Afternoon Report / Goodbye FY20, ASX ends down 10.9%, better times ahead! (CKF)

By Market Matters 30 June 20

Goodbye FY20, ASX ends down 10.9%, better times ahead! (CKF)

Market Matters Afternoon Report 30th June 2020


WHAT MATTERED TODAY

The end of financial year is always a busy time, although this year it feels like most activity happened at the end of the March quarter as we rose from the depths of the COVID-19 induced sell-off. While the year has been the weakest in the last eight, down -10.9% the quarterly performance has been a strong one up +16% offering some optimism for the bulls.

The first half of the year saw the market grind higher from 6630 up to the 7197 high printed on the morning of the 20th February, a commendable gain of ~8.55%, before all hell broke loose, and the market plummeted ~2797pts to 4400 on March 23, a decline of 38.8%. Since then, the ASX 200 has put on +1497pts/ 34% to close today at 5897, around about the midpoint of the trading range.  Phew!

Today the market ended on a positive note thanks to better economic data from the States overnight, Energy stocks bounced back adding a commendable 4.3%, Woodside (WPL) the standout adding 5.25% on a Macquarie upgrade while the tech sector ended a stellar year up another 2.56%.

Overall, the ASX 200 added +82pts / +1.43% today to close at 5897 - Dow Futures are trading down -62pts/ 0.24%

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE:

Golds: while a large number of brokers are pushing their gold price higher, Macquarie has moved against the tide calling the current earnings season as the high in local gold earnings. The looming strength in the Aussie dollar is the main reason for the call, with the precious metal priced in USD, local currency strength can weigh on earnings. The broker upgraded the gold outlook to an average of $2,440 this year falling to $2,394 next year as the currency drags. As a result of the changes in the price deck caused 10 downgrades across their gold coverage. We’re more positive Gold although we see where MQG are coming from in terms of the AUD, their call may lead to better entry levels in the sector.

Sectors this financial year: Health the standout followed by IT while the Supermarkets rounded out the only three sectors in positive territory. 5 sectors fell by more than 10% with Energy suffering from a period of low Oil prices, front month futures turned negative for a brief period which was a historic event, there’s been a few of those in the past few months.

Sectors this Financial Year

Source Bloomberg

Stocks this financial year: Afterpay (APT), not sure what to say other than we missed this boat big time and not through lack of opportunity given it traded down to ~$9 through COVID-19, to finish the year at $60.99, that’s some extreme volatility. The top stocks are mixed, payments, mining, healthcare and even retail had great years. On the flipside, media was a clear drag as was travel, although the biggest fall from grace must be Jumbo Interactive (JIN) which closed on its lows today, the lottery re-seller suffering at the hands of Tabcorp (TAH) after they flexed their muscle.  

Stocks this Financial Year

Source Bloomberg
Collins Foods (CKF) +12.68%: runs the KFC and Taco Bell brands in Australia, saw revenue jump 9% for FY20 with profit up 5% despite COVID-19 hit on operations. KFC stores did the bulk of the growth, managing to weather the impact delivery options helping offset falls in in-store sales as a result of the impact on foot traffic. They also run the European brands which saw a greater impact given the wide spread lockdown which Australia managed to avoid. CKF is one to watch as Taco Bell stores continue to roll out nationwide.

Collins Foods (CKF) Chart

 BROKER MOVES:

·         Jumbo Interactive Raised to Neutral at Evans & Partners Pty Ltd

·         Dacian Gold Cut to Underperform at Macquarie

·         Santos Cut to Neutral at Macquarie; PT A$5.50

·         Woodside Raised to Outperform at Macquarie; PT A$25

·         St Barbara Cut to Underperform at Macquarie; PT A$2.60

·         Saracen Mineral Cut to Neutral at Macquarie; PT A$5.40

·         Regis Resources Cut to Underperform at Macquarie; PT A$4.50

·         Panoramic Resources Cut to Underperform at Macquarie

·         Newcrest Cut to Underperform at Macquarie; PT A$28

·         Alacer Gold GDRs Cut to Neutral at Macquarie; PT A$9.40

·         Resolute Mining Cut to Underperform at Macquarie; PT A$1

·         Tabcorp Raised to Neutral at Citi; PT A$3.40

·         Iluka Raised to Buy at Morningstar

·         SCA Property Raised to Hold at Morningstar

·         Scentre Group Raised to Hold at Jefferies; PT A$2.32

·         Monash IVF Raised to Buy at Jefferies; PT 65 Australian cents

OUR CALLS

We bought Western Areas (WSA) & Bravura Solutions (BVS) in the Growth portfolio today

Major Movers Today

Have a great night

James & the Market Matters Team

Disclosure

Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.

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