Baidu’s core strength exercise is underappreciated 1 Aug 2018 The $85 bln Chinese search giant delivered 45 pct earnings growth last quarter, having shed a few distractions. The market is still cautious on Robin Li’s big AI plan as economic headwinds loom. But applying machine learning to content delivery - and censorship – should pay off.
Hot streak at Macau’s SJM may be short-lived 1 Aug 2018 The $7 bln gambling group’s shares have soared since announcing its founder’s retirement. Yet the launch of a new casino on the Cotai Strip faces delays and the company now has a “hydra-like” leadership structure. New boss Daisy Ho needs a better hand to justify a rich valuation.
Chinese mega-merger should catalyze chemical M&A 1 Aug 2018 A changing of the guard at ChemChina suggests a Sinochem deal is getting closer. At more than $100 bln in annual revenue, the resulting giant would be on par with DowDuPont. Some forced sales may result, but Beijing's ambition will keep the focus squarely on more buying.
Privacy builds a wider moat for Apple’s margins 31 Jul 2018 The iPhone maker’s premium prices and fast-growing services powered earnings in the latest quarter. Selling hardware rather than advertising once seemed like a weakness. But in the wake of Facebook’s woes, CEO Tim Cook is using data security to buff the brand – and profitability.
Activists finagle deal in toppy real-estate market 31 Jul 2018 Brookfield is buying Forest City, owner of a hodge-podge of assets including the New York Times building, for $11.4 bln. The 27 pct premium allows Starboard to exit with a profit. Rising rates and other heady markers mean the deal may signal a peak in property values, too.
Trumponomics flirts with more debt and inequality 31 Jul 2018 Treasury Secretary Steven Mnuchin wants to cut capital-gains tax bills by accounting for inflation. It’s sensible to assess the true value of costs and profit. But it’d mostly benefit the wealthy and add to what may be a $1.1 trln deficit in 2019. It also smacks of self-interest.
Franco-Dutch utility deal muddies U.S. M&A waters 31 Jul 2018 Suez is selling a fifth of its stateside unit to pension manager PGGM for 30 times earnings. The $601 mln transaction looks even pricier than the takeover battles for two other U.S. water utilities. With asset scarcity making the market frothy, buyers risk ending up high and dry.
Credit Suisse returns can vault flatfooted traders 31 Jul 2018 The Swiss bank saw earnings double in the second quarter thanks to its wealth management unit. A weak investment bank means the group is less profitable than rival UBS. But lower costs should allow boss Tidjane Thiam to achieve his 10 percent return benchmark next year anyway.
StanChart’s new glow dimmed by U.S. threats 31 Jul 2018 The emerging markets bank boosted first-half pre-tax profit by 34 pct and paid its first interim dividend for three years. Wealthy clients and a booming Chinese business are taking it closer to its targets. But a potential trade war and its U.S. probation overshadow the revival.
Bank of Japan tries cheap way of imposing will 31 Jul 2018 Governor Haruhiko Kuroda has pledged to keep rates very low for an extended period to calm investors’ concern that monetary policy may become less loose. The no-cost tactic to keep bond yields in check is born of necessity given how many assets the central bank is already buying.
Vivendi’s Universal sale offers cleaner fix to IPO 31 Jul 2018 The French media giant is looking to sell up to half of its music unit to new investors. Avoiding a listing, spares Vivendi Chairman Yannick Bolloré from the risk of an investor exodus to Universal. Uncertainty over valuation, and what he will do with the cash linger.
BP starts to differentiate itself in a good way 31 Jul 2018 The UK oil major’s net profit beat expectations in the second quarter, in contrast to rivals like Shell and Exxon. BP is generating free cash, doing logical deals and hiking output. A 5.4 percent dividend yield reflects past Gulf of Mexico problems more than future potential.
India’s top airline can evade a turbulent patch 31 Jul 2018 Shares in InterGlobe Aviation, which owns IndiGo, fell sharply after first-quarter earnings plunged 97 pct. A fare war at home is to blame, as are rising fuel prices. But rivals are suffering too, and high costs will encourage the carrier to pause a planned long-haul splurge.
China shows foreign investors carrot and big stick 31 Jul 2018 Plans to ease restrictions on overseas investment in mainland stocks are a welcome respite from trade tensions. But vetting buyers for security risks, as in the U.S., gives officials new clout. China’s recent veto of Qualcomm’s bid for NXP will make investors extra wary.
Asian videogame giant gives away online store 31 Jul 2018 Tencent-backed Sea, at $4.5 bln, trades at a 50 pct discount to the sum of its three parts, Breakingviews calculates. Investors essentially get the Shopee e-commerce business for free. With Alibaba-owned Lazada a big rival in Indonesia, the valuation gap may prove hard to close.
