Afternoon Report / Market grinds higher on final day of reporting (APX, NXT, WOW)

By Market Matters 29 August 19

Market grinds higher on final day of reporting (APX, NXT, WOW)

Market Matters Afternoon Report 29th August 2019

WHAT MATTERED TODAY

Today marks the final day of the local reporting season and it’s been a challenging one for investors. Beats have been slightly ahead of misses on FY19 numbers however outlook statements have been weak prompting substantially more downgrades to expectations for the year ahead. Offsetting to some degree has been the continued slide in bond yields, both in Australia and globally – today local yields are once again plumbing new lows courtesy of another contraction in business investment for the June quarter which  printed -0.5% - its second successive quarter of negative growth in Australian CAPEX. The AUD traded down to 67.23c

On the market today, the ASX 200 was weaker early before a good recovery from around 1pm onwards – the index closed near session highs, the Healthcare sector was strong followed by Energy for a second consecutive day while the It stocks were dragged lower by Appen – more on that below.  

Overall, the ASX 200 added +6pts today or +0.10% to 6507, a fairly muted session although it was +32pts from the session lows. Dow Futures are trading down -43pts /-0.17%.

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE;

Stocks today: The table below looks at the share price performance of those companies that reported today. The final day of reporting now wrapped up.

Appen (APX) -11.33%: We touched on this yesterday RE the markets positioning ahead of their result this morning. A stock that generally beats today met expectations, however it’s a good lesson in how the mkt was positioned ahead of the result. A +10% rally yesterday saw a raft of profit taking this morning, the stock higher on open before sellers took to it, closing 19% from the days early high of $29.98 – shows how market positioning plays a big part. The result was actually strong, met expectations with guidance upgraded to be at the top end of the prior guided range, however it wasn’t an upgrade, and the market was positioned for one.

Appen (APX) Chart

NextDC (NXT) -6.71%; the data centre operator posted a reasonable full year result today, marginally missing at the EBITDA line however the stock was sold off given the guidance at $100m-$105m in FY20, a 6% miss to consensus. Revenue was up 15% for the year, dropping down to a 13% EBITDA rise. The company continues to invest in growth with plenty of capital on the balance sheet supporting this. Demand for data centres continues to build momentum and we think the outlook is conservative at this early stage. We like NXT sub $6.

NextDC (NXT) Chart

Woolworths (WOW) +0.55%; had the ascendency over Coles this year, and it showed in the full year result. Woolies beat at the full year, and commentary suggests that the momentum has continued for the first few weeks of FY20. LFL sales in the second half at 3.6% was better than expected with many in the market pricing in the Coles Little Shop round 2 benefit - earnings drag from Big W was also less than many anticipated with the discount department store doing ~7% LFL sales which is a positive and now showing a path to positive earnings.

The stock up smalls today, however given its run of late it did well to post a gain. We aren’t keen on WOW as the competition in the supermarket space is set to pick up, although concede we’ve missed the rally to date.

Woolworths (WOW) Chart

Broker moves;

·         Perseus Downgraded to Neutral at Citi; PT A$0.90

·         F&P Healthcare Upgraded to Neutral at Macquarie; PT NZ$16.61

·         Nanosonics Downgraded to Sell at Wilsons; PT A$3.87

·         Ainsworth Game Upgraded to Hold at Wilsons; PT A$0.79

·         Sandfire Downgraded to Hold at Morningstar

·         Healius Downgraded to Hold at Morningstar

·         OZ Minerals Upgraded to Neutral at Credit Suisse; PT A$9.50

·         Virgin Australia Cut to Underperform at Credit Suisse; PT A$0.1

·         Macquarie Group Upgraded to Overweight at JPMorgan; PT A$133

·         National Storage REIT Cut to Neutral at JPMorgan; PT A$1.85

·         James Hardie GDRs Rated New Underperform at RBC; PT A$19

·         Wesfarmers Downgraded to Sell at Shaw and Partners; PT A$34

·         Aveo Downgraded to Neutral at JPMorgan; Price Target A$2.15

·         CML Group Downgraded to Hold at Blue Ocean; PT A$0.45

OUR CALLS

No changes today – we’re still in a holding pattern for our overseas portfolio while we remain close to exiting a few of the underperformers in the Platinum Portfolio.

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.

Disclaimer

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