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Macarthur Coal Limited (MCC) has updated the market on its bid for Gloucester Coal Limited (GCL) and other conditional acquisitions of assets from Noble Group. The company said it expects to hold a shareholder meeting in relation to transactions in mid April 2010.

On 22 December 2009, Macarthur announced its intention to acquire 100% of Gloucester via an off-market takeover by an all-scrip offer with cash alternative.

At the same time as the Gloucester takeover announcement, Macarthur also announced that it had entered into a conditional binding term sheet to acquire Noble’s interest in the Middlemount JV, taking Macarthur’s ownership to 100% including all marketing rights for product.

The company had also said that that it was continuing discussions with Noble to acquire a majority stake in Donaldson Coal Holdings.

Together, the Noble transactions are for a total consideration of $175 million in cash and 22.5 million Macarthur shares issued at a price of $9.70 per share.

Today, the company advised that it has now entered into definitive legal documentation with Noble, which gives effect to the terms agreed in the binding term sheet announced on 22 December 2009.

In addition, certain aspects of the binding term sheet have been amended. The amendments include a reduction in the future royalty payable to Noble.

The Middlemount transaction will remain conditional, amongst other things, upon FIRB approval, the Gloucester offer becoming unconditional and Noble accepting the Gloucester Offer.

In relation to the Gloucester offer, Macarthur said it is intended that its bidders statement will be despatched to Gloucester shareholders in early March 2010, as it has received relief from ASIC to allow it to despatch its Bidder’s Statement no later than 5 March 2010.

At 1047 AEDT, Gloucester Coal shares were down 10c to $8.42, while Macarthur Coal shares dropped 41c, or 4% to $9.85.

There is really only one outcome from such a flat price action that Seven (SEV) is displaying and that is an explosion in volatility and price so let’s examine the odds of which way that will direct the price.

SEV has endured a classic period of deflated expectations brought about by the overblown response to the big recovery in its fortunes by the share price (2003 – 2007) which is quite a normal excess however this has now corrected and alas exacerbated by the bear and has thus brought SEV’s share price back from $15.00 to $5.00 – a hearty correction! Now as the market recovers SEV has so far been left behind in a strengthening market and recovering Media sector.

However I don’t buy just on that basis but it does set good foundation and heightened odds that any move from here is more likely to be up than down and this is again supported by the stock market cycles of trend, distribution, trend, and accumulation, and the fact the market trends higher over time. A sound basis for beginning my simple process of assessment of a down trodden stock (read opportunity!) and approaching SEV from the long side should we be given the right price action that supports this repetitive historical behaviour.

So now let’s look at the price since I last reviewed it on the 19/12/2009 in Stockradar’s Weekly Sector Update on the Media sector. The same holds true now as it did then as the stock is still within the trading range boundaries and all I’ve really changed on the chart since then is to add a couple of self explanatory text annotations to underline my point. There is a unique simplicity about using charts and price analysis in reducing the myriads of complex fundamentals, and SEV isn’t getting any easier, and the points of significance on the chart are remarkably simple and easily identified.

A Gann or Elliot Waver may have an opinion on when a break will occur but I’m not overly concerned about knowing when I just want to play when it does and for sure the price will tell me when the time is right to have a go.

The SEV share price is simply being strangled by the trading range boundaries of $5.00 to $7.00 with $5.00 being a high odds low point for reasons mentioned above. As to the explosion well that is likely once the upper band of this constraining trading range is violated to the upside. Down I simply don’t care as a long only trader. SEV goes on watch primarily because the odds are escalating of a break because SEV is now trading in the upper echelons of this trading range and the period in the latter part of last year saw the volume (demand) expanding holding the price up a level from support at $5.00 to support at $6.00 – constructive and positive.

This doesn’t mean it’s going to break but it is solid evidence of demand as the potential trade looks more interesting and I know then there is a very high odds chance that should the stubborn selling be taken out at $7.00 then the buyers can easily swamp the sellers and in their absence or retreat and run the price higher. A common price affliction! I look for volume expansion to validate a break with level up around $9.00 a likely target for a market imbalance of buyers and sellers to take the price too initially. This is arrived at by focusing on the most recent overhead selling level and by extrapolating up the height of the trading range ($7.00-$5.00=$2.00) from the potential break point at $7.00.

