After Hours Summary: NTRI +18.5%, ALB +3%, EOG +2% following earnings/guidance, SBY +17% on M&A news... THC -14% following earnings/guidance, FRGI -13.3% on earnings/sale evaluation suspensionAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: NTRI +18.5%, BWXT +5.3% (light volume), KND +5.1%, TCMD +4.3%, WUBA +4.3%, PCLN +4%, ALB +3.4%, EOG +2.2%, HTZ +1.5%
Companies trading higher in after hours in reaction to news: SBY +17% (Silver Bay Realty Trust agrees to be acquired for $21.50 per share in cash), NSPR +15.4% (continued strength), INUV +13.5% (Inuvo's Vertro and Google entered into a Google Services Agreement), DRYS +7% (to initiate a new dividend policy; will pay a regular fixed quarterly dividend of $2.5 million to the holders of common stock), X +3.6% (upgraded to Outperform from Market Perform at Cowen)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: THC -14.4%, ESND -14.4% (ticking lower), FRGI -13.3% (also provides strategic update), PRGO -10.8% (also announces the resignation of CFO Judy Brown effective April 1, 2017; Ron Winowiecki appointed CFO effective immediately; to divest Tysabri royalty stream for up to $2.85 billion), KONA -9.9%, NVAX -9.2%, FTR -7.9%, ZTO -4.9%, IPWR -4.2% (enters into a definitive securities purchase agreement with various investors to raise gross proceeds of approx. $15 mln in a private placement of common stock and warrants to purchase common stock), ANTH -4%, CPE -3.7%, KTOS -3.2%, WDAY -2.2%, WDAY -2.2%, EXEL -2.1%, APLE -1.2%, DLNG -0.7%,
Companies trading lower in after hours in reaction to news: NVAX -9.2% (pulling back after closing near highs with notable afternoon move to highs), TTNP -7.9% (receives FDA communication on ropinirole implant Investigational New Drug Application; FDA indicated that it will require final release test data), HTGM -5.7% (modestly pulling back), TCAP -3.7% (announces the commencement of a public offering of 7,000,000 shares of common stock), HPP -2% (commences 8.5 mln common stock offering), O -1.8% (commences an underwritten public offering of 8,000,000 shares of common stock), SQ -1.7% (commences $350 mln offering of convertible senior notes due in 2022), TZOO -1.6% (following PCLN results)
Asia Mid-Session Market Update: Japan industrial output contracts; Australia Current Account hints at stronger Q4 GDP
***US Session Highlights***
- (US) Jan Building Permits revised higher from 1.285M to 1.293M
- (US) JAN PRELIMINARY DURABLE GOODS ORDERS: 1.8% V 1.7%E; DURABLES EX-TRANSPORTATION: -0.2% V +0.5%E
- (US) President Trump: defense budget increases will be offset by savings elsewhere; tomorrow's address will have big statement on infrastructure spending
- (US) JAN PENDING HOME SALES M/M: -2.8% V +1.0%E; Y/Y: +2.7% V -2.0% PRIOR (falls to one-year low)
- (US) White House spokesperson: budget plan to request $54B increase in defense spending; will look for corresponding cuts across other agencies - press
- (US) FEB DALLAS FED MANUFACTURING ACTIVITY: 24.5 V 19.4E
***US markets on close: Dow +0.1%, S&P500 +0.1%, Nasdaq +0.3%***
- Best Sector in S&P500: Energy
- Worst Sector in S&P500: Telecom
- Biggest gainers: ILMN +4.3%, SWN +3.5%, TGNA +3.5%, REGN +3.3%, JWN +3.3%
- Biggest losers: AES -6.6%, NEM -5.9%, NRG -4.0%, MDLZ -3.6%, HBI -3.4%
