Income Report / Stand out of the week 11th December 2013

By Market Matters 11 December 13

Stand out of the week 11th December 2013

The landmine of the week?
  • It is unfortunately a current strong reflection on the Australian stock market when the "Standout of the week" has become the land mine of the week.
  • After going into a trading halt last week on the request of the QBE board, the disastrous news hit the wires on Monday morning.
  • QBE had increased its North American claims provision and wrote down the North American goodwill, identifiable intangibles and other assets.
  • QBE are now predicting a net loss of $250m for FY13.
  • This has been especially disappointing to all investors; particularly with QBE not meeting it’s fully year guidance for the 4th year running.
  • On the first day alone, QBE wiped off $4.2b from investors wealth alone.
  • As trading resumed this week, QBE dropped to a low of $10.53 (-31.8%) with investors yesterday panic selling and some margin selling appearing evident.
  • Last night, Moody’s lowered QBE’s issuer and senior unsecured debt ratings from Baa1 to Baa2 in a reflection of its current balance sheet.
  • We view this stock to be a long term buy technically, and fundamentally, on risk reward basis but patience is likely required and some $$ left if it spikes into the mid $9 region to average the position.

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