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Wednesday, August 25, 2010

International News 2010: The Hindenburg Omen IS Scary, but So Are the Fundamentals

A view from the Member's Gallery inside the NYSEImage via WikipediaAfter tumbling below 10,000 yet again Wednesday morning, the Dow rebounded to close above that psychologically important level and was slightly higher early Thursday. Still, fear in the market is being expressed by the continued rally in Treasuries and widespread chatter about an ominous sounding technical indicator: The Hindenburg Omen.
The Hindenburg Omen has a roughly 25% accuracy rate in predicting big market upheaval since 1987, meaning it's far from infallible but isn't inconsequential either. The indicator's creator, mathematician Jim Miekka, compares the Hindenburg Omen to a funnel cloud that precedes a tornado in a recent interview with The WSJ. "It doesn't mean [the market's] going to crash, but it's a high probability," he said.
Complex and esoteric even in the world of technical indicators, the Hindenburg Omen is triggered when the following occurs, Zero Hedge reports:
-- The daily number of NYSE new 52-week highs and the daily number of new 52-week lows must both be greater than 2.2% of total NYSE issues traded that day.
-- The NYSE's 10-week moving average is rising.
-- The McClellan Oscillator (a technical measure of "overbought" vs. "oversold" conditions) is negative on that same day.
-- New 52-week highs cannot be more than twice the new 52-week lows. This condition is absolutely mandatory.
These criteria have been hit twice since Aug. 12, prompting Miekka to get out of the market entirely, The WSJ reports. Judging by the recent market action, many others are following suit -- or at least moving in the same direction.
Worry List Lengthens
As Henry and I discuss in the accompanying clip, there are a lot of reasons to be worried right now that having nothing to with The Hindenburg Omen, the "Death Cross", Mercury being in retrograde or myriad other indicators cited by market pundits of various stripes.
More fundamental reasons to be concerned include:
It's the Economy, Stupid: This week's weak durable goods and home sales reports are just the latest in a string of desultory data. In sum, the macroeconomic data strongly suggest the job market isn't going to improve anytime soon. And if the job market doesn't improve, there's really not much hope for a turnaround in housing, consumer sales or anything else really. Oh, and the stock market is still expensive on a cyclically adjusted P/E basis, making it more vulnerable to an economic slowdown.
Unusual Uncertainty: On July 21, Fed chairman Ben Bernanke testified on Capitol Hill that the Fed's forecast called for real GDP growth of 3%-3.5% for 2010 and 3.5%-4.5% in 2011 and 2012. Less than a month later, the Fed announced plans to buy Treasuries again (a.k.a. "QE2") and, as The WSJ reported this week, there's a tremendous amount of dissention within the Fed about the 'right' policy prescription.
Financial Follies: Whether it's renewed concerns about Europe's sovereign debt crisis, more U.S. bank closures or reports of commercial developers walking away from properties, it's clear the problems in the financial system were not resolved by various and sundry bailouts and government stimulus ... not by a long shot.
Good Politics vs. Good Economics: S&P's downgrade of Ireland's debt and Greece's revenue shortfall show the short-term perils of the austerity measures that have swept Europe. But promising to cut government spending and slash deficits appears to be a winning political strategy in America right now. Certainly, it's a key message of Republican and Tea Party candidates, who appear to have the momentum heading into the November mid-term elections. But if Europe's 'PIIGS' are any example, gridlock might not be so "good" for the economy this time around, much less the financial markets.
Of course, the "good" news here is that there's so much to worry about and the markets typically are darkest just before dawn.
Aaron Task
August 25, 2010
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Tuesday, August 24, 2010