- At the close: VIX 12.1 (+0.6pts); Treasuries: 2-yr 1.20% (+4bps), 10-yr 2.37% (+5bp), 30-yr 2.99% (+3bps)
***US movers afterhours***
- NTRI: Reports Q4 $0.29 v $0.22e, R$108.9M v $100Me; Guides Q1 GAAP $0.14-0.19 v $0.10e, R$202-207M v $180Me; EBITDA $11.6-13.6M; +17.9% afterhours
- SBY: To be Acquired by Tricon Capital Group Inc. in $1.4B in All-Cash Transaction, or $21.50/shr; +16.9% afterhours
- KND: Reports Q4 $0.08 v $0.06e, R$1.75B v $1.73Be; Guides initial FY17 $0.55 v $0.43e, R$7.1-7.3B v $6.8Be, EBITDAR $910-950M; +5.1% afterhours
- PCLN: Reports Q4 $13.47 v $13.06e, R$2.35B v $2.33Be; +3.3% afterhours
- HTZ: Reports Q4 -$0.71 v -$0.54e, R$2.01B v $2.03Be; +2.0% afterhours
- WDAY: Reports Q4 $0.07 v -$0.01e, R$436.7M v $430Me; Guides initial FY18 R$2.01-2.03B v $1.99Be; -2.1% afterhours
- FTR: Reports Q4 -$0.12 v -$0.03e, R$2.41B v $2.50Be; approves stock split; Guides initial FY17 Capex $1-1.25B, ~ unch y/y; -8.5% afterhours
- PRGO: Reports FY16 $5.6B v $5.44Be; To divest Tysabri royalty stream to Royalty Pharma in $2.9B deal; Guides FY17 adj $7.10-7.25 v $7.21e, R$5-5.2B v $5.51Be; -10.7% afterhours
- FRGI: Reports Q4 $0.27 v $0.27e, R$171.3M v $176Me; Halts strategic alternatives search; -13.3% afterhours
- THC: Reports Q4 $0.06 v $0.20e, R$4.86B v $4.97Be; Guides Q1 -$0.60 to -$0.45 v $0.45e, R$4.75-4.95B v $4.95Be, adj EBITDA $475-525M; -14.3% afterhours
***Politics***
- (US) Wilbur Ross confirmed as US Commerce Sec by US Senate in 72-27 vote - press
- (US) Former US Ambassador to China Jon Huntsman said to be in talks to become No 2 official at the State Dept - press
***Asia Key economic data:***
- (JP) JAPAN JAN RETAIL SALES M/M: 0.5% V 0.3%E; RETAIL TRADE Y/Y: 1.0% (3rd straight increase) V 1.0%E
- (JP) JAPAN JAN PRELIMINARY INDUSTRIAL PRODUCTION M/M: -0.8% (biggest decline since May 2016, first decline in 6 months) V +0.4%E; Y/Y: 3.2% V 4.3%E
- (JP) JAPAN JAN VEHICLE PRODUCTION Y/Y: 3.8% V 4.2% PRIOR
- (AU) AUSTRALIA Q4 CURRENT ACCOUNT BALANCE (A$): -3.9B V -4.0BE; NET EXPORTS OF GDP: 0.2% V 0.2%E
- (AU) AUSTRALIA JAN HIA NEW HOME SALES M/M: -2.2% (First decline in 3 months) V +0.2% PRIOR
- (AU) AUSTRALIA JAN PRIVATE SECTOR CREDIT M/M:0.2% V 0.5%E; Y/Y: 5.4% V 5.6%E
- (NZ) NEW ZEALAND JAN TRADE BALANCE (NZ$): -285M V -25ME (7th straight deficit)
- (NZ) NEW ZEALAND FEB ANZ ACTIVITY OUTLOOK: 37.2 (5-month low) V 39.6 PRIOR; BUSINESS CONFIDENCE: 16.6 (5-month low) V 21.7 PRIOR
***Asia Session Notable Observations, Speakers and Press***
- Asian indices traded mixed after consecutive down days, with funds flowing out of Treasuries and seeking riskier assets. Nikkei is outperforming as USD/JPY broke a string of 3 straight down days with a rally. Reversals in Treasuries and the greenback are construed as technically driven, with all eyes on President Trump's first speech to a joint session of Congress on Tuesday night and hopes of more concrete outline of promised tax cuts and infrastructure spending initiatives.
- Also due out tomorrow is Australia's Q4 GDP, and analysts are increasingly more upbeat following today's narrower than expected current account deficit as well as anticipated rise in Exports % of GDP component. This follows strong corporate profits data overnight and mixed CapEx figures last week, leading some analysts to revises their growth targets slightly higher.
