MQG.AX - Macquarie Group Limited
| Previous close | 129.43 |
| Open | 129.05 |
| Bid | 128.78 x 0 |
| Ask | 128.82 x 0 |
| Day's range | 128.10 - 129.30 |
| 52-week range | 103.30 - 136.84 |
| Volume | 850,335 |
| Avg. volume | 914,121 |
| Market cap | 41.742B |
| Beta (3Y monthly) | 1.26 |
| PE ratio (TTM) | 14.84 |
| EPS (TTM) | 8.68 |
| Earnings date | 2 Nov. 2019 |
| Forward dividend & yield | 5.75 (4.44%) |
| Ex-dividend date | 2019-05-13 |
| 1y target est | 129.79 |
- Bloomberg
Tiny Japan Firm Helps to Crack Code for Next-Gen Computer Chips
(Bloomberg) -- Chipmakers have spent two decades pouring investment into a revolutionary new technique to push the limits of physics and cram more transistors onto slices of silicon. Now that technology is on the cusp of going mainstream, thanks to a secretive Japanese company that’s mastered the skill of manipulating light for applications from squid fishing to cinema projection.Ushio Inc. announced July it had cleared a key milestone, perfecting the powerful, ultra-precise lights needed to test chip designs based on extreme ultraviolet lithography or EUV, the process through which the next generation of semiconductors will be made. With that, the Japanese company became a major player in future chipmaking.“The infrastructure is now mostly ready,” Chief Executive Officer Koji Naito said in an interview. “Testing equipment was one of the things holding back EUV. With that piece in place, production efficiency and yields can go up.”Read more: How an Obscure Rubber Company Became a Linchpin of Tech IndustryUshio’s advances cement its position among a coterie of little-known Japanese companies indispensable to the production of the world’s consumer electronics. The Tokyo-based company developed a light source for equipment used to test what are known as masks: glass squares slightly bigger than a CD case that act as a stencil for chip designs. These templates have to be absolutely perfect, as even a tiny defect in one of them can render every chip in a large batch unusable.That’s where Ushio comes in. Its technology uses lasers to vaporize liquid tin into plasma and produce light closer in wavelength to X-rays than the spectrum visible to the human eye. That light helps chipmakers spot potential defects in the product. This process takes a room-sized machine that looks like a sci-fi death ray and requires a team of people to operate. After 15 years in development, the EUV business will start contributing to profit from the next fiscal year, Naito said, without giving further details.The move to EUV is the culmination of a decades-old trend. The push for smaller geometries that started when integrated circuits replaced vacuum tubes in the 1970s is approaching its final stages, and the number of companies that can compete in that space has been whittled down to a handful. Only Intel Corp., Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. have plans to use EUV to go smaller than the 7-nanometer processes that are the current cutting edge of CPU design. All three will use lithography machines from ASML Holding NV, and for a few specialist suppliers like Ushio, that means a chance to have a 100% share of their respective markets.“We don’t chase the mass market, even though there is potentially a ton of money to be made in home lighting or automotive,” Naito said. “Instead, we want to focus on niche areas and do things that others can’t.”Naito believes Ushio is positioned to control the market for light sources used in testing of patterned EUV masks, while a small group of fellow Japanese companies specialize in other aspects of the technology. JSR Corp. and Tokyo Ohka Kogyo Co., for instance, control production of the light-sensitive resins required to print the designs, while the blank masks are made by only two companies, AGC Inc. and Hoya Corp., which both use Lasertec Corp.’s machines to test for flaws. All are based in the greater Tokyo area and espouse an almost artisanal commitment to high-precision manufacturing.Why Japan and South Korea Have Their Own Trade War: QuickTakeThe fact that much of the EUV supply chain hails from a single country was seized upon by Japan in its trade spat with South Korea. Tokyo slapped export restrictions on key materials heading to Korea, giving undesired attention to companies that prefer to operate behind the scenes. While Ushio’s machines were not targeted, photo-resists made by JSR and Tokyo Ohka made the sanctions list. The government has since relented, but concern lingers that the industry’s delicate balance may be again disrupted in the future.