Afternoon Report / All calm on the surface but plenty of action underneath – market closes unchanged (ORA, BSL)

By Market Matters 10 October 19

All calm on the surface but plenty of action underneath – market closes unchanged (ORA, BSL)

Market Matters Afternoon Report 10th October 2019

WHAT MATTERED TODAY

A roller coaster ride in today’s session, with mixed reports that Chinese officials will stay for the course of the trade talks then after a short time, we see reports where they won’t, and this is clearly creating some market volatility, with our own market largely keying off US Futures. Local SPI futures were +41pts after the US close this morning however US Futures tanked on open, down more than -200pts on the DOW before we opened, which wiped off the optimism implied by the SPI. When trade finally got going this morning, there was some optimism early with the ASX rallying +24 points higher towards 6570, only to find resistance and close flat on the session.

Defensive sectors were the outperformers for a second day which is fairly typical of this type of volatile environment.  Metcash (MTS) caught my eye today after gapping down on the open down on the session before fighting back fairly hard from the lows – a stock that’s on our radar for the income portfolio.  

Overall, the ASX 200 closed flat today at 6547, Dow Futures are trading down -35pts/-0.14%.

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE;

Orora (ORA) +13.92%; rallied after Japanese firm, Nippon Paper pulling together $1.7B to purchase ORA’s packaging unit, helping to overcome some of the pain seen after the full year result in August. The sale will leave Orora with their Australasian beverage and broad North American businesses with the company saying it does not expect any meaningful loss in synergies as a result of the sale.

A good result for Orora, which had struggled to please investors in recent times. If the whole company was to be valued on the same multiple, ORA would trade another 8-10% higher. There was little news regarding the current year’s performance ahead of the company’s AGM. This is positive news for other packaging companies with Pact Group (PGH), the deep value play we have in the Platinum Portfolio finishing up +2.19%.

Orora (ORA) Chart

BROKER MOVES; Bluescope was hit early on a broker downgrade from Goldmans’, down more than 3% at their worst before closing down -1.38%.  

Bluescope (BSL) Chart

Peter Zuk, our ex-REIT analyst at Shaw has initiated on an old favourite of his in Centuria (CIP) with a hold equivalent.  

•           Chorus (CNU) Upgraded to Outperform at Forsyth Barr; PT NZ$5.80

•           Rio Tinto (RIO) Upgraded to Buy at HSBC; PT 48.50 Pounds

•           Service Stream (SSM) Upgraded to Buy at Baillieu Ltd; Price Target A$3

•           BHP Reinstated at HSBC With Hold; PT A$39.50

•           Centuria Industrial (CIP) Rated New Neutral at Credit Suisse

•           Austal (ASB) Rated New Neutral at Goldman; PT A$4.09

•           Viva Energy Group (VEA) Rated New Neutral at Credit Suisse; PT A$1.92

•           Flight Centre (FLT) Raised to Outperform at Credit Suisse; PT A$49.91

•           Flight Centre (FLT) Cut to Hold at Shaw and Partners; PT A$50

•           Bluescope (BSL) Downgraded to Neutral at Goldman; PT A$12.20

•           Kogan (KGN) Rated New Outperform at Credit Suisse; PT A$7.18

•           Paradigm Biopharma (PAR) Cut to Speculative Hold at Bell Potter

OUR CALLS

No changes today – sometimes patience the key and at the moment, the markets ebbs and flows is not presenting any real opportunity for us – although we are keen on a few things at lower levels.  

Major Movers Today

Have a great night

James, Harry & 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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