Ind-Ra: Health Care Sector's Earning Drivers Leading to Continued Capex

India Ratings & Research (Ind-Ra) has a stable outlook on the health care sector and all its rated sector companies for FY15. The agency believes growth in the sector will continue to be driven by the wide gap between demand and supply in health care services. Key drivers for demand are increasing lifestyle-related health problems, the sector's immunity to economic cycles, improving health insurance penetration, increasing awareness and disposable income. The sector's growth is also likely to be boosted by continuing government initiatives and increasing medical tourism in the country. 

The industry is attracting investments towards health services (hospital beds) and the allied industries such as medical technologies, diagnostics, etc. Ind-Ra believes a majority of the investments in FY15 will continue to come from the private sector. Revenue of most health care players will grow 10%-15% yoy in FY15 due to continuous expansion in the bed capacity. However, the overall profitability of the sector might be affected due to long break-even period of new capex and high manpower costs. Ind-Ra believes credit profiles, especially of the standalone hospitals with recent bed additions, are likely to be stressed in FY15. However, larger players with multiple hospitals leading to higher economies of scale would be better placed. 

The government has made important contribution to incentivise the investments in the sector through its insurance schemes, encouraging investments in public private partnership and also qualifying hospitals (including medical colleges, paramedical training institutes and diagnostics centers) for infrastructure lending. These initiatives are likely to positively impact the occupancy levels and could also mean better lending terms in the form of concessional interest rates, longer moratorium and maturity aiding in the capex plans of health care players. The initiatives could also enhance the credit profiles of entities, especially in the initial years of the capex when optimum utilisation is yet to be achieved. 

Increasing competitive intensity and high real estate costs involved in the Tier I cities have shifted the investors' focus towards relatively lower cost, under-penetrated Tier II and Tier III cities and also towards asset-light, less capital intensive business models. Ind-Ra believes certain business models such as single specialty, hub-and-spoke, health mall and day care/ambulatory services centres will attract investors in FY15. 

What Could Change The Outlook 

Consolidation of Operations: Continuous capex in the last few years has led to a rise in borrowings for many players, impacting their credit profiles. Consolidation of operations leading to improved credit profile will be a positive for the sector Timely completion of the planned expansion along with attaining optimum occupancy rates will also lead to a positive outlook revision for both the sector and companies. 

Reducing the gap between the demand and supply of doctors and medical staff will also be a long-term positive for the sector. 

Debt-led Expansions, Commissioning Delays: Continuous debt-led capex, coupled with delays in commissioning of facilities and stressed profitability due to low occupancy could affect the outlook negatively.

Rupee closes stronger

At 62.2825/2925 per dollar 

Rupee ended stronger on Friday (07 February 2014) at 62.2825/2925 per dollar against its previous close of 62.3650/3750, posting its first weekly gain in three, helped by favourable flows and rising confidence over the country's defence against emerging market outflows.

Strong rally at Wall Street

The consumer discretionary group lead the rally 

U.S. stocks finished with strong gains on Thursday, 06 February 2014 as investors welcomed a larger-than-expected drop in weekly jobless claims and upbeat earnings from companies including Walt Disney Co. Stocks began on an upbeat note and climbed through the first 90 minutes of action. Much of the advance was paced by groups that faced aggressive selling during the recent pullback. Thursday's jobless claims data set an optimistic tone for Friday's non-farm payrolls report due a day later. 

The Dow Jones Industrial Average closed near session highs, adding 188.30 points, or 1.2%, to 15,628.53. The Nasdaq Composite ended the day 45.57 points, or 1.1%, higher at 4,057.12. The S&P 500 index closed up 21.79 points, or 1.2%, at 1,773.43. The consumer discretionary group ended in the lead. 

Earnings results released after the market close on Wednesday and before the opening bell Thursday were mixed. Disney shares jumped 5.3%, leading gains on the Dow average, after earnings topped estimates, helped by the popularity of the “Frozen” animated movie. Twitter I plunged 24% after earnings disappointed investors late Wednesday. 

A recent spate of disappointing U.S. economic data has put even more importance on Friday morning's monthly U.S. jobs report for January. A weaker-than-expected jobs report on Friday would call into question how much more the Fed would be able reduce its monthly bond-buying program, also called quantitative easing. 

The important data point for Thursday was the monthly monetary policy meeting of the European Central Bank, including a press conference by ECB president Mario Draghi. The ECB left its key interest rates unchanged at the meeting. 

Today's economic data at Wall Street featured three reports. The initial claims level settled back into the 330,000 range this week as the initial claims level fell to 331,000 from an upwardly revised 351,000 (from 348,000). The consensus expected the initial claims level to fall to 335,000. 

Fourth quarter nonfarm labor productivity increased 3.2% while the consensus expected an increase of 2.4%. That was down from an upwardly revised 3.6% increase (from 3.0%) in the third quarter. Profit growth outperformed labor gains in the fourth quarter. Compensation per hour increased only 1.5%, down from a 1.6% increase in the third quarter. With compensation increasing at a slower rate than productivity, unit labor costs fell 1.6%. That was the third quarterly decline of 2013. 

The U.S. trade deficit for December widened to $38.7 billion from an upwardly revised $34.6 billion (from $34.3 billion). The consensus expected the trade deficit to increase to $36.0 billion. The Bureau of Economic Analysis assumed the trade deficit in December increased to around $37.0 billion in the advance estimate for fourth quarter GDP. The slightly higher than expected deficit will likely contribute to lower GDP growth in the second estimate. 

Bullion prices ended moderately higher on Thursday, 06 February 2014. Gold futures managed to score a modest gain by the close on Thursday, after spending the bulk of the session trading a bit lower, with investors anxiously awaiting January U.S. jobs data, scheduled to be released early Friday. A weaker U.S. dollar index was a bullish daily input for the gold market on Thursday. However, a rally in U.S. equities kept a cap on any gains as the market digested comments from the European Central Bank's Mario Draghi and a fall in U.S. jobless claims. 

Gold for April delivery tacked on 30 cents to settle at $1,257.20 an ounce on the Comex division of the New York Mercantile Exchange. March silver added 12 cents, or 0.6%, to $19.93 an ounce, extending its 2% gain from a day earlier. 

Crude oil futures closed higher on Thursday, 06 February 2014 as a drop in U.S. jobless claims and strength in U.S. equities supported an upbeat outlook for energy demand. March crude oil picked up 46 cents, or 0.5%, to settle at $97.84 a barrel on the New York Mercantile Exchange. On Wednesday, the contract rose 0.2%. 

Treasuries ended near their lows with the 10-yr yield up three basis points at 2.71%.
Participation was a bit above average as 730 million shares changed hands at the New York Stock Exchange. 

Tomorrow's data will focus on jobs with the nonfarm payrolls report for January set to be released at 8:30 ET. Hourly earnings and average workweek will also be announced at 8:30 ET while the December consumer credit report will cross the wires at 15:00 ET.

Asia Pacific Market: Stocks shine amid US recovery hopes

Key benchmark indexes of the Asia Pacific market climbed up on Friday, 07 February 2014, as hopes for a solid US economic recovery lifted risk sentiment, helping shares regain some of the losses sustained earlier in the week. 

The MSCI Asia Pacific Index added 1.4% to 133.36. The measure has pared its weekly drop to 1.1%. The MSCI Asia-Pacific gauge dropped 4.6% in January for its worst start to a year since 2009. Stock buying was enthusiastic during the session after overnight U.S. indexes booked some of their best points gains of the year following data that revealed a bigger-than-expected drop in January U.S. weekly jobless claims last week. Initial jobless claims dropped for the first time in three weeks, falling 20,000 to 331,000 in the period ended Feb. 1, according to the Labor Department. 

Among Asian market, Japan's market advanced sharply, on the back of positive cues from Wall Street overnight and yen depreciation against major currencies. The benchmark Nikkei-225 index advanced 307.29 points to finish at 14462.41, while the Topix index of all first-section shares rose 26.77 point to 1189.14. 

The dollar was at 102.14 yen in the currency market today, hardly changed from 102.10 yen in New York on Thursday but well above the mid-101 yen range in Tokyo earlier Thursday. 

Shares of currency-sensitive exporters led the market higher Friday, with silicon wafer-maker Shin-Etsu Chemical adding 3.9% to 5703 yen and Honda Motor gaining 2.9% to 3680 yen. 

Sony Corp climbed 4.1% to 1691 yen after announcing an aggressive restructuring plan that offset disappointment over its forecast cut. Sony warned on Thursday that it would book a 110 billion yen annual loss as it cuts 5,000 jobs and exits the stagnant PC market this year
Nikon Corp gained 5.5% to 1765 yen after booking a sharply higher third-quarter operating profit aided by the weaker yen. Its digital camera sales continued to slip, however. 

Renesas Electronics also ended up 4.7% to 540 yen after a favorable third quarter. But it said that its full-year results will remain in the red due to early retirement expenses. 