“There hasn’t been a direct impact for us yet,” Naito said. “But because we have such a high market share for our products, we feel a responsibility to absolutely make sure our customers’ production lines do not stop.”Alongside its EUV ambitions, Ushio commands an 80% share of the market for lithography lamps used to make liquid crystal displays and controls 95% of the supply of excimer lamps used in silicon wafer cleaning. The key to its success is balancing mass production with craftsmanship. Materials like quartz glass are difficult to handle and have different thermal expansion properties from metals like the molybdenum in which they are housed. Some of the lamps still have to be finished by hand.“Wherever you have a manufacturing process that needs to shine a very bright light, you will find Ushio,” said Damian Thong, an analyst at Macquarie Group Ltd.Ushio’s expertise also extends beyond semiconductors. Founded in 1964, it was the first Japanese company to develop and produce halogen lamps. From 1973, fishermen began to use its lights to catch squid -- -- a controversial technique in many countries. Finding new uses for its technology, from tanning salons to movie projectors, helped Ushio more than triple its sales over the past 25 years. The company is now experimenting with the use of sodium lamps to nurture plants and using ultraviolet light calibrated to such a precise wavelength as to kill bacteria without damaging human skin.“For Japanese firms with strong legacy manufacturing technology, the bigger danger is being trapped in them,” Thong said. “You have to give Ushio credit for moving further downstream, away from manufacturing toward something that requires more system integration.”To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net;Yuki Furukawa in Tokyo at yfurukawa13@bloomberg.netTo contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Vlad SavovFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Bloomberg
Macquarie Near Deal for Majority Stake in Netrality
(Bloomberg) -- An affiliate of Macquarie Group Ltd. that invests in infrastructure is nearing a deal to buy a majority stake in Netrality Data Centers, which owns and operates data centers, according to people with knowledge of the matter.The talks are advanced and a deal could be announced in coming weeks, said the people, who asked not to be identified because the negotiations are private. The size of the transaction couldn’t immediately be determined, and it’s possible no agreement will be reached.A representative for Macquarie declined to comment, and representatives for Netrality didn't respond to requests for comment.Founded in 2015, Netrality has centers in Philadelphia, Kansas City, St. Louis, Houston and Chicago, according to its website.Companies such as Netrality have been in favor with infrastructure and real estate investors, in part due to rising technology demands by consumers and corporations. Last year, Macquarie came close to a deal to buy a majority stake in T5 Data Centers that ultimately fell apart. In April, T5 secured an investment from QuadReal Property Group, the real estate arm of British Columbia Investment Management Corp.To contact the reporters on this story: Gillian Tan in New York at gtan129@bloomberg.net;Nabila Ahmed in New York at nahmed54@bloomberg.netTo contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net, Steve Dickson, Daniel TaubFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Bloomberg
U.S. Firms Steer Clear of Europe's Big Mobile Tower Sell-Off
(Bloomberg) -- European phone companies are selling their mobile masts and growth-hungry U.S. tower companies have money to spend -- it looks like a marriage made in heaven.Instead, firms like American Tower Corp. and Crown Castle International Corp. are largely staying away, making it easier for Spain’s Cellnex Telecom SA and infrastructure funds managed by Macquarie Group Ltd., KKR & Co. and others to sweep up the region’s tower assets.Their hesitation is driven partly by price: the global hunt for yield has driven up the premium for these assets, which offer reliable, steady income streams. Independent tower companies also won’t pay top dollar unless they see a path to significant revenue growth -- and that’s where they have a problem with Europe.