TheChek News Flow

Will be delay Petrobras Contracts; Will remove $1.1B removed from backlog reported in Q3 

>>> Asset Class Flows 

EU's Moscovici: There is room to maneuver on the Greece bailout program

Altice to keep acquiring as European telecom market consolidates 

WPP to acquire up to 19.9% stake in comScore

Asian Mid-session Update: RBA Gov Stevens cautions to look beyond one month of bad jobs data in policy expectations

***Economic Data***

- (CN) CHINA JAN CONFERENCE BOARD LEADING ECONOMIC INDEX M/M: 0.9% V 1.1% PRIOR (10th increase)

- (NZ) New Zealand Jan Food Prices M/M: 1.3% v 0.3% prior; 7-month high

- (NZ) NEW ZEALAND JAN NON RESIDENT BOND HOLDINGS: 65.8% v 65.0% PRIOR

- (PE) PERU CENTRAL BANK LEAVES REFERENCE RATE UNCHANGED AT 3.25%, AS EXPECTED

- (CL) CHILE CENTRAL BANK (CCBH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.00%, AS EXPECTED

***Index Snapshot (as of 03:30 GMT)***

- Nikkei225 -0.3%, S&P/ASX +2.2%, Kospi +0.4%, Shanghai Composite +1.6%, Hang Seng +0.9%, Mar S&P500 flat at 2,083

***Commodities/Fixed Income***

- Apr gold +0.4% at $1,227/oz, Mar crude oil +0.2% at $51.40/brl, Mar Copper +0.5% at $2.61/lb

- GLD: SPDR Gold Trust ETF daily holdings fall 1.8 tonnes to 771.5 tonnes

- JGB: (JP) Japan's MoF sells ¥2.46T in 0.1% (0.1% prior) 5-yr notes; Avg yield: 0.12% v 0.00% prior; Bid to cover: 3.29x v 4.38x prior

- (JP) BOJ offers to buy ¥2.0T in T-bills

- (JP) Japan investors bought net ¥199.5B in foreign bonds v ¥675.2B in prior week; Foreign investors sold net ¥477.1B in Japan stocks v ¥104.8B in prior week

- (AU) Australia MoF (AOFM) sells A$600M in 4.25% 2026 Bonds; avg yield: 2.5992%; bid-to-cover: 2.89x

- (US) Weekly Fed Balance Sheet Total Assets for week ending Feb 11th: $4.50T v $4.50T prior; M1 y/y change: 8.7% v 9.3% w/w; M2 y/y change: 6.4% (5-month high) v 5.7% w/w

***Market Focal Points/FX***

- Australia is at the forefront of the regional indices, led by a 6.5% jump in shares of Rio Tinto after its strong FY14 report and an impressive share buyback. Goldminer Newcrest is lagging however after a modest decline in both profit and revenue from last year, even though the company affirmed this year's production targets despite the softer precious metals prices. AUD/USD also saw the most volatility among USD majors, rising about 60pips from the lows to $0.7790. After yesterday's weak employment data, economists began to price in more RBA rate cuts as early as next month. However, in his bi-annual testimony to parliamentary committee, RBA Gov Stevens said it would be unwise to react to one month of jobs numbers, also adding the impact of rate cuts may be diminishing. Traders took that as a sign the central bank chief wanted to temper expectations of more easing, even though he also expressed concern that the downswing in mining would only accelerate in 2015.

- Shanghai and Hong Kong markets were also firmer, tracking bullish sentiment on Wall Street in the wake of encouraging ceasefire plans in Ukraine. Conference Board leading index grew for the 10th straight month but at a slower pace, and resident economist remarked that "the softening in the short-term trend of the LEI, along with other high-frequency statistics, suggests that China's growth in 2015 is off to a weak start." In notable Chinese press, Securities Journal commentary indicated PBoC is unlikely to cut rates in the near future following the November move, preferring to manage liquidity via open market operations and other tools. S&P report warned the property market would consolidate further in both volume and price before recovering later in the second half. Finally, a separate report noted China may see higher default risks in the private bond market.

- After yesterday's press conference announcing the euro group and Greece are still apart on the terms of the funding, Dijsselbloem cautioned further talks are expected to remain challenging, and while a technical agreement is possible, a political solution will be difficult. Greek PM Tsipras maintained a hard stance, noting the essence of negotiation going forward would be "transition to a new program" which will be discussed on Monday, even as vocal German critics have been reluctant to budge on the possibility of relief without austerity. EUR/USD remains supported by overall weakness in USD, extending the gains made after soft US retail sales above $1.1430.

