The Match Out: ASX creeps up to a 6-week high, energy stocks the main driver

James Gerrish

Market Matters

The market remained in a holding pattern today waiting on Wednesday’s inflation print to get a better read on which direction to jump – although it has crept up to 6-week highs. Energy the standout with Coal stocks, in particular, roaring higher however we saw decent buying right across the sector, offsetting weakness that crept into retailers thanks to a downgrade from Walmart (WMT US) after-market in the US.

  • The S&P/ASX 200 added +17 points / +0.26% to close at 6807.
  • Energy (+2.82%), Materials (+1.60%) and Communications (+0.38%) standouts on the upside
  • Consumer Discretionary (-1.71%) and Healthcare (-0.89%) the weakest links.
  • Paladin (ASX: PDN) +8.13% was strong after releasing their quarterly, although no new news in it, a bounce back in energy was more likely the catalyst.
  • Nitro (ASX: NTO) -22.7% knocked lower after a very poor update and downgrade ARR guidance.
  • Myer (ASX: MYR) +21.25% rallied hard after saying that it expects 2022 full-year sales to be up double digits with its bottom line nearly doubling to as much as $60 million - its best results since 2018. MYR closed at 48.5c so the move needs to be kept in context – its market cap now ~$400m
  • Iress (ASX: IRE) -6.55% fell after the CEO Andrew Walsh announced his retirement.
  • Perseus (ASX: PRU) -5.3% was another gold company struggling with production numbers – this is a sector-wide trend at the moment.
  • Flight Centre (ASX; FLT) -5.62% didn’t last long in the winner’s circle, giving back yesterday’s gains and a bit of cream on top for good measure.
  • The market is taking a more favourable tilt towards BNPL and in particular, Zip Co (ASX: ZIP) +19.88% as they work hard toward profitability – winding down anything that will drain cash is the tonic the market was looking for it seems.
  • Iron ore futures were strong in Asia - up another ~4%.
  • Gold was also higher adding US$4 to US$1724/oz at our close - the key for gold remains the $US – more weakness needed there.
  • Asian markets were mixed, the Nikkei in Japan fell -0.18%, while Hong Kong +1.7% and China +0.66% both rallied.
  • US Futures are lower, down around ~0.40% across the board.

ASX 200 chart

Paladin (PDN)

PDN +8.13%: released its June quarterly activities report today, a quarter which saw the decision to return the Langer Heinrich Mine to production in 1Q24. PDN is in a strong financial position with net cash US$177m meaning it is fully funded for a Langer Heinrich restart (capital requirement US$118m) and should be in a position to pay dividends in CY25. The Uranium market has more or less been in a holding pattern for the past few months, with weakness coming into the equities as some of the bullishness subsided in the near term. If you are interested in Uranium (as we are at Market Matters), it’s worth listening to the quarterly update from Cameco, which is the world’s largest publicly traded Uranium company – it happens Wednesday morning at 8 am Eastern time in the US but will be recorded– here’s the link - (VIEW LINK)

Nitro Software (NTO) $1.26

NTO -22.7%: the signature and document productivity business was hit hard following their 2Q update today. Annualized Recurring Revenue (ARR) ended the period at $US51.5m, up 11% in the period, largely driven by an increase in services offered to existing clients. The company noted that sales cycles had lengthened, another way of saying new clients have been hesitant to spend money to integrate Nitro’s software. As a result, the company downgraded ARR guidance from $US64-68m to $US57-60m, an 11% cut, with the market particularly concerned with the reduction in expected revenue synergies from the Connective acquisition from $US2.5m to just $US1m. They did maintain revenue guidance, and improved operating EBITDA loss expectations by 30% to $US10-13m on the back of $US5m in planned cost savings to come through in the second half.

Broker moves

  • Australian Vintage Rated New Buy at Moelis & Company
  • Flight Centre Raised to Overweight at Jarden Securities; PT A$23
  • Corporate Travel Reinstated Neutral at Credit Suisse; PT A$19.60
  • Flight Centre Reinstated Underperform at Credit Suisse; PT A$14
  • Johns Lyng Rated New Overweight at JPMorgan; PT A$8.40
  • OZ Minerals Cut to Neutral at JPMorgan; PT A$17
  • SiteMinder Ltd Raised to Buy at Jefferies; PT A$4.46
  • Carnarvon Energy Ltd Cut to Sector Perform at RBC
  • Eagers Raised to Outperform at Credit Suisse; PT A$14.50

Major movers today

Enjoy your night,
The Market Matters team.

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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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