“The American tower companies say, ‘OK, Europe is fine at the right price, but prices are not where we need them to be, so we think the opportunities elsewhere are more attractive,”’ said Nick Del Deo, senior analyst at U.S. research firm MoffettNathanson.Tens of thousands of European masts are expected to see ownership changes in the next two years as companies such as Iliad SA, Vodafone Group Plc and Telecom Italia SpA bring in new investors to reduce debt and share the heavy cost of rolling out 5G technology.But only a quarter are likely to end up with independent operators, according to TowerXchange. Vodafone and CK Hutchison Holdings Ltd. are creating separate units for almost 90,000 towers and the consultancy expects them to maintain control over those businesses. That’s a turn-off for independent companies, which try to maximize revenue by leasing mast space to as many network operators as possible.Many European carriers want to keep some hold on their towers because they see mobile infrastructure as a strategic asset that can help them manage costs and perhaps gain a competitive edge. They’re also mindful of what happened in the U.S., where operators rushed to sell their towers more than a decade ago only to find themselves stuck with a big bill for leases and capacity rights.Vodafone Surges on Possible IPO, Stake Sale of Towers UnitVodafone and Telefonica Ink 5G Terms in Move to U.K. Tower SalesNiel Agrees to $3 Billion of Phone Tower Sales to CellnexCK Hutchison to Separate Out European Phone Towers BusinessSelling full ownership of towers to independent players can spur innovation and reduce expenses by encouraging carriers to share infrastructure, avoiding costly duplication. European carriers’ insistence on maintaining control means the continent’s progress in rolling out 5G will likely continue to be slower compared to the U.S., where towers are largely in independent hands.“There is a risk that the European carriers go too far the other way,” Del Deo said. “The captive tower model, if you look globally, has never proven to be that effective.”For now, American Tower is mostly relying on building towers in Africa, Latin America and India for its international growth.Crown Castle didn’t respond to a request for comment on its future European asset bidding plans. American Tower declined to comment. Its chief executive officer, James Taiclet, told analysts last month that recent large European tower sales didn’t meet its bar for growth prospects and asset costs.Here are some other reasons why U.S. tower firms aren’t piling into Europe:Redundancy: Europe has more cases of towers operated by rival carriers sitting in close proximity. An independent owner may want to remove one to cut costs, but the tower often comes with a ground lease that they must keep paying for years.Less Potential: Europe has lots of rooftop antenna sites, which can’t accommodate as many customers as can a ground-based tower. Many European portfolios include broadcast towers in rural areas that may not be as valuable as mobile towers.Radio Emission Rules: In some countries, rules on maximum electromagnetic radio emissions limit the number of antennas a tower firm can install at a single site.\--With assistance from Scott Moritz.To contact the reporter on this story: Thomas Pfeiffer in London at tpfeiffer3@bloomberg.netTo contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net, Jennifer Ryan, Anthony PalazzoFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Motley Fool
ALL ORDINARIES finishes higher Wednesday: 8 shares you missed
The S&P/ASX 200 (Index:^AXJO)(ASX:XJO) and ALL ORDINARIES (Index:^AXAO) (ASX:XAO) finished higher on Wednesday.
- Motley Fool
This ASX 200 stock is a hot favourite among top brokers this month
This reporting season is testing the faith in investors looking to chase the market higher, but there’s one stock that’s found redemption through its profit results.
Australian Associated PressMacquarie Group flags $1b capital-raising
Macquarie Group has announced a $1 billion capital-raising to help it shore up recent investments and meet new APRA requirements.
- Motley Fool
ASX 200 lunch time report: Afterpay & HUB24 higher, Bellamy’s lower
Afterpay Touch Group Ltd (ASX:APT), Bellamy's Australia Ltd (ASX:BAL), and HUB24 Ltd (ASX:HUB) shares have been making a splash on the ASX 200 index on Wednesday...
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Macquarie shares in a trading halt after launching $1 billion capital raising
The Macquarie Group Ltd (ASX:MQG) share price isn't going anywhere today after the banking giant requested a trading halt so it can launch a billion dollar capital raising...
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How I would build a basic ASX growth portfolio
Xero Ltd (ASX: XRO) is one of the shares I would use for a basic ASX growth portfolio.
