Stocks down, Westpac in Austrac crosshairs (WBC, ALL, SAR, WEB)

James Gerrish

Market Matters

A tough day at the office with the market hit hard, pretty much all day. The banks in the firing line thanks to a new Austrac law suit filed against Westpac refocussed attention on regulatory risk – the sector the worst performing on the board today with the BIG 4 banks accounting for 30% of today’s decline, although in fairness the sell-off was broad based with only the consumer discretionary stocks managing to eke out a small gain. While the banks were clearly weak, the defensive areas also proved to be anything but, Property and Utilities were also down 1.73% and 1.87% respectively, Goodman Group (GMG) a stock we’ve discussed recently a drag off nearly ~2.5% after holding their AGM, Macquarie downgraded their PT by 9% as a result of more downbeat commentary.

US Futures traded marginally lower while Asian markets were also down around 0.50% across the board. The US Senate voted in favour of supporting Hong Kong v China which implies a grey cloud over the looming phase 1 trade deal..

Overall, the ASX 200 lost -91pts /-1.35% today to close at 6722. Dow Futures are trading marginally lower

ASX 200 Chart

ASX 200 Chart – Big bearish day for the market


Stocks with AGM’s today: GMG -2.43%, IGO -2.89%, LLC -1.06% , MIN +0.41%, NWS -1.02%, PAN +1.37%, PTM -3.59% SVW -1.82%, SCP -1.09%, WEB +3.54%

Westpac (WBC) -3.31%: hit hard today and dragged the rest of the sector with it (and the broader mkt for that matter) after being accused of systemically breaching money-laundering laws more than 23 million times, and failing to report more than A$11 billion ($7.5 billion) in international transfers. This is the same issue that impacted CBA under the leadership of Ian Narev, they were ultimately fined $700m for 53,000 infractions. Interesting timing for the suit to be lodged by Austrac after WBC tapped the market for $2bn in new capital last week + they have the retail component underway. Austrac claim that WBC “adopted an ad-hoc approach to money laundering and terrorism financing risk management and compliance.” The headlines are poor for WBC with more to come here and this news certainly clouds the retail component of the current equity raise, the current SP now just 35c above the institutional issue price.

Westpac (WBC) Chart

Aristocrat Leisure (ALL) +6.01%: Better news for ALL today after they delivered a strong FY19 earnings report this morning. EBITDA came in close to $1.6bn, ahead of market expectations of $1.56bn and up +20% on FY18, margins were strong, net profit was a beat and they are poised for continued growth in fiscal 2020. The stock broke out to new highs today and looks strong. A growth business on a reasonable multiple…hard not to like it.

Aristocrat (ALL) Chart

Webjet (WEB) +3.54%: After a tough period for the online travel business, WEB rallied today after the CEO painted a more optimistic picture for the year ahead. For 1H20, the company now expects EBITDA to be at least $80m implying some upside to current mkt consensus which was sitting at $160m for the FY. A reasonable update from WEB.

Webjet (WEB) Chart

Saracen (SAR) -8.87%: back online today after raising $701m in an institutional raise at $2.95. The proceeds being used to partly fund the 50% acquisition of the Super Pit. Citi likes it post raise upgradi9ng to $4.10 PT.

Saracen (SAR) Chart

Broker moves;

  • Monadelphous Raised to Neutral at Citi; PT A$15.90
  • Saracen Mineral Raised to Buy at Citi; PT A$4.10
  • Collins Foods Cut to Hold at Canaccord; PT A$9.50
  • Sky Network TV Cut to Underperform at Forsyth Barr; PT NZD0.80
  • Sky Network TV Cut to Neutral at Jarden Securities; PT NZD1.01
  • Steel & Tube Raised to Outperform at Forsyth Barr; PT NZD1.05
  • Cleanaway Cut to Sell at Morningstar
  • Hub24 Raised to Buy at Citi; PT A$15.20
  • Woodside Raised to Overweight at JPMorgan; PT A$38.50
  • Wisr Rated New Buy at Shaw and Partners; PT 35 Australian cents
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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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