More news today follows from China, Ireland, Spain, The Netherlands, Israel, Japan, Brazil, Canada, and of course Britain where I am based for now. I have Internet only on my notebook, which means that my editing will be less keen-eyed than normal.
*Analysts from Trefis have done an in-depth study of what Brazil's Vale gains in the other bits of Asia outside China from its transport investment, starting with Japan. Unlike China which bans Valemax vessels which are over 400,000 deadweight tons in size, Japan welcomes them. A third huge shipment has just hit Kashima where Nippon Steel and Sumitomo run a joint venture in steel-making. This is the 3rd major port to welcome a Valemax this year after Oita and Kimitsu. The big ships help VALE cut costs serving Asia markets where about 60% of its ore is shipped. Japan accounts for about 20% of the global total sales.
Valemax ships cost $15 per ton of ore when they are allowed into port. That is still about $5 more per ton than Australian ore, but Vale has lower production costs and moreover its ~15% pelletized iron ore is more appealing to modern steelmakers trying to reduce pollution. When the cargo has to be broken up, as for China, the price per ton shipped rises to $22. China still accounts for most of the rest of Vale shipments to Asia but the real savings are going to the Japanese. Nippon Steel, the analysts say, is saving $400,000 for every Valemax cargo it takes.
Vale is also investing in its own breakup systems to continue to serve China and cut its prices somewhat, although there is no way to get to Australian levels. First it is building in Subic Bay, Manila, a former US base, a floating distribution center where ships banned from China can efficiently offload their cargo into smaller vessels. It also has a logistics center under construction in Malaysia. Of course both of these centers can also be used to supply iron ore to southeast Asian markets which are building steel mills. Vale has shifted strategy for its monster ships after the Chinese banned them, with better footwork than its poor football team displayed.
*Daniel Stewart Brokers commented about a different Chinese logistics puzzle, China Chain Tek which is listed in London on the AIM. It says that at about 100 pence or a GBP per share the stock is at a pe ratio of 2.7 and its yield is 6%. That is a nice set of numbers for a play on China's new consumerism and its still backward facilities.
*DSB also likes Naibu which makes sportswear and shoes and is the 10th largest clothing manufacture in China. It set a GBP 200 target price for NBU which was a 66 pence the last time I looked. This is also a risky play also listed on the AIM, risky because it is fast expanding its factories to meet demand.
*HSBC brokerage, where I have an account, has raised Schlumberger to overweight from neutral with a target price of $130/share, $30 higher than the last time it wrote up SLB. It predicts higher earnings, financial returns and cash-flow because of the upcycle in oil and gas exploration, particularly in the US. Part of the upbeat forecasts reflects the SLB 2017 forecasts which so far nobody has seen fit to share with me, a shareholder. It was presented last month to analysts. SLB is Dutch and their rules are different than those of the US.
*Shareholder activists are focusing on Barrick Gold as a target for both takeover and divestiture, perhaps with a rationalization of assets with Newmont, turned down earlier. The theory is that costs can be cut in areas where both gold-miner operate like Nevada if there was firm, perhaps spun off to feed the hunger for safe US gold mines.
*Chicago Bridge & Iron signed with Saudi Arabian Petrofac a $60mn contrct to build new product storage spheres. Once again, the is CBI business not SHAW takeover deals. We think CBI overpaid but we got the overpayment.
*GlaxoSmithKline is actually not going to benefit from the CHMP approval for Euroland sale sof Mekinist, its melanoma drug because under the deal signed in the spring with Novartis, the cancer portfolio is due to be transferred from GSK to the Swiss firm.
*Covidien now that it is being taken over is getting mixed reviews. Deutsche Bank raised it to a buy. However, reporting to the Dublin Stock Exchange, Vanguard Group appears to have sold much of its COV stake at $91. I am not sure if any of the sales were offset by other trades in COV or its acquirer.
*Online brokers 888 Holding reported a surprise boost in earnings which caught their own analysts unprepared and this has boosted the even-larger Paddy Power plc we own, which is the market leader in online bookmaking. It has scale and firepower exceeding that of 888 and is still on the cheap side with a 6 pe ratio at around euros 50 per share. DSB has a euros 69 target price which doesn't include a move into the US or all the benefits PDYPF will get from its deal with Playtech to add new offerings to its panoply of legal gaming options.
*The EU is cracking down on pay for delay where money goes to generics drugmakers to take their time going to market. The latest fines over a Servier blood pressure drug came to euros 427.7 mn, of which Teva wound up slapped for about 3%, hardly material. Servier is French; TEVA Israeli.
*I was only able to buy half of the Portugal Telecom shares I wanted during the peak of the selloff on Wednesday, when the stock fell over 6%. Others also were buying at $2.75. Yesterday, the panic has spread gently over the border to Spanish banks, including Santander which does operate in Portugal. Also feeding the sour mood in Spain is new stress tests being planned by the ECB, which frankly will hit almost all other Euroland banks harder than SAN. It is not yet a screaming bargain.
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