A positive start to the week in Oz although a gain of +23pts was a slight disappointment given the strong rally in US markets on Friday. Energy stocks the standout today thanks to the OPEC decision on Friday night to cut production by an extra 500k barrels a day. That supported the local energy stocks with Beach Petroleum (BPT) storming ~5% higher - commodity stocks also enjoyed a day in the sun with particular focus on some of the cheaper parts of the sector – South32 (S32) a stock on our radar added more than 4% while Lithium producer Orocobre put on something similar.

Overall, Energy, Materials & Utilities did well today, while Healthcare, Staples and Consumer Discretionary stocks lagged. Asian markets all closed up on the day while US Futures were trading marginally lower during our time zone.

Overall, the ASX 200 gained +23pts /+0.34% today to close at 6730. Dow Futures are trading marginally lower by -33pts/-0.12%

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE

Estia Heath (EHE) –7.14%; the aged care provider was down as the fallout from the royal commission continues. Estia blamed a shift in public sentiment for a -0.6% drop in occupancy across the portfolio which fell to 93.5%. Daily revenue rates have come in below expectations as a result, and while costs are being contained, guidance has come in around 7.5% below FY19 on a LFL basis at the EBITDA line. Despite the tailwind of an ageing population, care providers have struggled to capture profits with rising costs and poor publicity. It’s hard to get too excited just yet.

Estia Health (EHE) Chart

Viva Energy (VEA) –6.57%; was lower on soft guidance thanks to falling refinery margins and a tighter retail fuel market despite rising volumes. The FY19 profit is expected to come in between $135m-$165m with the top end of the range below the $167m consensus estimates. The partnership with Coles Express has seen a number of stores added and volumes are expected to rise ~4% in the year, however volatility in the oil price and heightened competition have squeezed margins with underlying EBITDA expected to fall around 8% for the year. The commercial supply shows a fairly similar story, with rising freight costs also causing profits to fall year on year. We remain negative VEA which looks set to test lows.

Viva Energy (VEA) Chart

Broker moves;

· Northern Star Raised to Outperform at RBC; PT A$11

· Boral Cut to Underweight at JPMorgan; PT A$4.25

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