In today’s daily we have covered stock research onJames Hardie (Expensive). 

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The S&P 500 was up by 9.90points or 0.50%on Tuesday.  U.S. stocks ended Tuesday's session higher as some positive earnings and economic data boosted stocks, with the S&P 500 at one point hitting an intraday record. After the market closed, Apple Inc reported third-quarter earnings that topped expectations, though revenue missed forecasts. Herbalife Ltd. shares surged the most since trading began in 2004

ARM Holdings Plc jumped 7 percent, the chip designer whose products power Apple’s iPhone and iPad. Intel Corp., the world’s biggest maker of semiconductors, rallied 2.1 percent for the biggest gain in the Dow, while Apple added 0.8 percent. The CBOE Vix index, closely watched as a guide of risk aversion was down 6.8%. In Europe the FTSE Eurofirst 300 index rallied 1.3% while the Nikkei 225 rose 0.8%.



Intel Daily Chart (Source – Thomson Reuters)
  

S&P ASX 200 was up by 3.4points or 0.06%on Tuesday and closed at 5543.3 points. Hutchison Telecommunications (HTA) reported a loss of $79.5 million loss for the half year ended 30 June 2014 compared with a loss of $95.8 million in the corresponding period last year. Transfield Services (TSE)  has extended $145 million worth of contracts in social services.  Macquarie Atlas Roads (MQA) have increased their average toll revenue for the quarter ending June 2014 by 4.2%. 

Australia's seasonally adjusted unemployment rate increased by 0.1 percentage points to 6.0 per cent in June 2014, as announced by the Australian Bureau of Statistics (ABS). The top two performers on the ASX 200 were Lynas Corporation (LYC – 6.25%) and G8 Education (GEM – 5.64%). To read our latest report on G8 Education – Click Here. Zinc hit a three-year high and aluminium touched a 16-month peak.


Lynas Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 









Stock of the Day – James Hardie  (JHX)

The US Census May construction data showed total privately owned building permits at a seasonally adjusted $991,000, down 6.4% month on month and 1.9% below May 2013. However within this single family permits at 619,000 were up 3.7% month on month. The South US region, followed by the West region, remain the two key drivers of population growth for the US and are also the areas of current highest fibre cement penetration. Both regions have seen some softness in forward indicators over 2014.


JHX Regional Segments (Source – Company Reports)

James Hardie announced a strong fiscal 2014 result and importantly has good exit momentum heading into fiscal 2015. Full year fiscal 2014 adjusted net profit after tax or NPAT of USD 197.2 million was up 40% on fiscal 2013 and ahead of average market estimates around USD 190 million guidance range.  Fourth quarter NPAT came in at USD 45.3 million up 48% on the prior corresponding period.


JHX Plant Locations (Source – Company Reports)

We are becoming more optimistic on James Hardie’s earnings outlook. The operating environment is increasingly supportive of further U.S volume growth and margin expansion. We continue to believe James Hardies unique technological advantage and sole focus on fibre cement gives it a portfolio of superior products and cost advantages. While an attractive one product business we reiterate the inherent earnings uncertainty in all building material companies which are at the mercy of housing construction activity.


JHX Daily Chart (Source – Thomson Reuters)

James Hardie is too exposed to the US economy. This is particularly pertinent given the depth and duration of the current housing cycle. The funding of asbestos liabilities will not allow the company to grow at its normal rate with 35% of annual cash flow to be used to fund liabilities. While there is some evidence of pricing pressure in generic fibre cement in the US, the company’s growing differentiated product range coupled with low cost producer status protects the competitive position. We believe the stock is expensive at its current price and would review the stock at a later date.

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