In today’s daily we have covered stock research on Pacific Brands (Expensive). To view 2 Dividend Stocks with 6%+ yield click here

S&P 500 was down 0.48 points or 0.02% on Tuesday and closed at 1950.79.  U.S. stocks ended flat on Tuesday, with the Dow eking out a record closing high while the S&P 500 utilities sector index fell as 10-year Treasury bond yields hit their highest level in a month. Facebook rallied 4.6 percent to the highest since March. RadioShack Corp. plunged 10 percent after reporting a wider quarterly loss. Molson Coors Brewing Co. jumped 5.4 percent for the biggest gain in the equities benchmark. Electronic Arts Inc. added 2.3 percent after disclosing release dates for new games.

The Shanghai composite index rose 1.1% as financials benefited from the latest move by the People’s Bank of China, announced late on Monday to cut the required reserve ratios for banks with sizeable loans to the farming sector and smaller companies. The less certain tone to equities whelped gold rally $9 to $1260 an ounce while palladium hit its highest for more than three years amid concerns about supply from South Africa.


S&P 500 Daily Chart (Source – Thomson Reuters)

S&P ASX 200was up by 5.7 points or 0.10% on Tuesday and closed at 5469.7 points. U.S listed Magnum Hunter Resources has launched a rival takeover offer for Cooper Basin Junior Ambassador Oil & Gas, outbidding Drillsearch Energy by 20%. Home loan approvals grew at a modest rate in April as the housing market continued to rise but at a slower pace than in the second half of last year. Perpetual Limited has become a substantial shareholder in Orica with a voting power of 5.08%. Australand property group has announced the substantial shareholding of UBS AG with a voting power of 5.17%. CBA has become a substantial shareholder of ISENTIA Group with a total voting power of 9.49%.


ASX All Ordinaries Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 



Stock of the Day – Pacific Brands (PBG)
 
PBG is a leading distributor and marketer of brands in Australia, New Zealand, the UK and Asia. The group has four operating divisions: underwear, Work wear, Sheridan Tontine and Brand Collective. The underwear division makes up over half of the company’s earnings. PBG’s fully owned brands include: Bonds, Explorer, Razzamatazz, Rio, Hard Yakka, KingGee, NNT, Stylecorp, Stubbies, Sheridan, Dunlopillo, Fairydown, Actil, Julius Marlow, Volley and Grosby. The company also has regionally owned brands and licenses.


Four Divisions (Source – Company Reports)

The apparel and footwear categories in Australia have been subdued over the past five years. The outlook has been improving based on an easing of currency induced deflation, but recent shocks to consumer confidence has increased the risks to the industry outlook. PBG has largely divested its non core brands and moved to an import model over the past seven years. The company is increasing its direct to consumer sales , lifting marketing expenditure to support its key brands and is in the early stages of a targeted offshore rollout.


Underwear Sales Performance (Source – Company Reports)

PBG’s work wear division is dramatically underperforming and the company faces strong currency headwinds for FY15. A number of PBG’s department store customers have reported relatively weak 3Q sales recently (average of DJS, MYR, Target, BigW: -0.5%) with the standout performer being DJS, which is a relatively small PBG customer. We expect the PBG customers to deliver a relatively flat sales result in fourth quarter.


PBG daily chart (Source – Thomson Reuters)

PBG is the most exposed company to a falling AUD in our small consumer coverage universe, because it remains largely a wholesaler in highly competitive categories. At its 1H14 result in February, PBG outlined that it was about 80% through discussions for price rises to wholesale customers that were targeting 5+%. Industry feedback suggests these negotiations have been slower than PBG would have liked. We believe the stock is expensive at its current price and would review the stock at a later date.

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