Cairn India - Factoring in lower crude oil forecast; maintaining Hold [Harshad Katkar]
Deutsche Bank has lowered its oil price forecast by 4-6% on weaker oil demand, resulting in a reduction to Cairn India’s FY14-15E EPS by 4-7% and valuation by 7% to INR330/sh. We have also lowered our Rajasthan oil production forecast by 9% to 184k bpd for FY14 and 6% to 207k bpd for FY15, but raised our USD/INR assumption by 2% to 55 for FY14 and 53 thereafter. We maintain a Hold, as we see near-term challenges to a faster crude oil production ramp-up.
Oil & Gas - ONGC and Oil India acquire stake in Mozambique gas block for USD2.5bn [Harshad Katkar]
ONGC Videsh (OVL), fully owned subsidiary of ONGC, and Oil India (OIL) have signed definitive agreements with Videocon to acquire its 10% participating interest in the Rovuma Area 1 Offshore Block in Mozambique for USD2.475 bn. The acquisition will likely be implemented via a newly incorporated special purpose vehicle with OVL and OIL having 60% and 40% shares respectively.
Metals & Mining - Increase in iron ore royalty to 15% under consideration [Anuj Singla]
An Indian government panel has recommended a 5% increase in iron ore royalty (charge paid by mine owner/lessee to the respective state government for every tonne of mined mineral), as per Bloomberg reports. In case this proposal was to be implemented, it will increase the royalty rate for iron ore miners to 15% from 10% earlier. The panel’s report will need the approval of the mines ministry as well as Cabinet approval before the new proposed royalty rates become effective.
Indraprastha Gas - Pricing power reasserted, but we expect volumes to disappoint [Amit Murarka]
IGL has increased the selling price of compressed natural gas (CNG) by INR2/kg (5%), effective today. The new consumer price is INR41.9/kg in Delhi and INR47.35/kg in Noida, Greater Noida and Ghaziabad. The company has also raised domestic piped natural gas (PNG) price by 4% to INR24.5/scm for consumption upto 30scm in two months and by 14% to INR40.5/scm for consumption beyond 30scm.
Commodities Quarterly - Searching For Value [Michael Lewis]
We expect the DBLCI-MRE will prosper in the event of an eventual upturn in Chinese and US growth while a turn in Fed policy and heightened asset market volatility should provide favourable market conditions that the DB Momentum index can exploit.
US Daily Economic Notes - The spring is coiled, as we are due for some meaningful payroll volatility [Joseph LaVorgna]
Changes in monthly nonfarm payrolls have shown very little variation over the past couple of years. For example, last month nonfarm payrolls rose 175k. This was little different than its trailing three-month moving average of 163k, which itself was not statistically different from the 12-month moving average of 137k. Incidentally, all of our analysis uses the initially-reported change in nonfarm payrolls.
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Deutsche Bank has lowered its oil price forecast by 4-6% on weaker oil demand, resulting in a reduction to Cairn India’s FY14-15E EPS by 4-7% and valuation by 7% to INR330/sh. We have also lowered our Rajasthan oil production forecast by 9% to 184k bpd for FY14 and 6% to 207k bpd for FY15, but raised our USD/INR assumption by 2% to 55 for FY14 and 53 thereafter. We maintain a Hold, as we see near-term challenges to a faster crude oil production ramp-up.
Oil & Gas - ONGC and Oil India acquire stake in Mozambique gas block for USD2.5bn [Harshad Katkar]
ONGC Videsh (OVL), fully owned subsidiary of ONGC, and Oil India (OIL) have signed definitive agreements with Videocon to acquire its 10% participating interest in the Rovuma Area 1 Offshore Block in Mozambique for USD2.475 bn. The acquisition will likely be implemented via a newly incorporated special purpose vehicle with OVL and OIL having 60% and 40% shares respectively.
Metals & Mining - Increase in iron ore royalty to 15% under consideration [Anuj Singla]
An Indian government panel has recommended a 5% increase in iron ore royalty (charge paid by mine owner/lessee to the respective state government for every tonne of mined mineral), as per Bloomberg reports. In case this proposal was to be implemented, it will increase the royalty rate for iron ore miners to 15% from 10% earlier. The panel’s report will need the approval of the mines ministry as well as Cabinet approval before the new proposed royalty rates become effective.
Indraprastha Gas - Pricing power reasserted, but we expect volumes to disappoint [Amit Murarka]
IGL has increased the selling price of compressed natural gas (CNG) by INR2/kg (5%), effective today. The new consumer price is INR41.9/kg in Delhi and INR47.35/kg in Noida, Greater Noida and Ghaziabad. The company has also raised domestic piped natural gas (PNG) price by 4% to INR24.5/scm for consumption upto 30scm in two months and by 14% to INR40.5/scm for consumption beyond 30scm.
Commodities Quarterly - Searching For Value [Michael Lewis]
We expect the DBLCI-MRE will prosper in the event of an eventual upturn in Chinese and US growth while a turn in Fed policy and heightened asset market volatility should provide favourable market conditions that the DB Momentum index can exploit.
US Daily Economic Notes - The spring is coiled, as we are due for some meaningful payroll volatility [Joseph LaVorgna]
Changes in monthly nonfarm payrolls have shown very little variation over the past couple of years. For example, last month nonfarm payrolls rose 175k. This was little different than its trailing three-month moving average of 163k, which itself was not statistically different from the 12-month moving average of 137k. Incidentally, all of our analysis uses the initially-reported change in nonfarm payrolls.
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