In Australia, Australian stock market advanced for second consecutive session, on the back of solid performance from bullion, energy, mining, and industrial blue chips. The benchmark S&P/ASX 200 index was up 35.10 points to 5166.50. Over the course of the week however the benchmark index lost 23.5 points or 0.4%. 

The Sydney share market commenced trading firmly higher on tracking strong cues from Wall Street overnight. Meanwhile, better than anticipated quarterly result from News Corp also underpinned buying activities on the domestic market. 

Shares of Australian mining companies surged, on tracking gain in base metal prices. Base metal prices advanced on the London Metal Exchange yesterday with zinc (up 2.1%) leading the gains. Other metals lifted between 0.2-1.7%. BHP Billiton was up 1.5% to A$36.09 while Rio Tinto rose 0.5% to A$65.96. Junior iron ore miner Fortescue Metals Group added 3.1% to A$5.60. 

Australia's biggest goldminer, Newcrest Mining, added 2% to A$10.37 as the precious metal's spot price rose over the week to $1260.61 per ounce. 

Shares of Australian media companies rallied, with News Corp leading the rally, up 8.2% to A$18.61 after reporting better than expected net income. News Corporation beat expectations with its second quarter profit, which came in at US$151 million thanks to lower legal costs associated with the News of the World phone hacking scandal, its acquisition of Fox Sports Australia and strong sales from its publishing business. Revenue fell 4% as expected to US$2.24 billion due to lower advertising sales. 

Woodside Petroleum declined 0.1% to A$37.58 after inking a deal to buy Israeli natural-gas licenses for more than $1 billion plus revenue sharing. 

Billabong International shares surged 13.2% to A$0.685 after saying it may sell its e-commerce businesses. 

Shares of Aurora Oil and Gas spiked 56.11% to A$4.09 after North American-listed Baytex Energy Corp has agreed to buy Australian-listed Aurora through a scheme of arrangement at A$4.10 per share in cash, a 56% premium to Thursday's closing price of A$2.62. 

In New Zealand, equities on the New Zealand share market climbed on tracking higher Asian stocks. The local market caught up after yesterday's holiday on account of Waitangi Day. By the provisional closing, the NZX 50 index gained 32.845 points, or 0.7%, to 4840.788. Within the index 28 stocks rose, 12 fell and 10 were unchanged. 

Chorus climbed 8% to NZ$1.49 after a research note by JP Morgan speculated the telecommunications network operator will seek to raise NZ$300 million from investors at a discounted price. Separately, the Commerce Commission outlined its proposed process to determine final pricing for services on Chorus's regulated copper network. 

Online Auction site Trade Me Group dropped 4% to an 18-month low NZ$3.80 amid reports the website is in a spat with real estate agents over lifting the price of its property listings.
In China, shares in Mainland China market finished higher on first working day after weeklong holiday for the Lunar New Year, with technology and small-company shares leading rally. The Shanghai Composite Index provisionally ended 0.6% higher at 2044.50 after reversing a loss of as much as 0.9%. 

China share market commenced first trading session after a weeklong Chinese New Year holiday deeply lower as China's service sector reported poor retail sales during the holiday. However, the market recouped lost ground to finish higher, thanks to rallies in technology and small-company shares overshadowed manufacturing and services data signaling an economic slowdown. 

China's service services Purchasing Managers' Index slid to 50.7% in January, according to a report by HSBC Holdings Inc on Friday. China's official Purchasing Managers' Index fell to a six-month low of 50.5 in January as output and orders slowed, Feb. 1 data showed. The non-manufacturing PMI dropped to 53.4, the lowest since at least March 2011, according to a Feb. 4 report. 

Retail and catering sales grew 13.3% year-on-year during the seven-day holiday, compared with 14.7 in 2013 and 16.2% in 2012, according the Ministry of Commerce on Friday. 

Shares of Chinese tech players advanced sharply, with Goertek paced gains for technology shares, rising 5.6% to 30.50 yuan. Sanan Optoelectronics Co. jumped 9.8% to 26.21 yuan.
Financial companies shares were weak. Ping An Insurance, the second-biggest Chinese insurer, lost 2.4% to 38.21 yuan. Citic Securities Co., the nation's biggest-listed brokerage, fell 0.9% to 11.48 yuan 

Chinese mainland's 2013 gold imports from Hong Kong more than doubled from the previous year to reach a record of more than 1,000 tons as a sharp fall in prices led to unprecedented demand. The mainland imported about 1,158.162 tons of gold from Hong Kong, compared with 557.478 tons in 2012, overtaking India to become the world's biggest gold buyer. 

