The Match Out: ASX creeps higher, Good news from Select Harvest, Weekly Video Update

The ASX recovered slightly today, although the best of it was seen before lunchtime, underpinned by a strong move higher in Energy stocks while financials also found some form.

• The S&P/ASX 200 added +14 points / +0.21% to close at 6842.
• Energy (+3.72%) and Financials (+1.11%) led the line.
• Property (-0.95%), Healthcare (-0.89%) and Utilities (-0.85%) all vied for the wooden spoon.
• Unemployment was a touch higher than expected in August printing 3.5% versus consensus of 3.4% due to higher participation rates. The AUD initially fell but was trading around par for the day by the close @ 67.50c
• Coal stocks were strong again with Newcastle Coal Futures for October up ~3% at $US424, although that’s off a ~$US450 peak.
• Oil and gas names also did well – Woodside (WDS) +4.30% and Santos (STO) +3.51% – WDS was upgraded by Citi this morning to a buy & $36.50 PT.
• There is growing optimism around insurance stocks as rates rise. It’s been a tough decade for the sector however premiums are on the up and the income earnt from the insurance ‘float’ mainly held in bonds is also improving. Some clear tailwinds building here.
• Portfolio Manager Harry Watt caught up with the team at Ausbiz this afternoon – Click Here to view
• Myer (MYR) -0.79% said it had posted the best sales start to a new financial year since 2006 – doesn’t smell recessionary!
• Select Harvest (SHV) + rallied on a strong (relative) update + some short covering it would seem – Harry covers below + it’s a stock discussed in our weekly video update. We do own this one.
• Lithium stocks continue to rip and a small cap we like is Global Lithium Resources (GL1) – they continue to go from strength to strength – one to watch.
• Aristocrat (ALL) +0.59% has been fairly lackluster of late however we continue to like our position in this one – Morgan Stanley upgraded to buy equivalent with a $45 PT this morning.
• Iron ore ticked marginally higher in Asia today – trading around $US103/tonne.
• Gold was knocked $8 lower now trading back below the $US1700/oz handle.
• Asian markets were mixed, the Nikkei in Japan was closed while Hong Kong was up 0.35% but China fell -1.4%
• US Futures are more or less flat.

ASX 200 Chart

Select Harvests (SHV) $5.56

SHV +13.24%: the almond grower rallied to 3-month highs today following a better-than-expected crop update. 80% of the 2022 crop has been processed, with 722% sold at a strong price of $6.75/kg. They’ve also forecast 30kt for the 2023 crop after securing the minimum level of bee hives required. While this is a slight downgrade, the market was positioned for worse with a short position of around 4% heading into the update. We suspect shares will be supported given the major risk is now less of a concern.

Ive Group (IGL) $2.45

IGL -0.82%: Yesterday the company announced they had bought the majority of the printing and finishing assets of Ovato from the administrators. Ovato had previously been a major competitor and at one point they were doing $500m in revenues, however a bunch of factors sent them down the gurgler. Their demise cements IGL as the number 1 player in the printing space and gives the group pretty much every major retailing and bluechip customer in Australia. IGL has flagged that post integration OVT assets would be expected to generate ~$160m in revenue, $28m in EBITDA at a margin of 18% and $15m in underlying NPAT. It’s been a tough few years for the sector, and IGL could have easily followed OVT out the back door (probably saved to come degree by Govt support) but their management team have also done a great job.

Broker Moves

• Yancoal Raised to Overweight at Morgan Stanley; PT A$8.84
• Mineral Resources Cut to Equal-Weight at Morgan Stanley
• Aristocrat Raised to Overweight at Morgan Stanley; PT A$45
• Kelsian Group Rated New Hold at Barclay Pearce Capital
• Regis Healthcare Rated New Hold at Barclay Pearce Capital
• Cedar Woods Rated New Hold at Barclay Pearce Capital; PT A$4.95
• Pacific Smiles Rated New Hold at Barclay Pearce Capital
• Bank of Queensland Raised to Neutral at Evans & Partners Pty Ltd
• Woodside Energy Raised to Buy at Citi; PT A$36.50

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