A Cliffhanger




Japan’s estimated economic quarterly growth in the three months to March was revised down to 0.3% from an initial 0.5% estimate.  Expectations had been for a modest upward adjustment to 0.6%. Year-on-year growth in the first quarter came in at 1% versus the initial estimate of 2.2% and expectations for an improvement to 2.4%. The downward revisions were driven by weak private consumption growth and residential investment.

Still, this did not stop the Japanese banks from surging yesterday. Banks we hold in the Asian and Global Managed Accounts and the Fat Prophets Global Contrarian Fund (ASX:FPC) were all higher with Bank of Kyoto lifting by 3%. Despite disappointingly low inflation data, Japan’s bond yields have risen (which helps the banks) and the Bank of Japan remains committed to its monetary stimulus program which is unlikely to change anytime soon. We also saw another day of good performance from the Macau Casino stocks with MGM China rising by 3%.

Bank of Kyoto

This is a stock chart for Bank of Kyoto

Auto Trader released full year results. The UK’s leading car listing website increased revenue by 9% in the year to March 2017 to £311m. The operating profit margin improved to 67% from 61% due to a 7% decline in costs. Diluted earnings per share jumped by 22% to 15.6p and the full year dividend came in at 5.2p.  Turning to the balance sheet and the net debt to EBITDA ratio improved to 1.6X from 2.2X at the start of the year.

Auto Trader instigated a share buy-back programme during fiscal 2017 with about 2.63% of the shares on issue acquired. The group’s policy is for the majority of surplus cash, after dividends, to be spent on buy backs. This sends a good message to the markets and the Board reiterated that it was confident that “growth targets would be achieved”.

Despite the result, Autotrader fell back by 3% at the close to 418p with investors concerned that the UK new car market will plateau or decline this year. The used car market, Auto Trader’s main area of focus, is however expected to continue to grow. Auto Trader is also continuing to enhance its platform with basic advertising packages now of higher quality.  This will help to enhance the purchasing experience and should help continue to grow average revenue per retailer (ARPR). We hold Autotrader in our UK and Global Managed Account portfolios as well as the Fat Prophets Global Contrarian Fund. After a lengthy consolidation, Autotrader is in the final stages of clearing resistance and we expect the stock to shortly resume trending to the upside.

This is a stock chart for Autotrader

Disclosure: The Fat Prophets Contrarian Fund declares a holding in Bank of Kyoto, MGM China and Autotrader.

Carpe Diem!

CEO | Fat Prophets
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