In today’s daily we have covered stock research on Caltex Australia. To view 3 Media Stocks with 6%+ Dividends click here

S&P 500 was up by 18.17 points or 0.97% to 1896.65 on Monday. The Dow and the S&P 500 ended at record highs on Monday while the Nasdaq rallied as shares of Internet and biotech shares advanced. Salesforce.com Inc. and TripAdvisor Inc. jumped at least 5.8 percent as all 41 members in the Dow Jones Internet Index rose. The gauge surged 3 percent after last week plunging 3.6 percent.
 
The Chicago Board Options Exchange Volatility Index, a gauge for U.S stock volatility known as the VIX, fell 5.34 percent today to 12.23, the lowest level since Jan. 10. The gauge has fallen 43 percent since reaching a two-year high on Feb. 3. On Wall Street, eight of the 10 primary S&P 500 sectors rose as advancing stocks topped declining shares by almost 4 to 1 on both the New York Stock Exchange and the Nasdaq. Crude Oil futures rose as investors braced for a possible supply disruption after the Ukraine referendum prompted the European Union to widen sanctions to Russian individuals and Crimean companies.



S&P 500 Hourly Chart for 6 Months  (Source – Thomson Reuters)

S&P ASX 200was down by 12.4 points or 0.23% on Monday and closed at 5448.4 points. Qantas Airways has issued $300 million worth of corporate junk bond amid strong demand from investors. Karoon Gas has extended the suspension of its share by a week as it continues talks with prospective investors.

Lend Lease might be bringing $500 million worth of unlisted portfolio of shopping centres to the retail investor sector. Nickel prices gained 8% bringing the gains for the year to 50% on the back of tougher sanctions on Russia which is the world’s biggest producer.



S&P ASX 200 Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 



Stock of the Day – Caltex Australia  (CTX)
 
Caltex Australia is the largest and the only Australian listed petroleum refiner and distributor with operations in all states and territories. It is 50% owned by Chevron Corporation of the U.S and Caltex is a major international brand of Chevron. Caltex has operated for more than 100 years. It owns and operates refineries at Kurnell in Sydney and Lytton in Brisbane, but is exiting refining to focus on the more profitable distribution/retail segment.

Caltex reported a 19% increase in underling 2013 earnings to AUD 397 million. Strong net operating cash flow of AUD 742 million, gearing (net debt to equity) of just 29%. However the full year dividend of just AUD 0.34 was below expectations, a payout of only 29% of underlying earnings. Marketing delivered another record result, but refining and supply losses were driven by a sharp deterioration in the refiner margin in the second half. This was despite improved reliability which drove record production of petrol, diesel and jet fuel.



Source - Caltex

The refinery losses lend support to the decision to close the Kurnell refinery and its conversion to import terminal progresses to plan. The market is clearly enthused by marketing earnings growth. With the closure off the underperforming Kurnell refinery, and improvement at Lytton, we forecast a rise in group returns on invested capital to low double digits. However we do not believe Caltex has sufficient competitive advantages to sustain those low double digit returns and ultimately any excess returns will likely to be competed away, either by expansion from existing players or new entrants on the marketing side.


Caltex Daily Chart  (Source - Thomson Reuters)
 
Caltex’s extensive network and comprehensive product offering are competitive advantages. A very efficient supply chain makes Caltex an effective competitor. We believe the stock is overvalued at its current price and would review the stock at a later date.

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