NAB result boosts banks; Woolworths, Bapcor, Block sink

The Queensland government has ruled Chow Tai Fook Enterprises is suitable to own and operate a casino following a 16-month investigation into allegations of involvement with criminal conduct.

Chow Tai Fook is an investing holding company for Hong Kong’s Cheng family and is working with Star Entertainment and Far East Consortium to develop the $3.6 billion Queen’s Wharf precinct.

The former Queensland attorney-general asked the state’s liquor and gaming regulator in September 2022 to assess whether it was fit to own a casino after allegations emerged of criminal associations.

On Thursday, Attorney-General Yvette D’Ath said she could not substantiate the allegations, and assertions that a CTFE subsidiary was a front for money laundering “fell well short” of what was necessary to support claims of involvement with criminal conduct.

“While the investigation found CTFE did have dealings with a business associate of ill repute which they did not disclose to the regulator, there was insufficient evidence that CTFE was aware of this person’s background during the period of their association,” she said.

“I am satisfied CTFE has improved its engagement and transparency with OLGR and is now very forthcoming with sharing information with the regulator.”

The investigation conceded the organisation “lacked candour and fulsomeness” in its discussions with the regulator and that concealment of information wasn’t deliberate.

The attorney-general has made recommendations to improve the relationship between CTFE and the Office of Liquor and Gaming, including the appointment of a local representative to monitor its investment and proactively share information.

“Failure by CTFE to meet its duty to corporate would bear upon CTFE’s ongoing suitability and may render CTFE liable to criminal sanction,” a statement said.

A spokesperson for CTFE said it would work constructively with the regulator.

“Under the assurance plan, CTFE has agreed to update its policies, procedures and training and to appoint a Brisbane-based senior executive,” the spokesperson said.

“We have a long-term interest in investing in Australia, are genuinely excited about the Queens Wharf project and can’t wait to play a part to help transform Brisbane ahead of the 2032 Olympics.”

Singapore’s Olam Group has talked up its commitment to Australian farming in seeking to deliver a knockout blow in the battle for Namoi Cotton.

Olam said on Thursday it was willing to pay up to 70¢ a share for Namoi, raising the stakes in a bidding war with French agribusiness giant Louis Dreyfus.

The latest Olam offer starts at 66¢ a share, conditional on it securing 50.1 per cent of Namoi stock, and jumps to 70¢ if it reaches 90 per cent, valuing Namoi at almost $145 million.

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Major shareholders in financial advice, broking, and media group Sequoia Financial are demanding the removal of its chief executive Garry Crole and claim the board is “dysfunctional” under his leadership.

Sequoia is an ASX-listed financial services business that provides financial advice and broking-related services under Sequoia, ShareCafe, Corporate Connect and Castle Corporate. It also part-owns Euree Asset Management.

The rebel shareholders led by Tony Jones the founder of Interprac and fund manager Michael Glennon of Glennon Capital are also nominating, Peter Brook and Brent Jones (son of Tony Jones) as new board nominees after requisitioning an extraordinary general meeting of shareholders via a section 249d regulatory notice.

Mr Glennon and Mr Jones this week posted a detailed letter to shareholders urging them to vote in favour of their plan to radically overhaul the business.

Sequoia also faces a court battle with Tim McGowen the founder of investment website ShareCafe, over a dispute around its acquisition of the business from Mr McGowen.

Sequoia shares fetched 51¢ on Thursday on a market value around $66.5 million.

Woolworths’ outgoing chief executive, Brad Banducci, expects trading conditions to be difficult for the next 12 months as rising rents, energy and insurance bills, and the fading prospect of mortgage relief, lead shoppers to cut supermarket spending.

“The consumer is coming in with a fixed dollar budget, and they are very disciplined in how they are spending that across the store,” he said on Thursday.

Sales in the Australian supermarkets business grew by just 1.5 per cent in the March quarter, well behind rival Coles which posted a 5.1 per cent increase on Tuesday.

Jarden analysts said Coles was stealing a march on Woolworths. “While expectations were low, it was a disappointing result with Coles clearly out-trading Woolworths on shorter-term initiatives,” Ben Gilbert said.

Woolworths shares slipped 4.1 per cent to $30.50.

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Rio Tinto’s chairman and chief executive are tight-lipped on whether the mining giant would make a rival bid for takeover target Anglo American, as Rio embarks on doubling its own copper production.

Rio chairman Dominic Barton would not comment on whether the company was considering making a play for London-listed Anglo American when questioned by a shareholder during the company’s annual general meeting in Brisbane on Thursday.

“Our policy is that we don’t speculate or comment on M&A activity. So that would be my comment,” Mr Barton said.

