Australian Dollar Advance; Kathmandu IPO

Darlington Musarurwa
19 Oct, 2009
New York City

Australian dollar continued its ascent against the dollar after comments from the Reserve Bank of Australia. Aussie dollar traded above 92 U.S. cents. Kathmandu Holdings plans to raise as much as A$375 million in a public offering. Energy Developments rejects A$415 million bid.

[R]1:00AM New York, 7:00PM Sydney – Australian dollar continued its ascent against the dollar after comments from the Reserve Bank of Australia. Aussie dollar traded above 92 U.S. cents. Kathmandu Holdings plans to raise as much as A$375 million in a public offering. Energy Developments rejects A$415 million bid from Pacific Equity Partners.[/R]

Stocks in Australia dropped in a directionless market after weaknesses on Wall Street and weak commodities prices. The comments from the Reserve Bank of Australia also lifted the dollar.

In Sydney trading the ASX 200 index fell 0.9% or 43.6 to 4,792.80 and the Aussie dollar increased 0.5% to 92.12 U.S. cents.

Of the index stocks, 46 rose, 137 declined, and 17 were unchanged. AWB Ltd. led gainers in the index shares with a rise of 3.6% followed by APN News & Media advancing 3.6%.

Phil Lowe, assistant governor, economics at the RBA suggested that Australian dollar is expected to trade at a higher level in international markets as the company attracts more investment in the resource sector and return on capital are on the rise.

He also stressed the need to contain inflation between annual rate of 2% and 3% and added, “We have done that and we will continue to do that.”

Australia’s Economic Recovery to be Difficult

Research company, Access Economics said in a report today Australia’s economic recovery will be more difficult than what is currently forecasted on dropping savings, soaring interest rates and a reduction in stimulus spending.

However, the company expects the economic recovery to be mainly supported by the resurgent consumer confidence and demand of raw materials from China.

Access Economics head of research in Australia Chris Richardson noted that households are spending 7% more than when the economic crisis began.

“Between them, the Reserve Bank and the government gave the average family the equivalent of 10% extra income to spend,” said Richardson.

But the increase in spend is beginning to fade.

The research company projects Australian economy will expand 0.9% this year and jump to 2.7% and 3.4% in 2010 and 2011 respectively.

Energy Developments Rejects A$415 Million Offer

Energy Developments reported today on its Web site that it has rejected a proposal from Pacific Equity Partners to acquire 100% of the company on a fully diluted basis on a cash price of A$2.65 per share.

According to the ENE, the proposal remains “incomplete” and an “in adequate consideration for the long-term intrinsic value of the company.”

The company’s Waste Coal Mine Gas projects were recently included under the Australian Government’s Renewable Energy Target from July 1, 2011.

In addition, the Minister of Climate Change and Water Penny Wong last month announced a A$130 million transitional package for entities affected by the transition from New South Wales Greenhouse Gas Reduction Schement, which includes the company’s landfill gas projects.

ENE says it will not prevent PEP from making an offer in the form of an “off market takeover bid.”

Gainers & Losers

Commodity stocks dropped despite crude oil prices jumping 1.2% to $78.5 per barrel and gold prices climbed 0.1% to 1,051 per ounce. Energy World Corp. fell 4.9%, Avoca Resources dipped 4.5% and Fortescue Metals shed 3.6%.

Banks also tumbled. Australia & New Zealand Bank dropped 3.4% to A$23.73, National Australian Bank declined 2.2% to A$30.88 and Commonwealth Bank decreased 1.4% to A$54.51.

Bank Queensland tumbled 2.6%.

Kathmandu Plans A$375 Million IPO

The outdoor equipment and clothing retailer Kathmandu Holdings plans to sell between 166.9 million and 197.4 million shares at a price between A$1.65 and A$1.90 a share. The retailer operates 82 stores and plans to list the stock in Australian and New Zealand.

The retailer expects revenues in fiscal 2010 to increase 11% to A$197 million and operating earnings to increase 15% to A$47 million.