BHP heads risers with weaker Australian currency giving cost benefitsLeading shares have moved sharply higher on hopes that a solution to Greece’s financial troubles can be found, while mining groups have been boosted by an Australian interest rate cut.BHP Billiton is 75.5p better at 1559.5p after the Reserve Bank of Australia reduced its cash rate by 25 basis points to a record low of 2.25%, to help lift its economy and keep a lid on the Australian dollar. A weaker currency benefits BHP in terms of its cost base in the country, and is also helpful to Rio Tinto, up 101p at £30.62.The positive open comes from more accommodate central bank moves with the Royal Bank of Australia unexpectedly cutting rates to a record low while oil posted further rises and optimism rose regarding a Greek solution to its debt woes.Assets under managment at £323.3bn were fractionally lower than our forecast £325bn, due to slightly weaker than expected net flows in most parts of the business (excluding Scottish Widows, where flows were marginally better). In particular the company highlighted that it had a difficult December, especially within EM equities and debt, contrasting with what it saw as an “encouraging” October/November. Management say that January flows have returned to more “normal” levels. Overall, despite this being an at the margin a little disappointing statement, we do not expect it to have any material impact on our current forecasts or view of the company, reflecting the materiality of the difference and management comments attributing it mainly to a difficult December. Delaying $65m of imminent debt and interest payments until the end of February gives Afren time to continue its discussions with Seplat over a possible merger, its largest bondholders on immediate funding needs and potential investors interested in recapitalising the business.At this point, we believe a positive outcome for equity holders rests on Seplat (or an alternative acquirer) being willing to assume the debt at face value and place some value on the equity to take control of the business as a going concern. Continue reading...
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