ASX drifts back from highs

James Gerrish

Market Matters

The ASX drifted marginally lower today, pulling back from recent highs but not aggressively so. Most Asian markets were higher while US futures were pretty flat during our time zone. Interesting to see the yield sensitive REITS pullback today which fits our commentary in the AM report today – the sector off by -1.62 % as the yield trade shows signs of cooling. The traffic this morning was heavier in Sydney, school back this week and the Eater festivities now wrapped up for another year, market volumes should go back to normal.

The Macquarie Conference starts tomorrow – more on that below, however suffice to say a lot of company news out over the next 3 days – most of which will be market moving.

Overall today, the ASX 200 fell by-26 points or -0.41% to 6359. Dow Futures are trading up +34pts / 0.12%

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE;

Macquarie Conference starts tomorrow – We saw Flight Centre (FLT) -0.03% kick off confession season last week – a typically tricky period where some companies need to ‘confess’ weaker than expected performance and realign market expectations with what’s happening on the ground – FLT the first to do so and they were whacked 12% for their troubles. This week the biggest equities conference in the land kicks off hosted by Macquarie with about 100 odd companies presenting. The timing of the event is perfect for companies to update guidance and release outlook statements given it’s between the Feb & August reporting periods, which is why it’s traditionally a market moving event. It kicks off tomorrow and lasts for 3 days with nearly all companies of note presenting at some stage.

Companies we’re most interested in tomorrow include; NCM, CSL, FMG, MPL (to get a read through on NHF), APT, WTC, CGC (guidance key on this one especially), NUF, EHL & ELD

Healius (HLS) +3.28% - Up today on the back of a Credit Suisse note with the broker effectively falling on their sword and upgrading the stock to neutral and putting on a $3.10 price target, up from $2.35. The upgrade underpinned by corporate appeal they say, claiming HLS is worth $3.80 if broken up. A similar thesis we’ve held for a while insofar as there is value in the assets that are underperforming currently.

Healius (HLS) Chart

Coles (COL) +0.32% : 3Q sales numbers out today which were largely inline with expectations, but they pointed to “moderating growth” for Supermarkets into 4Q19. Woolies is out on Thursday with their sales numbers which will serve as a comparison. It’s hard to get too excited about either here with a confluence of headwinds which Coles alluded to again today, including retail increasingly challenging, lack of promos (like Little Shop) stunting growth, COL market share losses in NSW (drought), rise of meal delivery and convenience options, higher input costs in Fresh, fuel volumes weak, etc. Not the rosiest of pictures.

Coles (COL) Chart

Sandfire (SFR) +0.70% On first pass the numbers looked pretty good and guidance hike (FY19) confirms a good June Quarter is likely as well. SFR has struggled of late however operationally at least. Now starting to do some good things.

Sandfire (SFR) Chart

Broker moves:

· Carsales.com Downgraded to Hold at Morningstar

· Flight Centre Upgraded to Hold at Morningstar

· Healius Upgraded to Neutral at Credit Suisse; PT A$3.10

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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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