The Match Out: ASX gets to within 1% of all-time high, Tech stocks rally, and the office market is not as bad as many thought!
The ASX 200 is up nearly 7% in calendar 2023 but is now looking very tired/uncomfortable above 7500. The best of today’s trade was seen early with the index +47pts at the high, hitting 7548, only ~1% from its all-time high, but with BHP (ASX: BHP) down 1.4% on the session and the banks rolling over into the close (CBA ASX: CBA looks a prime pullback candidate), broader strength elsewhere was not enough to offset the drag by these index heavy-weights.
- The ASX 200 finished up +9pts/ +0.13% at 7511
- The IT sector was best on ground (+3.15%) while Consumer Discretionary (+1.26%) & Property (+0.94%) were also strong.
- Energy (-0.89%) and Financials (-0.39%) the weakest links.
- There were some explosive moves in the tech space today with a few stocks we own doing particularly well. Xero (ASX: XRO) +7.47% saw buying from a low base, likewise for Seek (SEK) +5.36%.
- Goldies were good thanks to $US weakness, Evolution Mining (ASX: EVN) the best of the bigger caps up +5.99% with our growth portfolio enjoying the move.
- Pinnacle Investment Group (ASX: PNI) -2.69% fell after profit missed expectations thanks to higher-than-expected outflows. We cut this one recently from our Emerging Companies strategy.
- Centuria Office REIT (ASX: COF) +7.98% rallied on slightly stronger 1H23 results – the trends here are sort of okay, more on this below.
- James Hardie (ASX: JHX) +4.3% rallied on a Goldmans upgrade – we like JHX anywhere under ~$35.
- Iron Ore was flat in Asia today, although remains around US$128/tonne
- Gold was up overnight to ~US$1950adding another US$3 during our time zone today.
- Asian stocks were up Hong Kong +0.28%, Japan +0.33% while China was up +0.20%
- US Futures are mixed, Nasdaq is looking to open +1% following a 20% rally by Meta in after-hours trade, while Dow Futures are flat.
ASX 200 CHART
Pinnacle Investment Management (ASX: PNI) $9.39
PNI -2.69%: announced their half-year results after market yesterday, trading to 4-week lows during the session on some weak numbers. While revenue was marginally lower, profit fell 24% to $30.5m on lower performance fees and investment in growth initiatives. An increase in the average base fee margin to 53.5bps was positive, however, the company struggled to generate business and saw net outflows of $1.5b.
We continue to like the company over the medium term, positive on its diversified income streams and performance fee upside, however, these results justify our near-term bearishness with the need to see a turnaround in FUM flows and benefits from their investment in the business.
Centuria Office REIT (ASX: COF) $1.76
COF +7.98%: A slight beat on a number of key metrics at their 1H23 results today led to a reasonable pop in the share price which shows how bearish the market is towards office assets, and property more generally. Funds from operations (FFO) came in at $48.6m, a ~2% beat while the dividend of 7.1cps had already been pre-announced. Leasing volumes were solid and ahead of expectations while NTA of $2.40 was down on the $2.50 recorded in June 22, but clearly not a disaster and is still ~36% above the current unit price.
Gearing is a touch high at 35.6% and they only really have short-term hedging in place, so there is risk around that, but it’s manageable. Occupancy increased from 94.7% in June to 96.4% while their WALE stayed steady at 4.2 years.
Guidance for FFO of 15.8c was unchanged and inline with consensus while the dividend should be 14.1c, putting it on an 8% yield. We own Centuria Capital (ASX: CNI) in our Income Portfolio which in turn owns 14.3% of COF and view these trends as broadly positive, or at the very least, not as bad as expected. We also have a position in Dexus (ASX: DXS) making us ‘overweight’ the much-maligned office space.
- Virgin Money UK GDRs Cut to Neutral at Macquarie; PT A$3.60
- Judo Capital Rated New Overweight at Morgan Stanley; PT A$1.75
- James Hardie GDRs Reinstated Buy at Goldman; PT A$40.50
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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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