The Match Out: ASX edges higher in a choppy session, defensives lead, Altium hosts upbeat AGM

James Gerrish

Market Matters

It was a choppy session for the ASX, the market trading in a reasonable trading range of around 60 points. The worst of it was seen just after the open, when the market dropped around 30 points before a morning rally led to an 11.30 am high, up around 30 points before a choppy/weak afternoon played out. As AGM season remains front and centre, today saw both hits and misses. From a sector perspective, strength was seen primarily among the defensive areas of Real Estate, Telco and Healthcare.

  • The ASX 200 finished up +9points / 0.13% at 7379.
  • Property was underpinned by a strong move in Goodman Group (ASX: GMG) +1.79% following its AGM, while a 3% decline in oil overnight weighted on the Energy Sector, which fell 1.46%.
  • Commonwealth Bank (ASX: CBA) fell another 1.55% today following yesterday’s underwhelming update and subsequent downgrades to financial year earnings expectations today, we like the stock more in the low $90s.
  • Virgin Money (ASX: VUK) +3.16% was a strong performer today, we continue to see value in VUK down $3.50.
  • Altium (ASX: ALU) +2.98% hosted its AGM and it was one of the more optimistic I’ve attended. Upgrades in February seem likely and now Autodesk’s bid of around $40 looks way too cheap – more on that one below.
  • Aristocrat Leisure (ASX: ALL) -3.61% fell after releasing FY21 results. Topline revenue was in line with expectations but profit was a touch light, following a year of big acquisitions.
  • Coal stocks are under pressure again and Chinese Coal prices remain under the pump. While Coal prices for the product exported elsewhere have held up, they don’t disconnect for too long, Whitehaven Coal (ASX: WHC) is down 4.47%, which is starting to hurt.
  • Evolution Mining (ASX: EVN) +9.73% out with a great announcement today, buying from Glencore the rest of a Copper – Gold mine they don’t already own.
  • A rally of more than US$15 in Gold prices in Asia today saw the sector supported, spot gold sitting at $US1866 around our close.
  • Asian markets were all lower, the Nikkei in Japan -0.10%, Hong Kong -1.40% & China -0.50%.
  • US Futures are all trading marginally higher.
  • Don’t forget, if you are looking for a quick take on markets during the day, tune in to Market @ Midday, available on your dashboard here.

ASX 200 chart

Altium (ASX: ALU) $41.06

ALU +2.98%: held its AGM today and provided a positive trading update that suggests FY22 upgrades within their previously stated guidance range are on the cards in February. Management commentary highlighted a strong first four months of FY22 across the entire Altium group, as momentum returns to the business – it was actually one of the more upbeat CEO discussions I’ve been on this AGM season. As a refresher, management has guided to revenue of US$209-217m (16-20% growth), underlying EBITDA margin of 34-36% and ARR growth of 23-27%. In terms of revenue, consensus implies 17% growth, so it seems there is some upside to that number.

MM remains bullish ALU.


Evolution Mining (ASX: EVN) $4.40

EVN +9.73%: rallied strongly today after announcing the purchase of its JV partner Glencore’s $1 billion stake in a Queensland-based copper-gold mine. The addition of 100% of Ernest Henry from 1 January 2022 increases FY22 copper production guidance for Ernest Henry from 17 – 19kt to 34 – 38kt. There is no change to gold production guidance as Evolution already receives 100% of gold production from the current mining area. As Peter O’Connor put it succinctly today: “A smart deal – sensible. Logical, on strategy and on first glance very accretive … such a nice change from other recent deals in the metals and mining sector - all sensible but none overwhelmingly compelling value.”

MM is bullish on EVN and Gold stocks more broadly.

Evolution Mining

Broker moves

  • ALS Cut to Neutral at Jarden Securities; PT A$13.25
  • Atlas Arteria Raised to Outperform at Macquarie; PT A$6.87
  • Endeavour Group Rated New Neutral at UBS; PT A$7.10
  • Evolution Raised to Buy at Citi; PT A$4.70
  • CBA Raised to Buy at Jefferies; PT A$112
  • Redbubble Rated New Neutral 1 at Barrenjoey; PT A$4.10
  • JB Hi-Fi Rated New Underweight at Barrenjoey; PT A$48
  • Harvey Norman Rated New Overweight at Barrenjoey; PT A$6.10

Major movers today

Have a great weekend all,

James, Harry and the Market Matters team.

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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...

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