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

S&P 500 was down 6.90points or 0.35%on Wednesday and closed at 1943.89.  The S&P 500 posted on Wednesday its largest daily decline in three weeks - a mere 0.35 percent- following the World Bank's reduction of its global growth forecast. Bank of America Corp. dropped 2.1 percent after a report said the Justice Department may seek $17 billion to settle probes into mortgage lending. Nine of the 10 main S&P 500 groups retreated, with industrial and utility stocks losing at least 0.8 percent to pace declines.

Among the industrial commodities, Brent crude settled 43 cents higher at $109.95 a barrel as violence in Iraq prompted worries about supply disruption. Zinc climbed to levels not seen for 15 months on the back of falling warehouse stocks and expected cuts to supply. Palladium hit a 13 year high as strike action in South Africa fuelled supply worries.


Bank Of America Daily Chart (Source – Thomson Reuters)
 
S&P ASX 200was down by 15.7points or 0.29%on Wednesday and closed at 5454.0 points. There is speculation that Mineral Resources (MIN) has acquired a 12.1% stake in Aquila Resources (AQA) potentially setting up a takeover contest. CBA has increased its substantial shareholding in Charter Hall Retail REIT (CQR) with a voting power of 6.05%.

NAB has increased its substantial shareholding in Stockland Group (SGP) with a voting power of 6.23%. Perpetual Limited (PPT) has increased its substantial shareholding in Sims Metal Management (SGM) with a voting power of 9.46%. Goodman Group has upgraded its earnings outlook for the 2013-14 financial year to $600 million or 34.7¢ per security.


ASX 200 Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:-




 Stock of the Day – Incitec Pivot (IPL)
 
Incitec Pivot is a leading global explosives company with operations in Australia, Asia and the Americas. We estimate its share of the global commercial explosives market at about 15%. In fiscal 2013, explosives contributed two thirds of earnings before interest and tax, or EBIT, but we expect this to continue to grow. Incitec Pivot is also a major Australian fertilizer producer and distributor. It is the only Australian manufacturer of ammonium phosphates and urea. Ammonium phosphates are sold in the domestic market and exported.


IPL Strategy (Source – Company Reports)

Incitec Pivot reported a 7% increase in first half fiscal 2014 net profit after tax, or NPAT to AUD 115.7 million. While slightly better than we expected because of a lower tax rate the underlying trends were as expected. Increased earnings from the Moranbah ramp up and benefits of the business excellence program more than offset the impact of weak mining markets in Australia and the U.S.


IPL Lousiana Plant (Source – Company Reports)

The weak Australian dollar to a large extent offset lower fertilizer prices. We expect these themes to be maintained in the second half though there are some signs of an improvement in the explosives demand in the U.S coal market. Fertilizers will be impacted by a planned turnaround at the Phosphate Hill plant which will result in lower production for the year.


IPL Group EBIT (Source – Thomson Reuters)

We believe Incitec Pivot will benefit from steady long term growth in demand for resources. Completion of the Louisiana ammonia plant in third quarter fiscal 2016 will also result in a strong uplift in earnings. Incitec Pivot has strong market shares in the global commercial explosives market which possesses oligopoly characteristics. Most production facilities tend to be located close to the source of demand. We believe the stock is slightly expensive at its current price and would review the stock at a later date.

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