The Match Out: ASX edges into the week, ends flat, Weak production at Oz (OZL), EML hit again

James Gerrish

Market Matters

We edged tentatively into the new week with the ASX finishing 1pt lower as strength in Materials & Utilities was offset by weakness in Tech & Telcos – the market chopping around in a tight ~25pt range. Domestic inflation data is out on Wednesday which will likely be a big driver of stocks ahead of the US Federal Reserve decision on rates that evening. Consensus is for Aussie inflation to print 6.3% YoY while the US Central Bank is expected to hike rates by another 0.75%.
  • The ASX 200 finished down -1pt/ -0.02% at 6789
  • The Material & Utilities sectors (+1.08%) were best in ground while Industrials (+0.68%) were also strong.
  • IT (-1.51%) and Communications (-1.15%) the weakest links.
  • More big moves on the stock level with quarterly updates/broker moves and stock-specific ‘confessions’ hitting the tape
  • EML Payments (ASX: EML) -22.18% wacked again after it announced issues with its remediation program on the back of Anti-money laundering concerns.
  • Flight Centre (ASX: FLT) +2.98% announced an upgrade to guidance for FY22 on the back of a strong second half
  • Oz Minerals (ASX: OZL) -3.74% fell after saying quarterly production was down, costs were up and they also lowered their guidance – the negative trifecta.
  • Appen (ASX: APX) -15.02% hit after Citi says it sees risk to Appen’s guidance for a 2H skew to revenue due to digital advertising weakness and Facebook, Appen’s largest customer, transitioning to a new AI engine. This reliance on big tech in the US is a huge risk for APX.
  • Insurance Australia Group (ASX: IAG) +5.94% bounced back after flagging some issues on Friday to lead the ASX 200 today.
  • Dicker Data (ASX: DDR) -10.51% after a H1 FY22 update that was a record but below where the market was positioned for both in revenue & EBITDA – about a ~14% miss.
  • Iron Ore Futures were~7% higher in Singapore today supporting Fortescue (ASX: FMG) +2.36%.
  • Gold was flat at~US$1726
  • Asian stocks were weaker Hong Kong down -0.61%, Japan -0.68% while China was off -0.52%
  • US Futures are all lower, around -0.10% - a quiet start to trade. 

ASX200 chart

Oz Minerals (ASX: OZL) $17.00

OZL -3.74%: The predominantly Copper producer released quarterly production numbers today with production down, costs up and they also lowered their guidance – the negative trifecta. Q2 copper production was 27,423 tonnes vs quarter-ago 30,322 tonnes; Gold production 51,184oz vs quarter-ago 48,773oz; All-in Sustaining Costs $2.10/lb vs quarter-ago $1.75/lb. For the 12 months, they are guiding towards Copper production of120-135Kt; Gold production 208-230Koz and an AISC $1.60-1.80/lb. Covid absenteeism partly to blame while price inflation in the mining space is also have a decent impact – something we’ve seen right across the mining space. We now suspect they could defer their decision on West Musgrave given said cost pressures, however ultimately, OZL has followed the Copper price in an amplified way – Copper down ~30%, OZL down ~40% - we’ve recently bought Oz.

Oz Minerals (ASX: OZL) 

EML Payments (ASX: EML) 93c

EML -22.18%: further pain for the payment card technology business after it announced issues with its remediation program on the back of Anti-money laundering concerns from the Central Bank of Ireland that was announced last year. Issues with the remediation plans have been brought to the company’s attention and works are now expected to continue into 2023 to resolve the issue. The subsidiary in question, PCSIL, has been working under growth constraints imposed by the regulator while the issues are resolved and today’s announcement adds to the risk that the limitations will be extended beyond their planned expiry in December. New CEO Emma Shand, now just 3 weeks in the role, has her work cut out for her to return the business to growth once these issues pass. There has been some corporate interest in the stock in recent months though, perhaps a get-out-of-jail-free card if needed.

EML Payments (ASX: EML)

Flight Centre (ASX: FLT) $17.62

FLT +2.98%: travel agency company Flight Centre announced an upgrade to guidance for FY22 today on the back of a strong second half. EBITDA guidance was improved by ~12% at the midpoint to a loss of $180-190m meaning they may break even in the second half at the EBITDA line after posting a $185m loss in the first half. Total Transaction Volume (TTV) is expected to hit $10b after a surge in demand for both business and leisure travel supporting higher ticket prices in the period. Demand was running above pre-COVID levels by the end of the period, supporting profitability into FY23. They will report full-year numbers on August 25.

Flight Centre (ASX: FLT)

Broker Moves

  • Pilbara Minerals (ASX: PLS) Rated New Outperform at CICC; PT A$2.81
  • Evolution (ASX: EVN) Raised to Accumulate at Ord Minnett; PT A$2.90
  • Global Lithium Resources (ASX: GL1) Rated New Buy at Shaw and Partners

Major movers today

Have a great 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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