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Orica Limited (ORI) has raised the prospect of spinning off its paint and garden business, Dulux. Orica said a shareholder vote in favour of the demerger was in their best interests, citing Grant Samuel, an independent expert, which said the benefits were ‘collectively compelling and that shareholders are likely to be better off if the demerger proceeds, notwithstanding the disadvantages and risks.

Orica has dusted off a proposal that was first flagged in 2008, however was postponed due to the global financial crisis.

The company has suggested that the demerger would be implemented via a scheme of arrangement under which shareholders would receive one DuluxGroup share for each Orica share they own.

The board of Orica said the move would increase, in time, shareholder value.

The company said it would be able to “better focus on its business strategy, growth objectives and core competencies, supported by a dedicated board and management team”.

Orica will distribute the shares in DuluxGroup to Orica ordinary shareholders by way of a $216 million capital reduction as well as a demerger dividend.

Dulux would establish an independent capital structure with a net debt of around $245 million.

At 1012 AEST Monday, Orica shares were trading up 34c to $25.68.

Tox Free Solutions Limited (TOX) said it has been awarded a five-year contract worth an estimated $30 million to provide Industrial Services to Murrin Murrin Operations Pty Ltd at the Murrin Murrin Nickel / Cobalt operation in Western Australia. The company also said even with a strong finish to FY10 it is now unlikely the company would achieve its initial guidance of $26 million to $28 million EBITDA, which was provided in August 2009.

The waste management and environmental service provider now expects to achieve EBITDA around the $25 million for the full year.

The company said the FY10 second half period has been strong with preliminary May results and outlook for June looking favourable, while several contract wins, a restructure of east coast operations and an acquisition during the period are expected to benefit the company in the medium to long term.

However, Tox said a number of one off items would affect the FY10 second half result.

“As the company continues to win further long term contracts the seasonality and sensitivity of the company’s earnings will stabilize,” the company said.

”This year has been the first year in some time where there have been no cyclones in the North West of Australia and very minimal Emergency Response activity.

“These factors are outside Tox Free’s control, however historically they have assisted in the 45:55 earnings split previously observed in prior financial years.”

In regards to the contract, Tox said the scope includes the provision of industrial cleaning and maintenance services.

Tox said capital expenditure over the five-year period is expected to total of $4 million.

At the close of trade Friday, Tox shares were trading at $2.37.

GWA International Limited (GWT) said this morning that it would off-loaded its European sanitaryware subsidiary Wisa Beheer in a management buy-out. GWA said it would receive around $17 million for the company. GWA said the Wisa Beheer had limited growth prospects and was more suited to local ownership. The discontinued operations would appear on books as a $3.5 million post-tax loss, GWA said.

GWA International Limited (GWT) said this morning that it would off-loaded its European sanitaryware subsidiary Wisa Beheer in a management buy-out. GWA said it would receive around $17 million for the company. GWA said the Wisa Beheer had limited growth prospects and was more suited to local ownership. The discontinued operations would appear on books as a $3.5 million post-tax loss, GWA said.

Newsat Limited (NWT), a provider of satellite broadband & communication services and equipment and the importation, wholesale and distribution of technology products, shares soared Monday after the company posted its eighth consecutive quarter of sales growth. As at the end of the April 2010 quarter, NewSat’s monthly financial revenue earned has grown almost 70% since the beginning of the 2008/2009 financial year, the company said.

CVC Limited (CVC) said its forecast NPAT for FY10 would be a material improvement on the previous year. The company forecast a profit in the range of $15 – $20 million. CVC said this profit would be substantially attributable to write-backs of previously impaired investments and a profit of $9 million resulting from the realisation of a majority of the long-term investment in Sunland Group Limited, which has previously been recognised in reserves.

Wattyl Limited (WYL) upgraded its EBIT guidance for FY10 from the previously advised $12-13 million to $14-15 million. The company despite the Architectural and Decorative paint market remaining subdued, it has been successful in achieving revenue and margin growth as well as continuing to benefit from the cost management program undertaken.

Lihir Gold Limited (LGL) this morning said the mineral reserves and resources at its Bonikro operation in Côte d’Ivoire as at 31 March 2010 was 760,000 ounces against the previous stated reserve of 930,000 oz at October 2006. Lihir said the reserve estimate was partly due to mining depletion of 275,000 ounces, however was offset by a higher price for gold over the last four years. This doesn’t take into account mining since November last year, the company noted.