- Bloomberg
China AI Startup to File for Hong Kong IPO Soon Despite Protests
(Bloomberg) -- Chinese artificial intelligence startup Megvii is filing documents soon for a Hong Kong initial public offering that could raise as much as $1 billion, people familiar with the matter said, proceeding despite a market downturn spurred by pro-democracy protests across the financial hub.The owner of facial-recognition platform Face++ plans to submit an IPO filing to the Hong Kong Stock Exchange as soon as Friday, one of the people said, asking not to be named because the matter is private. Megvii declined to comment.Megvii is moving forward even as other companies pump the brakes on their Hong Kong listing ambitions, wary of months of protests that have gripped the city. Alibaba Group Holding Ltd., a backer of Megvii’s, is among those that are gunning for a Hong Kong listing but have held back to gauge investors’ reception.Megvii’s offering may face particular challenges. It would be the first in a coterie of Chinese AI companies to go public, raising money that would help further China’s effort to lead the sector by 2030. Donald Trump’s administration has raised the alarm about China’s ambitions in technology, which may erode the interest of U.S. money managers in the country’s AI startups."It’s a bit political," said Mark Tanner, founder of Shanghai-based research and marketing company China Skinny. “Trump’s big concern is that China has the aspiration to be the leader in AI.”Megvii’s filing will kick off the formal process for an IPO, though it could be months before its actual debut. Megvii competes with SenseTime Group Ltd. -- also backed by Alibaba -- in facial and object recognition technology and Internet of Things software.The seven-year-old outfit now provides face-scanning systems to companies from iPhone-maker Foxconn Technology Group to Lenovo Group Ltd. and Ant Financial, the payments giant that supports Alibaba’s e-commerce business. Its facial recognition technology has provided verification services to more than 400 million people, Megvii said in a statement in January.Beyond commerce, the company is also building software for sensors and robots. And the Chinese government is a client: Megvii’s AI technology has been used by authorities in more than 260 cities and helped police arrest more than 10,000 people, it said in January. The company last raised $750 million in a Series D financing round in May from investors including China Group Investment, ICBC Asset Management (Global), Macquarie Group and a unit of the Abu Dhabi Investment Authority. Its other backers include Boyu Capital, Ant, SK Group, Foxconn, Qiming Venture Partners and Sinovation Ventures.Megvii could have a first mover’s advantage."IPOs have been pretty disappointing in the past few months, but since AI is a hot category at the moment it could gain more traction," said Tanner.(Adds analyst comment in the fifth paragraph.)To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.netTo contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Edwin Chan, Vlad SavovFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Motley Fool
Top brokers say buy the Amcor share price crash
You don’t have to look far on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) for beaten up stocks missing market expectations, but some of these wrecks could prove to be a great buying opportunity.
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Top brokers uncover 2 key findings for the August reporting season
There’s good news and bad news when it comes to the unfolding reporting season with top brokers casting their vote on the state of the market and ASX company results.
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2 ASX shares I would buy for growth and income
Macquarie Group Ltd (ASX: MQG) is one of my ASX shares to buy for growth and income.
- Bloomberg
How an Obscure Rubber Company Became a Linchpin of Tech Industry
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. When Japan decided to step up its fight with South Korea last month, it dug deep into the supply chain to impose sanctions on three obscure materials made by a handful of Japanese companies few have ever heard of.The most powerful weapon in Tokyo’s campaign against its neighbor turned out to be a half-dozen or so niche firms with names like JSR Corp., Shin-Etsu Chemical Co. and Tokyo Ohka Kogyo Co. They make fluorinated polyimide, hydrogen fluoride and photo-resist: essential ingredients for the manufacture of the displays and semiconductors that go into every piece of modern consumer electronics, from Apple Inc. iPhones and Dell Technologies Inc. laptops to the full range of Samsung Electronics Co. devices. Japan prohibited the export of those materials, allowing an exception only if suppliers secure a license and renew that license regularly.How did they become so indispensable? And how did they manage to stay on top even after their Japanese clients ceded the chip and display markets to Taiwanese and South Korean rivals? The answer lies in a series of well-timed investments decades ago, combined with a willingness to explore foreign markets and an unceasing refinement of manufacturing standards too exacting for anyone else to try and match.