Afternoon Report / ASX marginally higher, CBA leads gain, A2 Milk lite on, Barangaroo opening delayed for Crown, Go the blues! (ALL, CWN, A2M)

WHAT MATTERED TODAY

The market was strong on open this morning and then went into a range bound / holding pattern for the rest of the session. The split of stocks that went up (97) versus those that went down (97) with 7 unchanged tells the story of a market that is losing some steam but sellers are reluctant to head for the exits. Again, it was the beaten down cyclicals that did best, Alumina (AWC) +5.85% a stock we own in the MM Growth Portfolio topped the winners list today, finally playing some catch up to overseas peers while Whitehaven Coal (WHC) +5.49% also enjoyed another strong session to close at $1.35. Our resource analyst Peter O’Connor is bullish WHC, suggesting in our morning meeting today they have $2 written all over them!

Banks again providing the underlying backbone of the market today with CBA the star of the show, it closed 2.9% higher at $77.55 contributing 12pts of today’s index gain (the big 4 collectively adding +24pts). Energy had a breather today down -0.7% after a solid week or two.

Asian markets were mixed, Japan lower, while the rest of the region was higher, US Futures were trading lower for much of the day. 

The ASX 200 finished up +32pts / +0.51% to close at 6531. Dow Futures are trading down -92pts/-0.31%

ASX 200 Chart

ASX 200 Chart – Market remains short term overbought

CATCHING MY EYE

Aristocrat (ALL) +3.84%: a pretty big turnaround for the gaming and gambling business today as the market digested their results. Numbers looked pretty solid despite declines year on year – revenue at $4.14b was off around 6% but around 5% ahead of expectations, dropping to an NPATA number of $477m which is nearly half that of FY19 but still marginally ahead of consensus. Lockdowns hit revenue from in-person machines and casino management systems. Digital did see a boost though as expected, but clearly not sufficient enough to make up the difference. They noted that 92% of casino’s in the US were back up and running, however at a reduced capacity for now. Given the uncertainty, there was little in the way of forecasts by the company, probably the main reason the stock was initially lower. The money flying around from personal discretionary spend is pretty significant, and ALL will see the benefit one way or another. It moved to post-COVID highs again today and looks on track to challenge the all-time high set early in the year.

Aristocrat (ALL) Chart

Crown (CWN) halted: Lots of negative press around this afternoon with the NSW gaming regulator delaying the planned opening of the Barangaroo Casino complex until the enquiry into Crowns conduct is handed down in February. Crown had suggested they open just one gaming floor instead of four to appease the regulator however that was knocked on the head this afternoon. The potential two-month delay is not a great surprise, although the rhetoric around money laundering is a bigger concern. As we wrote this morning, Its very important to note that MM have bought into the future outlook for CWN not its messy past where governance failures were clearly commonplace. We believe that Jamie Packer for example will be a silent shareholder at the most but when he finally manages to offload his stake our view is the stock is likely to rally strongly, the question of how much will be determined by the quality of the buyer (s)

Crown Resorts (CWN)

A2 Milk (A2M) -4.83%: AGM today and the NZ based milk / baby formula marketing company reiterated its full year revenue guidance for between $NZ 1.8-1.9bn, however the first half run rate is low and they’ll need a big second half skew to meet this range– this seems a decent long shot to MM and we’d expect some downgrades to trickle through given consensus currently sits at $1.82b. This is a business in transition phase, companies that move from high growth to lower growth often find an air pocket between growth investors and value funds, and it seems like A2 is in this pocket at the moment. One we remain cautious on.

A2 Milk (A2M) Chart

BROKER MOVES – slim pickings today, OZL fell -3.64% on the downgrade  

·         OZ Minerals Cut to Sell at Goldman; PT A$13.30

OUR CALLS

No changes

Major Movers Today

Have a great night

James, Harry & the Market Matters Team

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