Lihir Gold Limited (LGL) this morning said the mineral reserves and resources at its Bonikro operation in Côte d’Ivoire as at 31 March 2010 was 760,000 ounces against the previous stated reserve of 930,000 oz at October 2006. Lihir said the reserve estimate was partly due to mining depletion of 275,000 ounces, however was offset by a higher price for gold over the last four years. This doesn’t take into account mining since November last year, the company noted.

By Chris Shaw

A major lesson of the last few years according to Deutsche Bank is to  not be complacent about risk, so the current European debt crisis must be considered given the potential it develops into a problem for the global economy.

As Deutsche notes, inter-linkages in the global economy mean troubles in one part of the global financial system now tend to have more far reaching impacts, as the sub-prime debt crisis showed.

As well, Deutsche points out if the current issues in Europe do spread there is less scope for an appropriate policy response given governments have generally been on the stimulatory side with respect to policy settings over the past year or so.

Applying the current risks to the global economy to what is being priced into markets leads Deutsche to suggest the Australian market may now be factoring in too much risk. Australian equities have fallen 15% over the past month, which follows earlier sluggish performance.

On Deutsche's estimates, this means the market's price to earnings ratio on year ahead earnings forecasts has fallen from a normal level of around 15 times to 11.5 times currently. This compares to a low of around eight times when the Global Financial Crisis was at its peak in October of 2008 and amounts to a downgrading of growth in FY11 from 26% to more or less flat.

At that time markets were pricing in a severe global recession, so according to Deutsche the recent de-rating seems to be factoring in either a major slowdown or a stalling in global growth. Even allowing for the these risks the broker suggests current prices imply potential for a recovery, especially in those sectors hit the hardest of late.

These include the banks and mining stocks, construction contractors, wealth managers and some selected industrial stocks, the falls again creating value in Deutsche's view. To reflect this it suggests lifting or sustaining positions in these sectors to take advantage of any market rebound, rather than adopting a more defensive approach.

On the back of the value on offer, Deutsche has lifted its rating on the banks from underweight to index weight, this change being implemented by adding ANZ Banking Group ((ANZ)) to its recommended portfolio at the expense of Boral ((BLD)).

Deutsche retains its overweight positions in the mining, contractors, wealth managers and diversified financials sectors, while it continues to be underweight in defensive sectors. Deutsche is market weight Energy stocks in its recommended portfolio, pointing out the sector continues to trade at around an average price to earnings multiple despite the recent sell-off in the market.

According to Deutsche, the fact the Australian equity market and the Aussie dollar have both fallen significantly suggests foreign investors have been active in withdrawing from the market. This leads it to suggest at current levels the Australian market should again be looking reasonable value to foreigners, which has the potential to bring inflows again.

This is especially possible as US growth prospects continue to be upgraded, as this implies greater resilience in global growth than markets are currently estimating. The other point Deutsche makes is the de-rating of the Australian market reflects concerns over Chinese growth and the potential for policy tightening to prevent an overheating.

But if the sovereign debt crisis acts to dampen activity levels in China it would lower the pressure to tighten policy, which could also ease the market's sense of nervousness on the outlook for Chinese growth.

What supports Deutsche's positive view on mining stocks in particular is that commodity prices are still on average above the level it has built into its forecasts, with spot prices in particular still at elevated levels.

If spot prices were assumed to continue at current levels and this was factored into earnings, Deutsche notes price to earnings multiples for the likes of BHP Billiton ((BHP)) and Rio Tinto ((RIO)) would be down around the low multiples seen at the height of the global financial crisis. Such a multiple allows for significant falls in commodity prices in coming months.

Citi suggests such significant price falls are unlikely, as while a slowdown in China remains a risk underlying demand indicators ex-China have been recovering. This makes it unlikely in the broker's view average commodity prices in 2010/11 fall below the levels experienced in 2009.

Given this assumption, Citi suggests value on a 12-month basis is emerging in the Australian metals and mining sector. This view is reinforced as Citi notes its long-run commodity assumptions are very conservative, so when share prices breach its net present value estimates for companies good value is on offer.

