Energy prices wouldn’t be dampened by the prospect of a return to Cold War hostilities between Russia and the West.
The Australian newspaper reports that President Medvedev told anyone that would listen that Russia is “…not afraid of anything, including the prospect of a Cold War.”
If that doesn’t help to keep crude oil priced well above USD$100 a barrel we’re not sure what will.
Oiled Up
Woodside’s [ASX:WPL] half yearly results were released late yesterday morning returning a revenue increase of 45% to $2.6 billion. Profits tipped the scale at $1 billion thanks to an increase in volumes and higher commodity costs.
The only cloud on the horizon for Woodside is a windfall tax on gas condensate that is expected to reap the government a total of $2.5 billion in additional tax revenue – not all of it will be levied at Woodside of course.
Needless to say, it is the end consumer that will end up picking up the additional tax cost as it would seem unlikely that Woodside or any of the other gas condensate producers will simply absorb the cost.
A Tale of Two Tollways
Following on from yesterday with our comments about the RiverCity Motorway Group [ASX:RCY] in Brisbane, it was interesting to see the ConnectEast Group [ASX:CEU] results as well. ConnectEast operates the EastLink toll road which stretches between Mitcham in Melbourne’s east and the bayside suburb of Frankston. It also links up with the Eastern, Monash and Frankston freeways.
The major difference between EastLink and RiverCity Motorway is that the first one is now open for business and charging motorists to use it, while the latter is still at least two years away from completion.
Yet the market has so far greeted the opening of EastLink with nothing short of disappointment. Amazingly, analysts at broking firms seemed to be surprised that once the one month free trial to use the tollway ended that traffic numbers halved.
You don’t need to be an Einstein to work that that was going to happen. So is it a reason to sell ConnectEast shares, or is it a buying opportunity?
We still remain skeptical about the massively debt ridden business models of some of these large infrastructure companies, and there is little doubt that ConnectEast has a large interest bearing debt to service of over $2 billion.
But if you were intent on investing in a tollway, investing in one that is now achieving revenues probably makes more sense that investing in one that is still a couple of years away from completion.
Not So Big Macq
Yesterday broking firm and investment bank UBS cut its price target for Macquarie Group [ASX:MQG] to $48 from $60. Investors took to their heels and dumped the stock in their droves.
Macquarie shares closed down by nearly 10% on the day. Today, perennial Macquarie fan, JPMorgan analyst Brian Johnson begged to differ and raised his target on the bank to $72.83 from $71.49.
Not that it really makes much difference. Setting such specific price targets for a share price is pretty meaningless. The most important issue for investors is whether the share price is going to rise from this point, by how much and when.
Both UBS and JPM suggest the share price is going to rise, but then they have both stated that while the share price has continued to fall!
Macquarie may not have the same exposure to leveraged funds that Babcock & Brown [ASX:BNB] has, but it is still being dragged down nonetheless. It is going to take a complete cleanout of this sector before investors can start to have any confidence in companies that have any association with leveraged infrastructure funds again.
QGC Puts Its Foot on the Gas
In the seemingly long list of positive profit results for energy companies, Queensland Gas [ASX:QGC] was no exception this morning.
There were increases across the board for reserves, cash, sales, revenue and profits.
And looking ahead, QGC insisted that the outlook for FY2009 “was excellent.”
Cheers.
Kris
