ANZ leads market higher

James Gerrish

Market Matters

A bullish day for Aussie stocks with the banks underpinning the strength at the index level following ANZ’s 1H numbers – more on that below, however hard to not see the impressive performance from the likes of Afterpay Touch (APT) +5.37% and Zip Co (Z1P) +11.76% as momentum funds – some from overseas buy into SP + earnings momentum - pretty aggressive buying in each today plus Splitit (SPT) +$5.37 also joined in. The IT sector the most bullish on the board while the banks accounted for nearly half the markets gains. Resources were higher, but underperformed the broader mkt today.

Overall today, the ASX 200 added +50 points or +0.80% to 6375. Dow Futures are trading up +91pts / +0.35%

ASX 200 Chart

ASX 200 Chart


Macquarie Conference – another day of decent moves today emanating from the MQG conference - big winners were some of the beaten down names like Bingo (BIN) that rallied +5.34% (we own) plus Nine Entertainment (NEC) +6% while there weren’t any real big disasters. We were chatting on the desk mid-afternoon that theme, given this year’s event has held fewer large casualties relative to other years. A day to go and now I’ve said that we’ll get some big movers tomorrow no doubt…

Here’s a look at how all companies performed that presented today:

Tomorrows agenda as follows….

8.45am – Wesfarmers (WES), Jumbo Interactive (JIN), Western Areas (WSA), Australian Finance Group (AFG)

9.30am – Seek (SEK), Independence Group (IGO), 3P Learning (3PL)

10.30am – Pinnacle Investment Management Group (PNI), Clean Teq (CLQ), Australian Pharmaceutical Industries (API)

11.15am – Challenger (CGF), Pro Medicus (PME), Sandfire Resources (SFR), G.U.D. Holdings (GUD),

12.00pm – Cleanaway Waste Management (CWY), InvoCare (IVC), OZ Minerals (OZL), Contact Energy (CEN)

1.30pm – Downer Group (DOW), IOOF (IFL), Orocobre (ORE), Abacus Property Group (ABP),

2.15pm – Orora (ORA), GTN, Pilbara Minerals (PLS), Heartland Group (HGH)

3.00pm – Atlas Arteria (ALX), GWA, Carnarvon Petroleum (CVN), Marley Spoon (MMM)

4.00pm – WorleyParsons (WOR), Aurelia Metals (AMI), IPH

ANZ +2.76% - Rallied strongly today on the back of a good earnings report, or more accurately, good relative to downbeat market expectations. A few brokers put out bullish commentary intra-day. Shaw’s good banking analyst Brett Le Mesurier saying…. ANZ reported a 1H19 profit of $3173M as expected and a higher cash profit of $3514M. This profit included $201M after-tax gains from asset sales, so on a comparable basis with other banks, the cash profit was $3313M. There were customer remediation costs of $100M in 1H19, royal commission costs of $13M and restructuring costs of $51M pre-tax. These were described as large and notable items as were the gains from asset sales.

There was no change in the net interest margin and little change in loans from 2H18 to 1H19. Markets income increased by $67M from 2H18 to 1H19, which prevented the decline in total income. The bad debt charge of $393M represented 45% of new impaired assets in 1H19. There was no change in impaired loans from 30/9/18 to 31/3/19 but 90 day past due loans increased with home loans worthy of special mention. The best part of the result was the large growth in business loans with expanding margins. Hopefully, a large increase in problem loans won’t follow in the next few years. The CET1 ratio was 11.5% which will help the company cope with higher capital requirements in New Zealand, should they eventuate. In short, a fair result with little to depress or inspire.

It’s cheap, and should trade higher along with the rest of the sector.

ANZ (ANZ) Chart

Gemworth (GMA) +3.35% - reported quarterly earnings today and the stock rallied, more so on the lack of bad news than anything particularly good in the result. Top line continues to be a challenge however these are a capital heavy story that is held for income in the MM income portfolio. In terms of commentary about the housing mkt, which is always interesting, they expect housing to continue to cool through 2019 thanks to weak wage growth and as credit conditions tighten and the sector absorbs increased levels of supply. No new news really while they did say that there are signs first home buyers are coming back into the fray, the cohort that typically need mortgage insurance.

We remain comfortable holders of GMA for income, supported by their $100m on mkt share buy-back program that has more than $70m left.

Genworth (GMA) Chart

Broker moves: A big day from brokers with the MS downgrade of Ramsay (RHC) seeing that stocks off -2.8% while the mkt has now turned more bullish on Independence Group (IGO) after their quarterly

· Ramsay Health Cut to Underweight at Morgan Stanley; PT A$58

· Beach Energy Downgraded to Sell at Citi; PT A$1.80

· Beach Energy Downgraded to Sell at Canaccord; PT A$1.88

· Senex Downgraded to Neutral at Citi; PT A$0.41

· Regis Resources Upgraded to Neutral at UBS; PT A$4.80

· Independence Group Upgraded to Buy at UBS; PT Set to A$5

· Independence Group Raised to Outperform at Macquarie; PT A$5.10

· Independence Group Raised to Buy at Argonaut Securities

· Southern Cross Media Downgraded to Neutral at UBS; PT A$1.25

· Super Retail Downgraded to Neutral at UBS; PT A$8.50

· Domain Holdings Upgraded to Neutral at Macquarie; PT A$2.70

· Domain Holdings Cut to Underperform at Credit Suisse; PT A$2.30

· Domain Holdings Cut to Reduce at Morgans Financial; PT A$2.19

· Oil Search Upgraded to Hold at Morningstar

· New Hope Upgraded to Buy at Morningstar

· oOh!media Upgraded to Buy at Morningstar

· GPT Group Upgraded to Hold at Morningstar

· Steadfast Downgraded to Sell at Morningstar

· REA Group Cut to Neutral at Evans and Partners; PT A$87.65

· Redbubble Downgraded to Reduce at Morgans Financial; PT A$0.67

· Mirvac Group Downgraded to Underweight at JPMorgan; PT A$2.65

· Regis Resources Raised to Buy at Argonaut Securities; PT A$5.24

· Nufarm Downgraded to Hold at Morgans Financial; PT A$5.50

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James Gerrish
Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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