A breakout sees SEV escape free from a long term accumulation pattern and when this happens after a downtrend the next phase is to trend higher and as the SEV business seems to be running hot and Stokes who always keeps us guessing is behind its fortunes then it seems too good an opportunity to ignore as the stars align and the odds skyrocket to just where I want them, firmly in my corner. Until $7.00 breaks then……………..   “As a weekly long only equity trader my foremost rule is to protect and preserve and this WILL happen if I follow the rules and that’s why I don’t fear losses.”
– Richard Lie

Energy Resources of Australia Limited (ERA) reported NPAT for year ended 31 December 2009 was $272.6 million, up 23% on the previous year. The company said revenue from both sales of uranium and continuing operations were up 55% in the same period to $767.8 million and $780.6 million respectively.

Uranium oxide sales for the year were 5,497 tonnes, the third highest on record.

ERA said revenues from the sale of uranium oxide increased mostly due to an increase in the average realised sales price.

The company reported a slight weakening production for 2009 of 5,240 tonnes, down from 5,412t in 2007 and 5,339t in 2008.

”In 2009 underlying earnings of $272.6 million were the same as net profit after tax,” ERA said.

”In 2008, underlying earnings were $119 million, with net profit benefiting from an insurance settlement related to events in 2006 and 2007 partially offset by exchange losses on US dollar debt.”  

The company’s directors also declared a final dividend for the year of 25c per share, fully franked.

Looking to the year ahead ERA expects production, sales and average realised sales price to remain broadly similar to 2009, however the company added that production and sales would be significantly weighted towards the second half as an effect of mine sequencing, lower grades and scheduled maintenance in the processing plant in the first half.

“Higher expenditure on scheduled cyclical maintenance on the mining fleet, along with the expenditure on ERA’s development projects, will adversely impact earnings over the year,” the company said.

As at 1016 AEDT, ERA shares were up 4c to $20.92.

Auckland International Airport Limited (AIA) completed the institutional entitlement offer component of its 1 for 16 fully underwritten entitlement offer.  The offer was announced on 27 January 2010, and is expected to raise a total of approximately NZ$126.4 million ($99.4 million).

AIA said the proceeds of the offer would be used to repay a portion of the debt drawn down to pay for the purchase of a 24.55% stake in Cairns and Mackay Airports.

The institutional component raised gross proceeds of around NZ$54.6 million.

The company said it received overwhelming support from existing institutional shareholders, with over 99% of eligible institutional shareholders electing to take up their entitlements.

Auckland Airport’s chairman, Tony Frankham, said the success of the institutional component of the offer demonstrated strong support for the company.

The shares taken up under the Institutional Entitlement Offer are expected to be issued on 4 February 2010, and commence trading on the NZSX on 4 February 2010 and on the ASX on 5 February 2010.

The retail component of the offer will open on Tuesday, 2 February 2010 and will close on Thursday, 18 February 2010.

Eligible retail shareholders will be able to subscribe for 1 new share for every 16 Auckland Airport shares held on the record date 1 February 2010.

Auckland International Airport shares remain halted at $1.465.

Programmed Maintenance Services Limited (PRG) downgraded its FY10 EBITA forecast from $63 million to a range of $57 million to $60 million citing lower than expected discretionary or expansionary works being committed by customers in painting operations across Australia, New Zealand and UK. In addition the company said the Maritime Union of Australia is pursuing a wage claim that is not “acceptable” to its business or any clients.

”We, along with other operators, have endured with the support of all our clients a number of industrial stoppages to date,” Programmed Maintenance said.

”Despite our best efforts, the dispute remains unresolved and more stoppages are likely in the coming weeks.”

The company said some clients have now decided to defer work planned to commence in January until the industrial dispute is resolved to mitigate the significant costs the industry is bearing as a result of this dispute.

“The rising legal costs of this dispute along with the revenue fall from the deferral of works is now forecast to cause a material fall in Marine earnings in the second half, with the full year Marine FY10 EBITA result now expected to be similar to the prior year, due to a stronger first half result,” Programmed Maintenance added.

