Selling resumes following US trade escalation

A softer session locally following weakness overseas, although we did see the worst of the session early on with the market bottoming out at 10.30am before it grinded higher throughout the day, finishing +26pts from the low. Asian markets were weaker, although not materially so while US futures traded higher during our time zone. Defensive sectors did best while an ~11% fall in Flight Centre (FLT) saw the consumer discretionary sector lead the lagers.

Overall, the ASX 200 closed lower today, down -46pts or -0.71% to 6546, Dow Futures are trading up +44pts/+0.17%.

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE;

**New CBA Hybrid** CBA this morning have a launched a new hybrid security, looking to raise ~$750m, however they’ll likely do more. This is a tier 1 security structured in a similar way to existing CBA PERLS Capital notes on issue. The margin is likely to be 3% over the 90 day bank bill rate which equates to a grossed yield of ~3.84%. We covered in more detail in today’s Income Note – Click Here to view

Flight Centre (FLT) –11.72%; sold off on concerns flagged in the company’s presentation at the Morgan’s conference in Queensland. According to the presentation, FLT has seen subdued trading in Australian and US leisure travel while unrest and uncertainty is also impacting transaction growth in a number of other areas including the UK. This will drop down to “underlying FY20 1H profit likely to be below $140.4m FY19 1H result.” While not exactly guidance for the full year, it doesn’t paint a confident picture as we approach the November AGM.

The company was hoping to gloss over the first half struggles by presenting upside into the back end of the year saying any improvement in global unrest should restore demand, while the Australian and US markets could see a boost from lower interest rates. Despite all this, the company is off to a slow start in a year where analysts had pencilled in ~10% growth. On our numbers, FLT will need to deliver a very big second half, up something like 27% on 2H19 to meet current consensus.

We recently sold FLT in the income portfolio for a good profit at higher levels.

Flight Centre (FLT) Chart

Clinuvel Pharma (CUV) +60%; the biotech company rocketed higher today on announcing their SCENESSE drug has been approved for use on EPP patients in the US by the FDA. EPP sufferers experience extreme pain when exposed to light which can last days or weeks. There is estimated to be up to 10,000 patients with EPP globally with Clinuvel’s injection providing up to 60 days protection. Certainly a small market but a life changing drug.

Clinuvel Pharmacutical (CUV) Chart

Cleanaway (CWY) +6.25%; rallied against the grain today on news it had finally acquired the assets of SKM which had been in the hands of receivers since August. It follows Cleanaway’s purchase of $60m of the company’s debt a few months ago, with Cleanaway now picking up 5 sites including Victoria’s biggest recycling plant. 2 of the sites, both in South Australia, have already been flagged for sale however the news is good for Victorian councils, many of which were forced to send recycling waste to landfill since the collapse. We prefer Bingo (BIN) in the space, and will be looking for an opportunity around their AGM next month to buy a pullback.

Cleanaway Waste (CWY) Chart

BROKER MOVES;

· SeaLink Raised to Buy at Baillieu Ltd; PT A$5.20

· Qantas Cut to Neutral at Goldman; PT A$6.88

· TPG Telecom Rated New Underperform at Jefferies; PT A$6.18

· Telstra Rated New Buy at Jefferies; PT A$4.08

· Vocus Rated New Hold at Jefferies; PT A$3.55

· Rio Tinto Upgraded to Buy at Renaissance Capital; PT 46 Pounds

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