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Morning Equities Wrap 5 June 2018

Australian Securities Exchange (ASX): The ASX has blamed human error for the failure of its fire safety system that caused an outage of its futures trading platform, with no clear indication yet when it will be back online. At 4.55pm AEST on Monday, the ASX first updated the connectivity status of its ASX24 futures trading platform to ‘‘critical operational issue’’. It confirmed it was still investigating the accidental triggering of the fire system at its Gore Hill data centre, and its impact. The ASX ruled out a cyberattack and said that customers should assess their production infrastructure and recovery requirements, reports AFR;


BUBS Australia (BUB): Infant formula company Bubs Australia is targeting a fivefold increase in what is already the nation’s biggest milking goat herd to meet specialty product demand from Chinese families. Bubs founder and managing director Kristy Carr said it wanted to grow the herd from about 8500 milking goats to 50,000 and to lock in exclusive supply deals with other farmers. The herd increase will underpin Bubs’ aggressive strategy to emulate the success of bigger players in infant formula, including ASX-listed A2 Milk and Bellamy’s, by tapping into the evolving supply chain and the premium market segment, reports AFR;


Commonwealth Bank of Australia (CBA): Commonwealth Bank of Australia has been told to accelerate plans to overhaul its procedures after reaching a record-breaking $702.5 million settlement with the financial intelligence regulator AUSTRAC for 53,750 breaches of the law, involving money laundering by criminals. There is more pain to come for the Commonwealth Bank, with the fine for reporting failures leaving it vulnerable in the face of a pending class action by shareholders. A sticking point will be whether Maurice Blackburn can make the case that the scandal had a ‘‘material effect’’ on the shares, which fell 5.4 per cent in four days. Commonwealth Bank’s share price has bounced about 1.5 per cent – or $1.8 billion in market capitalisation terms –following news that it has settled the AUSTRAC money laundering litigation for $700 million, reports AFR;


Flow Power: Growing business power retailer Flow Power is extending its green power offering to include solar power in a move that managing director Matthew van der Linden said will ensure lower costs and reduced risks for customers. Flow Power has signed up to buy a quarter of the output of a new 200-megawatt solar farm being built in rural Victoria by Total Eren through to 2030. The $90 million Kiamal solar venture last week also sealed a direct electricity sales contract signed with confectionery maker Mars Australia and has an earlier offtake agreement with Meridian Energy, reports AFR;


Kogan (KGN): Competition between online retailer Kogan.com and giants JB Hi-Fi and Harvey Norman is set to intensify, with Kogan announcing plans to push into white goods and kitchen appliances. Kogan.com founder and chief executive Ruslan Kogan said on Monday the sector was ‘‘ripe for the picking’’. His company has signed supply and logistics agreements with unnamed players and should be selling fridges, washing machines, dryers, dishwashers, ovens and cooktops by the end of the calendar year. The products will be sold under the Kogan.com brand. Mr Kogan said he had secured supply agreements with ‘‘leading players in this space’’ and would use its existing third-party logistics providers to get the goods into the market, reports AFR;

Montem Resources: Following Riversdale Resources’ strategy of an IPO collection of Canadian coking coal assets is its competitor Montem Resources. Montem’s CEO Peter Doyle will begin talking to institutional investors next week for a non-deal roadshow. Montem's current focus is to restart the shuttered Tent Mountain mine in Alberta, Canada, with aims to be selling coal to Japan and North Asia by 2020. As Aurizon warns to reduce the amount of Australian coal that can travel down its railways to port, North Americans are evolving as the contingency suppliers to steel mills in Asia.


Myer (MYR): April retail sales figures have underlined the challenge ahead for new Myer chief executive John King. While retail sales rose 0.4 per cent in April, an improvement on flat sales in March, spending fell sharply at department stores (down 0.9 per cent) and in clothing, footwear and accessories (down 0.8 per cent). Annual spending at department stores was down 3.7 per cent – the worst outcome in 18 months – reflecting the 3.4 per cent fall in sales at Myer in the nine months ending April, reports AFR;


Qantas (QAN): Qantas chief executive Alan Joyce said the airline is exploring all avenues to digest rising jet fuel costs and minimise increases to airfares. Mr Joyce said Qantas’ fuel bill is expected to jump $200 million in 2017-18 and while increasing airfares is one way the airline can recoup the extra cost, it is also turning to technology and carefully managing weights on aircraft and carbon dioxide emissions to help minimise fuel consumption. It comes as Qantas is in extensive discussions with both Boeing and Airbus to build an aircraft which would allow non-stop flights from the east coast of Australia to London and New York – roughly 21-hour trips, reports AFR;


Seek (SEK): Workplace training marketplace GO1 has signed a major deal with the country’s largest jobs platform, SEEK, that will connect job seekers directly to short courses required to apply for a new role. It is the second major partnership for the Brisbane-based start-up, one of a handful of local companies to have graduated from the well-known US accelerator program Y Combinator, having also secured a deal with New Zealand-based Totara last year. It was estimated that this deal would lead to a $50 million revenue boost for the business within a few years, and GO1 chief executive Andrew Barnes said it was in line with its original estimates, reports AFR;


Sirtex Medical (SRX): The Sirtex Medical board has a tough call to make in coming weeks: back a higher, more complex takeover offer by Chinese private equity firm CDH Investments or go with the more secure, lower offer from a US trade player, Varian Medical Systems. There is a lot to weigh up over the merits and risks of each bid, not just the cash price per share of $33.60 and $28, respectively, reports AFR;

Vicinity Centres (VCX): Vicinity Centres, the country’s second largest retail landlord, has dramatically escalated its strategy to fortify its trophy assets, with a plan to sell off $1 billion in smaller malls in the next six months. Now led by Grant Kelley, Vicinity will direct the proceeds into bolstering and redeveloping its remaining portfolio which includes a half stake in Australia’s biggest mall, Chadstone shopping centre in Melbourne’s south-east. Chadstone, now boasts $2 billion in annual sales turnover and, Mr Kelley noted, is the prime case in point with its specialty sales metrics increasing each time more capital is invested in its development, reports AFR;


Westpac (WBC): Westpac Banking Group has accelerated moving all of its core banking applications into the cloud, after flicking the switch on a new private cloud environment it says will make its development 10 times faster and three times cheaper. The development is a major milestone in the 5 digital transformation and means the bank stands to save millions of dollars in technology costs each year and have the ability to create new tech products much faster. Systems moving into the cloud include regulatory apps, all the work it is conducting in preparation for open banking and also the customer service hub, which forms a huge part of the bank’s plan to work more personally with customers. Westpac’s new private off-site cloud is based on SoftLayer technology from IBM, and is housed in two Sydney data centre, reports AFR;


Woolworths Group (WOW); Coles Group Limited (CGJ): A new front has developed in the battle between Coles and Woolworths as both chains rush to implement ambitious new environmental and sustainability targets amid growing pressure from customers to cut down on waste. Chief executive Brad Banducci plans to remove 3.4 billion single-use plastic bags from stores and home deliveries by June 20, install recycling bins in all 1000 stores by June 30 and reduce plastic packaging on fruit and vegetables and in private label products, which account for 15 per cent of sales. Coles managing director John Durkan announced similar targets, pledging to phase out single-use plastic bags on July 1, halve food waste across grocery stores by 2020, make all packaging of Coles Brand products recyclable by 2020 and reduce plastic wrapping on fruit and vegetables, reports AFR.