Citi has taken a floor level net present value approach, which assumes 2009 average commodity prices until 2015 when long-term price forecasts kick in. This approach implies around 10-30% downside to base net present values, so the fact the likes of BHP, Rio Tinto, Whitehaven Coal ((WHC)), Fortescue ((FMG)), Energy Resources of Australia ((ERA)) and Paladin ((PDN)) are trading below these floor net present values suggests value is evident excluding any catastrophic market shock.

The proposed resources super tax has also been factored into Citi's analysis and it notes adding this to its model shows ERA, Paladin and Rio Tinto are still trading below the broker's "floor" scenario for net present value. Fortescue and BHP are trading broadly in line with net present value under such a scenario.

In terms of core picks, Citi continues to recommend Rio Tinto in preference to BHP Billiton given greater value and more leverage to a price recovery thanks to its aluminium and iron ore divisions. PanAust ((PNA)) remains Citi's core metal pick as the company should double production growth over the next five years and offers strong leverage to copper.

In coal Whitehaven is Citi's top pick as aside from value at current levels it offers good volume growth and exposure to tight coal markets, while Paladin is also viewed as attractive given an expected significant increase in production and merger and acquisition potential.　

By Chris Shaw

A major lesson of the last few years according to Deutsche Bank is to  not be complacent about risk, so the current European debt crisis must be considered given the potential it develops into a problem for the global economy.

As Deutsche notes, inter-linkages in the global economy mean troubles in one part of the global financial system now tend to have more far reaching impacts, as the sub-prime debt crisis showed.

As well, Deutsche points out if the current issues in Europe do spread there is less scope for an appropriate policy response given governments have generally been on the stimulatory side with respect to policy settings over the past year or so.

Applying the current risks to the global economy to what is being priced into markets leads Deutsche to suggest the Australian market may now be factoring in too much risk. Australian equities have fallen 15% over the past month, which follows earlier sluggish performance.

On Deutsche's estimates, this means the market's price to earnings ratio on year ahead earnings forecasts has fallen from a normal level of around 15 times to 11.5 times currently. This compares to a low of around eight times when the Global Financial Crisis was at its peak in October of 2008 and amounts to a downgrading of growth in FY11 from 26% to more or less flat.

At that time markets were pricing in a severe global recession, so according to Deutsche the recent de-rating seems to be factoring in either a major slowdown or a stalling in global growth. Even allowing for the these risks the broker suggests current prices imply potential for a recovery, especially in those sectors hit the hardest of late.

These include the banks and mining stocks, construction contractors, wealth managers and some selected industrial stocks, the falls again creating value in Deutsche's view. To reflect this it suggests lifting or sustaining positions in these sectors to take advantage of any market rebound, rather than adopting a more defensive approach.

On the back of the value on offer, Deutsche has lifted its rating on the banks from underweight to index weight, this change being implemented by adding ANZ Banking Group ((ANZ)) to its recommended portfolio at the expense of Boral ((BLD)).

Deutsche retains its overweight positions in the mining, contractors, wealth managers and diversified financials sectors, while it continues to be underweight in defensive sectors. Deutsche is market weight Energy stocks in its recommended portfolio, pointing out the sector continues to trade at around an average price to earnings multiple despite the recent sell-off in the market.

According to Deutsche, the fact the Australian equity market and the Aussie dollar have both fallen significantly suggests foreign investors have been active in withdrawing from the market. This leads it to suggest at current levels the Australian market should again be looking reasonable value to foreigners, which has the potential to bring inflows again.

This is especially possible as US growth prospects continue to be upgraded, as this implies greater resilience in global growth than markets are currently estimating. The other point Deutsche makes is the de-rating of the Australian market reflects concerns over Chinese growth and the potential for policy tightening to prevent an overheating.

But if the sovereign debt crisis acts to dampen activity levels in China it would lower the pressure to tighten policy, which could also ease the market's sense of nervousness on the outlook for Chinese growth.

What supports Deutsche's positive view on mining stocks in particular is that commodity prices are still on average above the level it has built into its forecasts, with spot prices in particular still at elevated levels.

If spot prices were assumed to continue at current levels and this was factored into earnings, Deutsche notes price to earnings multiples for the likes of BHP Billiton ((BHP)) and Rio Tinto ((RIO)) would be down around the low multiples seen at the height of the global financial crisis. Such a multiple allows for significant falls in commodity prices in coming months.