***Equities***

US markets:

- KING: Reports Q4 $0.57 v $0.47e, R$559M v $518Me; +19.4% afterhours

- CYBR: Reports Q4 $0.21 v $0.05e, R$36.3M v $26.7Me; +18.5% afterhours

- JCOM: Reports Q4 $0.98 v $0.90e, R$167.1M v $160Me; Raises dividend 11% to $0.2925/shr, implied yield 2.0%; +11.4% afterhours

- CBS: Reports Q4 $0.77 v $0.77e, R$3.68B v $3.64Be; +3.3% afterhours

- BYD: Reports Q4 $0.00 (adj) v -$0.06e, R$592M v $541Me; +0.8% afterhours

- BABA: China two major taxi hailing apps said to discuss merger - financial press; +0.6% afterhours

- MU: Micron, Seagate announce strategic alliance; +0.4% afterhours

- NKE: Announces Donald W. Blair to retire as CFO, effective Jun 31st; flat afterhours

- AIG: Reports Q4 $0.97 v $1.07e; Approves $2.5B share repurchase program (approx 3.4% of market cap); -1.7% afterhours

- KRFT: Reports Q4 $0.75 v $0.73e, R$4.70B v $4.64Be; -1.8% afterhours

- CPB: Guides FY15 lower $2.32-2.38 v $2.46e, Rev -1% to +1% y/y (implies R$8.21-8.38B v $8.16Be) ($2.42-2.50, Rev flat to +2% prior) cites currency headwinds; -3.2% afterhours

- CAG: Lowers FY15 $2.13-2.18 v $2.25e; op cash flow $1.6B (vs EPS at 'mid-single digit rate of growth' and op cash flow $1.6-1.7B prior); -3.6% afterhours

- SFLY: Reports Q4 $2.57 v $2.49e, R$483.3M v $476Me; Approves $300M share repurchase (16.5% of market cap); -3.7% afterhours

- MGI: Reports Q4 $0.18 v $0.23e, R$349.6M v $345Me; -5.2% afterhours

- ZNGA: Reports Q4 $0.00 v $0.00e, R$192.5M v $197Me; -14.3% afterhours

Notable movers by sector:

- Consumer Discretionary: Guangdong Mingzhu Group 600382.CN -4.7% (FY14 results); Automotive Holdings AHE.AU +3.0% (H1 results); Toppan Printing Co Ltd 7911.JP -1.8% (9-month results); Kirin Holdings Co Ltd 2503.JP -4.9% (FY14 results); Asahi Group Holdings 2502.JP -2.6% (FY14 results)

- Financials: China Overseas Grand Oceans Group 81.HK +2.6% (Jan sales results); Ping An Insurance 2318.HK +1.9% (Jan op results); China Overseas Land 688.HK +2.0% (Jan sales results)

- Materials: Rio Tinto +6.5% (FY14 results); Newcrest Mining NCM.AU +1.0% (H1 results); Balamara Resources BMB.AU -42.9% (intends to delist); Aquarius Platinum Limited AQP.AU -3.8% (shareholder cuts stake); Sims Metal Management SGM.AU +10.5% (H1 results); Yokohama Rubber 5101.JP -3.3% (FY14 results); Showa Denko 4004.JP -2.0% (FY14 results)

- Energy: Oil Search Ltd OSH.AU +4.0% (shareholder raises stake)

- Industrials: Shenzhen Infinova 002528.CN +10.0% (announces acquisition)

- Technology: Rakuten Inc 4755.JP +5.0% (FY14 results)

Is the Exxon Tiger Ready to Pounce?

Oil Giant Well-Armed With Treasury Shares as Downturn Provides Ripe Hunting

Five years ago, an energy rout even worse than the current crude-oil plunge sent natural-gas prices down 70% in a year. That is when Exxon Mobil Corp. snapped up XTO Energy Inc., one of the biggest U.S. gas producers, for $25 billion in stock.

Now the nosedive in oil prices is again creating Exxon’s favorite hunting conditions, as less-well-heeled companies struggle with shrinking cash flow.

