The S&P 500 was up by 1.76points or 0.09%on Thursday to 1997.45. The S&P 500 and Nasdaq ended slightly higher on Thursday, reversing earlier losses late in the session as energy shares bounced back with oil prices. Lululemon Athletica Inc. soared 14 percent after raising its full-year forecast as quarterly profit exceeded estimates. International Paper Co. rose 4.2 percent to $50.36 for the biggest gain in the S&P 500.

Tokyo’s Nikkei 225 rose 0.8% to its best level since late January after the exporter sensitive index welcomed the Yen’s breaching Y107 against the US dollar for the first time in nearly six years. Data showed China’s consumer inflation eased to a four-month low in August while factory-gate prices extended their decline to 30 months, adding to signs of weakness in domestic demand.


Lululemon Athletica Daily Chart (Source – Thomson Reuters)

S&P ASX 200was down by 28.2points or 0.51%on Thursday and closed at 5546.10 points. Australian Bureau of Statistics data showed the jobless rate dropped to 6.1 per cent last month, coming off a 12-year high of 6.4 per cent in July. The labour market participation rate for August was also stronger than economists predicted. The ABS reported the number of people employed increased by 121,000 to 11,703,500 in August 2014 (seasonally adjusted). The increase in employment was driven by increased part-time employment for both males (up 65,400 persons) and females (up 41,300 persons). In trend terms the number of people employed increased by 18,700 in August 2014.

Department store operator Myer Holdings was the worst-performing stock in the ASX 200, slumping 13 per cent to $2.15. The stock fell after the retailer handed down its fourth consecutive year of declining profits, slashed its final ­dividend by 31 per cent. Today Karoon Gas and Warehouse Group release their financial results. The following stocks will trade ex-dividend today:

Australian Ethical Investment, Calliden Group, Cash Converters, Data#3, GR Engineering, Independence Group.


MYER Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 





Stock of the Day – National Australia Bank (NAB)

NAB announced last month that it intends to sell a minority stake in its South Dakota based subsidiary Great Western Bank (GWB) through an IPO of shares in the US. According to management this is the customary process leading to a full exit of a business via the public markets. NAB intends to launch the IPO after 30th September 2014. The exit strategy is consistent with the new CEO’s focus on the Group’s core Australia and New Zealand businesses.


NAB Retail Mortgage Sales (Source – Company Reports)

GWB’s annualized cash NPAT for the 12 months to 231^st March 2014 is US$121m. Book value is currently estimated at US$1.4bn including goodwill of US$700m. Net of goodwill this implies CET1 capital of US$700m would be freed up for lending redeployment at higher ROE or possible return to shareholders. GWB’s estimated ROE of 8.5% remains well below the Group’s 14.6% ROE in 1H14 given the extent of goodwill in the books and we estimate a full exit from the US will only lift group ROE marginally.


NAB Market Share (Source – Company Reports)

GWB is a mid-west (South Dakota, Iowa, Nebraska, Kansas and Missouri) and Arizona lender to the agribusiness market that was acquired by NAB in late 2007 for US$798m. At the time it had US$3.4bn in assets and generated annualized cash earnings of US$35m. The bank has been a steady performer since 2007. The US move is regarded as a positive development for NAB.
  

NAB Daily Chart (Source – Thomson Reuters)
 
Longer term we view NAB as a turnaround stock now focused on the lower risk, capital efficient domestic financial services market space. Based on a strong top line growth, cost initiatives, better investment grade corporate exposures than its peers and earnings upside from NAB Wealth, we believe NAB will be able to sustain 15% ROE. There is also the prospect of a capital return when the bank divests its other non-core operation in South Dakota. We put a HOLD recommendation on the stock at the current price.
 

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