In an update on coal fundamentals and BTU's positioning, CEO Greg Boyce cites a fundamental mismatch in early reporting regarding China's new coal quality policies relative to the emerging view of its likely beneficial effects on Australian high-quality coal exports.
Still, Credit Suisse is not ready to embrace the steel company revival, at least when it comes to AK Steel (AKS -4.8%), whose self-help story has less scope for upside surprise than US Steel (X +0.2%); one obvious contrast is that X is looking at shutting down blast furnace steelmaking capacity in North America, while AKS is buying more of it.
That's hard to believe given single-family housing starts are on a pace of 622K this year, after 618K a year ago - a far cry from the pre-bubble average of 1.1M in the 1990s. Trouble is, says Kelko, the historical norm doesn't say what the level of construction should be now. Instead, look at the rate of household formation.
If housing starts run ahead of the rate of household formation, homes sit empty and vacancies rise, and that's just what the latest data from the Census Bureau shows. As opposed to multi-unit rental market where vacancies are falling. Even with an increase in single-family rentals, the overall single-family vacancy rate ticked up to 10.7% in 2013 from 10.6% a year earlier, and vs. 7.4% in the pre-bubble days of 2000.
For single-family vacancy rates to get back to normal, even household formation needs to increase or housing starts need to slow. In the meantime, it will be multi-family activity needing to lead the construction recovery.
Separately, the former head of Goldman's housing research team says home prices are 12% overvalued today and have already started to slide. "I am lamentably confident that home prices will fall by 15% within three years."
Apple's decision to double the storage capacities of its higher-capacity flagship iPhone models to 64GB and 128GB will have a "big long-term impact" on NAND flash suppliers, declares Morgan Stanley's Joseph Moore.
Moore, who is reiterating an Overweight and $115 target on SanDisk (SNDK +2.9%), suggests Apple's move will have a spillover effect on Android hardware, and ultimately provide "a long awaited source of demand elasticity, without major price declines."
SanDisk is rallying on a good day for chip stocks. Shares fell in July after the company provided a soft gross margin outlook believed to stem from major volume discounts provided to Apple.
Moore upgraded SanDisk two weeks ago, while arguing NAND pricing could remain healthy for longer than expected.
Mercurial SinoCoking Coal (SCOK -28.2%) plunges after agreeing to sell to investors ~2.82M shares at $5.10 each, to be issued on the initial closing of an offering to include Series A warrants to purchase ~1.41M common shares and Series B warrants.
SCOK expects the initial offering of ~$14.3M in gross proceeds will close on or before Sept. 23.
Although all three - American Campus Communities (ACC -1.3%), Campus Crest Communities (CCG -1.2%), and Education Realty Trust (EDR -1.1%) - have performed broadly in line with the broad REIT universe, the trio consistently score low in the Markit REIT model.
Said model ranks REITs on things like balance sheet strength, operational strategy, and price momentum, and those ranking near the bottom have underperformed the REIT sector by more than 25% over the past five years. CCG and EDR have typically been in the worst-ranked group, and ACC has recently joined them, mostly thanks to the stock price's premium to NAV.
Another red flag (or buying signal depending on how you look at it): The shorts are circling, with short interest up 41% YTD, particularly at EDR, where the ratio of shares on loan has jumped six-fold this year as of the end of July.
RBC drops the bull case on Denbury Resources (DNR -1.9%) and Southwestern Energy (SWN -1.1%), downgrading both to Sector Perform from Outperform.
The firm thinks DNR’s relative upside is more in-line vs. peers, as “the market will remain more focused on peers that provide higher near-term growth optionality from unconventional oil resource plays.”
As for SWN, RBC notes that its core operations are located in the Fayetteville and Marcellus shales, both of which will have restricted production growth in the near-term.
Oi (OIBR +2.6%) plans to sell its 75% stake in Africatel, a holding company for carriers in Angola, Namibia, and other African markets, following a dispute with Helios Investors (owns the remaining 25%).
Bloomberg reports Oi values Africatel, which it obtained through the Portugal Telecom deal, at $2.1B; that implies a $1.6B valuation for its stake.
The Brazilian carrier has been looking to pare its debt load - net debt stood at $20.3B at the end of Q2 - and has also reportedly been looking to acquire a stake in Telecom Italia's Brazilian unit. TI, in turn, has been rumored to be weighing an acquisition of Oi.
H.C. Wainwright's Kevin Dede: "We are initiating coverage of Novatel Wireless (NVTL +3.6%) with a Buy rating and setting a conservative $4 price target that we may be raising sooner rather than later."
Dede is pleased with Phillip Falcone's recent investment in Novatel, and notesthe deal requires "interim" CEO Alex Mashinsky to stay on board for at least 3 years. He's also upbeat about the long-term potential of the M2M modem market.
Peer Sierra Wireless (SWIR +2.3%) is also having a good day.
Hercules Offshore (HERO -12.5%) plunges to its lowest intraday price in almost three years after disclosing it had idled another vessel, the sixth out of its fleet of 18 in the Gulf of Mexico.
HERO likely will park two more rigs in the region next week as they roll off contract, Cowen analyst J.B. Lowe says, adding that the drop-off in Gulf of Mexico demand has been worse than expected and activity is set to stay depressed through end of hurricane season; he cuts HERO's stock price target to $4 from $6.
As recently as May, HERO had 15 of its rigs working with another three out of service for regular inspections or upgrades.