Phew - a big week comes to a close

James Gerrish

Market Matters

A big week of reporting / market turmoil as the newspapers would call it with global equity markets taking a hit. Concerns around an inverted yield curve, more Trump tweets and a fairly bumpy time on the reporting front created higher levels of volatility across the board. From a reporting perspective, good results were delivered from: JB Hi-Fi (JBH), Super Retail Group (SUL), CSL, NAB & Cochlear (COH) while weak reports came out from Challenger (CGF), Computershare (CPU)

Cleanaway (CWY), Pact Group (PGH, Orora (ORA), Invocare (IVC) & Woodside (WPL). Interesting to look below with the best stocks being those exposed to the Australian consumer. Reporting ramps up further next week.

Today the market traded in a tight range relative to yesterdays ~3% move, the market hitting a high of 6425, and a low of 6396.

Overall today, the ASX 200 closed down -2pts or -0.04% to 6405. Dow Futures are trading up +152 points or +0.59%

ASX 200 Chart

ASX 200 Chart


Reporting: Less on the scorecard today however another huge week coming, peaking on Thursday 22rd with ~30 companies reporting results on that day. Today we had a mixed bag although more positive than negative and by a bigger quantum.

Telstra (TLS) -2.58%; Hit hard today after reporting yesterday, they confirmed property sales today + they were also downgraded by Credit Suisse to $3.70 PT. Some big aggressive sell lines through TLS around lunchtime. Approaching into the buy zone again.

Telstra (TLS) Chart

Ooh Media (OML) - 27.48%: A big downgrade today and the stock was hit hard. Underlying EBITDA for the half now expected to be $56m, while full year guidance is for EBITDA of $125 - $135m versus prior full year expectations for $157m. A 17% downgrade at the mid point however that also leaves them with a decent second half skew . The stock smashed early but recovered some way from the lows…

Ooh Media (OML) Chart

Cochlear (COH) +3.93%; The hearing aid manufacturer had a reasonable result despite a slowdown in sales over FY19. Cochlear still managed to add 13% to net profit in the year, however the bulk of the profit was generated by increases to revaluation of innovation investments. Guidance was solid, with consensus right in the middle of their FY20 profit range of $290m to $300m. Emerging markets provided the biggest drag on sales growth, while market share was lost in the US and Germany following product launches from competitors. It wasn’t a bad result, however I struggle to justify paying a PE in the high 30s for a company seeing sales declining.

Cochlear (COH) Chart

Star Entertainment (SGR) +5.87%; The casino businesses have had a tough time of late with both Star and Crown getting hit on lower High Roller and Asian market income. Star did manage to turn a difficult revenue number into a reasonable profit line to meet expectations. While no outlook statements were given, the company has noted an increase in VIP visitors but on a lower spend per customer. The strategy aims to earn more per client, however this will largely be dependent on a discretionary spend growth.

Star Entertainment (SGR) Chart

Newcrest Mining (NCM) -1.39%; Australia’s largest gold company delivered a reasonable set of numbers today on most metrics with cost guidance one of the highlights. 2019 was a good year for NCM despite profits marginally missing expectations. Free cash flow of $800m was strong with Lihir pushing off $300m of it.

Newcrest (NCM) Chart

Healius (HLS) +5.02%; Not a lot of new news coming from Healius today after they provided an update a few weeks ago, confirming profit would be in the range of 93-95.5m. Today’s $93.2m result was just within the lower end of expectations. Their guidance for FY20 was for profit growth on FY19 however market consensus already implies growth of +15% for the year. A reduced dividend payout to fund higher capex to accelerate the turnaround seems to have got the market more positive on the stock today.

Healius (HLS) Chart

Sectors this week:

Stocks this week: Stocks exposed to the Australian consumer did best this week

Broker Moves;
• Evolution Downgraded to Sell at Citi; PT A$4.20
• InvoCare Upgraded to Neutral at Citi; PT Set to A$13.75
• InvoCare Upgraded to Outperform at Macquarie; PT A$15.60
• Blackmores Downgraded to Underperform at Macquarie; PT A$60
• Blackmores Downgraded to Hold at Morningstar; PT A$77
• Beach Energy Upgraded to Buy at Morningstar
• Credit Corp Upgraded to Hold at Morningstar
• Iress Upgraded to Hold at Morningstar
• Appen Rated New Neutral at Credit Suisse; PT A$23
• Super Retail Upgraded to Overweight at JPMorgan; PT A$10
• Super Retail Upgraded to Add at Morgans Financial; PT A$9.87
• Cleanaway Downgraded to Underperform at Credit Suisse; PT A$1.85
• Cleanaway Upgraded to Overweight at JPMorgan; PT A$2.30
• Cleanaway Upgraded to Add at Morgans Financial; PT A$2.31
• Breville Downgraded to Sell at Goldman; PT A$14.95
• Breville Downgraded to Sell at Bell Potter; PT A$15.60
• Orora Upgraded to Overweight at JPMorgan; PT A$3
• Orora Upgraded to Equal-weight at Morgan Stanley; PT A$3
• QBE Insurance Raised to Buy at Bell Potter; Price Target A$13.20
• Heartland Group Cut to Hold at Deutsche Bank; PT Set to NZ$1.70
• DWS Downgraded to Hold at CCZ Statton; PT A$1.25
• Woodside Upgraded to Neutral at JPMorgan; PT A$32.5

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James Gerrish
Portfolio Manager
Market Matters

James is the Lead Portfolio Manager & primary author at Market Matters, a digital advice & investment platform with over 2500 members that offers real market intel & portfolios open for investment. He is also a Senior Portfolio Manager at Shaw and...

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