How Sergio Marchionne saved Fiat and Chrysler 30 Jul 2018 The automakers’ former boss, who has died at 66, rescued both from the wrecker’s yard. His push for breakups and consolidation also helped produce better shareholder returns than his main rivals. A new selection of Breakingviews columns offers a taste of his 14-year tenure.
Rite Aid’s itch should be easy to scratch 30 Jul 2018 Hedge fund Highfields objects to Cerberus-owned Albertsons’ merger with the $2 bln drugstore chain. Minor conflicts at board level don’t help. But plenty of value is being offered to Rite Aid investors. Albertsons doesn’t need to offer much more to make a deal look reasonable.
Carlyle mega-fund rolls with valuation tide 30 Jul 2018 The buyout firm’s largest single pool of capital, at $18.5 bln, coincides with fresh records across the industry. It may get harder for Carlyle and its ilk to deliver high returns. With shareholders prizing fees over investment profit, though, taking more money is a no-brainer.
#MeToo is only one of CBS’s Les Moonves problems 30 Jul 2018 The media group is investigating its CEO over sexual-harassment accusations. Even without that, he was a risk. CBS has an entrenched board, is fighting unhelpfully with controlling owner Shari Redstone and faces a tricky industry-wide transition. Moonves is no longer an asset.
Heineken short on ideas to close AB InBev chasm 30 Jul 2018 The Dutch brewer’s shares fell after it said operating margins would dip this year instead of rise. The gap between its profitability and that of bigger rival AB InBev is widening. And beyond more craft beer, Heineken has few convincing ways to close it.
Vivendi disposals give Bolloré scary M&A war chest 30 Jul 2018 Vincent Bolloré’s acquisitive media group raised $2.7 bln from disposing of stakes in Ubisoft and Fnac Darty, and could borrow more. Possible targets are video games and live music. Yet given a dicey Italian foray and stretched valuations, investors may prefer cash to more M&A.
EU bank fees stuck between politics and regulation 30 Jul 2018 Faced with ultra-low interest rates, the European Central Bank has urged banks to hike non-interest income, which accounts for 30 percent of revenue. Meanwhile French authorities are warning lenders about overcharging clients. The profitability squeeze shows no sign of ending.
Imran Khan’s Pakistan vision is beyond reach 30 Jul 2018 The former cricket hero and likely new premier wants to fight corruption and improve the lives of the poor. It’s fanciful given the likely demands of a bailout of the $300 bln economy by China or the IMF. Khan’s agenda is also hard to reconcile with Pakistan’s powerful army.
China’s Starbucks-wannabe has a weak brew 30 Jul 2018 Luckin Coffee says it's worth $1 bln after raising money from Singapore’s GIC and others. It’s growing fast and wants to woo consumers away from its dominant rival. Yet an emphasis on takeaways and sub-prime locations means the startup is not shaping up as a threat.
Saudi’s Aramco plan B is too clever by half 27 Jul 2018 With the oil giant’s listing stalled, Riyadh wants to lever it up to buy a stake in chemicals group SABIC. It shouldn’t overburden Aramco, and offers a roundabout way of getting money to the state. But compared to an IPO it’s riskier, and does less to boost Saudi capital markets.
Exxon long-term view is more than short-term worry 27 Jul 2018 With declining production, the $360 bln group is missing out on current buoyant oil prices. Chevron’s second quarter likewise fell short, but along with European competitors it is boosting share buybacks. Exxon’s owners can justifiably fret about the industry’s uncertain future.
Predicting U.S. GDP more exciting, more pointless 27 Jul 2018 The U.S. economy grew at a healthy 4.1 percent pace in the second quarter. A surge in exports ahead of retaliatory tariffs helped. Consumer spending, aided by tax cuts, was also a factor. The trade war and fiscal stimulus could result in zig-zagging GDP figures for some time.
Review: Barclays’ enduring investment bank problem 27 Jul 2018 In “The Bank That Lived a Little”, Philip Augar documents the UK lender’s tortured attempts to build a business capable of taking on Wall Street rivals. Battles over strategy, scandals, bonuses and poor returns will be all too familiar to present boss Jes Staley.
Twitter purges users and shareholders alike 27 Jul 2018 The social network’s efforts to reduce spam, fake users and toxicity shrank active monthly users. Investors fled as well. That leaves both the platform and valuation more salubrious. Healthy returns will now depend on finding growth.
BP takes worthwhile gamble with shale deal 27 Jul 2018 The $10.5 bln that the oil major is paying for BHP’s U.S. shale assets is a full price and allows the miner to finally extricate itself from an expensive mistake. But BP is plugging a strategic gap and can easily cut costs. That makes the price appear more reasonable.