Citi suggests such significant price falls are unlikely, as while a slowdown in China remains a risk underlying demand indicators ex-China have been recovering. This makes it unlikely in the broker's view average commodity prices in 2010/11 fall below the levels experienced in 2009.

Given this assumption, Citi suggests value on a 12-month basis is emerging in the Australian metals and mining sector. This view is reinforced as Citi notes its long-run commodity assumptions are very conservative, so when share prices breach its net present value estimates for companies good value is on offer.

Citi has taken a floor level net present value approach, which assumes 2009 average commodity prices until 2015 when long-term price forecasts kick in. This approach implies around 10-30% downside to base net present values, so the fact the likes of BHP, Rio Tinto, Whitehaven Coal ((WHC)), Fortescue ((FMG)), Energy Resources of Australia ((ERA)) and Paladin ((PDN)) are trading below these floor net present values suggests value is evident excluding any catastrophic market shock.

The proposed resources super tax has also been factored into Citi's analysis and it notes adding this to its model shows ERA, Paladin and Rio Tinto are still trading below the broker's "floor" scenario for net present value. Fortescue and BHP are trading broadly in line with net present value under such a scenario.

In terms of core picks, Citi continues to recommend Rio Tinto in preference to BHP Billiton given greater value and more leverage to a price recovery thanks to its aluminium and iron ore divisions. PanAust ((PNA)) remains Citi's core metal pick as the company should double production growth over the next five years and offers strong leverage to copper.

In coal Whitehaven is Citi's top pick as aside from value at current levels it offers good volume growth and exposure to tight coal markets, while Paladin is also viewed as attractive given an expected significant increase in production and merger and acquisition potential.　

US stocks continued their roller coaster ride, ending the week down sharply. The catalyst was once again European debt, this time a downgrade of Spain’s credit rating sparked a sell-off.

With the markets closed Monday for the Memorial Day weekend, Friday also brought the curtain on trading for month, with the Dow Jones posting a near 8% drop for the month, its worst May result in 70 years.

Investors overlooked more positive economic indicators, with the University of Michigan, consumer sentiment index, 73.6 from 73.3 last month, ahead of expectations.

The Dow Jones fell 122.36, or 1.19%, to 10,136.63, the S&P 500 lost 13.65 points, or 1.24%, to 1,089.41 and the NASDAQ retreated 20.64 points, or 0.91%, to 2,257.04.

Citigroup shed 1.5%, while Bank of America and Wells Fargo fell 2.7% and 2.5% respectively.

Among tech stocks, Apple put on 1.5%, consolidating its position as the world’s largest tech company, as Microsoft dipped 0.8%

Search engines were out of favour with Yahoo! and Google down 2.2% and 1.1% respectively.

It was a mixed day for retailers with Wal-Mart down 0.3% and Macy’s edging 0.7% higher.

Among the Dow components, Caterpillar shed 2.1%, while Boeing was off 1.5%. 

NYMEX light crude oil for July delivery fell US58c to settle at US$73.97 a barrel.

Exxon Mobil lost 1.6%, while Chevron retreated 0.7%.

Meanwhile, BP ADR’s fell 5.4% as its latest attempt to plug the Gulf of Mexico oil leak failed.
 

COMEX gold for August delivery rose US30c cents to settle at US$1,212.20 an ounce.

European Markets

It was a mixed, and generally flat, day for European markets. Across the region bets were even over whether the Eurozone is strong enough to withstand its current debt crisis.

The UK benchmark FTSE 100 lost 6.74, or 0.13% to 5,188.43. The French CAC40 retreated 10.25, or 0.29% to 3,515.06, while the DAX added 9.04, or 0.15% to 5,946.18.

In the UK, Barclays was 1.2% weaker, while Lloyds and Royal Bank of Scotland eased 0.5% and 0.1% respectively.

On the continent, Deutsche Bank and BNP Paribas lost 0.3% and 0.8% respectively.

It was a mixed day also for base metal prices, which was reflected among the mining stocks. BHP Billiton retreated 1.3%, while its Aussie peer Rio Tinto edged 0.2% above the line.

Xstrata added 0.4%, while Anglo American shed 0.9%.
 
BP slumped 5% as its woes over the Gulf of Mexico oil leak continue.

Royal Dutch Shell was 0.4% above the line.