“JSR is an interesting case in that they became big in photo-resists because they succeeded overseas first,” said Damian Thong, an analyst at Macquarie Group Ltd. “And much of this success was because of the strategy of one man — Mitsunobu Koshiba.”The JSR chairman’s story shows just how hard it would be for a newcomer to fill the shoes of one of these suppliers. Koshiba spearheaded the company’s pivot into photo-resists, a light-sensitive liquid used to imprint circuits as narrow as a few strands of DNA onto silicon wafers in a process called lithography. Gadgets keep getting slimmer, more powerful and cheaper because chip companies are able to etch ever smaller circuit patterns onto silicon. When it comes to the most advanced chip processes, JSR is one of the few that can deliver the goods.When 25-year-old Koshiba joined JSR in 1981, the company’s biggest business was still tire rubber. (The name is an abbreviation of Japan Synthetic Rubber.) As luck would have it, photo-resist at that time used resins that JSR had access to for its existing business, and the company saw an opportunity to break into a new growth industry. Japanese semiconductor makers were just beginning their rise to global dominance, and suppliers were positioning themselves to go along for the ride.The problem for JSR was it didn’t belong to any of the local keiretsu, a grouping of suppliers that receives preferential access to contracts. And the company was also up against Tokyo Ohka or TOK, the first in Japan to manufacture photo-resist. By the mid-1980s, TOK controlled as much as 90% of the domestic market.“As a neutral company without keiretsu affiliations, we had to look outside Japan,” Koshiba said in an interview, outlining JSR’s decades-long rise but declining to talk in detail about sensitive trade negotiations now underway between Tokyo and Seoul.JSR’s decision to get into that market was bold but Koshiba seemed like the right person for the job. He’d spent two years studying materials science at the University of Wisconsin-Madison on a Rotary Club scholarship, was one of the few English speakers at the company and was eager to work abroad. In 1990, JSR sent him to Belgium to set up a photo-resist joint venture with the country’s biopharmaceutical giant UCB SA. The goal was to target the American market.As timing would have it, JSR was going overseas just as Japan was approaching the peak of its semiconductor prowess. That same year, NEC Corp., Toshiba Corp. and Hitachi Ltd. were the world’s biggest chipmakers, pushing aside Intel Corp. and Texas Instruments Inc. Japanese firms occupied six spots in the industry’s top 10 ranking by revenue, a level of concentration that hasn’t been matched by any country since, according to IC Insights.Japan’s seemingly unshakable control of the computer memory market gave the country renewed national confidence. The mood was reflected in the book “The Japan That Can Say No,” in which right-wing politician Shintaro Ishihara and Sony Corp. co-founder Akio Morita argued for a more muscular foreign policy. In an eerie echo of recent events, the authors contended that the Japanese government had the power to determine the outcome of the Cold War just by directing its national companies to sell the chips used in intercontinental ballistic missiles (ICBMs) to the Soviets instead of the U.S.But the Cold War ended before that theory could be tested. Over the following decade, personal computers overtook ICBMs as the primary destination for chips and demand shifted to prioritize low unit costs over military-spec quality. By 2006, Samsung had risen to No. 2 on the list of the world’s biggest chipmakers, with Korean compatriot SK Hynix Inc. ranking seventh and only three Japanese names remaining among the top 10.For JSR, the turning point came in 2000. Koshiba, who was based in California at that time, recalls being dragged into an emergency meeting on a Sunday wearing a T-shirt and shorts. Word was a rival company was about to clinch an agreement with IBM for joint research on a next-generation photo-resist material. “Get it back,” he was told. Koshiba leaned on the network of American industry contacts he had spent a decade building, people who had known him through the worst of U.S.-Japanese trade tensions. Within a month, IBM signed with JSR.