Stock News 2010: FELI turns around with P2.63-million profit in 9 months

Marikina Riverbanks Center at night.Image via WikipediaMANILA, Philippines - Sobrepeña-led Fil-Estate Land Inc. (FELI) posted a net income of P2.63 million in the nine months ending June this year, a reversal of the P73.12-million loss incurred in the same period a year ago.
In a financial report filed with securities regulators, FELI said the turnaround was a result of the reduction of costs and expenses despite a drop in revenue. The net income translated to earnings per share of P.0011 as against a loss per share of P.02183 last year.
Cost and expenses dropped 28.5 percent from P549.47 million to P392.82 million.
Revenues amounted to P392.9 million from October 2009 to June 2010, down 16.7 percent from P471.49 million the previous period.
Sales of real estate and golf club and resort shares reached P136 million, coming from the sale of condominium units in Sto. Domingo, Quezon City; condotel units and forest cabins in Camp John Hay, Baguio City; residential subdivision lots in Manila Southwoods in Cavite; Forest Hills in Antipolo City; Riverina in San Pablo City; Goldridge Estate in Guiguinto, Bulacan; Puerto Del Mar in Lucena City; Plaridel Heights in Bulacan; Holiday Homes in Gen. Trias; Cavite City; Bentley Park in Antipolo City; Monte Cielo De Naga in Bicol; Puerto Real De Iloilo in Iloilo City; and golf club and resort shares in Fairways and Bluewaters in Boracay.
As of end-June this year, FELI had total assets of is P14.88 billion. But cash and cash equivalents decreased 58 percent to P81 million as funds were utilized for operations.
FELI is primarily engaged in the horizontal development of residential subdivision lots, integrated residential, golf and other leisure-related properties, and vertical development of mixed use complexes.
Zinnia B. Dela Peña
August 24, 2010
http://www.philstar.com/Article.aspx?articleId=605493&publicationSubCategoryId=66
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International News 2010: Wendy's/Arby's: Add to Your Watch List

Wendy's/Arby's GroupImage via WikipediaBOSTON (TheStreet) -- Restaurant company Wendy's/Arby's Group(WEN) gets no love from investors, but the company delivered solid quarterly numbers, exceeding analysts' earnings forecast by 25% and matching their sales estimates.
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Wendy's stock has fallen 25% from a 52-week high on April 26, but considering the volatility of stocks in recent weeks, Wendy's/Arby's Group appears to be a comparatively safe investment at its current price.
The company's second-quarter net income dropped 28% to $11 million, but earnings per share remained steady at 3 cents. The gross margin hovered at 25%, but the operating margin extended from 7.5% to 8.6%. Wendy's comparable store sales declined 1.7% while Arby's registered a drop of 7.4%. However, revenue fell just 3.9% to $877 million. Operating profit was boosted by a 3.9% decrease in the cost of sales and a 14% drop in general and administrative expenses. Although respective business performance was lackluster, there is reason for optimism.
Wendy's has ambitious international expansion plans. Since Wendy's and Arby's merged in 2008, they have opened up 45 restaurants outside of North America. And management has signed development agreements for 400 new international locations over the next 10 years. Franchise sales comprised just 12% of quarterly sales, so the international franchise arena is a preferred growth venue. The balance sheet stores $508 million of cash, equaling a quick ratio of 1.4, and $1.6 billion of debt, converting to a debt-to-equity ratio of 0.7.
Wendy's stock has dropped 36% a year, on average, since 2007. In 2010, it has fallen 11%, more than the S&P 500, which is down 4%. Wendy's is a pricey stock. It commands a forward earnings multiple of 23, on par with other restaurants, but higher than the S&P 500 average. But its book value multiple of 0.8, sales multiple of 0.5 and cash flow multiple of 7 reflect discounts of 86%, 81% and 43% to restaurant averages.
Quarterly return on assets widened to 0.2% and return on equity rose to 0.3%, lagging the industry average of 27%. Both measures were negative in the year-earlier quarter.
Analysts' opinions of the company vary. Six, or 38%, advise purchasing its shares, nine recommend holding and one advocates selling them. A median target of $5.18 suggests a potential return of 25%. CL King expects the stock to gain 68% to $7. Oppenheimer predicts a rise of 27% to $5.30. Deutsche Bank(DB) projects a climb of 26% to $5.25.
http://www.thestreet.com/_yahoo/story/10842282/1/wendysarbys-add-to-your-watch-list.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
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International News 2010: Burger King 4Q net income falls 17 pct; sales slip

