Afternoon Report / IT stocks once again offer most support, market edges higher (BVS, LNK, TYR)

By Market Matters 12 October 20

IT stocks once again offer most support, market edges higher (BVS, LNK, TYR)

Market Matters Afternoon Report 12th October 2020

WHAT MATTERED TODAY

A reasonable session to kick off the week with the IT stocks building on last weeks solid performance putting on +3% while the financials were also well bid rising more than 1%. AGM season is now upon us with a number of companies out today,  commentary from Bingo (BIN) which was in line with recent updates was one we had most interest in (resides in the MM Growth Portfolio), although we did see Ian Malouf sell a few million shares - Ian was the founder of Dial-a-dump (DADI) and is now BIN’s second largest shareholder behind MD Daniel Tartak, although he spends most time on his 52m super yaucht – ‘Mischief’. The Diggers and Dealers event is on in WA (Kalgoolie) + is being live streamed, Fortescue (FMG) headlining the card tomorrow.

The market ticked around in a tight 20pt range for most of the session before ticking higher into the close, finishing on the session highs. MM holds 2 of the top 3 gaimers today (BVS +8.88% & Z1P +5.69%), which is nice, Link (LNK) which Harry covers off below the star adding +25% on a takeover.  

Asian markets were mostly bullish today, Japan flat however Chinese stocks rallied nearly 3% on data that showed money supply was high and new loans were strong. All the talk in the US media centres around stimulus however the traders I speak with arn’t expecting anything pre-election, instead it seems the consensus is looking for a big post November deal, whoever gets in. US Futures edged higher during our time zone

By the close, the ASX 200 was up by 29pts / +0.49%. Dow Futures are trading up 70pts/+0.25%

ASX 200 Chart

ASX 200 Chart

CATHCING MY EYE

Bravura Solutions (BVS) +8.88%:  A good session after announcing a deal to acquire Delta Financial Systems in the UK for around $40m. Delta are software specialists in the UK pension space with the acquisition fitting into Bravura’s core Sonata offering. They say the deal will be earnings accretive in FY21 with Delta growing their top line at 20-30% pa. BVS has been a weak performer in our growth portfolio since acquisition, however today’s announcement could be the catalyst to turn the needle. At the time of their recent results, it was their conservative guidance for flat YoY growth that prompted the sell-off, today’s announcement obviously paints a more optimistic picture than that, hence the pop in the share price. We remain bullish and if BVS can surprise in terms of earnings growth, they’ll also capture a P/E re-rate.

Bravura Solutions (BVS) Chart

Link Administration (LNK) +25.06%: A private equity consortium lobbed a bid for Link today, valuing the administration and share registry business at $5.20/share – a nice 30% premium to yesterday’s close.  The bidders are led by Carlyle Group & Pacific Equity – PEP sold down its stake in LNK’s 2015 IPO. Link’s largest shareholder Perpetual (PPT) has indicated it would support the bid in the absence of any superior offer. Link shares closed at a 5% discount to the offer - there are a few conditions to be met and the group will need to do there DD first before making a binding offer – I hope that doesn’t include trying to change anything or do any sort of administrative work on a holding – they’ll run a mile!

Link has had a tough time over the last few years with pressure on all sides of the business – superfund administration fees are tightening, early access super withdrawals didn’t help and it’s UK exposure took a big hit with BREXIT uncertainty. At around $5 a pop, it’s not a bad chance for long suffering LNK shareholders to take the money and run.

Link Administration (LNK) Chart

Tyro Payments (TYR)  +6.67%:  this morning released its weekly trading update during COVID. We haven’t provided an update for a few weeks so this catches us up. As a reminder we provide TYR data for sector interest. TYR is one of the largest points of sale terminal providers in Australia and has been growing/taking share off the majors.

Key takeout’s from Jono Higgins

·         Weekly transaction volume to 9th of October was $65.4m per day, this grew +11% vs the prior week;

·         Weekly volume to the 9th was the highest daily average for payment volumes during CY20 to date. A record for this year. Closest to the mark was the first week of July wherein volumes were $63.1m;

·         Volume to the 9th of October is up 11% MoM and now 9% YoY. This is a relatively strong result considering the environment. TYR volumes with Victorian restrictions likely to loosen a little this weekend are likely to comp higher materially over the next quarter in our view; and

·         This is positive for more the offline and recovery players if this trend continues. Categories continuing to do well include electronics, outdoor, home improvement amongst others.

Tyro Payments (TYR) Chart

BROKER MOVES

·         Sydney Airport Raised to Overweight at Morgan Stanley

·         Newcrest Raised to Buy at Citi; PT A$37

·         ANZ Bank Raised to Overweight at JPMorgan; PT A$20

·         Silver Lake Cut to Hold at Canaccord; PT A$2.50

·         Rio Tinto Cut to Hold at Shaw and Partners; PT A$99.99

·         Janus Henderson GDRs Raised to Neutral at Credit Suisse

·         South32 Cut to Hold at SBG Securities; PT A$2.37

OUR CALLS

No changes today

Major Movers Today

Have a great night

James & 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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