“Without that deal, we wouldn’t have gotten to No. 1,” Koshiba said.In lithography, the formula for shrinking transistors has only two levers: increase the light power or use a lens that lets more light through. Every time the chip process shifts to a higher-energy band of light, resist makers have to go back to the drawing board, opening up new opportunity. The research partnership with IBM ushered in the fourth such shift since integrated circuits replaced vacuum tubes in the 1970s, and JSR rode it all the way to the top.The company now commands about 40% of the market for the latest generation of resist used in mass production. It also supplies more than 30% of the photo-resist for 3D NAND, the most advanced flash memory chips, which are among the few product lines where Japan still competes with Korean rivals. In 2019, JSR is expected to generate about three times the revenue and five times the profit it did in the early ‘90s.What makes this business inaccessible to newcomers is the extreme degree of purity and quality demanded by customers. TOK says a single drop of coffee in two Olympic-sized swimming pools would be considered an unacceptable defect. JSR’s analogy is to a handful of tainted golf balls being enough to spoil a batch the size of the entire Japanese archipelago.In addition to being technically challenging, the markets these companies operate in are small and don’t promise fantastic growth. According to research firm Fuji Keizai Group, the industry’s sales rose just shy of 8% last year to $1.3 billion. Koshiba jokes that even the market for ramen noodles is bigger than that.“To recreate JSR, you basically need to spend as much as they did in the past 20 years on R&D and relationships, and also rebuild their reputation,” Macquarie’s Thong said. “These materials are used in such moderate quantities that to rebuild the whole infrastructure is probably not worth the investment.”And that’s the irony of the current situation. By stoking trade tensions, Japan may encourage its neighbor to subsidize competition to JSR and TOK that wouldn’t make sense under normal market conditions. It’s a matter of survival: Korean corporations now depend on Japan for over 90% of all the fluorinated polyimide and resists they need, and 44% of hydrogen fluoride requirements, Societe Generale estimates.Read more: Japan Grants South Korea Export License, Lessening Trade FearsFor the time being, JSR and TOK retain dominance over one prized material that keeps the consumer electronics industry ticking. According to South Korean Prime Minister Lee Nak-yon, Japan has approved exports of photo-resist for the next-generation of lithography currently under development by Samsung and Taiwan Semiconductor Manufacturing Co. But one of Japan’s last strongholds of tech industry domination may be under threat.“They have the engineers, and once national pride is involved they can possibly make it even if it loses money,” Koshiba said. “We don’t have an impregnable wall.”\--With assistance from Jason Clenfield.To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net;Yuki Furukawa in Tokyo at yfurukawa13@bloomberg.netTo contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Vlad Savov, Edwin ChanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Motley Fool
3 ASX dividend shares I would buy for 2020
Telstra Corporation Ltd (ASX: TLS) is one of the ASX dividend shares I would buy for 2020 and beyond
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Why I’d buy Macquarie shares over CBA shares at this share price
I would much rather buy shares of Macquarie Group Ltd (ASX:MQG) over Commonwealth Bank of Australia (ASX:CBA) shares at the current share prices.
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5 ASX dividend shares to solve your income needs in 2020
Scentre Group (ASX:SCG) is one of five dividend shares on the ASX that could solve your income needs in 2020...
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Why an inverted yield curve has investors worried the S&P/ ASX200 could crash
Bond investors are Turing gloomy on the global economy.
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Why I would buy Macquarie and these ASX dividend shares
The Macquarie Group Ltd (ASX:MQG) dividend and two others could be good options for income investors...
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What should you look for when investing in ASX blue chips?
Investing in ASX blue chips can be a tricky activity.
- Bloomberg
Reliance Surges Most Since 2017 on Ambani Plan to Slash Debt
(Bloomberg) -- Reliance Industries Ltd. soared the most in more than two years after billionaire Mukesh Ambani revealed a plan to sell a stake to Aramco as part of efforts to pare debt.The conglomerate aims to be a zero-net-debt company in 18 months, Asia’s richest man told shareholders Monday. Aiding that would be a proposed sale of 20% of Reliance’s oil-to-chemicals business to Saudi Arabian Oil Co. at an enterprise value of $75 billion. The company will also start preparing to list its retail and telecommunications units within five years, Ambani said.Shares of Reliance jumped as much as 9.3% in Mumbai on Tuesday, their biggest intraday gain since Feb. 22, 2017. Morgan Stanley, Macquarie Group and BOB Capital Markets were among brokerages that upgraded the stock.Aramco Buys Into Reliance Refining Business as Earnings DropThe tycoon is cleaning up the group’s finances following years of spending on his wireless carrier, whose entry in 2016 with free calls and cheap data upended the industry and spurred a consolidation. The $50 billion plowed into the phone venture, mostly in debt, has raised concerns among analysts including at Credit Suisse Group AG that Reliance’s ballooning borrowings could weigh on growth. Ambani sought to allay those fears.