In today’s daily we have covered stock research on Leighton (Expensive). To view list of dividends click here

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S&P 500 was up 14.99 points or 0.77% on Wednesday and closed at 1956.98. U.S. stocks rose on Wednesday, with the S&P 500 ending at a record after the Federal Reserve hinted at a slightly faster pace of interest-rate increases starting next year but suggested rates in the long run would be lower than it had indicated previously. FedEx Corp. (FDX) advanced 6.2 percent as the operator of the world’s largest cargo airline predicted a pickup in domestic and global economic growth.

The CBOE VIX equity volatility index was down more than 12% in late trade at lowest level for more than seven years. The price of gold flat for most of session was up $3 at 1,274 an ounce. August Brent settled 81 cents higher at $114.26 a barrel – approaching a nine month intraday high of $114.69 struck last week.


S&P 500 Daily Chart (Source – Thomson Reuters)
 
S&P ASX 200was down by 18.0 points or 0.33% on Wednesday and closed at 5382.7 points. Rio Tinto has followed Fortescue Metals into discounting low grade iron ore prices amid weak demand from Chinese steel mills. Perpetual Limited has increased its substantial shareholding in Boral from a voting power of 6.04% to 7.12%. Perpetual Limited has increased its substantial shareholding in Freedom Foods Group to a voting power of 8.03% from 6.94%. Capilano Honey Limited has resolved to pay a fully franked full year dividend of 15 cents per share with the addition of 5 cents per share special dividend. Horizon Oil has lodged a draft scheme booklet for the proposed merger with ROC Oil along with the independent expert’s report to ASIC for review and Court approval ahead of issue to Horizon Oil’s shareholders.


ASX 200 Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 




Stock of the Day – Leighton Holdings (LEI)
 
New CEO, Marcelino Fernandes Verdes, is likely to at least accelerate the strategic changes being implemented by the former management team. But we believe there is a risk of more significant changes across LEI, including the sale of assets, a further move away from more capital intensive businesses and/or consolidation of brands. There may be some good strategic reasons for some of the changes. We believe the changes may also be pushed onto the group in order to address the high level of gearing which may lead to sub optimal outcomes and fundamentally alter LEI’s risk profile.


Zayed University, Abu Dhabi (Source – Company Reports)

While management has reiterated CY14 underlying NPAT guidance of $540m - $620m at 1QCY14 trading update and AGM, LEI’s work in hand continues to fall.  Despite winning work across its Asian and Middle East operations the pullback in Australian resources and energy spending is leading to a contraction in Australian engineering construction activity and putting pressure on the mining service providers.


Wheatbelt Road Services, Western Australia (Source – Company Reports)

LEI remains in a rebuild phase with opportunities to restructure operations to achieve improved returns to shareholders. However in the near term the group faces two key overhangs that are likely to dictate the choices of management and speed of a recovery: 1 – The decline in Australian engineering construction activity as resources and energy capex falls. 2 – LEI’s continued high level of gearing.
  

Zuellig Building Philippines (Source – Company Reports)

In our view both these issues are likely to weigh on near term revenues and earnings given the shrinking pipeline of available work and the decisions that could be made to fix gearing. These changes could also be accelerated under new management HOT/ACS .We believe the stock is expensive at its current price and would review the stock at a later date.

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