Sellers dominate following soft leads
The market traded lower today thanks to weakness from overseas markets last night and again during our time zone today, however despite the day being dominated by sellers the market did recover from the mid-morning lows. A number of clear standouts on the stock side today with NAB being a strong outperformer in the banking space closing up ~1% while the rest of the sector closed in the red. Other bright spots were Iluka (ILU) which added +1.48% and Bingo (BIN) which added +1.32%.
Asian markets were a mixed bag today while US Futures are down. At a sector level, Telco’s held firm to be the only sector in the green while the industrials were the weakest link. REITs traded lower as investors no doubt make some room for the juicy Mirvac capital raise.
Overall today, the ASX 200 fell -44 points or -0.69% to 6440. Dow Futures are trading down -96pts / -0.38%.
ASX 200 Chart
ASX 200 Chart
CATCHING OUR EYE;
Mirvac (MGR), 0%; shares in the real estate group Mirvac spent the day in a trading halt following the announcement of a $750m placement to the market today. The deal will be priced at $2.97, around a 4% discount to the last traded price, while MGR will simultaneously launch a share purchase plan for existing shareholders at raise $75m at $2.90/share. Mirvac owns a number of office, industrial, residential and retail sites around Australia and saw its operating profit climb 39% at the half year result to December on the back of strong performance in the Office and Industrial portfolio.
No one specific site has been flagged as the reason for the raise with the company noting it had a significant pipeline which has previously been disclosed to the market. The company has over $3b of commitments which has been fully funded, and the capital raising will open up capacity to fund additional projects, and while trading near 10 year highs raising capital makes sense. MGR guided to EPS of 17.1c, or nearer to the top of the previously guided range confirming the impressive performance continues. They expect to pay a 11.6c divided to round out the year.
Mirvac Group (MGR) Chart
Downer EDI (DOW), – 9.14%; hit hard today after its partner in the Murra Warra wind farm filed for self-administration in Germany. The wind farm being built by Downer and German based Senvion will be one of Australian’s largest wind farms, which is located in the north western part of Victoria. It has around 116 turbines reaching up to 220m in the air.
Today’s announcement could have wider implications for Downer now Senvion has a court-appointed custodian. Credit Suisse put out a note saying that they may attempt to offload some of the cost of completing the project to Downer plus of course bank guarantees provided by Senvion on the project could hold less sway. CS went onto cast doubt on other DOW projects in what was a fairly negative note.
Downer EDI (DOW) Chart
Lynas (LYC), 15.48%; recent takeover target Lynas topped the leader boards today despite no company specific news. Shares in the rare earths miner has well and truly shot through the takeover price on $2.25 as it firms as one of the few beneficiaries from an impending China trade war. Lynas is the biggest rare earths miner & processor outside of China and the country is now threatening to use its position as supplier to 80% of the market to its advantage. The result would see demand of product from Lynas surge. LYC certainly could be used as a hedge against the trade war, but we remain optimistic of a deal being done so for the moment we aren’t looking to chase LYC.
Lynas (LYC) Chart
· Audinate Rated New Buy at UBS; PT A$9.45
· Avita Medical Raised to Speculative Buy at Bell Potter
· Coles Group Upgraded to Neutral at Credit Suisse; PT A$11.83
· Downer EDI Cut to Underperform at Credit Suisse; PT A$7.10
· Metcash Downgraded to Underperform at Credit Suisse; PT A$2.69
· Sydney Airport Downgraded to Neutral at Goldman; PT A$7.35
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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...