The defensive GlaxoSmithKline put on 1.8%. Roche and Novartis added 1% and 1.5% respectively.

Japanese Markets

Japan’s Nikkei advanced for a second consecutive day as a weakening yen boosted the earnings prospects of exporters. Profit taking limited gains.

The Nikkei 225 rose 123.26, or 1.28% to 9,762.98.

Panasonic, TDK and Canon added between 1.5% and 1.7%, while Fanuc climbed 4.4%. 

Automakers Toyota and Mazda closed 1.4% and 3.5% dearer.

Trading house Mitsui & Co. rose 1.4% following a rise in commodity prices.

Energy explorer Inpex Corp. jumped 4.8%, while Mitsui Mining & Smelting Co added 3.6%. The latter received a broker upgrade.

Among the heavyweight financials, Sumitomo Mitsui advanced 0.4%, while Mitsubishi UFJ shed 0.2%.

Hong Kong Markets

Hong Kong markets rallied Friday. The miners and banks led the rally on a strong lead from international markets and an upbeat economic outlook.

The Hang Seng surged 335.34, or 1.73% to 19,766.71.

Industrial and Commercial Bank rose 1.2%, while Bank of China added 1.3%.

Bank of Communications was 3.4% above the line, while HSBC rallied 2.1%.

Warren Buffet backed carmaker BYD surged 9.3% after saying it would set up a JV with Daimler Chrysler.

PetroChina added 3.5%, while Chinalco gained 3.4%. Off-shore oil producer Cnooc was 2.8% dearer.

Local shares kept up momentum throughout the afternoon, adding 1.7% for the day, and around 3.5% for the week. The big banks led gains as every sector moved into positive territory, although BHP Billiton was flat, while Virgin Blue tumbled as it slashed its profit forecast by around 75% for the full year.

A poll this week revealed economists were overwhelmingly of the view the Reserve Bank will keep the cash rate unchanged at its board meeting next Tuesday in the face of all the market turbulence seen recently.

At the end of the day, the All Ords gained 79.9 to 4,479, while the ASX/200 rose 78.3 to 4,457.5. Around 2.4 billion shares worth around $8.4 billion had changed hands.

The Banks and Financials sector added 2.7%, following a strong lead from international peers as China rejected claims they were reviewing their nation's investment in European bonds.

NAB, Westpac and CBA were between 2.6% and 3.0% higher, while ANZ put on 43c, or 1.9% to $22.52.

Investment bank Macquarie rose 82c to $44.10.

AMP was the best of the insurers with a 22c, or 4.1% rally to $5.65. The other insurers were between 1.4% and 2.6% higher.

Among Property Trusts, Westfield spiked 48c to $12.80.

Mirvac, Stockland and Dexus were between 4.5% and 5.2% stronger, with the sector climbing 4.3%.

Metals prices rose considerably in London overnight, including a 3.3% rise in the price of copper, as the Materials and Resources sector gained 0.9%.

BHP Billiton edged just 12c higher to $38.97 and Rio Tinto added 80c to $67.83.

Iron ore miner Fortescue climbed 4.8% to $4.19.

Gold stocks Newcrest and Lihir tracked the price of the yellow metal lower to be trading down 35c and 5c to $32.04 and $3.95 respectively.

Chemicals and explosives company Orica put on $1.01 to $25.34.

Gunns shares spiked 43.6%, although was up only 14% at lunch, after chairman John Gay resigned from all roles in the forestry company. The company’s shares were trading above $1.30 last September.

James Hardie added 29c to $7.40. The company said it would spend US$63 million shifting its head office from the Netherlands to Ireland.

Energy stocks received a boost from a 4.1% jump in the price of crude as the sector advanced 1.7%.

Santos put on 18c, or 1.5% to $12.45 the Gladstone Liquefied Natural Gas project today became Australia’s first major coal seam gas to LNG project to receive environmental approval from the Queensland government.

Sector heavyweight Woodside gained 83c to $43.46, while Caltex Australia jumped 4.8% to $11.23.

Aquila Resources was trading up 4.7% to $9.00.

A $1.49, or 4.8% jump to $32.69 from Leighton led the Industrials sector 0.9% higher.

Brambles gained 5c to $6.54, while Seven Group climbed 5.7%.

