The Match Out: ASX flat, why did TPG Telecom (TPG) fall 12%?

James Gerrish

Market Matters

A subdued end to a positive week for the ASX with Energy & Material stocks the only real shining light while there were a few hits and misses from reporting, MM chalking up our first ‘landmine’ in TPG Telecom (TPG), which dampened what was an otherwise strong week across portfolios.
  • The S&P/ASX 200 added 1 point / +0.02% to close at 7114 - for the week, the ASX added +1.17%
  • Energy (+1.96%) & Materials (+0.82%) the clear standouts on the upside today plus they were the best performers across the 5 sessions.
  • Property (-1.31%) and Healthcare (-0.94%) the weakest links today while the Utilities took the gong for the week.
  • TPG Telecom (ASX:TPG)  -12.39% on a weaker 1H result and no guidance.
  • Inghams (ASX:ING) -9.43% down after profit fell nearly 60% to $35m,
  • AGL Energy (ASX:AGL)  -3.92% missed their previously stated EBITDA guidance.
  • Stockland (ASX:SGP)  -2.10% was lower despite a better than expected result & guidance, a soft July to blame.
  • Newcrest (ASX:NCM) +3.64% was positive today on better FY22 profit and stronger than expected guidance for FY23.
  • Cochlear (ASX:COH)  +2.18% was up despite FY22 results missing the mark – upbeat outlook comments helped the SP.
  • Iron ore futures lower in Asia, off 1.5%
  • Gold was down a touch trading US$1756/oz at our close.
  • Asian markets were down, the Nikkei in Japan fell -0.03%, while Hong Kong was off the same and China fell -0.70%.
  • US Futures are lower but not by a lot.

ASX 200 Chart

TPG Telecom (TPG) $5.80

TPG -12.39%: A weaker 1H result for the telco than we hoped and the share price is unfortunately reflective of that. Revenue of $2.19bn was around 2% light on while EBITDA was a 3% miss (excluding restructuring costs relating to the Vodafone merger). The miss was a result of lower Average Revenue Per User (ARPU) and higher costs. Not all bad news though, with a 9cps interim dividend while they added +135k new mobile users, which was above company guidance of 120k for the half. They talked to a better 2H however they didn’t provide actual guidance which is the main issue, the market was looking for specific financial guidance and they failed to deliver. The share price was off sharply, and while it’s a big reaction, the stock had run into the result. We’ve unfortunately seen a nice profit evaporate in our position today, however, for now, we are inclined to hold the position.

AGL Energy (AGL) $7.84

AGL -3.92%: A weak FY22 result today from AGL with underlying profit of $225m below consensus of $240.1m and a final dividend per share of $0.100 vs. $0.340 last year. EBITDA missed company guidance and clearly, the company has had a tough period operationally. Without the corporate interest, we suspect AGL would be trading lower than $7.84. Naturally, investor focus turns to their outlook which doesn’t improve until FY24 given AGL is largely hedged in FY23. We see AGL as an undervalued asset play that is brimming with corporate appeal, and would be interested again if it dipped into the low $7’s, having sold out at $8.38 back in May.

Stockland (SGP) $3.73

SGP -2.10%: FY22 was a better year for Stockland with Funds From Operations (FFO) coming in at $851m, up 8% y/y and above the estimate of $837.5m. That dropped down to FFO per security of $0.357 vs. consensus of $0.33 while the final distribution was solid at $0.146. FY23 guidance was above consensus, but they then went on to say that July sales were soft and enquiries had halved – i.e. not a good start to the year and no doubt the reason for some selling today. “While macro-economic conditions remain uncertain, the underlying performance of our business segments give us good visibility for the year ahead," CEO Tarun Gupta said “Importantly, we enter FY23 in a very strong capital position, with gearing sitting below our target range of 20-30% on a proforma basis”.

Newcrest (NCM) $19.35

NCM +3.64%: results for the gold stock were positive today, and the share price rallied on some decent guidance. Earnings for the second half were $US872m, a small beat, as was the US20c final dividend. Their key asset, Cadia, has seen mining operations offline for a few weeks with an issue in the underground mine, however, they were able to use stockpiles to keep production levels up and the mine is now back online. FY23 guidance was key to the move higher today with gold production of 2.1-2.4Moz and copper between 135-155kt expected in FY23. Costs are expected to be up 6-8%, which was better than feared.

Cochlear (COH) $218.86

COH +2.18%: FY22 results from the hearing implant company missed the mark today, however, outlook comments helped to lift the share price. Revenue climbed 10%, however, profit fell 11% to $289m with margins being squeezed on surgery restrictions. The company noted a strong pipeline of sales and improving margins with new product launches expected to lift profit by around 10% in FY23, ahead of market expectations. They said all regions and products are performing ahead of pre-COVID levels.

Inghams (ING) $2.69

ING -9.43%: a difficult session for the poultry goods business that faced a difficult FY22. Profit fell nearly 60% to $35m, well below consensus at $43m despite volumes increasing more than 4%. Supply chain costs, COVID-absenteeism, weather and input cost inflation all weighed on the numbers. While these pressures have started to ease in the final quarter, the company said consensus expectations were too high for FY23 and they would expect downgrades of up to 10%.

Sectors This Week – Source Bloomberg

Stocks This Week – Source Bloomberg

Broker Moves

  • Treasury Wine Raised to Outperform at Macquarie; PT A$15
  • Xero Cut to Underperform at Macquarie; PT A$70
  • HT&E Cut to Neutral at Macquarie; PT A$1.30
  • Deterra Rated New Underperform at Barclay Pearce Capital
  • Orora Rated New Hold at Barclay Pearce Capital; PT A$3.34
  • HT&E Rated New Buy at Barclay Pearce Capital; PT A$1.71
  • Pro Medicus Rated New Underperform at Barclay Pearce Capital
  • Nearmap Rated New Underperform at Barclay Pearce Capital
  • IPH Rated New Underperform at Barclay Pearce Capital; PT A$7.07
  • Treasury Wine Cut to Neutral at Citi; PT A$13.50
  • Beacon Lighting Cut to Neutral at Citi; PT A$2.53
  • Origin Energy Raised to Neutral at Jarden Securities; PT A$5.75
  • Beacon Lighting Cut to Neutral at Jarden Securities; PT A$2.30
  • Transurban Cut to Underperform at Credit Suisse; PT A$13
  • Blackmores Raised to Outperform at Credit Suisse; PT A$90
  • Amcor GDRs Cut to Hold at Morgans Financial Limited; PT A$18.75
  • IPH Cut to Hold at Morgans Financial Limited; PT A$10.63
  • Orora Raised to Buy at Jefferies; PT A$4.10
  • Pro Medicus Cut to Hold at Moelis & Company; PT A$56.74
  • Transurban Cut to Neutral at Evans & Partners Pty Ltd
  • Amcor GDRs Cut to Neutral at Macquarie; PT A$19
  • ASX Raised to Hold at Morgans Financial Limited; PT A$76.90
  • Medibank Private Cut to Hold at Morgans Financial Limited
  • HomeCo Daily Raised to Buy at Jefferies; PT A$1.43
  • Amcor GDRs Cut to Underperform at Jefferies; PT A$16
  • Pro Medicus Cut to Hold at Bell Potter; PT A$55
  • Aurora Energy Metals Rated New Speculative Buy at Euroz

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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