The Match Out: ASX down but bounces well off lows, Adairs hurt by rising costs, Regis Resources’ FY production caves in

James Gerrish

Market Matters

The ASX opened on the back foot this morning, hitting a low of 7086 / down -89 points on the ASX 200 shortly after the open. This followed the weakness in the US on Friday, but the “buy the dip” mentality emerged and we saw the market bounce +53points to end the session down -0.50%. 

US Futures helped the move, the S&P “e-minis” up +0.80% during our time zone. At the sector level, it was a classic risk-off. Defensives did well, real estate the main support, followed by the supermarkets, while IT stocks dragged. But the majority finished well up from session lows.

  • The S&P/ASX 200 fell -36points / -0.51% to close at 7139.
  • Real estate stocks (+1.45%) led the line, Consumer Staples (+0.36%) was also relatively well insulated while IT (-1.58%) and Utilities (-1.29%) dragged.
  • Fortescue Metals (ASX: FMG) -2.01% has agreed to buy Williams Advanced Engineering which was founded by the Williams Formula 1 racing team, for $223 million to gain access to battery technology that it will use in mining haulage trucks.
  • Regis Resources (ASX: RRL) -14.29% hit hard today after lowering its full-year gold production forecast.
  • Bed & Bath retailer Adairs (ASX: ADH) –21.52% fell hard today after saying reduced rental relief, higher wages and increased warehouse costs have hurt margins
  • Uniti (ASX: UWL) +9.28% was the top performer in a weak market after saying it’s received takeover approaches.
  • Goodman Group (ASX: GMG) +3.54% was higher today as investors looked for high-quality stocks that have been beaten down in recent weeks – GMG fits that bill and is the latest addition to the MM Flagship Growth Portfolio
  • Iron Ore was flat in Asia today while Coal prices edged higher
  • Gold was up smalls +US$1.70 at US$1837 at our close.
  • Asian markets mixed, Japan up +0.20%, Hong Kong -0.68% & China +0.26%.
  • US Futures are pricing a higher open, up around +0.75% across the board.

ASX 200 chart

Regis Resources (ASX: RRL) $1.80

RRL -14.29%: came out of a trading halt today following a geotechnical incident at its Rosemont pit. The pit wall fell following heavy rain last week, which has caused a significant downgrade to production guidance. While no workers were injured, Regis lowered guidance for the full year by 40koz to between 420 and 475koz for the group. Costs will also rise by around 10% an oz. Regis has seen the benefit of some higher-grade deposits and improving production out of its 30% stake in Tropicana, but the pit wall falling is a major setback

MM prefers NCM & NST for gold exposure

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Regis Resources

Adairs (ASX: ADH) $2.99

ADH -21.52%: it was a tough day for the homewares retailer after pre-releasing first half results. Sales in the first half were +2.7% on a like-for-like basis, but fell overall to $242 million despite a small contribution from the acquisition of Focus on Furniture. Earnings have taken a hit, though, as costs bite. Reduced rental relief, higher wages and increased warehouse costs have taken a knife to margins, with first half underlying earnings expected to be between $32 million and $33 million, down from $60.2 million last year. Shares fell to a 12 month low

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MM is cautious retailers generally.

Adairs (ASX: ADH)

Broker moves

  • Cochlear Cut to Neutral at Macquarie; PT A$222.50
  • Ramsay Health Cut to Neutral at Macquarie; PT A$71.85
  • Regis Healthcare Cut to Neutral at Macquarie; PT A$1.95
  • Lendlease Raised to Outperform at Macquarie; PT A$12.64
  • Integral Diagnostics Cut to Neutral at Macquarie; PT A$4.85
  • HUB24 Raised to Outperform at Macquarie; PT A$32.40
  • Estia Health Cut to Neutral at Macquarie; PT A$2.40
  • Dexus Industria REIT Raised to Outperform at Macquarie
  • Telstra Cut to Neutral at Goldman; PT A$4.40
  • Northern Star Cut to Sell at Argonaut Securities; PT A$7.90.

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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