Market commentary: Vantas Inc, FedEx Corp and the Easter Monday equity rebound

On Easter Monday, while most of European markets were closed for holidays, around the world investors seemed to disregard the latest disappointing US jobs report and decided to take advantage of the recent decline in the equity markets to add new positions. US, Japan, Canada, Australia, China, all major equity indexes closed the day in positive territory reporting solid daily gains in an equities rebound across the board.

As anticipated yesterday in my article discussing the latest jobs report, it is interesting to see that investors in the equity markets do not seem to be rattle by the labour market disappointing data and, on the contrary, they went on a buying spree.

The S&P 500 added 0.66%, erasing most of the losses of last week; while the Nasdaq returned above the 4,900 level, after gaining 0.62% and closing at 4,917.32 points. The Dow Jones Industrial Average was also 0.66% higher, extending its recovery from the 2.05% drop recorded last week.

Overnight the Asian markets followed suit and extended the gains recorded yesterday, with the Nikkei 225 jumping 1.25%, the Shanghai Composite Index adding 2.52% and the Australian market gaining 0.46% after the Reserve Bank of Australia decided to maintain interest rates at 2.25%, postponing any additional interest cut to the second half of the year.

Within this widespread equities rebound, Ventas Inc, a $24.2 billion real estate investment trust owning and operating senior housing and healthcare facilities across US and Canada, jumped 5% closing at $76.90 in New York. The shares’ jump followed the announcement that the company had agreed to by US hospital firm Ardent Medical Service Inc. and affiliates for $1.75 billion in cash, implementing Ventas’ strategy to enter the increasingly profitable US hospital market.

Ventas also announced that intends to spin off most of its skilled-nursing and rehabilitation properties into an independent real estate investment trust in order to streamline its corporate structure and free up cash for additional acquisitions that would further diversify its business portfolio.

With an aging population, an exponential increase in emergency-room visits and about 10 million newly insured individuals, the US hospital market is estimated to be worth as much as $1 trillion and its profitability potential is increasingly attracting new players, such Vants, able to bring improved competition for customers and economy of scale across the different States.

In Europe, FedEx Corp. is likely to steal the spotlight today, after announcing early this morning that it had reached a conditional agreement to acquire Dutch financially struggling TNT Express NV for €8.00 a share.

Throughout this acquisition FedEx, the operator of the world’s largest cargo airline, intends to expand its operations in Europe where it has little presence and competitors UPS and DHL retain the majority of market share. On the other hand, TNT is desperately in need of an exit strategy after posting four straight annual losses, the falling apart of a bid from UPS in 2013 and the disposal of several assets proved insufficient to revamp the firm’s operations and financial position.

Although the deal is still at a conditional stage and it will need approval by the Board of Directors of both companies and by European regulators, it is posed to create a strong third player within the European market able to compete with UPS and DHL, while also helping FedEx to achieve geographic revenue diversification.

This article was issued by Paolo Zonno Trader/Analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

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