The Match Out: A whisker from 12-month lows, the ASX remains under pressure

Shares were 1pt off a 12-month low intraday today, with pain in the interest-rate-leveraged Tech and Real Estate sectors under the most pressure. Tech was hit particularly hard following a soft session for the Nasdaq overnight and follow-through selling seen on its futures today.

Materials once again put up a reasonable fight thanks to support in Iron ore stocks, and the second biggest sector constituent for the local market finished marginally higher.

Financials also outperformed the fall despite some weakness across the banks.

• The ASX 200 finished down -42pts/ -0.61% to 6,812
• Utilities (+1.30%) was best on ground today, joined by Materials (+0.14%) as the only other sector in the black.
• Tech (-2.56%) was the hardest hit, followed by Real Estate (-2.07%), Telcos (-1.90%) and Industrials (-1.14%) being the 4 sectors more than 1% worse off today.
• Negative sentiment from the US spilt onto the local tech sector dragging it down over -2.5%, for example, Technology One (ASX: TNE) -2.35%, NEXTDC (ASX: NXT) -2.47%, and Xero (ASX: XRO) -1.98%.
• Bond yields continued to charge higher following yesterday’s strong CPI, Michele Bullock looks set to hike on Cup Day.
• The ASX had a tough day at the office with over 70% of stocks closing lower but fortunately, another positive session by the resources kept losses under -1%, e.g. Iluka (ASX: ILU) +2.85%, RIO Tinto (ASX: RIO) +1.2%, and BHP Group (ASX: BHP) +0.47%.
• Westpac (ASX: WBC) -1.11% announced a net $173m notable item loss that will be recognized in their FY23 results on Monday the 6th. The bulk of the line relates to a $176m hit from customer refunds and litigation costs as well as a $140 million hit from restructuring spend offset by a $256m profit on the sale of Advance Asset Management. Bank reporting is just around the corner
• Fortescue (ASX: FMG) +0.86% 1Q production numbers were a touch soft, with shipments off 4% on the quarter and higher costs. The company maintained FY24 guidance though annualising today’s numbers has the company marginally below the low end.
• Wesfarmers (ASX: WES) -0.89% AGM update today was soft flagging higher costs though retail trade performance for the first 16 weeks has broadly been as expected and in line with what was flagged at their FY23 results in August.
• JB Hi-Fi (ASX: JBH) -0.18% said Q1 sales were broadly in line with expectations. The Comparable sales for the Australian business were down -1.4% in the quarter, NZ -1% and The Good Guys -12.2%. Consensus expects a ~4% slide in revenue for FY24.
• G8 Education (GEM) -11.82% Investor Day today failed to inspire investors. They have agreed to offload 31 loss-making centres and pay a fee for the privilege. Occupancy has fallen by 1.4% in the 12 months to 22 October, down to 75.4%.
• Sandfire (ASX: SFR) +0.17% 1Q production numbers were solid, if not better than expected. Copper production was up 44% in the quarter and costs have come down further while their new Motheo mine has come online as planned.
• Silver Lake Resources (ASX: SLR) +0.52% the gold company managed 65.4koz of sales in the first quarter, posting positive free cash flow of $13.3m. They maintained FY24 sales and cost guidance.
• Boral (ASX: BLD) -0.65% said trading performance in the first quarter was solid. Price rises put through in FY23 have been well absorbed by customers and the company maintained FY24 EBIT guidance.
• Megaport (ASX: MP1) -16.33% fell to 3-month lows on softer customer growth despite posting record EBITDA numbers in Q1. More on that below.
• Iron Ore was flat in Asia today.
• Gold is trading at 5-month highs, up $US9, +0.45% to $US1988/oz. For the most part though, gold stocks couldn’t escape the weakness in equities today.
• Indices in the region were also weaker today. Hang Seng -0.65% and Nikkei -2.13%.
• US Futures continued to soften. S7P500 futures point to a -0.7% fall tonight, Nasdaq worse off expecting a -1.15% drop.

ASX 200 Index

Megaport (MP1) $9.63

MP1 -16.33%: any sign of weakness in the Tech sector has been treated harshly recently, and connectivity company Megaport was no exception today despite maintaining FY24 guidance. The company hit record quarterly EBITDA of $15m which compares to the $1m EBITDA in 1Q23 and up 27% on the prior quarter. Cashflow was also positive at $5.6m however it was the slow growth in customer numbers that had the market concerned. Annualized Recurring Revenue (ARR) was up 6% QoQ, largely driven by a 5% benefit from FX, and Customer Ports was up just 1%. Cost control has improved the underlying business substantially in the last 6 months however stagnating the top line growth had the market concerned.

Broker moves

• Super Retail Jumps as Jarden Raises to Neutral; PT A$12.90
• Reliance Worldwide Raised to Buy at Jefferies; PT A$3.96
• Viva Energy Raised to Overweight at Barrenjoey; PT A$3.74
• Brickworks Cut to Hold at Morgans Financial Limited; PT A$25.90
• Pilbara Minerals Cut to Accumulate at CLSA; PT A$4.20
• Mineral Resources Cut to Accumulate at CLSA; PT A$70
• Allkem Cut to Reduce at CLSA; PT A$10.90
• Beach Energy Raised to Hold at Canaccord; PT A$1.54
• Super Retail Raised to Buy at CLSA; PT A$15.25
• Super Retail Raised to Neutral at JPMorgan; PT A$13
• Treasury Wine Raised to Neutral at Citi; PT A$12.20
• Mineral Resources Raised to Overweight at Barrenjoey; PT A$73.50
• Mineral Resources Raised to Buy at Jefferies; PT A$75
• Next Science Cut to Speculative Buy at Canaccord
• Damstra Holdings Raised to Equal-Weight at Morgan Stanley
• ARN Media Ltd Rated New Neutral at Evans & Partners Pty Ltd
• oOh!media Rated New Positive at Evans & Partners Pty Ltd
• Beach Energy Raised to Neutral at Citi; PT A$1.55.

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