After knocking back a $60 billion takeover bid from BHP, Anglo American chairman Stuart Chambers has not ruled out selling the mining giant to one of its competitors, saying the company would deal with any potential future bid “when it comes”.

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Australia’s trade surplus for March of just over $5 billion is the lowest since 2020, according to National Australia Bank.

The bank said the surplus shrank due to soaring goods imports, with exports – heavily reliant on commodities – remaining roughly steady since June 2023.

“Goods exports have been broadly stable around $45 billion since June 2023 as a rebound in LNG values offset a decline in iron ore,” NAB said. “Export values continue to be buoyed by elevated prices for key commodity exports.

“Import values rose to a new record high of $39.9 billion, up 4.2 per cent month on month in March. There were sizeable increases across a range of import categories.”

Bapcor’s shares plunged as much as 35 per cent after the company handed down another hefty profit downgrade and flagged write-downs.

More than $500 million in market value was wiped from Bapcor when a two-day trading halt was lifted on Thursday, concluding an extraordinary turn of events where CEO-elect Paul Dumbrell pulled the pin on the top job two days before he was due to start on May 1.

Bapcor, which had already downgraded profits twice in the past eight months, warned that soft conditions in its retail operations would drag net profit sharply lower in the June half.

Bapcor, which runs 1100 stores across the Autobarn, Autopro and Burson brands, said net profit for the full year would be $93 million to $97 million, having booked $54.2 million in the first half.

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Australian shares edged higher on Thursday, to head for their third day of gains in four after retreating over the prior week on worries interest rates will stay higher for longer.

The S&P/ASX 200 is up 0.5 per cent at lunchtime, with National Australia Bank adding 2.5 per cent despite a fall in its cash profit. The news boosted the other big banks and Macquarie to lift the financials sector 1.5 per cent.

“NAB’s result looks a bit better than expected, NIM [net interest profit margin] is marginally better, a few seasonal factors benefited its markets business and the whole sector is getting a bit of a bid today on that,” said Jason Kururangi a portfolio manager at Milford Asset Management.

Elsewhere, supermarket giant Woolworths sunk 4 per cent after its half-year profit missed expectations.

Rate hike unlikely

“Woolworths looks like a bit of a downgrade and the big issue is incremental supply chain costs rising. The sales environment is holding up ok, but we’re seeing a bit of deflation coming through in terms of food prices,” Mr Kururangi said.

Overnight, US sharemarkets briefly spiked before closing mixed after the US Federal Reserve held cash rates between 5.25 and 5.5 per cent and chairman Jerome Powell said another rate increase was unlikely.

“Chair Powell pointed out rate cuts are not yet appropriate. However, [he] stopped short of signalling rate cuts were likely this year or that rates were at a peak, which he had said previously,” said Commonwealth Bank’s economic teams.

“We interpret Powell’s comments as rate cuts are delayed not derailed.”

The Fed also confirmed it will slow the pace of its balance sheet run-off from June in a process nicknamed quantitative tightening where it allows bond holdings to roll off its balance sheet without reinvesting them.

“The tone of this Fed meeting wasn’t as hawkish as markets feared,” said ANZ Bank. “The Fed is confident that policy is restrictive, giving the impression that it’s a matter of when, not if, rate cuts get underway.”

CBA expects the US Fed to cut rates twice in 2024, with the first cut in November.

The Australian dollar recouped some steep losses this week, rising 0.7 per cent to US65.7¢, oil prices extended a slide with benchmark US WTI oil falling below $US80 a barrel, and bitcoin lost another 4 per cent overnight to fetch just $US57,840 this morning.

Stocks in focus

Supermarket group Woolworths has posted a 2.8 per cent lift in March quarter sales to $16.8 billion. It said total food sales lifted 1.5 per cent, and online sales jumped 17.6 per cent on the prior corresponding quarter to $1.9 billion. The result missed analysts’ forecasts with the stock losing 3.9 per cent in early trade.

The supermarket group said average food prices were largely flat in the March quarter, versus the prior year.

National Australia Bank has declared a flat 84¢ per share interim dividend on a statutory profit that edged up 1.4 per cent to $3.49 billion for the six months to March 31.

The bank also said it would lift its ongoing on-market share buyback by $1.5 billion. The stock added 0.5 per cent in early trade to $33.96.

Autobarn-owner Bapcor plunged 31 per cent to $3.98 after it downgraded its profit guidance this morning and blamed consumers reluctance to spend on their cars as living costs rise.

Iress will hold its AGM after the financial software group upgraded its profit guidance this week.

Rio Tinto is also holding its AGM.

Australia’s $5 billion trade surplus for March missed expectations for around $7 billion.

Analysts blamed the outcome on weaker than expected commodity-related exports of $44.9 billion, versus imports of $39.9 billion.