Afternoon Report / Stocks bullish early but succumbs to sellers (ILU, WZR)

By Market Matters 28 July 20

Stocks bullish early but succumbs to sellers (ILU, WZR)

Market Matters Afternoon Report 28th July 2020

WHAT MATTERED TODAY

A poor day for the ASX with the market looking very strong for the first hour of trade only to succumb to sellers from around 11am onwards. The high was put in at 6113 keying off a reasonable lead from overseas markets however the selling in the higher value area of the market, tech and healthcare and the like prompted more broader based selling. The reflation trade we’ve harped on about for a while held up well, the Material stocks best on ground today up +0.87% while Credit Corp (CCP), a stock we covered in the AM note this morning (click here) finished up +8.76% on the day. Emeco (EHL), who reported yesterday and fell bucked the negative vibe today and rallied +7.58% to close at $1.065, recovering from yesterday’s weakness which we struggled to understand.

Overall, the ASX 200 fell  -23pts / -0.39% to close at 6020. Dow Futures are trading up 1pts / +0.05% 

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE

Iluka (ILU)+0.75%  Released June Quarter production and sales numbers today that confirmed a challenging period for ILU – with global zircon headwinds noticeable in demand, sales offtake and pricing; the TiO2 feedstock side of the business (rutile) performed ok on price but volume was similarly lower. At the end of the quarter Iluka faced the stark realisation that offtake agreements are not necessarily “take or pay” – court ruling pending. A hard one to be bullish on given the confluence of trends across the business and more broadly.

Iluka (ILU) Chart

Wisr (WZR) -1.96%: alternative finance play Wisr was out with their 4th quarter update which showed more growth despite the resounding weakness in the broader economy. Loan originations for the quarter came in at $42.2m, 8% higher than the 3rdquarter, and nearly double that of the last quarter. Revenues followed suit, up 188% on pcp with the company now totalling $244.9m in originations. Further to this, 90 day+ arrears fell to a record low of 1.44% of the book, and the average credit score now an impressive 723. The growth did come at a cost, with operating cashflow at -$12.8m for the financial year. The trends are mostly improving for Wisr but the market wasn’t keen on giving it credit just yet. Shares finished lower despite touching recent highs intra-day. The company continues to show impressive results despite the COVID-19 impact on the economy. 

Source; Wisr (WZR)

Liquidity remains strong with more than $44m in available funding. The fintech screens positively and should be further validated as the market share wins continue. We like the stock as a speculative play given the key driver, loan originations, continues to show solid growth.

Wisr (WZR) Chart

BROKER MOVES:

·         Healius Cut to Neutral at Citi; PT A$3.35

·         Nufarm Raised to Buy at UBS; PT A$5.19

·         ResMed GDRs Raised to Neutral at Evans & Partners Pty Ltd

·         Perpetual Raised to Add at Morgans Financial Limited

·         Panoramic Resources Raised to Speculative Buy at Hartleys Ltd

·         Adbri Raised to Outperform at Taylor Collison

OUR CALLS

No changes 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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