There was choppy action on the open this morning as the index jumped in and out of positive territory for the first 90 minutes of the session. There was little direction until local employment data hit the screens which lit a fire under the market for the rest of the morning. The index swiftly moved ~50points higher on an unexpected rise in unemployment to 5.3% which edged up despite the participation rate falling. a total of 19k jobs were taking out of the economy, a long way from the expected 15k jump expected.

The dollar took a beating as well as it continued its recent pull back. A couple of misses in the 1PM China data post encouraged the selling as well. Retail sales were in well below expectations while more important for the currency was a miss in industrial production which came in at +4.7% yoy, below the 5.4% expected.

Australian Dollar vs USD Chart

Consumer staples was the best sector to be in today, getting a sugar hit from increasing rate cut chants. Financials were the only sector to close lower, however NAB went ex-dividend 83c which tipped the sector into the red.

Overall, the ASX 200 gained 36pts/+0.55% today to close at 6735. Dow Futures are trading marginally lower, -9pts

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE;

Emeco Holdings (EHL) +10.22%: the market was impressed by some of the comments out of the company’s AGM today with the MD talking up the company’s start to FY20 as trends turn in the company’s favour. The AGM address included 1H20 EBITDA guidance of $118-120m which is slightly ahead of the markets $117m expectations which flows through to a $240m EBITDA at the full year.

The strong start to the year has been driven by robust demand from the Eastern Australian coal while the assets acquired last financial year which drove debt concerns from the market have been integrated are performing to expectations. The trend is heading in the right direction now for Emeco. Utilization rates have been subdued for a while now however these appear to be lifting as the company extracts more out of the assets at hand with western Australian iron ore and gold projects on the rise. Deleveraging is now the key issue with the board looking for debt to drop to 1x EBITDA by FY21. We own Emeco and the price action today makes us more confident in the position.

Emeco Holdings (EHL) Chart

Nearmap (NEA) +14.06%; The mapping tech business was best on ground of the top 200 today on comments at their AGM. Shares had been under pressure with fears a third competitor in the market would put pressure on the company’s growth outlook. Those fears were set aside today with guidance for Average Contract Volume (ACV) in FY20 set at $116m to $120m, a 30%% jump from the groups $90.2m ACV last financial year. The key for Nearmap is scale and they will need to maintain the 30+% growth seen over the past few years to justify their valuation.

Nearmap (NEA) Chart

G8 Education (GEM) –17.76%; the childcare centre owner was tossed around today and sent to new 52-week lows on news it would sell 25 centres in WA for a total of $6.4m, as well as pushing through a downgrade at their investor day. The company guided to EBIT for next year of $131m-$134m, a 7% downgrade to their guidance provided at the half year back in August. The miss comes from a lack of occupancy growth which has been below expectations in what is normally a seasonally strong period. Wages have also crept higher, coming in around $3m above forecasts, which is squeezing margins. The sale of the 25 centres was down on a multiple of 4.1x FY19, significantly below where the stock is currently trading, while the funds will be used to reduce debt levels. MM is not interested in GEM.

G8 Education (GEM) Chart

Broker moves;

· James Hardie GDRs Rated New Hold at Jefferies; PT A$27.70

· Adelaide Brighton Rated New Underperform at Jefferies

· CSR Rated New Underperform at Jefferies; PT A$3.53

· Reliance Worldwide Rated New Hold at Jefferies; PT A$4.37

· Boral Rated New Hold at Jefferies; PT A$5.03

· AusNet Cut to Reduce at Morgans Financial Limited; PT A$1.58

· Spark Infra Raised to Equal-Weight at Morgan Stanley; PT A$2.15

· Cromwell Property Cut to Underweight at JPMorgan; PT A$1.10

· AUB Group Raised to Outperform at Credit Suisse; PT A$12.75

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