Afternoon Report / ASX little changed, resources continue to shine led by Copper, big results day tomorrow (TYR, LLC, BIN, BSL, CGC)

WHAT MATTERED TODAY

A fairly lacklustre way to kick off the week from an index perspective, however again, there was a fair amount of action under the hood. As is customary at MM we like to address the uncomfortable things first and today it was Costa Group (GCG) which rallied +12.97% on a good Full Year update. We sold CGC to fund the purchase of A2 Milk (A2M) last week which has also rallied, but not by as much. More on CGC’s result below. On a more positive note we did enjoy a strong rally in the Copper miners today with our position in Oz Minerals (OZL) +7% making a new all-time high in the process. The resources remain on fire at the moment with sector leader BHP trading +3.34% to close today at $48.90 while the recently weak mining services stocks (MND, NWH etc) are showing signs of bouncing – MND report tomorrow. We remain committed to our view around inflation and this is bullish for resources stocks, something we’re positioned for.

Reporting tomorrow we have: (stocks we hold in yellow): ABC, ABY, APA, AWC, BGA, CRN, EHE, GEM, JIN, MCY, MND, NSR, OSH, PRN, SEK

Asian markets were mixed today, China the best of them, while US Futures are trading marginally lower.

The ASX 200 finished down -12pts / -0.19% to close at 6780. Dow Futures are trading lower, -32pts / -0.10% 

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE

Tyro Payments (TYR) +11.76%: decent first half despite revenue fell on 1H20 being blamed on lock downs but EBITDA climbed substantially to $8.5m, though Tyro terminals processed a record $12.1b in transaction for the 6 months, up around 10% on a 13% increase in merchants. The market was more consumed with the response to recent outages which put them in the cross hairs of a short seller report earlier in the year. Tyro has estimated the cost to fix or replace impacted terminals would be ~$4m, as well as up to $15m in possible claims. Despite the unprecedented outage, the company noted churn rates and new terminal applications were not significantly different to historical levels.

MM is bullish TYR

Tyro Payments (TYR) Chart

Lendlease (LLC) -1.35%: Underwhelming update today even against low expectations. Core NPAT at $205m was 7.6% below the $222m expected while the dividend of 15cps was pretty much in line. The building / construction segment was strong, the development and investment management area was not and provided the biggest drag on the result today. They did talk up their pipeline, although that’s pretty common, and as usual they provided no guidance. We like the underlying dynamics that should be supportive of LLC, i.e. infrastructure spend, however as was the case with Cimic and a few other companies in this sector, time frames are blowing out. For FY21, the market is forecasting NPAT of $471m.

MM remains bullish

Lendlease (LLC) Chart

Bingo (BIN) -2.19%: First half 21 saw COVID impacts continue for Bingo, though the company noted the rebound is clearly underway. NPAT was down 32% to $19.6m with discounting continuing across the board. Utilisation is picking up though, back to around 75% as Bingo builds into the second half. For the most part, the numbers are as expected. It is under a takeover bid at the moment, with the indicative price $3.50/share. There was little in the way of update from either side at the result other than to say due diligence is well-progressed.

MM Is neural BIN.

Bingo Industries (BIN) Chart

BlueScope Steel (BSL) +2.26%: First half result out today was largely pre-announced at the back end of January so EBIT at $531m came as no surprise. They continue to benefit from the building led rebound that many governments are stimulating. Outlook for 2H EBIT to coming in ~50% ahead of first half is a slight miss to consensus though for the most part this looks conservative, so we expect little changes to expectations from analysts.

MM is bullish BSL

BlueScope Steel (BSL) Chart

Costa Group (CGC) +12.97: The momentum in CGC continued today as the company beat FY20 earnings expectations plus they paid down more debt than we thought they would. For the year, CGC produced normalised earnings of $140m which was ahead of the $130m expected., plus importantly, they broad down net debt to $144m which was a good outcome. We clearly got off the CGC bus too early, however our new position in A2M has rallied, just not as far!

Costa Group (CGC) Chart

BROKER MOVES:

·         Lovisa Raised to Buy at Canaccord; PT A$14.20

·         QBE Insurance Raised to Buy at UBS; PT A$10.25

·         Lovisa Raised to Overweight at Morgan Stanley; PT A$15

·         QBE Insurance Raised to Neutral at Macquarie; PT A$9.40

·         Goodman Group Raised to Outperform at Macquarie; PT A$20.39

·         GWA Group Raised to Hold at Morningstar

·         QBE Insurance Cut to Hold at Morningstar; PT A$10.50

·         Dalrymple Bay Rated New Outperform at Credit Suisse; PT A$2.50

·         Goodman Group Raised to Outperform at Credit Suisse; PT A$19.62

·         a2 Milk Raised to Neutral at JPMorgan; PT NZ$11

·         Goodman Group Raised to Overweight at JPMorgan; PT A$20

·         Cleanaway Raised to Buy at Jefferies; PT A$2.61

·         Pact Group Cut to Neutral at Credit Suisse; PT A$2.95

·         OceanaGold GDRs Cut to Neutral at JPMorgan; PT A$2

OUR CALLS

No changes today

Major Movers Today

Have a great night

James, Harry & the Market Matters Team

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