Welcome to Wednesday. Here are the five things I'm looking at today on the Australian sharemarket.
- The S&P/ ASX 200 (Index: ^AXJO) (ASX: XJO) has opened 1% higher, after US markets soared overnight. The Dow Jones Industrial Average gained 1.3%, while the S&P 500 added 2% and the NASDAQ soared 2.4%.
Bloomberg put the moves down to traders speculating that the European Central Bank will boost economic stimulus and tech-giant Apple forecast record sales.The best comment came from Benjamin Dunn, president of Colarado-based Alpha Theory Advisors when he told Bloomberg,
"The market's a sugar addict and the sweet nectar of free money, any kind of incremental liquidity from a central bank..is what the market is looking for."
- Child care centre group G8 Education Ltd (ASX: GEM) has announced an institutional placement of $100 million, with $36.7 million allocated to the purchase of 20 more child care centres, and the remainder as cash – likely to fund future acquisitions.The new shares issued under the capital raising will be issued at a price of $4.91, a 4.5% discount to yesterday's closing price of $5.14.
17 of the centres are being acquired for 4 times earnings before interest and tax (EBIT), while the remaining 3 are priced at 6.2x EBIT. That appears a fairly cheap price for the company to add additional growth, but retail shareholders are unlikely to be happy about being diluted, given there is no additional share purchase plan being offered. G8's shares are in a trading halt, until the placement has been completed.
- Fund manager Perpetual Limited (ASX: PPT) says Medibank Private is a very attractive opportunity pending the right price. Head of equities, Matt Williams, says Medibank is a high quality business, and should be able to cut costs over the medium to long term, thereby increasing margins. However, he did not reveal what price per share he was prepared to pay.
Medibank shares are being offered in an indicative price range of $1.55 to $2.00 each, but institutional investors may bid higher prices than that.Retail investors are guaranteed to pay no more than $2.00 per share, although that appears to be expensive, as we suggested earlier this week.
- Tweet of the Day.
$BHP BHP Billiton "Group production increased by 9% during the period with records achieved for eight operations and four commodities."^CJ
CommSec (@CommSec) October 21, 2014
BHP Billiton Limited's (ASX: BHP) quarterly operations update is out today, and the big miner is clearly not worried about sinking commodity prices. - Stock of the Day – brought to you by Ryan Newman – Lynas Corporation Ltd (ASX: LYC). Yesterday, the rare earths miner saw its share price plunge 4.7% to just 8.2 cents. Does it have further to fall? Read Ryan's article here to find out.