Ausenco lost 5.3% to $2.34 after the company’s shares slumped over 18% yesterday. The company’s shares received both upgrades and downgrades in reports this morning.

Transport and logistics stocks underperformed, as did the airliners.

Virgin Blue slumped 27.9% to be trading at 31c after the discount airliner announced it was expecting a net profit before tax and exceptional items to be between $20 million and $40 million for the year, down from previously offered guidance of around $80 million. The company’s previous guidance was only announced three weeks ago.

This afternoon, rival airline Qantas came out and reaffirmed guidance, offering a very different outlook for the same sector.

Qantas shares added 3c to $2.45.

Coca-Cola Amatil added 12c to $10.84 as the beverage maker denied it was set to make a bid for Foster’s beer division. Foster's lost 4c to $5.50.

The Consumer Staples sector was 1.4% in the black, with Wesfarmers up 4.3% to $28.90.
 
Consumer Discretionary stocks rallied 2.2%, led by strong gains from the retailers.

Myer added 12c, or 3.9% to $3.21, while rival David Jones was 3.8% above the line at $4.40.

Premier Investments, Harvey Norman and Billabong were between 1.7% and 3.3% dearer.

Media stocks were broadly stronger, led by Fairfax which rallied 5.5c, or 3.8% to $1.50.

Healthcare put on 1.9% thanks largely to CSL moving 2.8% higher to $31.40.

Sigma was up 1% as the company’s institutional shareholders requested the company to reject Aspen Pharmacare’s takeover offer.

Around the region, the Nikkei 225 rose 123.3 to 9,763.0, while the NZSE50 added 12.9 to 3,047.7. The Hang Seng added 343.3 to 19,774.6.

Spot gold was trading at US$1,212.72 per ounce, while the Aussie was buying US$0.8503.  

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Qantas' April passenger numbers up
Qantas Airways said passenger numbers increased 5.3% in April over the previous corresponding period and were up 7.8% for the financial year to April 2010 compared to the pcp. Interestingly, on the same day discount airliner Virgin Blue downgraded its profit guidance, Qantas reiterated its guidance for FY10, expecting underlying profit before tax to be in the range of $300 – $400 million.

At the bell, Qantas shares were up 3c to $2.45.

GLNG receives environmental approval
Santos said the Gladstone Liquefied Natural Gas (GLNG) project today became Australia’s first major coal seam gas to LNG project to receive its environmental approval from the Queensland government. The statement was released after the state government granted conditional approval to the $7.7 billion Santos/PETRONAS project.

At the close, Santos shares were up 18c to $12.45.

Fisher & Paykel Appliances reports NZ$83m loss
Fisher & Paykel Appliances posted a net loss of NZ$83.3 million for the year ended 31 March 201, a 12.5% improvement on the previous year. The company said the result reflects a second half recovery for the Appliances’ business, notwithstanding a continuation of difficult trading conditions in the US.

At the end of the day, Fisher & Paykel Appliances' shares were down 1c to 44c.

TWR HY profit up 5.9%
Tower reported a 5.9% increase in net profit to $27.9 million for the six months to 31 March 2010, compared to the previous corresponding period. The company said the strong result reflected good performances by all three of its businesses, which includes Health & Life, General Insurance and Investments.

At the finish, Tower shares were trading up 7c to $1.50.

Virgin Blue downgrades guidance
Virgin Blue said this morning it was expecting a net profit before tax and exceptional items to be between $20 million and $40 million, down from previously offered guidance of around $80 million. Virgin Blue indicated its long haul business was the major drag, with short haul flights expected to generate over $100 million in profit for the company.

At the end of the session, Virgin Blue shares were trading down 12c to 31c.

Suncorp doubles RMBS offer

Suncorp-Metway doubled the size of its RMBS offer from $500m to $1bn in response to significant investor demand. The company said a total of 14 investors participated in the transaction with the majority of the Class A1 notes bought by domestic fund managers.

At the bell, Suncorp shares were up 13c to $8.14.

James Hardie Irish move to hit US$63m
James Hardie Industries said its planned move to domecile in Ireland, from its current base in the Netherlands, remained on track. The home building materials producer said it was now asking shareholders to approve the move to Dublin after setting itself up as European company, instead of a Dutch entity – something that will cost James Hardie US$63 million in consultancy fees and tax payments.

At the close, James Hardie shares were trading up 29c at $7.40.