The State Administration of Foreign Exchange said on Friday that China's current account--its broadest measure of trade with the outside world--was in a surplus of $49.8 billion in September-December, compared with a $40.4 billion surplus over June-September. The capital and financial account was in a surplus of $81.0 billion in the fourth quarter, indicating net inflows of investment funds. The capital and financial account was in a surplus of $80.5 billion in the third quarter. Foreign exchange reserves rose $131.0 billion in the fourth quarter, compared with an increase of $97.6 billion in the third quarter. 

For the full year of 2013, China reported a surplus of $188.6 billion on its current account, compared with a surplus of $193.1 billion in 2012, and a surplus of $242.7 billion on its capital and financial account, compared with a deficit of $16.8 billion in 2012. 

In Hong Kong, shares of city's market advanced for second consecutive session on tracking strong cues from Wall Street overnight. Meanwhile, positive trade on the Mainland bourses also underpinned buying activities on the city's market. The benchmark Hang Seng Index provisionally finished 213.72 points higher at 21636.85. 

Among the HK 50 blue chips, 39 stocks rose and 9 stocks fell, while remaining 2 closed steady. China Merchants Holdings (International) Co advanced 4.6% to HK$26.35, while Sands China fell 2.3% to HK$59.20, making themselves the biggest blue-chip gainer and loser. 

Shares of mobile carriers rose, with China Unicom (Hong Kong) grew 2.55% to HK$10.46 and China Mobile added 0.83% to HK$73.10. China Telecom Corp. closed 0.27% down at HK$3.71 despite Credit Suisse raise its rating for the company to outperform. 

Chinese developers listed in Hong Kong were mixed, as a state-run newspaper reported sluggish property-market activity in China's largest cities during the Lunar New Year holiday amid worries that the government may further tighten controls to cool real estate prices. China Overseas Land & Investment rose 0.25% to HK$20.35 while China Resources Land shed 0.22% to HK$17.92 

Hong Kong Monetary Authority said that the official foreign currency reserve assets of Hong Kong amounted to US$312.2 billion as at the end of January 2014 (end-December 2013: US$311.2 billion). There were no unsettled foreign exchange contracts both at end-January 2014 and end-December 2013. The total foreign currency reserve assets of US$312.2 billion represent about seven times the currency in circulation or about 50% of Hong Kong dollar M3. 

In India, key benchmark indices edged higher in a choppy trading session. Gains in Asian and European stocks and rally in US stocks overnight aided the up move on the domestic bourses on the last trading session of the week. 

The S&P BSE Sensex garnered 65.82 points or 0.32% to settle at 20,376.56, its highest closing level since 31 January 2014. 

Steel stocks rose after ArcelorMittal, the world's biggest steelmaker, announced strong Q4 December 2013 results and said earnings will continue to climb in 2014. Tata Steel (up 6.39%), Steel Authority of India (Sail) (up 2.26%), JSW Steel (up 3.05%) and Jindal Steel and Power (JSPL) (up 0.37%) gained. 

Ambuja Cements rose 4.97% after announcing its year ended 31 December 2013 results. The company's consolidated net profit fell 1.13% to Rs 1278.57 crore on 5.52% fall in total income to Rs 9583.05 crore for the year ending 31 December 2013 (FY 2013) over FY 2012. The result was announced after market hours on Thursday, 6 February 2014. 

Reliance Infrastructure rose 2.16%. NTPC gained 1.5%. The Supreme Court reportedly ordered state-run power producer NTPC on Friday not to disconnect power supplies to distribution companies in the capital New Delhi until March 26, averting a potential blackout next week. NTPC had said BSES Yamuna Power, which sells electricity in the central and eastern parts of the city of about 16 million people, must pay its bills or be cut off from February 11. The court asked BSES, part of Reliance Infrastructure, to pay Rs 50 crore to NTPC as part of its outstanding dues. 

Elsewhere in the Asia Pacific region, South Korea's KOSPI index added 0.77%. Taiwan's Taiex index grew 0.92%. Malaysia's KLSE Composite rose 0.59%. Singapore's Straits Times index jumped 0.83%

Birla Sun Life Mutual Fund announces dividend under two schemes

Record date for dividend is 24 January 2014 

Birla Sun Life Mutual Fund has announced 24 January 2014 as the record date for declaration of dividend under the following schemes. The quantum of dividend (Rs per unit) on the face value of Rs 10 per unit will be: 

Birla Sun Life Top 100 Fund-Regular Plan-Dividend Option: 0.80 

Birla Sun Life Index Fund-Regular Plan-Dividend Option & Direct Plan-Dividend Option: 1.00 each