Afternoon Report / CBA doing the heavy lifting (CBA, TAH, AMP)

By Market Matters 08 August 18

CBA doing the heavy lifting (CBA, TAH, AMP)

Market Matters Afternoon Report 8th August 2018


A few of the better known Aussie brands reported today with Tabcorp (TAH), Commonwealth Bank (CBA) and AMP all rallying post their results. We’ll touch on these in more detail below, however in the case of CBA and AMP, the results were not as weak as the market had feared while TAH’s numbers were weak, however their guidance was strong particularly around the likely synergy benefits to be achieved from the Tatts acquisition.

The results put a bid tone under the market for most of the session before a late sell off saw the index trade lower into the close – a soft outcome really given that CBA, the markets largest index constituent was up more than 2.5% on the session adding ~11 index points. We wrote about CBA’s result in today’s Income Report here.

Commonwealth Bank (CBA) Chart


Suncorp, the largest weighted stock in the MM Platinum Portfolio reports full year numbers tomorrow…expectations are outlined below. The Insurance / Banking company has enjoyed a strong run in recent times up from the mid 12’s to above $15 before both JP Morgan and Bells downgraded the stock last week, both to a hold and $15 price target. Clearly there are now more risks for disappointment given the SP run of late.

In their full year numbers we’ll be looking closely at underlying insurance margins and how they are tracking towards SUNs through the cycle 12% target, while volume and pricing will also be key. SUN is reducing costs and has excess capital in the balance sheet so the chance for a special dividend remains.

Market Expectations – SUN

Overall, the ASX200 gained 14 points today or +0.23% to close at 6268 – Dow Futures are currently trading up 3pts.  

Australian Reporting season is underway – for a full list of company reporting dates – click here

ASX 200 Chart


ASX 200 Chart


Broker Moves;  analysts have been busy updating numbers through the reporting season. One out of cycle move was Citi turning negative on A2 Milk today, lowering expectations around the daigou sale channels suggesting inventory levels are building.


·         A2 Milk Co Downgraded to Sell at Citi; PT A$9.50

·         Independence Group Cut to Underweight at Morgan Stanley

·         Evolution Mining Raised to Equal-weight at Morgan Stanley

·         IPH Upgraded to Buy at Canaccord; PT A$5.30

·         Transurban Downgraded to Neutral at Credit Suisse; PT A$12.30

·         Eclipx Downgraded to Neutral at Credit Suisse; PT A$1.90

AMP Ltd (AMP) $3.48 / +3.88%; This morning AMP reported their first half results that proved to be better than the markets downbeat expectations, in terms of the underlying earnings, dividend and even at the profit line, albeit, it was down substantially on the pcp. Obviously AMP has some major structural headwinds playing out, and the reputational damage caused by the Royal Commission is hard to quantify, the results today gave some insight into the costs so far.

The underlying profit at $495m was ahead of forecasts of $485m however there were significant costs that impacted the net profit line which came in at $115m. These included $312m in advice remediation and related costs, $13m of costs associated with the Royal Commission and other bits and pieces.

AMP had previously guided to a profit of about $100m and todays result was better than that, however there remains many challenges on the horizon for the iconic Australian wealth business, including an ongoing reduction in adviser numbers with adviser headcount down by 7% over the year and net cash outflows – nearly $1B in cash outflows in the first half.

AMP (AMP) Chart 

Tabcorp (TAH) $4.84 / +7.56%; Betting agency Tabcorp has rallied on what looks at first glance a poor result. The stock was sold off yesterday prior to the result but has bounced back strongly today despite missing consensus earnings by ~2% at $246.2m. The key to the market’s reaction has been the focus on the integration of Tatts post the merger completed earlier this year – it seems the market is starting to believe the purported $130m in EBITDA synergies expected in FY21, although only $8m has been delivered thus far.

The result is somewhat messy, it includes costs associated with the merger as well as a $91m loss to close the Sun Bets UK joint venture with News Corp. Some of these impacts were offset by a highly successful Soccer World Cup in which Tabcorp realized $26m revenue and also saw active users rise and remain elevated after the event.

Tabcorp has a large competitive advantage to other betting agencies and a digital foot print which is unrivalled – this will help them sustain market share as more betting moves online. It seems those with the inside tip focused on a near-term miss while the market is optimistic around future integration & growth

Tabcorp (TAH) Chart



No trades across the MM portfolios today

Have a great night

James / Harry & the Market Matters Team


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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