Market Matters Report / Surpirse unemployment jump sents stocks higher (GEM, EHL, NEA)

By Market Matters 14 November 19

Surpirse unemployment jump sents stocks higher (GEM, EHL, NEA)

Market Matters Afternoon Report 14th November 2019


There was choppy action on the open this morning as the index jumped in and out of positive territory for the first 90 minutes of the session. There was little direction until local employment data hit the screens which lit a fire under the market for the rest of the morning. The index swiftly moved ~50points higher on an unexpected rise in unemployment to 5.3% which edged up despite the participation rate falling. a total of 19k jobs were taking out of the economy, a long way from the expected 15k jump expected.

The dollar took a beating as well as it continued its recent pull back. A couple of misses in the 1PM China data post encouraged the selling as well. Retail sales were in well below expectations while more important for the currency was a miss in industrial production which came in at +4.7% yoy, below the 5.4% expected.

Australian Dollar vs USD Chart

Consumer staples was the best sector to be in today, getting a sugar hit from increasing rate cut chants. Financials were the only sector to close lower, however NAB went ex-dividend 83c which tipped the sector into the red.

Overall, the ASX 200 gained 36pts/+0.55%  today to close at 6735. Dow Futures are trading marginally lower, -9pts

ASX 200 Chart

ASX 200 Chart


Emeco Holdings (EHL) +10.22%:  the market was impressed by some of the comments out of the company’s AGM today with the MD talking up the company’s start to FY20 as trends turn in the company’s favour. The AGM address included 1H20 EBITDA guidance of $118-120m which is slightly ahead of the markets $117m expectations which flows through to a $240m EBITDA at the full year.

The strong start to the year has been driven by robust demand from the Eastern Australian coal while the assets acquired last financial year which drove debt concerns from the market have been integrated are performing to expectations. The trend is heading in the right direction now for Emeco. Utilization rates have been subdued for a while now however these appear to be lifting as the company extracts more out of the assets at hand with western Australian iron ore and gold projects on the rise. Deleveraging is now the key issue with the board looking for debt to drop to 1x EBITDA by FY21. We own Emeco and the price action today makes us more confident in the position.

Emeco Holdings (EHL) Chart

Nearmap (NEA) +14.06%;  The mapping tech business was best on ground of the top 200 today on comments at their AGM. Shares had been under pressure with fears a third competitor in the market would put pressure on the company’s growth outlook. Those fears were set aside today with guidance for Average Contract Volume (ACV) in FY20 set at $116m to $120m, a 30%% jump from the groups $90.2m ACV last financial year. The key for Nearmap is scale and they will need to maintain the 30+% growth seen over the past few years to justify their valuation.

Nearmap (NEA) Chart

G8 Education (GEM) –17.76%; the childcare centre owner was tossed around today and sent to new 52-week lows on news it would sell 25 centres in WA for a total of $6.4m, as well as pushing through a downgrade at their investor day. The company guided to EBIT for next year of $131m-$134m, a 7% downgrade to their guidance provided at the half year back in August. The miss comes from a lack of occupancy growth which has been below expectations in what is normally a seasonally strong period. Wages have also crept higher, coming in around $3m above forecasts, which is squeezing margins. The sale of the 25 centres was down on a multiple of 4.1x FY19, significantly below where the stock is currently trading, while the funds will be used to reduce debt levels. MM is not interested in GEM.

G8 Education (GEM) Chart

Broker moves;

·         James Hardie GDRs Rated New Hold at Jefferies; PT A$27.70

·         Adelaide Brighton Rated New Underperform at Jefferies

·         CSR Rated New Underperform at Jefferies; PT A$3.53

·         Reliance Worldwide Rated New Hold at Jefferies; PT A$4.37

·         Boral Rated New Hold at Jefferies; PT A$5.03

·         AusNet Cut to Reduce at Morgans Financial Limited; PT A$1.58

·         Spark Infra Raised to Equal-Weight at Morgan Stanley; PT A$2.15

·         Cromwell Property Cut to Underweight at JPMorgan; PT A$1.10

·         AUB Group Raised to Outperform at Credit Suisse; PT A$12.75


We were filled in our SGM buy order at $10.65 yesterday – although only a small number of shares traded there. Sims traded comfortably through that level today.

Major Movers Today

Have a great night

Harry & the Market Matters Team


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.


All figures contained from sources believed to be accurate.  All prices stated are based on the last close price at the time of writing unless otherwise noted. Market Matters does not make any representation of warranty as to the accuracy of the figures or prices and disclaims any liability resulting from any inaccuracy. 

Reports and other documents published on this website and email (‘Reports’) are authored by Market Matters and the reports represent the views of Market Matters. The Market Matters Report is based on technical analysis of companies, commodities and the market in general. Technical analysis focuses on interpreting charts and other data to determine what the market sentiment about a particular financial product is, or will be. Unlike fundamental analysis, it does not involve a detailed review of the company’s financial position.

The Reports contain general, as opposed to personal, advice. That means they are prepared for multiple distributions without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of a financial advisor.  Market Matters or its author(s) accepts no responsibility for any losses or damages resulting from decisions made from or because of information within this publication. Investing and trading in financial products are always risky, so you should do your own research before buying or selling a financial product.

The Reports are published by Market Matters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports. Market Matters may publish content sourced from external content providers.

If you rely on a Report, you do so at your own risk. Past performance is not an indication of future performance. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence.