16 July 20
Unemployment continues to climb (AWC)
16 July 20
Unemployment continues to climb (AWC)
16 July 20
The reflation play roars ahead, what stocks can play “catch-up” (OZL, RIO, ILU, S32, IGO, NCM)
15 July 20
ASX rallies on despite the virus news (Z1P, OPY, APT, WPL)
15 July 20
Income Note: 3 short dated hybrids that look good (BENPE, AMPPA, CBAPE)
15 July 20
Overseas Wednesday – Reviewing the US tech MM uses on a daily basis (HUBS US, TWLO US, SPT, ZM US, TEAM US, FB US, GOOGL US, TTD US)
14 July 20
Tech stocks give back some recent gains (WHC)
14 July 20
“Buy now pay later” stocks get hotter by the day! (ORE, APT, Z1P, OPY, SZL)
13 July 20
Late rally pushes the markets into green territory (OPY, FMG)
13 July 20
Subscribers questions (TSLA US, NWH, STO, IFT NZ, OZL, APT, QAN, NXT, Z1P, IGL, BIN, TYR, SSM, WOR, IVC, MAQ, SGP)
12 July 20
Market Matters Weekend Report - Sunday 12th June 2020 (NAB, NCM, TLS, SBUX US, IZZ)
WHAT MATTERED TODAY
A better day for Aussie stocks with most sectors finishing higher following a more bullish session overseas. The high beta IT stocks did best with the likes of Appen (APX) +6.42%, Z1P Co (Z1P) +7.5% & Jumbo Interactive (JIN) +10% bouncing back from recent weakness. Asian markets enjoyed the more peaceful protests in Hong Kong over the weekend while US Futures were also higher during our time zone.
The biggest weight from the local market came from the Gold sector which is now pulling back after a solid run, Newcrest (NCM) down -3.01% and Saracens (SAR) down -5.12% to $3.71 – we continue to remain cautious gold in the short term, but will once again be buyers of protracted weakness.
Around 10 companies out with results today, around 15 out tomorrow then a big 2 days Wednesday / Thursday. BHP out tomorrow which is obviously of interest. Underlying profit expected to rise 11% to $9.9 billion.
A quick rundown on companies that reported today: BSL, SIQ, LLC, NHF,
Overall, the ASX 200 added +62pts today or +0.97% to 6467. Dow Futures are now trading up +180pts /+0.69%.
ASX 200 Chart
ASX 200 Chart
CATCHING OUR EYE;
Stocks today: The table below looks at the share price performance of those companies that reported today. A mixed bag although more beats than misses overall.
Bluescope (BSL) -8.36%: While the FY19 result was in line with NPAT coming in marginally ahead of expectations investors seem to be spooked by the outlook statement provided for FY20 which implies a decent miss to current consensus expectations.
For FY19 all metrics were as per expected and shareholders will get a 14c full year dividend with income for FY19 in line with FY18. The company’s large cash balance is also being put to work in supporting the stock with buybacks currently in place. Despite all this, the stock has dropped more than 9% today. While the market was already downbeat FY20 earnings for BSL pricing in a decline of 40% at the EBIT line, they have guided to a 45% fall in EBIT from the 6 months just passed for the 1st half of 2020. The significant fall will be driven by tightening steel spreads for the first half and falling volumes.
BSL do see a reasonable 40/60 skew in earnings towards the second half. With FY20 consensus EBIT sitting at $803m and applying the 40/60 1H / 2H skew to those numbers, guidance now implies a number closer to $700m for the year, or a 12% miss versus current expectations. It also seems like the selloff is being amplified by a headline grabbing $1b expansion of the North Star mill in the US which will add 850kt of capacity by 2023. The big CAPEX spend will hurt in the short term however it is an amount the balance sheet can handle even while the company continues to buy back stock and pay healthy dividends. An inline result for FY19 while the markets bearish expectations for FY20 where not bearish enough. With the stock trading on just 10x FY20 earnings, it’s hard to be too negative BSL at this juncture. We bought recently below $12 and remain buyers more than sellers of the dip.
BlueScope (BSL) Chart
NiB Holdings (NHF) -6.29%; It’s been a difficult reporting season for MM thus far however a stock we did own and booked a nice ~47% profit in July is private health insurer NiB Holdings (NHF). Today they traded down -6.29% after reporting a result that was broadly inline with expectations. While the result was decent, the sell-off would have been further amplified by the strong share price gains of recent times. Guidance as is generally the case with NHF was tepid and for a stock trading on 21x low single digit growth is hardly exciting. The post-election bump in price seems to be wearing off. Our $8.10 sale price looking better than our BSL buy.
NiB Holding (NHF) Chart
Lend Lease (LLC) +10.86%; A nice bump in share price today thanks to a beat at the EBITDA line and a lack of any material surprises. The ‘core’ business is performing well while the engineering business, which has now been deemed, non-core continues to struggle. They talked about visibility in earnings and a substantial ‘near $100bn development pipeline’. The core business did profit after tax of $804m while the non-core business which includes engineering & services lost $337m, they say a sale is now underway for this business – something the market clearly took well.
Lead Lease (LLC) Chart
Beach Energy (BPT) +10.80%; Beach rallied back above $2 today on a solid full year. Pre-tax profit of $810m was ahead of expectations, helped by a strong start from their Lattice acquisition integration. Shareholders won’t see much of the income yet despite the company swinging into net cash, increasing CAPEX in a bid to lift production by ~30% in the medium term. Guidance for FY20 was ahead expectations as well and shareholders welcomed the exploration and development push.
Beach Energy (BPT) Chart
Smartgroup (SIQ) +21.68%: A very strong day for the salary packaging business, one we’ve talked about at MM and held off due to volume issues. They reported 1H19 beats across the board with top line revenue coming in +3% better than expected while all other metrics followed suit. Importantly, the momentum year on year was reasonably strong and the market is now factoring in decent momentum for their December year end FY results. A decent numbers in a low volume stock and the price has rallied strongly.
Smart Group (SIQ) Chart
No changes today
Major Movers Today
Have a great night
James, Harry the Market Matters Team
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