The market isn’t expected to move by much this morning but there are a number of stocks that are likely to see action today.
The futures market is pricing in a two to three point dip for the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) on mixed offshore leads but support isn’t likely to come from resource stocks as iron ore, copper and oil suffered losses.
The West Texas Intermediate (WTI) oil price fell 2.2% to $US56.61 a barrel while the Metal Bulletin iron ore index and the copper price fell around 1% to $US51.04 a tonne and around $US2.71 a pound.
Investors will be more focused on three miners in particular today as they are expected to release their quarterly updates.
BHP Billiton Limited (ASX: BHP) will be among the first to give the market an update on its March quarter production numbers and its nickel output is expected to take a big hit due to an ongoing strike at its Columbian mine that has halted operations.
Coincidently, Morgan Stanley has crunched the numbers on BHP’s planned spin-off, South32, and has come up with a pretty wide valuation range of between $1.43 and $3.88 a share.
The difficulty in valuing South32 is due to the volatile commodity prices but the new miner is well placed to ride out any down cycle as Morgan Stanley estimates that South32 has the capacity to take on $4.4 billion in additional debt.
There’s also high operating leverage in the business with every 1% cut in cost lifting net profit by 3%, added the broker.
Independence Group surged 5.1% to $5.81 yesterday and is up more than 12% over the week as investors are expecting some solid numbers, while PanAust will be closely scrutinised in the wake of the hostile takeover bid by its biggest shareholder Guangdong Rising Assets Management.
Meanwhile, struggling department store operator Myer Holdings Ltd (ASX: MYR) will be under the pump with the Australian Financial Review reporting that fund managers are giving its chairman three to six months to win back investor confidence, or he and the board could be forced to resign.
On the other hand, media group Fairfax Media Limited (ASX: FXJ) is likely to enjoy further support after JPMorgan became the latest broker to upgrade the stock. JPMorgan lifted its recommendation to “neutral” from “underweight” following a 22.5% rally in Fairfax’s share price over the past three months to $1.03.
Over in the property sector, DEXUS Property Group (ASX: DXS) could be under pressure today after it announced a $450 million equity raising. The group is reported to be bidding for property assets that are being sold by Investa.
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Motley Fool contributor Brendon Lau owns shares in BHP and PanAust. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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