ASX 200 Henry Jennings, Australian Market Wrap. Headlines, Stocks & Sectors, Bonds, Economic & Asian Market News with Idea of the Day – END of DAY REPORT.

 

ASX 200 slips 10 to close at 6096 after a positive start. US futures down 33. Once again results dominated with a cracker from FMG and a special dividend.Miners in favour. Banks soft. CTD also delivered but DMP failed yet again to show growth. WTC took the wind out of tech stocks as APT and others turned lower. Retail in focus as LOV delivers a stellar result. A2M stared down its critics with a solid number and good growth in China. Car leasing out of favour with MMS and ECX falling heavily on results. Staples such as COL and WOW also showed signs of the consumer strains and price competition. Gold stocks muted despite bullion rise as stronger AUD took some of the optimism out. Wage growth in private sector picking up. AUD slightly higher on wage growth at 71.70c

Today’s Highlights

  • ASX 200 down 20 to 6087 in good volume.
  • High 6126 Low 6077
  • Miners the stand out with iron ore in demand.
  • FMG and BHP drive resources higher.
  • Energy mixed.
  • Banks see selling again as defensives turn lower.
  • Tech rally finishes as WTC underwhelms.
  • AUD weaker at 71.64c
  • Bitcoin rises to US$3900
  • Aussie Gold firms to $1876
  • US futures down 33.
  • Asian markets stronger with Japan up 0.07% and China up 0.92%

INSIGHTS FROM MARCUSTODAY TEAM

  • IDEA OF THE DAY Resmed (RMD) – bashed on an earnings miss but the underlying story remains sound. Sell-off has created value and RSI has printed a buy signal.
  • HENRYS TAKE – Took profits in ALU. Staggering move higher. A look at a small cap tech stock, Citadel (CGL) which has been sold off on results and the key themes for results season. EHL in focus on sell-off but has already bounced.

STOCKS IN FOCUS

  • LOV +20.16% actually good numbers. Shorts scramble.
  • EHL +13.62% rethink after falls yesterday.
  • BIN +12.35% recovery continues.
  • ORE +7.38% the rain on the plain maybe not so bad.
  • 4DS +44.83% positive news on new imac chip.
  • GOR +6.29% RIU conference presentation.
  • MMS -12.77% ECX -7.64% car slowdown hurting.
  • HLO -7.80% media reports on US issues. Since denied.
  • DMP -3.05% fails to deliver.
  • LCK +26.47% builds on yesterday’s news.
  • BYE -1.56% profit-taking.
  • CVN +5.56% cleansing notice.
  • CTD +14.69% VGI shorters punished.
  • NAB -0.32% formalises Thorburn payout and succession plans.
  • SAR +4.81% bounces after a nasty day yesterday.
  • PGH -17.04% who stole the dividend?
  • JIN +2.81% busts through the ceiling.
  • LCK +26.47% yesterday’s spec stock of the day fires again on presentation.
  • AHY -10.95% rolled on results.
  • TWE -1.74% large line of $200m worth crossed at 1480c.
  • Speculative stock of the day:First Wave (FCT) +21.74% announced it had secured a NTT Data partnership which will accelerate its global expansion. First revenue expected in Q4 FY19.
  • Biggest Risers LOV, CTD, EHL, BIN, SVW and A2M
  • Biggest Fallers PGH, MMS, AHY, WTC, APT and HLO

