Afternoon Report / Iron Ore tumbles (DLX, BHP)

By Market Matters 17 April 19

Iron Ore tumbles (DLX, BHP)

Market Matters Afternoon Report April 17th 2019

WHAT MATTERED TODAY

Surprisingly resilient day was seen on the local market today, once again held up by the banks. Resources took a hit though with the iron ore names finally coming off substantially all on the back of some better news from Vale. For those that missed it, Vale got the go ahead to resume use of one of the dams that the Brazil courts had placed an injunction over – the result is some supply will come back online shortly, although a number of dams still remain out of action as this Brazil disaster continues to play out. Fortescue (FMG) was hit the hardest as a result, falling 8.52%.

Overall today, the ASX 200 down -21 points or -0.33% at 6256. Dow Futures are trading higher, up +10pts / 0.04%

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE;

DuluxGroup (DLX), +27.12%, shares traded strongly higher after the company confirmed it had received a takeover offer from Japanese company Nippon. The offer at $9.80/share was worth a 27.8% premium to yesterday’s close, with the stock traded through that level early in the session to a high of $9.87. The bid includes a fully franked dividend component and hence is worth more than $9.80 to many shareholders that are able to use the credits.

The board has unanimously recommended the bid, saying “it provides an opportunity for shareholders to realise a significant premium to market value and is on terms that reflect the strategic value of DuluxGroup.”

DuluxGroup (DLX) Chart

BHP (BHP), -2.72%, sold off today on the back of soft iron ore price movements, but held up better than its peers thanks to a reasonable quarterly production report. Similar to Rio Tinto’s report yesterday, BHP lowered iron ore guidance on the back the cyclone impact, however the rest of the production deck remained intact. One interesting thing to note was commentary around cost pressures on labour and energy however nothing to be overly concerned with just yet. As we have said before, iron ore price will remain choppy as this Brazil situation plays out and will present buying opportunities.

BHP (BHP) Chart

Broker Moves:

·         Mirvac Group Downgraded to Hold at Deutsche Bank

·         Mirvac Group Downgraded to Hold at Shaw and Partners; PT A$2.64

·         Scentre Group Downgraded to Sell at Deutsche Bank

·         Regis Resources Raised to Buy at Blue Ocean; Price Target A$6.30

·         Telstra Upgraded to Buy at UBS; PT A$3.60

·         Restaurant Brands NZ Cut to Underperform at First NZ Capital

·         Cochlear Upgraded to Buy at Goldman; PT A$197

·         Transurban Cut to Underperform at Credit Suisse; PT A$12.20

OUR CALLS

No changes to either portfolio 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.

Disclaimer

All figures contained from sources believed to be accurate.  Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy.  Prices as at 17/04/2019

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