BlueScope Steel (ASX: BSL)has been soaring high (up 4.28% on December 21, 2017) with a $40 million lift in its first-half underlying earnings forecast to $460 million at the back of better steel prices and volumes for Australian steel products, improved contribution from export coke, and recognition of previously impaired tax assets at the Indian joint venture, TBSL. Further, the passing of US Tax Reform would lead to a 7% decrease in the federal tax rate on BSL’s US earnings in FY18 and 11% in subsequent years. BSL’s North Star BlueScope, New Zealand and Pacific Steel and North America Buildings will be delivering performances as per guidance. On the other hand, the group raised caution against rising raw material costs and competition from imports.
BSL Stock has been up 53.7% this year to date (as at December 20, 2017), and is trading at high levels.
Meanwhile, AWE Ltd.’s (ASX: AWE) shares edged low with the group’s board found to support Mineral Resources’ takeover offer through entering into a binding scheme implementation deed. The offer values AWE at 83 cents a share ($526 million), and is based on a scheme of arrangement with 41.5 cents in cash and between 0.0198 and 0.0277 Mineral Resources shares per AWE share. The share price of the group has thus helped the market cap move up a bit.
The shareholders, having the option to receive either 100% cash or scrip, have been indicated to choose to remain invested in the larger and more liquid Mineral Resources, or to sell their new Mineral Resources shares for cash. The actual allocation is subject to scale back to ensure total transaction consideration paid is 50% cash and 50% scrip. Looking at the scenario and Mineral Resources trading position, we recommend investors to “Sell” the stock at the current price of $0.855, ahead of the implementation of deed in 2018.
On the other hand, a new gas sales agreement with Origin Energy Retail Ltd has been put in place for Casino Henry wherein AWE has 25% interests.
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