“With these initiatives, I have no doubt that your company will have one of the strongest balance sheets in the world,” he said. “We will also evaluate value unlocking options for our real estate and financial investments.” The group spent $76 billion in the last five years, he said.The Aramco deal should be completed by March and is subject to due diligence, definitive agreements and regulatory and other approvals, Ambani said. He didn’t say how the deal would be structured.Saudi Aramco and Reliance Industries have agreed to a non-binding Letter of Intent regarding a proposed investment in the Indian company’s oil-to-chemicals division comprising the refining, petrochemicals and fuels marketing businesses, according to a statement from Reliance on Monday.Signaling an end to the spending cycle at Reliance Jio Infocomm Ltd., Ambani is setting a new growth path for his group, whose bread-and-butter business has been oil refining and petrochemicals. The company is building an e-commerce platform by leveraging its phone network and Reliance Retail Ltd. to eventually take on Amazon.com Inc. and Walmart Inc.“This is a unique business model we are building in partnership with millions of small merchants” and mom-and-pop stores, he said. As part of the plan, Reliance has been forming partnerships and acquiring technology assets. This month, Reliance announced plans for a joint venture with Tiffany & Co. to open stores for the jeweler in India, and in May paid $82 million for the British toy-store chain Hamleys.The Tiny Deals Behind Mukesh Ambani’s Bid to Take on AmazonThe new businesses are likely to contribute 50% of Reliance’s earnings in a few years, from about 32%, Ambani said.What Bloomberg Intelligence Says“Reliance Industries could dominate the Indian telecom and organized-retail segments through aggressive expansion, capitalizing on its energy business. More than $7 billion in annual cash flow from the energy business provides a war chest to win market share in the retail and telecom industries”\--Kunal Agrawal, energy analystWhile the spending on Jio has helped Reliance lure almost 350 million users in the world’s second-biggest mobile market, the growth has come at a price.Not Since 2013Reliance had a net debt of 1.54 trillion rupees ($22 billion) at the end of March 31, according to Ambani. His plan to carry zero debt would mean the borrowings would fall below the company’s cash reserves to a level not seen since 2013.Last week, Credit Suisse cut its recommendation for Reliance’s stock and the price target citing reasons including rising liabilities and finance costs. Shares of the company pared their losses Tuesday after having earlier slumped about 18% from a record reached on May 3. The benchmark S&P BSE Sensex declined 4% in the same period.Reliance’s debt is backed by “extremely valuable assets,” Ambani said, signaling his group isn’t prone to the kind of troubles that have been plaguing many other corporate borrowers in India. The conglomerate controlled by Ambani’s younger brother, Anil, has been struggling to pay creditors while his mobile carrier has slipped into bankruptcy.Apart from the Aramco deal, Reliance also announced a joint venture with BP Plc this month, under which the European oil major would buy 49% of the Indian firm’s petroleum retailing business. Reliance would receive about 70 billion rupees under this deal.The “commitments” from the Aramco and BP deals alone are about 1.1 trillion rupees, Ambani said, adding that Reliance will induct “leading global partners” in telecom and retail units in the next few quarters.Some of the planned offerings revealed by Ambani:A new broadband service called Jiofiber will start commercial services from Sept. 5 and will be available at tariff packs starting as low as 700 rupees a month with a minimum speed of 100 MbpsJio will install across India one of the world’s largest blockchain networks in the next one yearAfter mobile broadband, Jio to start generating revenues from Internet of Things and broadband for home, businesses and smaller enterprises by March 2020Reliance is getting ready to roll out the new commerce platform at a larger scale to capture what Ambani sees as a $700 billion business opportunityReliance Retail aims to be among the world’s top 20 retailers in the next five years(Updates with stock upgrades in third paragraph)\--With assistance from Ari Altstedter.To contact the reporters on this story: P R Sanjai in Mumbai at psanjai@bloomberg.net;Dhwani Pandya in Mumbai at dpandya11@bloomberg.net;Debjit Chakraborty in New Delhi at dchakrabor10@bloomberg.netTo contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net, Bhuma ShrivastavaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Motley Fool
Brokers pick these 3 ASX stocks to buy amid the volatility
Investors remain on edge during this reporting season as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index tries to regain its composure after the brutal sell-off.