- Japan industrial output surprised with its first sequential decline in 6 months. While METI raises its Feb forecast to 3.5% m/m v 0.8%, March is seen contracting again at -0.5% as JPY remains stubbornly stronger in the first two months of the year.
- China's Vice Premier Yang took a more conciliatory tone ahead of Trump's address tomorrow, calling for Beijing to maintain non-confrontational principle with the US despite the recent press reports of both sides boosting their military spending. Overnight, a PBoC official also called for monetary policy to be more neutral, as China govt looks ahead to Trump's address and any further mention of Beijing being the "grand champion" Of currency manipulation.
***Asian Equity Indices/Futures (00:30ET)***
- Nikkei +0.6%, Hang Seng -0.1%, Shanghai Composite +0.2%, ASX200 -0.2%, Kospi +0.3%
- Equity Futures: S&P500 flat; Nasdaq flat; Dax +0.1%; FTSE100 +0.1%
***FX ranges/Commodities/Fixed Income (00:30ET)***
- EUR 1.0570-1.0595; JPY 112.45-112.80; AUD 0.7665-0.7690; NZD 0.7175-0.7195
- Apr Gold -0.4% at $1,254/oz; Apr Crude Oil +0.3% at $54.20/brl; May Copper flat at $2.69/lb
- (CN) PBOC SETS YUAN MID POINT AT 6.8750 V 6.8814 PRIOR
- (CN) PBOC to inject combined CNY30B v CNY30B prior in 7-day, 14-day and 28-day reverse repos
- (JP) Japan MoF sells ¥2.09T v ¥2.3T indicated in 2-yr 0.1% JGBs; Avg yield: -0.252% v -0.173% prior; bid to cover: 3.93x (lowest since Sept 29) v 5.19x prior
***Asia equities / Notables / movers by sector***
- Consumer discretionary: HVN.AU Harvey Norman +0.3% (H1 result); MBE.AU Mobile Embrace -9.0% (H1 result); VTG.AU Vita Group +7.1% (H1 result)
- Financials: 1233.HK Times Property Holdings +6.6%, 388.HK Hong Kong Exchanges & Clearing -0.9% (FY16 result); SPO.AU Spotless -13.7% (guidance); EGH.AU Eureka Group Holdings -14.0% (H1 result)
- Industrials: WOR.AU Worley Parsons +30.2% (receives proposal); 7013.JP IHI Corp +3.6% (booked gain); CDD.AU Cardno +11.9% (Morgans Financial raises rating)
- Technology: 018260.KR Samsung SDS Co Ltd -1.9% (momentum)
- Materials: RSG.AU Resolute Mining -12.8% (H1 result); FMG.AU Fortescue -0.3% (no interest in Wesfarmers coal assets); ORE.AU Orocobre -14.6% (H1 result)
- Energy: AWE.AU AWE +3.2% (H1 result)
- Healthcare: CAJ.AU Capitol Health -6.1% (H1 result)
- Telecom: SDA.AU SpeedCast International -6.0% (FY16 result)
Dialog Semiconductor watching for bolt-ons
STRATEGIC SNAPSHOT27 FEB 2017
Dialog Semiconductor [FRA:DLG], the UK-based provider of standard and custom mixed signal integrated circuits, will focus on bolt-on transactions, according to CEO Jalal Bagherli.
On the 4Q16 earnings call held 23 February, Deutsche Bank analyst Robert Sanders noted that billion dollar-plus deals had been off the table in 2016 and asked if Dialog would continue to focus on bolt-ons. Bagherli said he had spent a lot of time looking at potential acquisition targets in 2016 but had not found the right candidate to buy.
“We are looking at smaller acquisitions relative to what we tried prior to that,” the CEO said. “And that strategy will continue in 2017, so there will be bolt-on acquisitions that we look at.”
He noted that the company could not be certain of making any deals until it went through the due diligence and valuation process, adding that Dialog was wary of misspending its cash on assets that did not create value.
“As we scale up, you need to also consider that (M&A) scales up with us,” Bagherli continued.