TODAY

  • Domino’s (DMP) -3.05% global food sales up 14.6% to $1.43bn leading to a 12.1% lift in EBIT to $108.3m. Strong sales performance from Japan (unusual) Germany, Benelux and NZ. Australia showed a weaker performance. Europe and Japan account for more than 70% of our revenue and, more than half of our EBITDA. Australia/New Zealand – Network Sales +6.2% to $592.5m (+3.5% SSS), 13 new stores opened. Europe – Network Sales +17.4% to €349.9m6 (+2.3% SSS), 33 new stores opened. Japan – Network Sales +9.0% to ¥22,936m7 (+4.8% SSS), 31 new stores opened. Management expects Same Store Sales for the Full Year to be within guidance, at the mid-to-lower end of the +3%- 6% range. As a result, EBIT is expected to be at the lower end of guidance of $227m-$247m. The outlook statement will fuel the bear case for this one. On a PE of around 33 with a growth rate of low single digits seems expensive.
  • A2 Milk (A2M) +10.53% Results look like a beat across the board. First-half net income NZ$152.7m vs NZ$141.0m expected. Revenue NZ$613.1m vs NZ$597.3m. EBITDA NZ$218.4m vs NZ$204.7m. Guidance was conservative however, and is expected to be broadly in line with the first half.
  • Woolworths Group (WOW) –5.16%  First half NPAT came in at $979m vs consensus of $973m. Revenue was in line with expectations at $30.59bn, EBIT beat slightly at $1.53bn vs consensus of $1.5bn. WOW observe a solid first few weeks in the second half, although they expect a more subdued consumer environment to continue for the foreseeable future.
  • Corporate Travel Management (CTD) +14.69% First half underlying NPAT up 20% on year to $42.6m. Revenue up 23% to $212.2m and underlying EBITDA 21% higher to $64.6m. CTD expects underlying EBITDA to meet the top-end of guidance in FY19, around $150m.
  • Sydney Airports (SYD) +0.72% Traffic numbers. Domestic numbers falt (there is that consumer sentiment playing out again) 2% growth overall with 4.9% in international. Lunar New Year accounted for a big increase in international travelers. Double-digit passenger growth on three of the top 10 markets – China including Special Administrative Regions (20%), United States of America (11.1%) and India (10.6%).
  • Nearmap (NEA) +7.53% has reported this morning. H1 NPAT loss $2m vs estimates of $1.3m Revenue $35.5m vs forecasts of $35.3m EBITDA A$8.1m vs Forecast of $5.2m .”Company well positioned for continued growth in H2”. Has run really hard into the result. Annualised Contract Value is up 42%. So when do they start making money? Global customers of 9,300. The US is the key and it doubled its ACV portfolio in the last year. Subscriptions of 1,178. Continued growth in ARPS. No concrete guidance except to say core business will reach cashflow breakeven during FY19. Bear in mind it is a $1bn company. EBITDA of $8.1m. One thing to consider is the cost of marketing at $9.7m directly. Cash costs to acquire the pictures of $9.3m. Corporate costs of $9.2m. Not cheap. Big potential though. Market prices potential.
  • Lovisa (LOV) –20.16%  Revenue up 12.3% to the $133.2m Gross margin of 81%. Gross profit up 13% to $107.8m. Dividend of 18c fully franked. Growth in the European and US markets accelerated in the period, with 12 new stores in the UK, 8 stores now trading in Spain, 7 in France and 8 in the US. Gross Margin increased 60bps to 81.0% as it continues to benefit from higher USD hedge rates in the period. The key driver of future growth for LOV is the continued international store roll out. The store network increased to 366 stores as at the end of the period, a net increase of 40 stores from June 2018. Outlook: Trading since the end of the half-year has seen improvement across all markets with positive comparable store sales for the period however still below target comparable store sales range of 3% – 5%. LOV expect currency headwinds to begin to have an impact later in the financial year and into FY20 as the average USD hedge rate reduces. The outlook will not please the market.
  • APA Group (APA) –2.00% First half statutory NPAT came in at $157.4m vs consensus of $149m. Statutory revenue beat at $1.24bn vs expectations of $1.18bn. EBITDA missed at $787.7m vs consensus of $799m. APA expects to reach the upper end of guidance for EBITDA in FY19, between $1.55bn and $1.575bn. Net interest costs are expected to be at the lower end of guidance, between $500m and $510m.
  • St Barbara (SBM) +2.95%  First half underlying NPAT down 21% on year to $77.4m. Revenue beat at $332.1m vs expectations of $319m. Gold production of 187,792 oz was achieved, at a group AISC of $1,008 per ounce. A fully franked interim dividend of 4c has been declared. Management notes Gwalia and Simberi have continued to perform well in H1 leading to a modest increase in consolidated guidance for FY19.
  • Scentre Group (SCG) –3.49% Funds from operations (FFO) beat slightly, at 25.24c per security versus expectations of 25.11cps. Revenue missed $2.64bn vs $2.77bn. Forecasts for FFO growth of 3% in FY19, with distribution expected to be 22.6cps. Pre-market has the stock opening 1% higher.
  • Sonic Healthcare (SHL) +3.36% Up 1% in the first 30 minutes of trade on what looked like a slight miss. NPAT $223m versus $230.5m. Revenue $2.9bn vs $2.92bn. EBITDA $4884.9m vs $490.7m. After seven months of trading, on track to achieve full-year earnings guidance. Full-year guidance upgraded to 6-8% underlying EBITDA growth.
  • Stockland (SGP) -2.39% Funds from operations (FFO) of $407 million, down 6.7% on 1H18 reflecting residential profit skew to 2H19 . Return on equity (ROE) of 10.6%, down 60 basis points on FY18, excluding workout project. FFO per security growth for FY19 is expected to be around 5%. Reaffirming an estimated full-year DPS of 27.6c, a 4% increase on FY18. Company expects further price declines in residential land of around 5% over this calendar year, concentrated in Sydney and Melbourne. Guidance for over 6,000 residential settlements are expected for FY19. Could have been worse but will see downgrades.

ECONOMIC DATA

  • Wage Price Index: For the quarter the index was up 0.5%. For the year to December, the index was up 2.3%, consistent with forecasts.
  • ABS Chief Economist Bruce Hockman said: “The seasonally adjusted, quarterly rise of 0.5% continues an extended period of moderate hourly wage growth. Annually, private sector wages rose 2.3% and public sector wages grew 2.5%.”

BOND MARKETS

  • 2-Year bond yieldsfall 3bps to 1.71%
  • 5-Year yieldsfall 3bps to 1.73%
  • 10-Yearyields fall 4bps to 2.10%

ASIAN NEWS

  • Something to ponder. The Chinese CSI 300 is up 14% this year and there are signs of a bubble in places but the CSI 300 still trades at less than 11 times projected earnings — about a quarter lower than last year’s peak. Even the ChiNext Index of small caps is 35% cheaper than its five-year average. That means there are still plenty of opportunities in China even if the rebound isn’t as broad going forward, according to Arthur Kwong, head of Asia Pacific equities at BNP Paribas Asset Management in Hong Kong.
  • Japan shows the worse export drop in over two years.

EUROPEAN AND US NEWS

  • Bernie Sanders running for President. Maybe not running at his age. Maybe a stroll for President.
  • Ford will stop selling heavy commercial vehicles in South America.
  • In the UK, a record number of people are in work. Average earnings are up 3.4% Employment increased by 167k in the quarter to December to 32.6m The highest since 1971. Deadline fast approaching. 38 days.And counting.
  • And finally, only the French. The country’s fencing association has designated lightsabre dueling as an official sport. May the Force be with them.

And finally……………

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Clarence

XXX

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About the author

Henry Jennings Contact: henryjennings@mac.com // @henryj007 Has been involved in Investment Banking and Stockbroking since the early 1980's. Stockbroker - Camerons Stockbroking Macquarie Bank - Equity Capital markets Macquarie Group - Divisional Director