Burger King, Donegall Place, Belfast, Northern...Image via WikipediaBurger King earns $49M in 4Q, down 17 pct; lower sales, higher ingredient costs take toll
MIAMI (AP) -- Burger King Holdings Inc.'s fourth-quarter net income fell nearly 17 percent as sales slipped and costs for ingredients and packaging climbed.
The fast-food restaurant said Tuesday that it earned $49 million, or 36 cents per share during the period that ended in late June. That compares to last year's net income of $58.9 million, or 43 cents per share.
The company also got a smaller tax benefit than last year.
Revenue slipped 1 percent to $623 million.
The earnings beat Wall Street forecasts, but revenue fell short. Analysts surveyed by Thomson Reuters expected the company to earn 34 cents per share with revenue of $635 million.
Sales at restaurants open at least a year slid for the fifth consecutive quarter. That key indicator of a restaurant chain's performance excludes growth at stores that open or close during the year. The measure fell 0.7 percent around the globe and 1.5 percent in the U.S. and Canada.
While the declines weren't as steep as those recorded in previous quarters, Burger King continued to lag its bigger competitor, McDonald's Corp.
Burger King has been particularly vexed by the economic downturn as layoffs and a high unemployment rate hurt its core demographic of young men. Its tried to compensate by expanding its menu with items that appeal to both budget-conscious customers and those willing to spend more.
And Tuesday, the company said that effort is showing some success as customers in North America bought its $1 menu items like a breakfast muffin and a double cheeseburger. But customers also gravitated toward some more expensive dishes too, like the company's breakfast bowl, Whiplash Whopper and ribs.
For the full year, Burger King earned $186.8 million, or $1.36 per share. That's down 7 percent from last year's net income of $ 200.1 million, or $1.46 per share.
Full-year revenue slipped 1 percent to $2.50 billion, down from $2.54 billion.
"In fiscal year 2010, we faced sustained levels of high unemployment and a fragile global economy that combined made this one of the toughest operating environments in recent history," Chairman and CEO John Chidsey said in a statement.
Burger King is based in Miami and has more than 12,000 restaurants around the globe.
Its shares climbed 38 cents, or 2.3 percent, to $17 in pre-market trading Tuesday.
http://finance.yahoo.com/news/Burger-King-4Q-net-income-apf-3616881703.html?x=0
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Monday, August 23, 2010

International News 2010: AIG Moves Closer To Independence

The top portion of the American International ...Image via WikipediaNEW YORK (TheStreet) -- With the repayment of $4 billion in taxpayer funds, American International Group (AIG) has moved closer to financial independence and prepared a viable subsidiary for an eventual spin-off.
AIG said on Monday that its International Lease Finance Corporation (ILFC) subsidiary had restructured its debt by issuing $4.4 billion in private notes. ILFC used the proceeds to repay outstanding debt to the Federal Reserve, which it had secured through AIG's funding facility.
In doing so, the Los Angeles-based aircraft leasing business was also able to recoup $10 billion in collateral that the Fed had been holding against possible repayment issues. The new debt is structured into four smaller parcels - both secured and unsecured - that are due in later years, giving the business more flexibility as it moves forward.
It's widely known that AIG plans to divest ILFC. When AIG announced its restructuring plans after the federal bailout in the fall of 2008, ILFC was cited by analysts and industry players as a "crown jewel" among the businesses it could sell. However, the insurance giant had issues in finding interested suitors because of ILFC's debt obligations. Murmurs about former ILFC CEO Steven Udvar-Házy buying the business went silent when the longtime leader departed to start up a competing business, Air Lease Corp.
Over the past several months, the business has become a turnaround story once again - installing a new CEO, building up new and future orders and boosting liquidity by $12.5 billion.
"This capital raise, combined with the capital raises earlier this year, demonstrates that ILFC is getting stronger with each passing day," AIG CEO Robert Benmosche said in a statement, adding that "ILFC has made substantial and impressive progress in dealing with its liquidity needs."
The deal represents AIG's single biggest repayment of bailout funds so far, as it awaits progress on larger transactions. AIG plans to sell a life-insurance subsidiary to MetLife (MET) later this year, and is hashing out plans to offer an Asian life-insurance subsidiary to the market in an IPO. Those two deals stand to cut AIG's federal tab further, by roughly $50 billion.
As for ILFC's prospects, new CEO Henri Courpron said the firm has $13 billion in orders, adding that the market's appetite for ILFC debt is "a direct reflection of our company's viability and future prospects."
ILFC remains one of the biggest, if not the biggest, airline-leasing businesses in the world. Among its top competitors are subsidiaries owned by General Electric (GE), CIT Group (CIT), RBS (RBS), Boeing (BA), BAE (BAESY) and an assortment of private players.
http://www.thestreet.com/story/10842451/1/aig-moves-closer-to-independence.html
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International News 2010: The Next Bubble? Investors Flee Stocks in Droves In Favor of Bonds

