In today’s daily we have covered stock research on Brambles (Expensive).









 
The S&P 500 was up by 3.45points or 0.17%on Friday to 2075.37 points. TheDow and S&P 500 closed a seventh straight weekly advance on Friday as a better-than-expected jobs report indicated strong economic growth, but perhaps to the point where interest rates could rise sooner than previously anticipated. Bank stocks and other sectors tied to the pace of growth led on the day, though continued weakness in crude oil weighed on energy shares. While major indexes ended off their highs of the session, both the Dow and S&P closed at records. American Eagle Outfitters   fell 13.8 percent to $11.91 after the teen apparel retailer forecast a current-quarter profit below analysts' estimates and reported its fifth straight drop in quarterly income.

Payrolls rose by 321,000 in November, way above the 230,000 estimated, while the unemployment rate held steady at 5.8 percent, a six-year low.  The report blew past forecasts, but also raised expectations that a rate hike from the Federal Reserve may materialize sooner than previously thought. For the week, the Dow rose 0.7 percent and the S&P rose 0.4 percent. It was the seventh straight weekly gain, a streak not seen in a year for both. The Nasdaq fell 0.2 percent on the week.



American Eagle Outfitters Daily Chart (Source – Thomson Reuters)
S&P ASX 200was down by33.5points or0.62%on Friday and closed at 5335.3 points. The broader All Ordinaries Index closed 0.6 per cent lower on Friday but closed up 0.3 per cent for the week to 5313.60. The ASX200 closed 0.6 per cent lower on Friday, finishing the week 0.45 per cent higher at 5336.70. Mount Gibson shares were smashed on Friday morning after it cuts its sales target and suspended operations at its Koolan Island mine, flagging job cuts. The mine was shut after extensive flooding in October. The miner was the week’s worst ASX200 performer, its share price collapsing 50 per cent to just 21¢.
Shares in aged-care operator Estia plunged after listing on the ASX, finishing the session at $4.74 from their $5.75 issue price in a horror market debut. The company raised $725 million in the fourth-biggest IPO of the year. The float was priced on a multiple of 21 times forecast earnings and gave Estia a market capitalisation of $1.035 billion. Engineering and construction company Bradken was a star performer on Friday, rocketing 36.45 per cent on the day to $4.53 on the back of a takeover offer by private equity firms PEP and Bain Capital. It finished the week 24.79 per cent higher.

Bradken Daily Chart (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-


 
Stock of the Day - Brambles (Expensive)

Brambles dominant market positions, offshore exposure and robust underlying volume and earnings growth highlight its attraction. BXB’s pallets business continues to control 90% of the markets it serves and with that dominance comes pricing power together with lane growth giving leverage to any retail and FMCG volume growth, as evidenced by the recent 1Q15 trading update and sector volume growth numbers.


Sales Revenue Trend US$M (Source - Company Reports)

While Toll’s increased leverage to the Australian economy, lack of top line growth and cost base normalization not occurring until FY16 point to a tough FY15. Toll’s recent asset sale announcement highlights the position the company is in , while we agree with the strategic rationale of exiting underperforming businesses in favor of capital allocation in dominant market positions, the cycle is not supportive.


Underlying Profit Trend US$M ( Source - Company Reports)

For Brambles Pallets Americas delivered 1Q15 sales growth of 5% which compares to US retail sales growth of 4.3% and FMCG volume growth of 1% - 3%, suggesting price increases and/or continued lane growth. We expect this positive leverage to continue, driven by BXB’s dominant market position and the market continuing to favor a pooled vs non-pooled solution.


BXB Daily Chart (Source  - Thomson Reuters)

Pallets EMEA delivered 4% growth in 1Q15 considerably stronger than the 1.5% growth exhibited by EMEA retailers and above the 2% growth exhibited by the European FMCG companies. We attribute this to lane growth principally as BXB continues to expand in Germany particularly, with Spanish growth supportive rather than overwhelmingly positive. We like the BXB story but find the stock to be too expensive.

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