Afternoon Report / ASX soft again, Financials rally, Outdoor adventure retailers shine (ALU, SLU, ARB)

**We had technical issues this morning when sending out the morning note and it didn’t go. We are working hard to launch our new site and unfortunately this impacted this morning’s send. We apologies for the issue and fingers crossed we’ll be right for tomorrow morning to be business as usual**

WHAT MATTERED TODAY

The market closed lower again today although it chopped in and out of positive territory for most of the session only the get sold in what was a very low volume match out. Financials were best on ground today which fits our current thinking while the IT stocks were again the weakest link, a downgrade from Altium (ALU) didn’t help. The retailers were generally positive today thanks to a UBS upgrade on Super Retail (SUL) and a good half year release from my favourite 4wd accessories supplier ARB Corp (ARB), Harry covers off on both below. Other than that, not a lot to get excited about other than to highlight again the positive move we’re seeing in reflationary sectors like financials.

Asian markets were higher today, China up ~1% the best of them while US Futures were trading flat into our close.

The ASX 200 finished down -18pts / -0.27% to close at 6679. Dow Futures are trading up +21pts / +0.07% . 

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE

Altium (ALU) -2.11%: Out with a downgrade this morning however the market was already positioned fairly negatively on this high quality technology stock. ALU now say revenue for the half will be $89.5m, a decline of around 3% where the market was looking for a flat result following their recent update in November. They did however reconfirm full year guidance for a revenue range of $200-212m, the market was already at the lower end of the band looking for $203m. They say COVID is impacting customer decisions which is understandable with particular impact coming from the US. If/when the US do get COVID under control, ALU should recover from this soft patch in earnings, however the longer the vaccine takes to roll out, the quicker the market will doubt the current FY21 guidance. We think ALU is a high-quality growth stock, although the momentum is against it at the moment.

Altium (ALU) Chart

Super Retail Group (SUL) +5.47%: wasn’t bothered by the broader market weakness, nor the mixed bag its peers threw up today. UBS upgraded the lot for Super Retail today - price target, rating and earnings expectations saying it was an attractive long term call with demand to continue to run ahead of expectations. They have revenue growing nearly 15% thanks to the tailwind of COVID stimulus and a domestic focus on discretionary spending across their brands while noting it trades on a steep ~25% discount to peers on a forward earnings multiple. We have traded SUL in the past, particularly within the Income Portfolio. It’s on the radar, more to come tomorrow.

Super retail Group (SUL) Chart

ARB Corp (ARB) +5.75%: 4x4 accessories took off through 2020 with ARB (& SUL for that matter) one of the big beneficiaries. They were out with another upgrade today, with the preliminary numbers for the first half printing a 21% lift on sales, and pre-tax profit doubling though it did come with one-off government benefits of nearly $10m . The order book remains strong with Australian’s continuing to look at domestic holidays through 2021, though management backed away from providing FY guidance at this stage.

ARB Corp (ARB) Chart

BROKER MOVES

·         Super Retail Raised to Buy at UBS; PT A$12.20

·         United Malt Raised to Buy at Morningstar

·         Nearmap Ltd Raised to Outperform at RBC; PT A$3

OUR CALLS

No changes today

Major Movers Today

Have a great night

James & the Market Matters Team

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