NEW YORK - SEPTEMBER 17:  Traders work on the ...Image by Getty Images via @daylifeIndividual investors are fed up with the stock market. Burnt by 10 years of negative returns, two crashes, and a current economy mired with high unemployment and lackluster growth, many are throwing in the towel.
Investors have pulled $33.12 billion from U.S. mutual funds this year through July, according to the Investment Company Institute, the mutual fund industry trade group. With the exception of 2008 (height of the financial crisis), that’s on pace to be the worst year for stock funds since the 1980s, reports The New York Times.
What’s interesting is, this mass exodus comes at a time when stocks are holding up relatively well, as Aaron and Henry point out in this clip. The Dow Jones Industrial average has been volatile but is down less than 2% this year. Not exactly crash territory.
The next bubble?
Investors are fleeing the stock market in favor of bond funds. It’s happening at such a staggering rate, Bloomberg compares the flood of money into bonds to the stock market bubble surrounding the dot.com craze:
“Investors poured $480.2 billion into mutual funds that focus on debt in the two years ending June, compared with the $496.9 billion received by equity funds from 1999 to 2000, according to data compiled by Bloomberg and the Washington-based Investment Company Institute.”
Contrarian investors view this exuberance for fixed-income funds as a potential signal of the beginning of a new bull market in stocks.  Plus, there could be another enemy lurking in the wings for bondholders, as Aaron and Henry discuss: If inflation takes hold, as many predict it will, bonds will get “hammered.”
http://finance.yahoo.com/tech-ticker/the-next-bubble-investors-flee-stocks-in-droves-in-favor-of-bonds-yftt_535357.html;_ylt=AjsgIZYN4G4XlAwQJ50PU2Peba9_;_ylu=X3oDMTFnbmN1Ymc2BHBvcwMzBHNlYwNjb250ZXh0dWFsLXRlY2h0aWNrZXIEc2xrA3RoZW5leHRidWJibA--
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Friday, August 20, 2010

Stock News 2010: PhilWeb okays cash dividend

Philippine Stock Exchange in Makati City with ...Image via WikipediaMANILA, Philippines - PhilWeb Corp., the country’s first and largest listed online technology firm, has approved a cash dividend of 10 centavos per share worth a total of P125 million.
In its disclosure to the Philippine Stock Exchange, PhilWeb said the cash dividends are payable on Sept. 20 to shareholders on record as of Sept. 3.
PhilWeb president Dennis Valdes said this marks the company’s first dividend declaration, coming off the back of four years of growing profits dating back to 2006.
“We are very proud to join the ranks of PSE-listed companies that can be classified as dividend-paying entities. This is just small measure of the thanks we have to our loyal stockholders who have supported us since our listing in 2001,” said Valdes.
“We fully expect to continue this trend of paying dividends on a regular basis from hereon,” he added.
In the first half this year, PhilWeb reported a 41-percent jump in net profit to P322 million on strong revenues from its core gaming operations. Revenues grew 40 percent to P508 million from P362 million.
PhilWeb is a lead technology enabler of state-run Philippine Amusement and Gaming Corp. (Pagcor) whose core businesses include e-Games (PEGS) Cafes, Internet sports betting stations, mobile phone gaming and online casino gaming.
The company’s other products, namely Basketball Jackpot, Premyo Sa Resibo, and the newly-launched Bid Wars mobile game, also boosted PhilWeb’s bottom line.
Valdes said the company’s core businesses continue to do well, and that they are already closely coordinating with the new management of Pagcor on how PhilWeb can continue to be a major contributor to the state-run gambling agency’s bottom line.
“Last year, we contributed over P1 billion to Pagcor from our PEGS business alone. This amount flows directly to Pagcor’s net income, as they do not have any capital expenditures or operating costs associated with this revenue. As of June 2010, our PEGS business alone has remitted over P600 million to Pagcor, a growth rate of 33 percent,” Valdes said.
Valdes said the company has also been focusing on its expansion overseas. It is close to obtaining a gaming license in Cambodia. PhilWeb is also working to obtain gaming licenses in other countries, including Laos, Vietnam, Myanmar, Guam, Saipan, Palau, Papua New Guinea, East Timor and Nepal.
The company expects it bottom line to reach over P1 billion this year with the launch of its e-Games Online, operated by subsidiary Philweb Homeplay Inc. which allows Filipinos nationwide to access Pagcor’s traditional casino games like blackjack, baccarat and roulette.
Last year, PhilWeb posted a net profit of P552 million, up 89 percent from the 2008 level. Bulk of earnings, or P523 million, came from core gaming operations which represented an increase of 126 percent over the previous year. The balance of P29 million came from PhilWeb’s equity investment in ISM Corp., amounting to P633 million.
Zinnia B. Dela Peña
August 20, 2010
http://www.philstar.com/Article.aspx?articleId=604255&publicationSubCategoryId=66
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Stock Analysis 2010: Philippine Seven Corp (SEVN)

