Afternoon Report / Industrials, Energy take the ASX within a whisker of 7000 (RSG, PPT)

By Market Matters 15 January 20

Industrials, Energy take the ASX within a whisker of 7000 (RSG, PPT)

Market Matters Afternoon Report 15th January 2020

WHAT MATTERED TODAY

Another storming session for the ASX today with the 200 approaching the 7000 milestones, at its best today it got within 3.2 points with a high of 6996.8. Buying was more selective today however the stocks that saw a bid got a good run on, a number of which we hold across the MM Portfolios. Gold names were strong today playing some catch up with the Gold price after lagging recently while a number of deeper value stocks outperformed higher value growth. Long mining services and gold today = outperformance while some of the recently hot Lithium stocks gave back recent gains.

Overall, the ASX 200 added +32pts / +0.47% today to close at 6994. Dow Futures are trading marginally higher up by +18pts/+0.06%

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE

Stocks running: Things catching the eye included Service Stream (SSM) which was up more than +4% today and looks strong. Fund Manager Naos named SSM as their No 1 pick for the year on Livewire at the start of Jan and that pick is looking good so far – we agree with the rationale and remain content holders. Other stocks in that same video were WISR (WZR) picked from Elley Grifiths, through Shaw we raised $30m for them yesterday in a placement that was massively oversubscribed, a speculative peer to peer lending business that looks good. EML Payments (EML) was named by QVG Capital, Nufarm (NUF) by Firetrail, City Chic (CCX) by Orphir and Bid energy (BID) by Centennial. Ben Clark from TMS is keen on Amazon overseas while Magellan tipped Alibaba which we hold in our international equities’ portfolio.

NRW Holdings (NWH) also strong today adding +4.32% as the capital raise is now complete, and the stock hit a new 8-year high today. We’re long and see further upside here.

NRW Holdings (NWH) Chart

Resolute Mining (RSG) +0.85%; traded higher today after confirming the sale of their Ravenswood mine in Queensland for $100m upfront, along with the potential for another $200m contingent to performance of the mine and medium-term gold prices. The sale has been speculated for some time with EMR Capital having exclusive negotiation rights with Resolute set to expire this afternoon. EMR just made cut off, securing the deal this morning and bringing in Singapore’s Golden Energy & Resource Ltd to finalize the offer. The deal relieves a bit of balance sheet stress for Resolute, owing having some leeway to drive growth in other projects. We prefer Newcrest for our gold exposure although we are sellers of strength.

Resolute (RSG) Chart

Perpetual (PPT) +0.35%; released Funds Under Management (FUM) for the quarter this morning with outflows in equities offset by inflows into fixed income products, all in all total FUM ended the month at $26.3b, an increase of $200m. Shares were higher today, but still underperformed the broader market which is uncharacteristic of how Perpetual normally trades on an up day. It shows the result was a touch behind what the market would have liked. FUM growth remains key and it did grow, even if it was just +0.75% it’s hard to take today’s announcement as a negative. We like PPT given it is reasonably priced vs historical metrics and continues to pay a good dividend.

Perpetual (PPT) Chart

Broker moves; 

·         Ardent Leisure Cut to Hold at Baillieu Ltd; PT A$1.55

·         Carsales.com Cut to Sell at Morningstar

·         Platinum Asset Cut to Sell at Morningstar

·         Dexus Rated New Buy at Jefferies; PT A$13.67

·         Tyro Payments Rated New Overweight at JPMorgan; PT A$3.75

·         Saracen Mineral Raised to Buy at Goldman; PT A$4.30

·         Mosaic Brands Cut to Hold at Morgans Financial Limited

·         Metcash Raised to Neutral at Credit Suisse; PT A$2.64

OUR CALLS

No changes across portfolios today

Major Movers 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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