He said what was previously considered a tuck-in deal was now just “noise” to Dialog, adding that with its increase in size, the company’s cash level and revenue growth were higher.
“So we will be looking at things which are bigger than say what we did three or four years ago potentially. But we're not looking, in terms of our scale, at major large scale acquisitions,” the CEO said.
In a March 2016 published report, Bagherli said the company remained interested in acquisitions, adding that any takeover would involve a company that was smaller than Atmel, a California-based rival that Dialog tried to acquire. The CEO said Dialog had learned its lesson after successfully finalising two smaller buys, but failing to nail down two larger transactions, the report said.
Dialog announced in September 2015 its agreement to buy Atmel for approximately USD 4.6bn. The deal lapsed in mid-January 2016, and the latter was subsequently bought by Microchip Technologies [NASDAQ:MCHP]
Dialog’s main reporting segments are: Mobile Systems, including power management, audio and display; Connectivity, such as Bluetooth Smart, short-range wireless VoIP and voice over DECT; Power Conversion, including AC/DC converters, solid-state lighting LED drivers and AC/DC chargers and adapters; and Automotive & Industrial, providing motor control ICs and control ASICs. Mobile Systems is the largest contributor to earnings, providing 82% of revenues, with the latter three segments providing 9%, 6% and 3%, respectively.
The company’s most recent transaction was a USD 10m investment in Energous Corporation [NASDAQ: WATT], a California-based developer of wireless charging technology.
Morgan Stanley advised Dialog on the attempted Atmel takeover, while RBC Capital Markets was used for the 2013 purchase of iWatt for around USD 310m. Jefferies advised on an earlier transaction.
Dialog used Davis Polk & Wardwell for the Energous deal, as well as for iWatt and the failed Atmel acquisition. UK-based RPC was also used for iWatt and Amtel, according to the Mergermarket M&A database.
Colin Sturt, Dialog’s General Counsel, previously worked at Davis Polk. Dialog’s 2015 annual report named RPC as the company’s legal advisor.
Dialog reported a cash balance of USD 697m at year-end. It has a market capitalization of EUR 3.8bn.
Closing Market Summary: Dow Posts 12th Straight Record Close on Monday
Investors cautiously nudged the major averages higher on Monday in another afternoon rally that has become almost expected as of late. The Dow (+0.1%) closed at a fresh record high for the 12th consecutive time, while the S&P 500 (+0.1%) posted a fresh record high of its own. The Nasdaq finished with a gain of 0.3%.
Equity indices opened the morning session mildly lower following a relatively disappointing durable goods, excluding transportation, reading. However, President Trump got things rolling with some comments shortly after the opening bell.
Bulls turned their attention to aerospace & defense names like Boeing (BA 179.43, +1.99) and Lockheed Martin (LMT 269.36, +5.18) after Mr. Trump proposed a $54 billion boost to defense spending, making good on his promise from last Friday to implement one of the "greatest military buildups in American history." Additionally, the president's comments helped send shares of Caterpillar (CAT 97.44, +1.96) higher after the promise to touch on his infrastructure plan during his first address to Congress, which will take place tomorrow evening.
The industrial space (+0.3%) led the stock market back to its flat line, where it hovered until its afternoon advance.
Energy (+0.9%) finished Monday at the top of the leaderboard. The space did receive some help from crude oil, although not as much as early indications may have predicted. WTI crude finished just above its flat line, higher by 0.1% at $54.04/bbl, despite trading as high as $54.60/bbl in the overnight session.
Financials (+0.5%), health care (+0.4%), and real estate (+0.5%) also outperformed with health care receiving a boost from the biotechnology industry. The iShares Nasdaq Biotechnology ETF (IBB 298.27, +8.37) jumped 2.9% higher, closing near its five-month high.
On the flip side, telecom services finished Monday at the bottom of the leaderboard after AT&T (T 41.82, -0.54) announced that it will be lowering the price of its unlimited data plan, pointing to increased competition within the wireless space.
Consumer staples (-0.6%) fared only slightly better, suffering in light of the dissolved Kraft-Heinz (KHC 90.51, -2.54)-Unilever (UL 47.69, +0.58) merger after Warren Buffett said that KHC is not planning a hostile takeover of UL and that there is no backup deal in the works. Given that Mr. Buffett is the chairman of Berkshire Hathaway (BRK.b 170.63, +0.41), which invested in the Kraft-Heinz merger back in 2015, his comments on the situation hold some weight.