With its ability to borrow cheaply—Exxon has a higher credit rating than the U.S. government—analysts say the company is capable of swallowing any rival, regulatory obstacles aside. And the company has amassed a hoard of its own shares that boost its takeover power.

A blockbuster deal is far from a sure thing. Irving, Texas-based Exxon would have to go after a big target to meaningfully boost its oil and gas reserves, its inventory of fuels that it can pump at a profit.

Acquiring another of the world’s biggest oil companies, such as BP PLC, would create an oil company of a size without modern precedent. Already, big oil companies have struggled with managing the logistics of their largest projects, from developments in Canada’s oil sands to liquefied natural-gas plants.

ENLARGE

“The idea that bigger is better I don’t think holds water,” said Amy Myers Jaffe, executive director of energy and sustainability at the University of California-Davis. “The megaprojects haven’t panned out for shareholders.”

Even so, Wall Street is already speculating on which company Exxon will woo during this downturn. BP “is the obvious fit,” Paul Sankey, senior analyst at Wolfe Research, wrote in a report earlier this last week. Buying London-based BP London-based, which is still dealing with the fallout of the 2010 Deepwater Horizon disaster, “would close out a damaged brand at a terrific price” and bolster Exxon’s capacity to find new sources of oil and gas.

Other potentially attractive targets singled out by analysts include a smaller tier of companies, which have discovered huge deposits of oil and gas but may lack the cash flow to develop them quickly.

Among them is Anadarko Petroleum Corp. , which has a stock-market value of $44 billion, operates in shale-rock formations across the U.S. and is in the early stages of building a massive plant to export gas from Mozambique. Another is BG Group PLC, with a $32 billion stock-market value, which is a major player in shipping natural gas globally and is exploring potentially giant oil prospects in the deep waters off the coast of Brazil.

BP and BG declined to comment. An Anadarko spokesman said the company doesn’t comment on rumors.

Last week, Jeff Woodbury, the company’s head of investor relations, told analysts it is “very alert to value propositions,” adding that “we’ll pursue only those acquisitions that we think have ultimate strategic value and are accretive to our longer-term returns.”

Exxon has a history of doing transformative deals during times of distress in the energy industry. It bought Mobil Corp. for about $82 billion in stock in 1999 amid a period of prolonged low oil prices.

But it may be wary of another deal like XTO, which has dented its profits because U.S. natural-gas prices have remained low.

Today Exxon has few peers big enough to boost its output or profits in a meaningful way. It already produces 2.3% of the world’s oil, and refines 11.5% of the gasoline and other fuels in the U.S. If combined with Chevron Corp. , the next largest Western oil company by stock-market value, they would supply 4% of global oil, and 17% of American refining output.

Such a merger, which would reunite the two biggest pieces of the former Standard Oil empire, might not pass muster with U.S. regulators, some analysts say.

Exxon has another tradition—buying up its own shares. It has spent $197 billion on buybacks since 2005, more than double what it has paid in dividends and about 65% of its investment in oil and gas projects over that time. It plans to spend $1 billion buying back its shares in the first quarter of the year, down from a rate of $3 billion a quarter since 2013.

The shares go into Exxon’s treasury and can be reissued to make acquisitions. Its treasury shares are worth about $353 billion. Exxon’s stock rose 2% to $92.37 in 4 p.m. trading on Thursday.

Buying back shares shrinks the number available to the public and can increase their value. Exxon has said it buys back shares only after funding oil-and-gas projects that offer a high return, and after paying dividends.

Exxon’s swollen treasury testifies to the difficulty of improving its profit margins—and, perhaps, to the rich stock-market values of rivals that have made them tough acquisition targets. The downdraft in oil prices is changing that.

An index of 21 U.S.-based oil and gas producers is down about 25% from a year ago. Exxon, more resilient to lower prices, is down about 3%.

ExxonMobil has the means to pursue an energy rival, but experts say getting bigger may not be better. ENLARGE

ExxonMobil has the means to pursue an energy rival, but experts say getting bigger may not be better. PHOTO: CORBIS

“Given the financial strength of the company and given the distress of the rest of the industry, this is a situation that is tailor made for” Exxon, said J. Robinson West, a senior adviser at the Center for Strategic and International Studies, a Washington, D.C.-based research institution.

But that doesn’t mean it should acquire another major oil company, he adds. That “doesn’t do them much good,” he said. “It just makes them bigger.”