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

S&P 500 was down 13.78points or 0.71%on Thursday and closed at 1930.11.  U.S. stocks ended lower, extending a retreat from recent gains on escalating concerns about Iraq. Eight of the 10 S&P 500 sectors finished in negative territory, led by losses in S&P industrials. The Dow Jones Transportation Average retreated the most in two months as oil prices rose to an eight-month high. Diamond Offshore Drilling Inc. and Noble Corp. climbed at least 3.2 percent as oil and gas companies rallied. 


Daily Brent Crude Chart (Source – Thomson Reuters)

The CBOE Vix volatility index was up more than 9% in late trade and back above the 12 level. Gold which traditionally benefits from any rise in geopolitical concerns was up $13 at $1,273 an ounce. U.S government bonds attracted buying as the market mood turned more cautious and as the domestic retail sales data disappointed. The Reserve Bank of New Zealand raised its main interest rate by 25 basis points to 3.25%.
  

S&P 500 Daily Chart (Source – Thomson Reuters)
 
S&P ASX 200was down by 25.2points or0.46%on Thursday and closed at 5428.8 points. Oil search has tightened security and prepared evacuation plans for 100 plus contractors and employees at its Kurdistan oil drilling operation. Newcrest Mining confirmed previous guidance commentary relating to 2014 financial year. The company expects to generate free cash flow of around A$100 million for the 2014 financial year. Federation Centres have announced the distribution payable for the half year ending 30 June 2014 at 7.8 cents per FDC security.

Wesfarmes announced that it has received all the regulatory approvals for selling its insurance broking and premium funding operations to NYSE listed Arthur J. Gallagher & Co have now been received. Goodman Fielder is investing about $25 million to expand a New Zealand UHT milk plant.


ASX All Ordinaries Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 




Stock of the Day – Graincorp (GNC)
 
GrainCorp Limited (GNC) is a leading agribusiness in Australia, focusing on grain storage, handling and freight services on Australia’s east coast, as well as being the dominant competitor in bulk export grain terminals. The company is the world’s fourth largest maltster in the world and owns a share in the largest flour miller in Australia (Allied Mills). GNC also crushes and refines edible oils at port.


GNC Financial Highlights (Source – Company Reports)

The industry’s long term outlook is robust with Asian population and wealth growth leading to increased demand for proteins and grains from Australia. In the near term a potential El Nino weather event could negatively impact east coast crop volumes. We believe GNC’s supply chain assets are, most valuable to an international grain trader that can leverage its asymmetrical grain inventory informational advantages. We see potential for the company to be subject to another takeover bid over the long term.


GNC Bulk Grain Port Facility (Source – Company Reports)

Partially offsetting our positive view of the fundamental value of the asset base is that there is increased port and marketing competition which has reduced GNC’s long term earnings power. GNC announced a $200m grain storage rationalization and receival upgrade program to reduce operating costs and increase its tail loading times and efficiency. GNC will move from 280 grain silos (77 primary sites) to 180 grain silos, with 68 primary sites upgraded to triple average rail loading rates.
  

GNC daily chart (Source – Thomson Reuters)

The rationalization is required by the company given there is 2.5MT of new effective bulk capacity recently established or announced for completion by 2017. GNC expect their program to be broadly EPS neutral in a normal crop year. The company’s core gearing ratio is expected to lift to around the top end of GNC’s target (Core Gearing <25%). We believe the stock is slightly expensive at its current price and would review the stock at a later date.

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