Mr. Buffett also revealed that he more than doubled his holdings in Apple (AAPL 136.93, +0.27) between January 1 and the company's earnings report on January 31. AAPL added 0.2% on the news, but it wasn't enough to keep technology (-0.1%) out of the red.
U.S. Treasuries finished the day with large losses as investors revised up their probabilities for a rate hike at the March 14-15 FOMC meeting; the fed funds futures market now shows an implied probability of 35.4% from 26.6% on Friday. The benchmark 10-yr yield closed Monday five basis points higher at 2.37%. In addition, bond traders have started looking at the possibility of another debt ceiling showdown and a possible government shutdown if there is no agreement on how to deal with the debt limit by March 15.
Today's economic data included January Durable Orders and January Pending Home Sales:
- January durable goods orders rose 1.8%, which is in line with the consensus. The prior month's reading was revised to -0.8% (from -0.4%). Excluding transportation, durable orders declined 0.2% (consensus +0.5%) to follow the prior month's revised gain of 0.9% (from 0.5%).
- The key takeaway from the report is that the "hard" data indicates business spending declined at the start of the year, which is contradictory of the spending optimism reported in the "soft" survey data.
- Pending Home Sales for January declined 2.8% while the consensus expected an increase of 0.9%. Today's reading follows a revised 0.8% uptick in December (from 1.6%).
Tuesday's economic data will include the second estimate of fourth quarter GDP (Consensus 2.1%) and January International Trade in Goods at 8:30 ET, February Chicago PMI (consensus 53.0%) at 9:45 ET, and February Consumer Confidence (consensus 111.5) at 10:00 ET.
Toshiba requesting 20%-30% premium from companies seeking to acquire 100% stake in memory-chip business - report (translated)
27 FEB 2017
Toshiba [TYO:6502] is seeking to obtain around JPY 2.5tn (USD 22bn) for the sale of 100% of the new company to be formed for the spin-off of its memory chip business, the Mainichi Shimbun reported.
The Japanese-language report disclosed, citing a person related to the matter, that Toshiba is requesting a 20%-30% premium from companies seeking to acquire all of the shares in the new company. Toshiba could secure a maximum of about JPY 2.4tn-2.6tn from the sale of a 100% stake, the report said, adding that, if successful, the company would be able to drastically improve its finances. On the other hand, the report went on, depending on the results of the bidding, there is a possibility that its plans could go for naught. Considering the cost of the acquisition, there are likely only a few companies that would be interested in acquiring all of the shares in the new company, the report said.
After obtaining approval for the sale of the memory unit at an extraordinary shareholders meeting to be held at the end of March, Toshiba is aiming to narrow down the number of candidates by mid-May, with the aim of completing the sale during FY17, the report said.
Toshiba is currently moving forward on the bidding process for the memory chip business, which the company has decided to sell in order to cover an impairment loss of around JPY 712.5bn incurred at its US-based nuclear power subsidiary Westinghouse Electric, the report said. As a result of the loss, Toshiba is expected to fall into negative net worth of around JPY 150bn for the fiscal year through March 2017.
SoftBank reaches for stars with $18bn OneWeb, Intelsat merger
Japan’s Softbank is stitching together a deal that would see OneWeb merge with New York-listed Intelsat, Sky News learns.
The Japanese technology investor SoftBank is hatching plans for a multi-billion dollar merger of two major satellite companies - OneWeb and Intelsat - in a deal that would create a global powerhouse in the fast-changing arena of space technology.
Sky News has learnt that discussions involving a combination of OneWeb - shareholders in which include Airbus, The Coca-Cola Company and Virgin Group - and Intelsat are at an advanced stage.
Intelsat is also a small shareholder in OneWeb.
One source indicated that a deal could be outlined when Intelsat, which is listed in New York, reports financial results on Tuesday.
If the talks are successfully concluded, an announcement would come just two months after SoftBank invested $1bn in OneWeb, a move designed to help it build the world's first high-volume satellite production facility in Florida.
