The Match Out: ASX defies overnight weakness, Commodities drag, Perpetual (PPT) tumbles on recut Pendal (PDL) deal
The ASX snapped a 3-day losing streak today, managing to brush weakness in the US to trade in the black for most of the session. Commodity stocks were left behind as most commodities were weak overnight and throughout our session, not helped by a bouncing USD. All other sectors closed higher today though, with 5 sectors better than 1% on the day. Consumer sectors, both staples and discretionary, were outperformers on the back of strong US retail sales overnight combined with a handful of better-than-expected quarterlies from US counterparts.
- The ASX 200 finished up +13pts/ +0.19% at 7135
- The Staples sector was best on ground (+1.91%) while Healthcare (+1.31%), Discretionary (+1.26%), Tech (+1.21%) and Utilities (+1.17%) also caught a bid.
- Energy (-2.06%) and Materials (-1.17%) were the only sectors lower today
- Local employment data landed at 11.30 am, coming in slightly better than expected. The unemployment rate dropped to 3.4% with 32k jobs added, though the participation rate also fell marginally. The ASX lost ~10pts at the time, a pretty muted impact, while the AUD trended lower after the data printed.
- Altium (ASX: ALU) +2.38%, maintained guidance at their AGM today, with the stock enjoying the commentary. More on that below.
- Seek (ASX: SEK) +1.73%, also at their AGM today, stuck to guidance across the board and applications per ad have improved.
- Perpetual (ASX: PPT) -12.63% & Pendal (ASX: PDL) +10.54%, recut their merger terms today with Pendal shareholders giving away some of the cash component for more stock. More on the deal below
- Webjet (ASX: WEB) +10.14%, a strong rally for the travel business with better-than-expected first-half numbers. Revenue was 77% of pre-COVID levels while costs were well controlled. A far better set of numbers than Flight Centre (ASX: FLT) put out at their AGM last week.
- St Barbara (ASX: SBM) +3.39%, announced their CEO will depart, to be replaced by ex-WSA MD Dan Lougher. A good replacement given Dan successfully navigated a takeover of WSA by IGO earlier this year.
- Paladin (ASX: PDN) -5.88%, hosted their AGM today with very little in the way of new news as they progress towards a restart of the anger Heinrich uranium mine. Shares were soft in line with moves in uranium peers.
- ASX -0.18%, announced the write-off of ~$250m worth of investment to bring the CHESS software into the blockchain age. Many years and plenty of capital invested for no return.
- Coal stocks were lower today as the Coal price fell ~4% overnight, Whitehaven (ASX: WHC) -6.31% & New Hope (ASX: NHC) -6.5%
- Iron Ore was ~0.7% lower in Asia today, Fortescue (ASX: FMG) -1.76% & RIO -1.78%
- Gold continued to ease, down $US11/-0.65% today, settling at $US1762 at our close.
- Asian stocks were weak, Nikkei -0.39%, Hong Kong down -2.5%, while China was off -2.9%.
- US Futures are marginally higher, S&P +0.2%, Nasdaq +0.3%.
ASX 200 Chart'
Altium (ASX: ALU) $37.38
ALU +2.38%: Held their AGM today and reconfirmed their FY23 guidance for revenue $255m to 265m, and still sees underlying EBITDA margin 35% to 37%. They talked to a solid first four months of fiscal 2023 year across the business with higher average revenue per user (ARPU) for PCB subscriptions as mainstream customers continue to adopt Pro-level platform capabilities in tandem with the growing uptake of Term-Based Licences. They went on to talk about their FY26 aspirational revenue target of $500m per annum, saying they now believe this will be achieved from a base of 75,000 to 90,000 subscriptions rather than 100,000 seats. A good update from a great company!
PPT -12.63%, PDL +10.54%: Another twist in this ongoing tussle today with the pendulum swinging back in favour of Pendal. This morning saw a number of announcements including a court ruling regarding the proposed merger. The key points being:
- PPT had sought clarification with regards to the terms of the fiduciary carve out with the PDL deal and in particular the scope of the directors’ obligations with such a deal, noting that typically directors have to act in the best interests of shareholders.
- Basically, PPT was trying to say they could break the PDL deal on this basis and pay the stated $23m break fee if it was in the best interests of shareholders.
- In response, the court advised Perpetual (but didn’t rule on) that Pendal could have the right to compensation above and beyond the break fee if PPT gets out of the deal to seek further performance.
- Effectively, we take that as meaning PDL will go after PPT for $$$ over and above the break fee if PPT walks away.
- As such the chance of a deal being agreed to by PPT outside of the PDL deal has decreased hence the respective moves in SP today.
- This doesn’t necessarily mean that PPT couldn’t walk but the magnitude of what PDL may then ask for or go to the courts for is unknown and creates a big variable in the whole process, something that Phil King & Co would ideally like to quantify.
- South32 Cut to Neutral at Macquarie; PT A$4.40
- Pact Group Cut to Underweight at Jarden Securities; PT A$1.35
- GrainCorp Cut to Underperform at RBC; PT A$7.75
- National Storage Cut to Neutral at JPMorgan; PT A$2.60
- Abacus Property Raised to Overweight at JPMorgan; PT A$3.10
- HMC Capital Cut to Neutral at JPMorgan; PT A$5.60
- Charter Hall Retail Cut to Underweight at JPMorgan; PT A$4
- BWP Trust Cut to Underweight at JPMorgan; PT A$4
- Vicinity Ltd Cut to Underweight at JPMorgan; PT A$2
- Alumina Cut to Neutral at JPMorgan; PT A$1.50
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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...