Afternoon Report / Money finds its way in ahead of the long weekend (GNC)

By Market Matters 07 June 19

Money finds its way in ahead of the long weekend (GNC)

Market Matters Afternoon Report 7th June 2019

WHAT MATTERED TODAY

***Please note, given the long weekend, there will be no Weekend Report sent on Sunday. Instead, we will send a version of the weekend note through on Tuesday Morning. We hope you have a great long weekend –James***

It seemed there was a some buying appetite heading into the long weekend, with the local market starting strong and then rallying late in the day to close on the high with an extra 13pts added in the match this afternoon. Money was headed into resources names which saw a steady stream of buying as the day went on. GrainCorp helped the consumer staples names do well today while the consumer discretionary sector was the only one to fall.

It is set to be a big long weekend with US employment data out tonight, as well as UK GDP data hitting on Monday.

Overall today, the ASX 200 closed up +60pts  at 6443. Dow Futures are trading up +38 points or 0.15%

ASX 200 Chart

ASX 200 Chart

 

CATCHING OUR EYE:

Sectors this week;  The bond proxy utilities and REITs were best on this week. Energy and materials followed weakness in oil & resources lower.

Stocks this week; Eclipx (ECX) bounced back this week, while one of the most shorted companies in Syrah (SYR) looks to have taken more shorts on

GrainCorp (GNC) +5.97%;  the local grain dealer saw its share price higher today on news it had inked a 10-year long insurance deal against poor harvests with Aon that will see GNC compensated if crop harvests fall below 15.3mt, while the company will have to pay the insurer if production rises above 19.3mt. The insurance deal aims to smooth out earnings for the business, allowing better business planning through the cycle. In the 2018 financial year the drought stricken east coast of Australia managed 16.6mt, a fair distance from the record breaking 28.2mt in FY17.

The volatility of earnings for GNC in life after the malt business departs was playing on investors’ minds ahead of the demerger after it saw EBITDA fall from a $30m gain in the first half of FY18 to a $52m loss in 1H19. On the day, the stock fell almost 7% while GNC is currently trading around 20% below this year’s high set in February. The market likes some stability to earnings and GNC will be rewarded.

GrainCorp (GNC) Chart

Broker Moves;

  • JB Hi-Fi Downgraded to Neutral at JPMorgan; PT A$29
  • Rio Tinto Downgraded to Underweight at Barclays
  • Super Retail Downgraded to Neutral at JPMorgan; PT A$9.50

OUR CALLS

No changes today

 

Watch out for the weekend report. 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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