Afternoon Report / Gold & IT stocks best on ground, Energy stocks weigh (CNI, CMA, QAN)

By Market Matters 18 September 19

Gold & IT stocks best on ground, Energy stocks weigh (CNI, CMA, QAN)

Market Matters Afternoon Report 19th September 2019

WHAT MATTERED TODAY

A fairly muted session in Australia today with the market briefly trading in the black  early on before the market trickled lower into the close. Energy stocks hardest hit on the downside thanks to the pullback in Crude prices overnight while we saw a move back into the higher growth area of the market, IT stocks best on ground adding +0.55% led by Pro Medicus (PME) which added +5.52% while Gold stocks were also well bid, Resolute adding +4.58% and Saracens (SAR) up +3.49%. We continue to see Gold as a short term bullish trade targeting a quick +10% upside from current levels – we’re positioned accordingly.

We’re now more comfortable holding higher cash levels with a more defensive portfolio set leading into index options expiry tomorrow morning – the market looks tired although no sell signals have been generated as yet. 

Overall, the ASX 200 lost -13pts today or -0.20% to 6681, Dow Futures are now trading down -43pts/-0.15%.

ASX 200 Chart  - obvious buying once again in the match this afternoon.

ASX 200 Chart

CATCHING OUR EYE;

Centuria (CNI & CMA); both spent the day in trading halt as they raised capital in unison. Centuria Metropolitan REIT (CMA) is raising $273m at a 4.7% discount to last close, using the proceeds to purchase 2 properties while Centuria Capital (CNI) is raising $100m to fund their portion of the CMA raise. The first acquisition from the metro REIT is a 50% stake in a 10 year old building on the fringes of the Sydney CBD in Eveleigh. The site is 100% leased with a weighted average lease expiry (WALE) of 8.5yrs – more than 50% of the income stems from two tenants in the State Government and Seven Network. The second acquisition is full ownership of a Perth office block in the CBD. Once again, 100% leased, with a WALE of 7.5yrs. This site is corner stoned by government leases as well as a long term lease from WeWork – more on these guys another time…

The capital raise came with re-iteration of CMA’s funds from operations (FFO) guidance of 19cps, dropping down to a 17.8cps distribution for holders, or 6.2% yield at the issue price. For CNI, they maintained their 9.7c expected distribution for a 4.6% yield on the issue price – which is 50% above NAV.

Centuria Metro REIT (CMA) Chart

BROKER MOVES; Qantas made fresh 52-week highs today on the back of the Morgan Stanley note. The analyst bumped the price target up 17% and slapped a buy on the flying kangaroo against the market view that higher oil prices means higher fuel costs. MS was running the story that Qantas is fully hedged in FY20 and doubts the oil curve has shifted significantly for the medium term. Upside is seen the Loyalty business, which now accounts for a third of the valuation given the much higher EBITDA multiple it attracts. Shares were up 1.78% by the close.

Qantas (QAN) Chart

 

·         QAN AU: Qantas Upgraded to Overweight at Morgan Stanley; PT A$7

OUR CALLS

We sold Estia Health (EHE), Flight Centre (FLT) & Whitehaven (WHC) to buy Spark infrastructure (SKI) and Transurban (TCL) in the Income Portfolio today. See Income Report

Major Movers Today

Have a great night

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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