The Match Out: ASX gives up early gains, Healthcare struggles, JB Hi-Fi (JBH) sees strong 2nd Quarter

James Gerrish

Market Matters

The local market started on the front foot today, trading as much as +28pts/+0.38% to 7445 around midday before selling off into the afternoon. The slide seemed to coincide with the Bank of Japan (BOJ) talking to inflation risks, increasing their CPI expectations for the next 12 months to 1.1%. Healthcare was weak today, and while the Tech sector finished marginally better, it was the standout earlier in the session and felt the brunt of the afternoon’s weakness.

  • The S&P/ASX 200 fell -8 points / -0.11% to close at 7408.
  • Material stocks (+0.55%) re-took their spot on the top of the leader board while Healthcare (-1.23%) was the weakest link.
  • Redbubble (ASX:RBL) -22.41% had a disastrous day after missing on 1H earnings and saying most metrics will be lower year on year – the quandary when a growth stock stops growing and starts to emphasise the amount of cash they have on their balance sheet.
  • JB Hi-Fi (ASX:JBH) +6.86% on the other hand was strong on the back of a better than feared trading up when they released their 1H results this morning.
  • Appen (ASX:APX) +2.44% rallied today after Citi opened a positive catalyst watch on the stock saying it’s a “good sign” the artificial intelligence company hasn’t issued a trading update ahead of its FY result as it implies upside to earnings expectations. If you recall last year, Macquarie said that APX was about to downgrade and the stock fell off a cliff. They haven’t yet and if they don’t, it’s one that will rally strongly.
  • Iron Ore was down -0.50% in Asia today.
  • Gold was flat at US$1816 at our close.
  • Asian markets were mixed, Japan -0.25%, Hong Kong -0.44% and China +0.76%.
  • US Futures are pricing a weaker open down between -0.22% (Dow) and -1% (Nasdaq).

ASX 200 Chart

JB Hi-Fi $49.

JBH +6.86%: a strong day out for the retailer today with 2Q sales figures coming in better than feared. JB Hi-Fi said that sales for their Australian business was up 1.2% on 2Q last year, The Good Guys adding 2.8% while the New Zealand business fell -3.4% largely due to lockdowns. The 1H looks to have come in better than the market expected with many fearing a tangled up supply chain would weigh on the key quarter’s performance. Unaudited EBIT and Net Profit were both ~9% below 1HFY21, but still a decent beat to expectations. The CEO said households upgrading technology and appliances drove the solid performance. The commentary also helped comp Harvey Norman (ASX:HVN) rally today.

MM is neutral on JBH.

Rio Tinto $109.05

RIO -0.35%: out with their December Quarter and full year production numbers today which managed to largely meet expectations, if not on the weak side. Iron ore production fell 3% in the year in line with expectations but it did include a larger portion of lower grade product which weighed on price realisation. It was a challenging year for iron ore with weather, cultural heritage headwinds and delays to growth projects all contributing to a soft result. These issues are expected to continue into 2022 with guidance of flat to marginal growth in iron ore production. The copper result read a little easier. Production fell as expected given the reduced capacity at the flagship Escondida mine due to COVID impacts largely offset by improved pricing. Strikes and weather impacted bauxite and aluminium production, however this was well flagged.

MM is neutral on RIO.

Broker Moves

  • Ventia Services Rated New Overweight at Barrenjoey; PT A$2.95
  • Perenti Cut to Hold at Argonaut Securities; PT A$1.15
  • ARB Raised to Neutral at Macquarie; PT A$46
  • Senex Cut to Hold at Canaccord; PT A$4.65
  • Healius Rated New Sector Perform at RBC; PT A$5
  • Sonic Healthcare Rated New Outperform at RBC; PT A$47
  • Australian Clinical Labs Rated New Outperform at RBC; PT A$6.50
  • Capitol Health Rated New Sector Perform at RBC
  • Integral Diagnostics Rated New Outperform at RBC; PT A$5.50
  • Wesfarmers Raised to Add at Morgans Financial Limited

Major Movers Today

Enjoy your night

The Market Matters Team.

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James Gerrish
Portfolio Manager
Market Matters

James is the Lead Portfolio Manager & primary author at Market Matters, a digital advice & investment platform with over 2500 members that offers real market intel & portfolios open for investment. He is also a Senior Portfolio Manager at Shaw and...

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