The S&P 500 was down by 6.17points or 0.31%on Monday to 2001.54. The Dow and S&P 500 ended lower on Monday, dragged down by declines in energy shares, while the Nasdaq advanced led by gains in Microsoft and Yahoo. Exxon Mobil Corp. and Chevron Corp. dropped at least 0.9 percent to pace declines in the Dow Jones Industrial Average as oil prices tumbled. The S&P 500 trades at 18 times the reported earnings of its members, near the highest level in four years. 

Campbell Soup Co. slid 2.6 percent to $43.39 as its 2015 profit forecast was less than analysts had estimated. Sterling fell to a 10 month low on Monday, as investors shunned the currency after the Yes Vote campaign for Scotland’s independence took a lead in the recent polls. Total Chinese exports rose 9.4% year on year in August ahead of economists’ expectations of a 9% rise.


YAHOO Daily Chart (Source – Thomson Reuters)

S&P ASX 200was down by 21.7points or 0.39%on Monday and closed at 5577.0 points. Macquarie Bank nearly doubled its stake in  Yellow Brick Road. Macquarie Bank shares finished 0.8 per cent down for the day at $57.28. Charter Hall announced a $603 million purchase of properties from the Woolworths-owned ALH Group. Charter Hall has partnered with HostPlus to purchase 54 pubs. Charter Hall shares rose 0.2 per cent to $4.37.

The $1.3 billion takeover of Goodman Fielder by Wilmar International and First Pacific has been delayed because of delays to regulatory approval. Iron ore was around $US83.60 a tonne. Brent crude has traded below $US100 a barrel for the first time in more than a year as Chinese and US data pointed to slower-than-expected growth in the world’s top oil consumers. Veda Group was among the torp performers. To read our latest report on VEDA group Click Here. The following stocks will trade ex-dividend today:

Colorpak, ERM Power, Hunter Hall Int, LogiCamms, OZ Minerals, Oil Search, Perpetual, Pro-Pac Packaging, RCR Tomlinson, SDI Ltd, Village Roadshow


VEDA  Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 



Stock of the Day – Federation Centres (FDC)

Federation centres reported underlying fiscal 2014 earnings of AUD 242.9 million or AUD 17.0 cents per security up 7.6% on the prior year. As with fiscal 2014 earnings growth in fiscal 2015 will be boosted by low quality improvement from reduced borrowing costs. Fiscal 2015 average borrowing cost should be between 4.7% and 4.9% about 8% below the fiscal 2014 average of 5.2%.


FDC Gearing Levels (Source – Company Reports)

Federation Centres fiscal 2015 guidance is for underlying earnings per security between AUD 18.0 and AUD18.3, implying growth of up to 7.6%. With the Australia economy looking sluggish we don’t see a compelling catalyst for retail turnover to improve in the near term. We expect rental growth to decline from 2.3% in fiscal 2014 to 2.2% this year (towards the bottom of management’s guidance of 2% - 3%).



FDC Portfolio  (Source – Company Reports)
 
Rental growth should account for roughly one third of Federation Centres’ expected earnings growth with the balance from lower interest rates and reweighting towards higher yielding assets. Accretion comes from selling AUD 467 million of malls with a weighted average capitalization rate or WACR of 7.29% and acquiring AUD 602 million of assets with an 8.2% WACR.  Lower overheads are predominantly the result of a new property management platform and the associated headcount reductions.


FDC Daily Chart (Source – Thomson Reuters)

Forthcoming initiatives to further centralize purchasing its big ticket items such as electricity are conducive to Federation Centres extracting higher rents from tenants. Through remixing Federation Centres has reduced its exposure to discretionary homewares and apparel categories. The categories are struggling against the weight of online retailers, but the strategy to replace these categories with more tenants selling food could backfire. First because food retail is under pressure from supermarkets. Second food is unlikely to be a driver of additional foot traffic and third because profitability may suffer as the number of food stores competing for the same number of stomachs increases. We believe the stock is expensive at the current price and would review the stock at a later date.

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