As of August 20, 2010 1:10PM ET

SNAPSHOT OF PHILIPPINE SEVEN CORP (SEVN)

OPEN
$19.00
PREVIOUS CLOSE
$18.80
DAY HIGH
$19.00
DAY LOW
$18.80
52 WEEK HIGH
08/17/10 - $20.00
52 WEEK LOW
10/12/09 - $2.90
MARKET CAP
5.4B
AVERAGE VOLUME 10 D
2.8K
EPS TTM
$0.54
SHARES OUTSTANDING
287.1M
EX-DATE
08/24/10
P/E TTM
34.8x
DIVIDEND
$0.05
DIVIDEND YIELD
--
K = Thousands  M = Millions  B = Billions

















INDUSTRY ANALYSIS

ValuationSEVNIndustry Range
Price/Earnings35.7x
Not meaningful
Price/Sales0.8x
Price/Book6.1x
Price/Cash Flow357.8x
TEV/Sales8.3x
SEVN

SEVN DETAILS

Philippine Seven Corporation operates a retail chain of convenience stores in the Philippines. Its stores offer beverages, food service items, fresh foods, hot foods, frozen foods, confectioneries, cookies and chips, personal care products, groceries, and other daily needs and services. As of December 31, 2009, the company operated 447 stores, including 166 franchise stores. It also engages in the management, development, sale, exchange, and holding of real estate properties, including buildings, houses, and apartments and other structures. The company is based in Mandaluyong City, the Philippines. Philippine Seven Corporation is a subsidiary of President Chain Store (Labuan) Holdings Ltd.
Detailed SEVN:PM Company Description...
www.7-eleven.com.ph
707 Employees


SEVN TOP COMPENSATED OFFICERS

No compensation data is available at this time for the top officers at this company.
Executives, Board Directors


KEY DEVELOPMENTS FOR PHILIPPINE SEVEN CORP (SEVN)

Philippine Seven Corp. Reports Earnings Results for the Second Quarter and First Half 2010; to Invest PHP 2.5 Billion in Stores
08/17/2010
Philippine Seven Corp. reported earnings results for the second quarter and first half 2010. The second-quarter performance pushed first-half net income to PHP 130.81 million, almost triple from PHP 52.75 million the previous year. The improvement in sales can be attributed to various factors such as the favorable effect of a recovering economy, good weather conditions, and increased spending in connection with the national and local elections. Total revenues, grew by 33.81% to PHP 2.19 billion in the second quarter. New franchise operators also boosted the store base and resulted in higher franchise revenues of PHP 113.89 million [from PHP 78.309 million in the second quarter last year. Total revenues, grew by 30.93% to PHP 4.07 billion in the first half. First-half franchise revenues jumped by 40% to PHP 210.46 million. The retailer will invest PHP 2.5 billion to hike the number of stores to 1,000 by 2013, from 500 as of end-July.

Philippine Seven Corp. expected to report Q2 2010 results on August 20, 2010. This event was calculated by Capital IQ (Created on August 14, 2010).
08/14/2010
Philippine Seven Corp. expected to report Q2 2010 results on August 20, 2010. This event was calculated by Capital IQ (Created on August 14, 2010).

Philippine Seven Corp. Approves Dividend Payable on September 23, 2010
07/29/2010
Philippine Seven Corp. announced that the board of directors, approved dividend declaration of PHP 0.5 per share. The record date for entitlement to said cash dividend shall be August 27, 2010 and the payment date shall be on September 23, 2010.

http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=SEVN:PM