Trapped on a long and stomach-churning ride

AS REPORTING season draws near, the prospect of a further sharemarket mauling is growing - and not just on the results for the latest financial year, which are about to be unveiled.

Macquarie Equities says that, while forecasts for 2007-08 have already been downgraded to incorporate most of the bad news expected, there is still plenty of room for grief when it comes to the outlook for 2008-09.

"Despite the downgrades seen already, our analysis suggests that the forecasts are expecting operating margin expansion to come from domestic, mid-size and cyclical stocks at a time of a sharp slowdown in the local non-resource sector," the broker said, citing stocks like Qantas, Seven and David Jones.

Macquarie said forecast earnings-a-share growth in 2008-09 of more than 10 per cent meant that "downgrades will still be potent".

Stalled again

With the current roller-coaster ride on the market, it is safe to assume that only the bravest and most desperate would seek to sell new shares. Which obviously does not apply to carsales.com.au, the automotive site 49 per cent owned by PBL Media.

Having just posted a 58 per cent rise in earnings to 8.2c a share for the year to June, on $71.9 million in sales, the site's managing director, Greg Roebuck, hinted to Xchange that the long-touted listing of the company may be postponed yet again.

Australia's biggest car site was first expected to float in May or June, then the timing was pushed out to September or October. Yesterday, Roebuck said the company would be looking for a market rebound and three months of lower volatility before going ahead.

With a lot of the work done already, the site could be listed very quickly. He said this calendar year was "still achievable", depending on market conditions, but was quick to concede that it sounded a tad optimistic given current declines.

On the earnings front, he said carsales.com.au had yet to feel a downturn from the slowing economy and high petrol prices. The site had benefited from the continuing migration of ads to the internet, the demand for used and smaller, fuel-efficient vehicles and companies filling up their corporate car parks with luxury cars before the end of the financial year.

Copping out of copper

At a time when most zinc miners are more than happy to add higher-margin copper production, Perilya has decided to put its Mount Oxide copper project up for sale.

The struggling Broken Hill miner said yesterday it had already received "a number of expressions of interest" from local and overseas companies for the 200,000 tonne copper resource, near Mount Isa.

The most obvious buyer would be its mining neighbour Aditya Birla, but its management has not exactly inspired the confidence of the market with its decisions of late.

Another logical buyer would be CopperCo, particularly if it was able to use the processing method it uses at its nearby Lady Annie operation at Mount Oxide.

An industry source said Mount Oxide could fetch about $30 million. Perilya shares closed 2c lower at 55c yesterday, down from $4.48 this time last year.

Disaster upstaged

You have to hand it to the British banking duo heading up our second and fourth biggest banks. As the past few days have proved, one good turn deserves another.

Certainly the Scottish-born John Stewart of National Australia Bank had an excellent reason to thank the English expatriate Mike Smith over at ANZ for taking the market heat off him and his hard-pressed institution.

Stewart was looking at his stock price taking another hammering yesterday following news on Friday of NAB's $830 million write-off of investments exposed to the US subprime crisis.

But ANZ trumped that with a profit warning and $1.2 billion provisions of its own before the market opened - conveniently switching investors' focus from one financially stretched Melbourne bank to the other.

Welcome as the move away from the spotlight was, it did not save NAB from the negative attention of a flurry of analysts' reports.

Macquarie was the most critical. It admitted it had been "wrong" to upgrade the stock last week and downgraded it to "underperform", with a $24.78 price target incorporating a 20 per cent "risk discount" against fair value.

Harsh as some of the brokers were, NAB could at least take some comfort from the view expressed by some that it had copped the latest losses on the chin without taking the axe to the second-half dividend.

It also earned a plaudit or two for ruling out some of the potential acquisitions to which its name had been appended - like ABN Amro's Australian business and a JP Morgan-led consortium aimed at bidding for the British bank HBOS and its Australian offshoot, BankWest.

Nonetheless, analysts such as Ross Brown at Deutsche Bank were disappointed the additional provisions had followed so quickly on the first tranche in May, when NAB said it had taken a "conservative" approach to such charges.

And while Deutsche reckons exposures to collaterised debt obligations (CDOs) made up of mortgage-backed securities are now basically ring-fenced, it remains concerned about possible provisions on NAB's $4.5 billion worth of corporate securities.

These are a lot less risky than the CDO portfolio, but Deutsche estimates a 10 per cent hit - $450 million - is possible.

Not surprisingly, the investment bank has cut its performance target from $37 to $33, which still requires a leap of faith given the weaker outlook for earnings in 2009.