The company expects full year revenue from its painting operations to be down an average 10% across all three countries, while the sub zero temperatures and snow conditions being experienced in the UK have resulted in additional difficulties for its UK operations during December and January.

Programmed Maintenance forecast FY10 NPAT to be in the range of $26m to $29m compared with a reported $28m last year.

At the close of trade Thursday, Programmed Maintenance shares were trading at $3.66.

Transfield Services Limited (TSE) and oilfield engineering firm WorleyParsons Limited (WOR) said their 50/50 joint venture Transfield Worley Services had secured a $700 million contract to supply brownfield project and maintenance services to Woodside Petroleum Limited’s (WPL) onshore LNG facilities in Western Australia.

The joint venture said the contract would be made up of two components. Firstly a four-year deal, worth $600 million, to deliver brownfield project services to Woodside’s offshore and onshore facilities, including King Bay Supply Base and the Angel platform.

The second component would be worth around $100 million over two years, is for maintenance and shutdown services to Woodside’s onshore Karratha gas plant and offshore facilities.

The two components have four and two year options to extend respectively.

The joint venture also affirmed its work on LNG projects in Qatar and the Philippines.

At the close of business Thursday, WorleyParsons shares were $23.49 and Transfield Services shares were $3.68.

Tech stocks led Wall Street lower Thursday following weak outlooks from within the sector. President Obama, in his State of the Union Address, called for a new jobs bill, while the Senate reconfirmed Ben Bernanke as Fed Chairman for a second term.

The Central Bank also decided to keep interest rates steady on Wednesday as the economy recovers slowly.

In employment news, new unemployment claims fell from a revised 478,000 the previous week to 470,000 last week. Continuing claims fell from 4,659,000 to 4,602,000 in the same period. Forecasts were for larger decreases in both cases.

Meanwhile, durable goods orders rose 0.3% in December after falling 0.4% the previous month. Expectations were for an increase of 2%.

The Dow Jones dropped 115.70 points, or 1.13%, to 10,120.46, the S&P’s 500 fell 12.97 points, or 1.18%, to 1,084.53 and the NASDAQ lost 42.41 points, or 1.91%, to 2,179.00.

Talk that investor expectations may have been too high before the unveiling of Apple’s iPad sent the company’s share price tumbling 4.1%.

Hewlett-Packard and Microsoft lost 1.7% and 3.3%.

Qualcomm sank 14.2% after the maker of gear for mobile phones cut back its earnings and revenue outlook for the current quarter.

Motorola slumped 123% after saying it would post a loss in the current quarter due to spending to launch new smartphones.

Both companies posted better than expected fourth quarter profits.

Bank of America, Citigroup and Wells Fargo led financial higher, adding between 1.1% and 1.5%.

3M lost 1.8% despite beating quarterly sales and earnings forecasts and upgrading its earnings forecast for the current year.

AT&T dipped 0.2% after meeting quarterly earnings estimates.

Procter & Gamble added 1.6% as cost cutting resulted in the consumer packaged goods company beating fiscal second quarter forecasts.

Ford weakened 0.8% despite the automaker posting its first annual profit since 2005 and beating expectations. The company also said it expects this to continue in 2010.

NYMEX light crude oil for February delivery fell US23c to US$73.44 a barrel. ConocoPhillips lost 2%, while heavyweight Exxon Mobil slid 0.8%.

COMEX gold for February delivery rose US70c to US$1,085.90 an ounce after receiving a boost from President Obama’s focus on job creation.

European Markets

European stocks weakened for a second day in a bank and resource led slide. Stocks initially rallied after President Obama called for an extension of tax incentives over this year and next.

Concerns over the health of the Greek and Portuguese economies weighed, resulting in the eventual fall in equity markets. 

The benchmark UK FTSE 100 shed 71.73, or 1.37% to 5,145.74. Germany’s DAX dropped 102.87, or 1.82% to 5,540.33, while the French CAC40 fell 71.01, or 1.89% to 3,688.79.

After a promising start to the session the banks lost ground after Standard & Poor's issued a report making negative comments on the British banking system. Standard Chartered and Royal Bank of Scotland dipped 2.6% and 1.3%.

Commerzbank shed 1.1% in Germany, while Societe Generale and BNP Paribas lost 2.4% and 1.3%.

