Afternoon Report / Healthcare underpins a decent market bounce (MIN, NBL)

By Market Matters 22 November 18

Healthcare underpins a decent market bounce (MIN, NBL)

Market Matters Afternoon Report 22nd November 2018

WHAT MATTERED TODAY

A better day for Aussie stocks with the market opening up and grinding higher throughout the session. A strong performance from the recently weak healthcare stocks – ASX:CSL & ASX:COH both did well up  +3.34% & +2.85% respectively, however buying was pretty well spread across the board. Macquarie Group (ASX:MQG) appeared at the Royal Commission, however it was only brief relative to the other banks and the share price was bid up after they finished. MQG has been weak of late, obviously a result of equity market weakness but also concerns over their pending appearance at the RC – perhaps some clear air in front of it now.

Overall, the ASX 200 closed up +48 points or +0.86% to 5691. Dow Futures are currently up  +30 points or +0.11%. US stock & bond markets are closed tonight for Thanksgiving, with a half day on Friday – essentially they’re off for the rest of the week.

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE;

Broker Moves;  

·         Cochlear (COH AU): Upgraded to Overweight at Morgan Stanley; PT A$175

·         Gascoyne (GCY AU): Rated New Buy at CCZ Statton; PT A$0.16

·         NRW Holdings (NWH AU): Upgraded to Accumulate at Hartleys Ltd; PT A$2.11

·         Pro Medicus (PME AU): Upgraded to Outperform at RBC; PT A$10.50

·         Webjet (WEB AU): Upgraded to Outperform at Credit Suisse; PT A$14.40

·         Wesfarmers (WES AU): Downgraded to Sell at Morningstar

Mineral Resources (ASX: MIN) $15.76 / 26.59%;  Rallied hard today on the announcement of an exclusivity agreement in relation to a joint venture with Albermale to develop the Wodgina Lithium project. The JV purchase price for a 50% stake is around A$1.57b which puts a value on the project of more than A$3bn - this is a big number. MINs market capitalisation prior to this announcement was $2.34bn plus they also have other assets that add to the valuation by another ~$2bnish.  Clearly the market  had a reason to get excited today and it certainly did.

A few things to consider; The price is big, a lot bigger than I thought it would be when we owned the stock and it’s a credible deal with the acquirer having cash and debt facilities available, however the deal is not yet done (subject to various conditions) and within today’s announcement, MIN slipped through a 40% earnings downgrade with a huge second half skew to boot. In short, a cracking deal for MIN on the Wodgina asset but the rest of the business is struggling. If this deal does fall over, look out, the SP is going significantly lower. If we still held, we’d be sellers into this strength.

Mineral Resources (MIN) Chart

Noni B (ASX: NBL) $2.90 / +12.84%; the women’s fashion retailer jumped today whilst they held the AGM, giving a reasonable update to the year’s trading thus far. While not expecting much in the way of same store sales growth – like nearly every other retailer in the Australian market – Noni B was showing significant progress in the integration of the 5 Specialty Fashion brands it purchased.

The $31m acquisition was completed in July, and added Crossroads, Rivers and 3 other brands to the Noni B set up. While not expecting much in the way of same store sales growth – like nearly every other retailer in the Australian market – Noni B was showing significant progress in the integration of the 5 Specialty Fashion brands it purchased. The $31m acquisition was completed in July, and added Crossroads, Rivers and 3 other brands to the Noni B set up.

Originally the acquisition was not expected to add to the company’s bottom line in FY19, however today’s update showed synergies have been achieved faster than expected, and revised EBITDA guidance 21% higher to $45m, mostly thanks to the $30m annual savings. Despite the jump, the stock doesn’t excite us.

Noni B (ASX: NBL) Chart

OUR CALLS

No changes today

Have a great night

James/ 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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