Sources said SoftBank, which last year acquired the UK's biggest home-grown technology company, ARM Holdings, would also commit to paying down some of Intelsat's huge debt-pile as part of the transaction.
It could invest several billion dollars through an offer to Intelsat's debt-holders, according to one source.
The deal is understood to be conditional on Intelsat's bondholders accepting an offer at a slight premium to where the bonds were trading on Monday.
OneWeb was valued at $2.5bn in its most recent fundraising, while Intelsat, shares in which have a market value of roughly $550m, carries about $15bn of debt.
In total, the new business, which effectively gives OneWeb a stock market listing, would have an enterprise value of about $18bn.
Greg Wyler, OneWeb's founder, is expected to become executive chairman of the company, while Stephen Spengler, Intelsat's chief executive, will continue in that role, according to bankers.
OneWeb was conceived by a group of technology investors and entrepreneurs as an attempt to extend internet access to rural areas and developing countries around the world.
Intelsat, which is headquartered in Luxembourg, is the world's largest satellite services business, and provides commercial satellite capacity to the US government and a number of military organisations.
SoftBank's involvement in the deal underlines its status as a power-broker in the technology industry, and follows its recent decision to raise a $100bn fund - the largest pool of capital dedicated to technology in the world.
Announcing its investment in OneWeb in December, Masayoshi Son, SoftBank's chairman and chief executive, said:
"OneWeb is a tremendously exciting company poised to transform internet access around the world from their manufacturing facility in Florida.
"Earlier this month I met with President-Elect Trump and shared my commitment to investing and creating jobs in the US.
"America has always been at the forefront of innovation and technological development and we are thrilled to be playing a part in continuing to drive that growth as we work to create a truly globally connected ecosystem."
Mr Wyler said at the time: "We look forward to working together as we execute on our mission to build a global knowledge infrastructure that provides affordable broadband to the over four billion people across the globe without internet access."
An Intelsat spokeswoman said the company did not comment on rumours or speculation about it, while OneWeb and Softbank were unavailable for comment.
Closing Commodities: Natural gas futures drop to fresh session lows as expectations for Thursday's EIA call for one of the smallest winter draws on record
- Crude oil gave back nearly all of its initial morning +1.0% gains & closed pit trading nearly unchanged ahead of tomorrow evening's API
- April crude oil futures rose $0.07 (+0.1%) to $54.04/barrel
- Contributing factors affecting the price of oil:
- Crude oil futures for April delivery were initially on track to test last week's 7-week high earlier in the morning, following data from the CFTC which showed that investors now hold 951,312 lots worth of U.S. & Brent crude futures/options, equivalent to nearly 1 bln barrels of oil at a value of more than $52 bln, as of this morning.
- Oil prices were also seeing a boost initially from comments this morning by Russian oil minister Alexander Novak regarding the possibility that Russia may accelerate the pace of its 300k barrel/day expected production cut.
- It is worth noting that crude has now given up nearly all of its initial morning gains, closing pit trading nearly flat ahead of tomorrow's API data release.
- Reminder: The IEA recorded OPEC's avg compliance at a record 90% in Jan, as stated in the latest monthly oil market report.
- Natural gas dropped and closed at a fresh session low as Thursday's EIA calls for the smallest winter draw on record
- April natural gas closed $0.10 lower (-3.6%) at $2.69/MMBtu
- Contributing factors affecting the price of natural gas:
- EIA natural gas data will be released at 10:30 am ET.
- A fifteen-day weather forecast shifted moderately warmer over this past weekend, creating a downward bias in natural gas prices.
- EIA is likely to report one of the smallest winter draws ever on Thursday, negatively impacting the market. Certain estimates call for a draw of just ~4 bcf.
- In precious metals, gold & silver remained at their initial opening prices & closed pit trading nearly unchanged
- April gold ended today's session up about $0.40 (+0.1%) around the $1258.60/oz level
- Mar silver closed today's session $0.01 higher (+0.1%) at $18.34/oz
- The dollar index was nearly flat around the 101.12 level
- Commodities, as measured by the Bloomberg Commodity Index, were -0.4% around the 87.10 level