets like New Zealand and Australia where there is no overhang of existing housing stock,” Mr ling said.

“We believe that commercial activity will, however, take longer to recover.”

Mr Ling added that pleasingly, the strong cashflow performance Fletcher Building saw in the last financial year has continued into the first three months of FY10.

”On top of this, we expect capital expenditure to be well down on the $289 million recorded last year,” Mr Ling said.

”We are targeting stay-in-business capital expenditure of around $130 million this year compared with a depreciation rate of $211 million in 2009.”

The company said it currently has over $1 billion of undrawn bank facilities available to the group, while the board’s present intention is to pay a total dividend for the year of 28c per share, being the annualised rate of the second half dividend in the 2009 year of 14c per share.

At the close of trade Tuesday, Fletcher Building shares were trading at $6.38.

Wall Street finished the day mixed Tuesday to put a halt to the previous session's strong rally. The Dow still managed to close at a new 2009 high. 

In economic news, 650,000 troubled borrowers have been put into trial loan modifications under the current administration's foreclosure rescue plan.

Meanwhile, the median home price rose US$7,000 to US$177,900 in the third quarter.

The Dow Jones added 20.03 points, or 0.20%, to 10,246.97, the S&P 500 weakened 0.07 points, or 0.01%, to 1,093.01 and the NASDAQ shed 2.98 points, or 0.14%, to 2,151.08. 

Financials were mainly lower, with Wells Fargo retreating 1.1%, while Morgan Stanley and JPMorgan slid 0.7% and 0.4%.

Bank of America bucked the trend after putting on 1.7%.

American Express advanced 1.6%.

Oracle dipped 0.1% after the European Commission objected to its takeover proposal of Sun Microsystems. Sun Microsystems shares lost 1.1%.

IBM and Apple gained 0.7% and 0.8%.

Sprint Nextel sank 5.5% after wireless and wireline communications company said it plans to reduce staff number by between 2,000 and 2,500.

The biggest losses on the Dow included Boeing and Cisco which fell 2% and 1.4% respectively.

A falling local dollar boosted commodity prices. ConocoPhillips and Chevron gained 1.4% and 0.9%, while Exxon Mobil dipped 0.3%.

NYMEX light crude oil for December delivery dropped US38c to settle at US$79.05 a barrel.

COMEX gold for December delivery rose $1.10 to settle at $1,102.50 per ounce after reaching a record intraday high of $1,109.90.

European Markets

European stocks dipped slightly as a larger than expected drop in German investor confidence outweighed positive quarterly result from HSBC. Telco’s struggled after Vodafone posted a disappointing result.

The UK benchmark FTSE 100 slipped 4.63, or 0.09% to 5,230.55. The French CAC40 added 0.10 points, or 0.00% to 3,785.59, while the German DAX shed 6.52, or 0.12% to 5,613.20.

The region’s largest bank HSBC put on 4% after reporting an increase in third quarter profit versus a year ago due to a drop in impairments. 

UK peer Barclays shed 5.1% as it reported a 54% drop in third quarter earnings.

Lloyds finished the day flat as it revealed plans to cut 5,000 jobs.

Commerzbank dropped 2.5%, while in France BNP Paribas and Societe Generale put on 0.5% and 0.3%.

Insurer AXA rallied 2% on the back of a slew of positive broker notes following its proposal to buy out the Asian assets of AXA Asia Pacific. 

Miners tracked metals prices lower. Antofagasta and Anglo American weakened 2.5% and 2.2%, while BHP Billiton lost 0.3%.

In the energy sector, BG Group and BP slid 0.9% and 0.3%. Royal Dutch Shell gained 0.3%.

UK telco Vodafone shed 1.5% after reporting a 2.1% percentage point drop in its earnings margin. France Telecom weakened 0.3%.

Volkswagen slumped 8% on reports Qatar sold half of its shares in the automaker.

Renault and Peugeot fell 3% and 1.3%.

Japanese Markets

Japan’s Nikkei made ground following a strong lead from financials. Investors were buoyed by the news the interest rates would remain low after the G20 meeting.

The Nikkei 225 gained 61.74, or 0.63% to 9,870.73.

Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group advanced 2.7% and 3.6% after the government said it was prepared to allow local banks to drop below capital ratios for a limited time to ensure the supply of credit. 

Mizuho Financial Group added 1.1%, while trading house Itochu Corp put on 3.4%.

Advantest Corp and Tokyo Electron tracked US chipmaking peers with gains of 1.5% and 2.5% respectively.

Dainippon Screen Manufacturing Co surged 7.8% after the company narrowed its full-year loss forecast.

Casio Computer Co rose 4.4% on a broker upgrade.

Hoya Corp put on 1.2% to its highest close since the last week of September after analyst upgrade on the optical glassmaker.

Hong Kong Markets

Hong Kong closed at a two-week high following a positive lead from Wall Street and recent agreements by the G20 to sustain capital flow to the world economy. Financials led the rally while automakers surged on the back of positive sales data.

The Hang Seng rose 60.61, or 0.27% to 22,268.16.

Bank of China and Industrial and Commercial Bank of China added 1.1% and 1.2%, while HSBC Holding fell 0.2%.

Sinopec Corp dropped to 1.5% despite China increasing fuel prices which will lead to a lift in profits. PetroChina rose 0.8%.

Sino Gold surged 5.7% as the US dollar dropped to a 15-month overnight.

BYD Electronics fell 5.1% after Nokia announced a recall of its China made mobile chargers.

Auto stocks rallied after a report revealed a 76% jump in car sales during October compared to a year earlier.

Qingling Motors and Brilliance China climbed to 32% and 15%.

Substantial Shareholder Changes 
10 November 09

All movements are percentage changes