The Match Out: ASX ends a tough January marginally lower, ARB upgrades and rallies, Ansell does the opposite

James Gerrish

Market Matters

The final trading session for a tough January saw the ASX track marginally lower, although there was some buying obvious into early morning weakness, particularly in some of the beaten-up technology stocks, while Resources cooled. For the month, the ASX 200 fell -6.35% but there was some huge divergence between sectors, with Energy +7.88% for the month while IT fell by -18.43% and Healthcare was off -12.13%. More on these stats is outlined below.

  • The ASX 200 finished down -16ts/-0.24% at 6974 today.
  • The IT stocks bounced well, up +3.69% as a group supported by Energy (+1.36%) and Property (+1.35%). Financials were the weakest link, off by -1.83%.
  • Ansell (ASX: ANN) -14.34% hit hard on a decent profit downgrade, blaming higher costs.
  • ARB Corp (ASX: ARB) +7.9% rallied on a profit upgrade, the four-wheel-drive accessories business saying that pre-tax profit for the first half of 2022 should be between $90 million and $92 million. The consensus for the full year was a pre-tax profit of $152 million, so they’re tracking very well for the first-half – upgrades will come here.
  • Resmed (ASX: RMD) +2.24% higher on two broker upgrades, with both Citi and Evans & Partners moving to Buy equivalents.
  • Dubber (ASX: DUB) -6.84% after delivering a trading update this afternoon, having been up strongly this morning. Harry covers this below.
  • The BNPL stocks bounced today – it’s been a long time between drinks. They were also higher overseas with Affirm +17% higher on Friday night.
  • Iron Ore was lower in Asian trade, however, it had traded up to near $150 a tonne.
  • Gold was flat in Asia at $US1789 at our close.
  • Asian markets were mixed– Japan’s Nikkei up +1.12%, the Hang Seng +0.20% while China was off -0.97%.
  • US Futures are marginally higher, Nasdaq Futures the best of them up +0.38%.
ASX 200

Sectors in January (Source: Bloomberg)

Stocks in January (Source: Bloomberg)

Ansell (ASX: ANN) $26.76

ANN -14.34%: The healthcare and industrials supplies company was today smacked to 18-plus month lows after it flagged several issues leading into the half-year result. Sales for the half are expected to jump around 7% to $US1,009 million, however, a big jump in costs will weigh on margins, with profit to take a hit of around 25%. Management noted that supply chain disruptions, forced manufacturing shutdowns due to COVID outbreaks and higher input costs have weighed on the half, while also seeing a slowdown in demand as customers look to draw down inventory. The news that US Customs has also held a shipment of medical gloves following allegations of forced labour at a third-party production facility also shocked the market. Ansell is working to clear the allegations but it’s another pain point in a tough half. A knife was taken to full-year earnings guidance given the pressures facing the business, the share price revised 27% lower to $US1.25-1.45.

MM continues to have no interest in ANN.

Ansell

Dubber (ASX: DUB) $1.77

DUB -6.84%: started well however the cloud-based communications business rolled off into the close following the release of their 2Qtr results. Average Reoccurring Revenue (ARR) jumped over to $50m for the first time with the fastest net add rate on record with organic growth of 19% in the quarter alone. ARR nearly doubled in the last twelve months and with operating costs only marginally higher there’s a clear path to being operating cash flow positive, potentially by the end of the year. They continue to pen new partnerships & secured 2 acquisitions that will also bolster ARR & their unique offering to customers. The negative market reaction seemed to be a result of a miss to cash receipts following a delayed payment from a large customer - however, these issues should pass and we are confident in the direction being taken by the company.

MM continues to like DUB despite SP weakness.

Dubber

Broker moves

  • Tuas Rated New Overweight at Morgan Stanley; PT A$2.10

  • ResMed GDRs Raised to Buy at Citi; PT A$38

  • Hot Chili Rated New Speculative Buy at Cormark Securities

  • Domino's Pizza Enterprises Raised to Hold at Jefferies; PT A$100

  • CSR Raised to Overweight at JPMorgan; PT A$6

  • Adbri Raised to Overweight at JPMorgan; PT A$3.20

  • Boral Raised to Neutral at JPMorgan; PT A$5.90

  • Servcorp Rated New Buy at Shaw and Partners; PT A$6

  • PointsBet Cut to Neutral at Credit Suisse; PT A$5.50

  • Nib Cut to Underweight at JPMorgan; PT A$6.10

  • Medibank Private Cut to Underweight at JPMorgan; PT A$3

  • ResMed GDRs Raised to Positive at Evans & Partners Pty Ltd

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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