Afternoon Report / ASX cracks the record (TLS, CKF, EHL)

By Market Matters 27 November 19

ASX cracks the record (TLS, CKF, EHL)

Market Matters Afternoon Report 27th November 2019

WHAT MATTERED TODAY

Big intra-day buying today highlighted the dry powder hanging around the market now being forced the chase stocks higher. The Aussie dollar falling further encouraged the equity bulls taking the ASX200 to a new record close at 6850.6, just marginally behind the day’s high. The Aussie battler was thrown around by increasing bets on further rate cuts as well as hope for a return of QE on the back of a speech from RBA Governor Philip Lowe overnight. He talked to rates falling to 0.25% if needed as well as launching a Government bond buying program if the economy warranted a cash injection – more money sloshing around the economy will naturally mean higher equity prices. Westpac was out today confirming they are expecting two cuts and QE next year.

All sectors finished in the black today but communications copped the most buying but heavy weight Telstra (TLS) doing the bulk of the work – more on them below.  Healthcare was the laggard today.

Overall, the ASX 200 gained +63pts /+0.93% today to close at 6850. Dow Futures are trading marginally higher by 10pts/0.04%

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE

Collins Foods (CKF) +6.58%; Australians are out buying plenty of fried chicken according to the half year result from the largest franchisee of KFC stores in the country. Collins saw profit up 9% with same store sales adding nearly 5% on the first half of last financial year, boosted by the introduction of Deliveroo. CKF also run 10 battling Sizzlers sites which it is looking to transition and has recently launched 7 Taco Bell sites in Queensland which have been received well. Shares were up strongly on the back of the result. The company also talked to solid growth across the business segments into the second half, while targeting an additional 13 Taco Bell sites by the financial year end.

Collins Foods (CKF) Chart

Telstra (TLS) +2.77%; A good day for the telco rallying on the back of their investor update. They maintained guidance for underlying EBITDA of $7.4-$7.9bn on the back of revenue of $25.3-$27.3bn. Cost guidance was also in focus and the guided for further reductions in their operating expenditure to the tune of $2.5bn by FY22. All up, no real surprises in the update however the share price had been drifting from yearly highs above $4 in August. Today’s update a solid one.

Telstra (TLS) Chart

Emeco (EHL) unchanged; Had an investor conference today recapping FY19 and providing guidance for FY20, although it was the same numbers, they put out two weeks ago, so no new news. Growth in the 2H20 to continue and they are well positioned to at least meet market expectations (FY EBITDA of $243m). We own EHL as a value play in the Platinum Portfolio believing that deleveraging of the business while still showing decent growth will lead to a re-rate on their currently depressed trading multiple of 8x FY20 numbers.  For those interested in trucks and graders etc, here is a quick look at the Emeco fleet of equipment!

Emeco (EHL) Chart

Broker moves; 

·         Silver Lake Reinstated Outperform at Macquarie; PT A$1.40

·         Panoramic Resources Cut to Neutral at Macquarie

·         Scentre Group Rated New Hold at Jefferies; PT A$3.94

·         Bravura Raised to Buy at Goldman; PT A$5.06

·         Westpac Raised to Neutral at UBS; PT A$24.50

·         Sydney Airport Cut to Hold at Morgans Financial Limited

·         McMillan Shakespeare Cut to Neutral at Credit Suisse

·         Bank of Queensland Raised to Neutral at Goldman; PT A$8.36

·         Caltex Australia Raised to Hold at Shaw and Partners

OUR CALLS

No changes to the portfolios today.

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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