In today’s daily we have covered stock research onPacific Brands (Expensive). 

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The S&P 500 was down by 4.59points or 0.23 %on Monday.  U.S. stocks slipped on Monday as investors remained cautious about instability in Ukraine and Gaza. After the market closed, Netflix Inc reported a quarterly profit that more than doubled from a year ago, sending shares up 0.7 percent to $455.08 after the bell. McDonald's Corp shares slid 1.5 percent to $97.55 and Yum Brands Inc shares fell 4.2 percent to $74.13 as the fast-food restaurant chains face a new food safety scare in China, denting efforts to shore up reputations hurt by a 2012 safety scandal in one of their biggest markets.

The CBOE Vix volatility index, Wall Street’s so called fear gauge, was 5% higher at 12.7 in late trade well below its 2014 average. Across the Atlantic, the pan – European FTSE Eurofirst 300 fell 0.5%. Japanese markets were closed for the holiday. In Industrial commodities oil prices gave a relatively muted response to worries about supply disruptions. Brent Crude settled at $107.8 a barrel. Aluminium stood out among base metals as it gained 2% to finish above $2000 a tonne for the first time since February 2013.



Netflix Daily Chart (Source – Thomson Reuters)

S&P ASX 200was up by8.2 points or0.15%on Monday and closed at 5539.9 points. Quickflix (QFX) has confirmed that Nine Entertainment (NEC) has acquired all the HBO’s preference shares it holds in Quickflix. Australand (ALZ) has reported a 49 per cent rise in net profit, the group release its financial report for the half year to June 30 on Monday. IOOF Holdings (IFL) has increased its shareholding in the fund manager HFA Holdings (HFA) managing US$8.4 billion in assets.

Iron ore was down 0.62 per cent at $US96 a tonne. AMP has become a substantial shareholder in Fonterra Shareholders Fund (FSF). Tribeca Investment Partners have become a substantial shareholder in Kathmandu Holdings (KMD). Among the top 2 performers on ASX 200 were Lynas (10.34%) and Transfield Services (5.43%). 



Lynas Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 




Stock of the Day – Pacific Brands  (PBG)

Highly Regarded PBG CEO, John Pollaers, quit as head of the company following a disagreement with the board over the best path forward for the company and its businesses according to the company. The company’s chairman Peter Bush has temporarily stepped into an Executive Chairman position. Pollaers had been determined to increase the level of advertising and marketing support for PBG’s major brands although no detail was provided for the divergence of views.



PBG Sales Revenue (Source – Company Reports)

It is unclear whether the differnce in opinion is also shared by other exceutives  within PBG and whether Pollaers will be the sole departure. PBG recently flaggged higher than expected inventories and net debt and we expect the lagged impact of a falling AUD to negativel impact near term eranings. In 1H15. PBG’s hedged rate will fall to around 90 cents which would atleast require 4-5% price increases for 1H15 and even after cost reductions we expect 1H15 EBIT to be 37% below the previous corresponding period.



PBG Income (Source – Company Reports)

PBG has largely divested its non-core brands and moved to an import model over the past seven years. The company is increasing its direct to consumer sales (online, retail stores), lifting marketing expenditure to support its key brands and is in early stages of targeted offshore rollout. PBG’s Workwear division is dramatically underperforming the company faces strong currency headwinds for FY15 and the balance sheet is stretched in our view.



PBG Daily Chart (Source – Thomson Reuters)

PBG has recently engaged external advice. We continue to expect the company to implement heavy cost restructuring and pursue a sale of its Brand Collective and Flooring assets (limited information is disclosed but potential sale price of ($20 – 30m) and also to potentially seek a takeover offer for the whole company while PBG is without a CEO. Although a takeover offer would be viewed as an upside risk we believe the outlook for the company is deteriorating and an attractive offers appears unlikely in the near term. We believe the stock is expensive at its current price.

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