Miners struggled amid lower metals prices on the LME. Xstrata, Antofagasta and Anglo American dropped 4.3%, 3.9% and 3.3% respectively.

Aussie peers BHP Billiton and Rio Tinto shed 2.4% and 2.5%.

Royal Dutch Shell and Total were the worst among the energy majors losing 2.1% and 2.6%.

Pharmaceutical AstraZeneca slumped 4.6% after announcing a disappointing sales forecast and missing fourth-quarter profit expectations.

In positive news, Nokia beat fourth quarter earnings and sales forecasts, sending the mobile phone shares soaring over 9.9%.

Japanese Markets

Japan’s Nikkei snapped a four-day losing streak on positive earnings reports. President Obama’s call to pass a package of tax cuts and further stimulus spending played its part in the rally.

The Nikkei 225 put on 162.21, or 1.58% to 10,414.29.

Canon rose 1.8% after forecasting a 52% rise in net income this year.

Sony gained 4.9% on the back of a newspaper article that said the electronics company will report higher earnings.

The article said the same thing about Honda, whose shares went up 3.3%. 

Toyota fell 3.9% after extending a sales freeze on several of its models due to a faulty part. 

Hitachi Construction Machinery slumped 7.6% after posting a loss.

Nippon Electric Glass climbed 7.1% after forecasting full-year earnings would more than double in the year to the end of March, while it also received a broker upgrade. 

Hong Kong

After six days of losses stocks in Hong Kong rebounded as bargain hunters moved in. Banks were returned to favour following China’s recent efforts to cap lending, while investors were also cheered by Barack Obama’s focus on job creation in his inaugural State of the Union address.

The Hang Seng put on 323.30, or 1.61% to 20,356.37.

Bank of China surged 3.5% after several days of similar sized sell-offs. Heavyweight lender Industrial and Commercial Bank of China (ICBC) put on virtually exactly the same amount.

HSBC tacked on 1.2%.

Even though banks on the island performed well banks in Shanghai were heavily sold.

Esprit climbed 5.8%, the largest mover on the Hang Seng index. Generic clothes manufacturer Li & Fung put on 0.9%.

The railway sector was muscular, following the US President’s proposal to create a network of high-speed railway corridors.

China Railway Construction also said profit was expected to climb by 50%, while China Railway Group put on 1.8%.

The automakers returned the black in a big way Thursday. Geely Automobiles, backed by Goldman Sachs spiked 8.2% after losing more than 20% of its value in the last week. BYD, backed by Warren Buffet, rallied 5.4%.

China recently overtook the US as the world’s largest automobile market.

Among the resource stocks Aluminum Corp. of China rose 2.2%.

Jiangxi Copper Co put on 3.3% following a rating upgrade on the stock from Morgan Stanley. 

Directors' Interest Notices
28 January 10

BHP Billiton Limited (BHP) said it had reached an agreement to buy Canadian potash miner, Athabasca Potash Inc (“API”). The Aussie miner said it would acquire all the shares of the company for C$8.35 per share (A$8.75), for a total consideration of C$341 million (A$357 million).

BHP Billiton paid a 25% premium to the closing price for API shares on 27 January 2010, and more than double the share price from last July when the takeover was first mooted.

BHP Billiton Diamonds & Specialty Products President Graham Kerr said the purchase was consistent with the miner’s policy of building a strong potash portfolio.

"We continue to pursue opportunities that fit within our portfolio and are aligned with our strategy of developing Tier 1, long life, low-cost, expandable assets,” Mr Kerr said.

”This acquisition fits well with our existing projects and land positions in the Saskatchewan potash basin.”

API, which is listed on the Toronto stock exchange, is a potash company that owns the Burr Project and various potash exploration properties in Saskatchewan, Canada. It also holds an exploration license covering nearly 7,000 square kilometres.

The Burr Project is located adjacent to BHP Billiton’s Jansen Project and some of API’s exploration properties neighbour BHP Billiton’s potash permit areas.

API said the purchase would go to a shareholder vote in early March.

At the close Thursday, BHP Billiton shares were $40.70.

Substantial Shareholder Changes 
28 January 10

All movements are percentage changes