Afternoon Report / ASX 200 closes just 25pts below all-time highs (HLS, CCP)

By Market Matters 29 July 19

ASX 200 closes just 25pts below all-time highs (HLS, CCP)

Market Matters Afternoon Report 29th July 2019

WHAT MATTERED TODAY

Reporting season is now upon us and this morning we had Credit Corp (CCP) out with full year results, the stock down -6.17% on the session highlighting the volatility that will likely play out over the coming month. Harry covers that result in more detail below, however from this Wednesday onwards (no major companies out tomorrow), I’ll be providing a quick take on reporting in a podcast each morning around 9.15am. The link will be included in the AM report each day (no podcast Monday’s) and will look at results as they drop, or the results expected for the day ahead. Below links to a quick promo.  

**A new initiative this reporting season**

Another bullish day for stocks with the index closing at 6825 near the high of the session. The IT and Telco sectors were the strongest today, while the Real-Estate sector closed lower.

Overall, the ASX 200 added +32pts today or +0.48% to 6825. Dow Futures are trading down -22pts / -0.08%.

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE;

Healius (HLS) +1.74%: Provided an operational update today reconfirming earnings expectations that are at the bottom of the previously guided range (underlying net profit of $93-$98m), but in-line with consensus  expectations ($93.6)  plus some management changes which included the departure of their very well regarded CFO, Mal Ashcroft and the CEO of their  Pathology division Wes Lawrence - who had been with the company for 25 years.

This comes on the back of an AFR article last week which detailed around $30m worth of cost savings in the medical centre and pathology businesses.  We held HLS for some time, looking for another bid from their Chinese suitor, which to date has proven elusive –we  recently cut the position. Today’s announcement around earnings being at the lower end of prior guidance, plus the departure of two senior guys within the organisation provides some clarity in the near term but it speaks to the challenges being faced by the company. On 19x earnings the market is still pricing in a high chance for another takeover. All too hard for now.

Healius (HLS) Chart

Credit Corp (CCP) -6.17%; the worst performer in the top 200 by some margin, Credit Corp slumped after announcing a full year profit that was in line with expectations but came with soft guidance. FY19 saw near record collections for the company, but there are signs appearing that the cycle is starting to peak. NPAT of $70.3m was up 9% on FY18, and came was marginally below expectations at $70.7m. The US has been the big driver for CCP in recent times. The company aims to have this segment equal the size of it’s Australian & New Zealand over the next few years.

The market’s issue with the result came with the guidance. CCP is looking for 10-12% growth at the NPAT line, which is around half the rate at which analysts were expecting, falling 10% short of the FY20 estimate of $83.5m. One for the traders, looks reasonable technically for a bounce to new highs.

Credit Corp (CCP) Chart

Broker moves

  • Bingo Industries Downgraded to Neutral at Goldman; PT A$2.80 -** Stock closed down -3.33% at $2.61
  • ResMed GDRs Upgraded to Buy at Goldman; PT A$21.20
  • ResMed Upgraded to Buy at UBS; PT $140
  • GUD Holdings Downgraded to Neutral at Citi; PT A$11.02
  • GUD Holdings Downgraded to Sell at UBS; PT A$9.50
  • GUD Holdings Downgraded to Neutral at Macquarie; PT A$10.50
  • NIB Downgraded to Underweight at Morgan Stanley; PT A$6
  • Mineral Resources Downgraded to Hold at Morningstar
  • Spark Infra Upgraded to Neutral at Credit Suisse; PT A$2.30

OUR CALLS

No changes today

Major Movers Today – Telco’s were well bid today, Vocus +3.5% and TLS +1.56% now at $3.90

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.

Disclaimer

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