The Match Out: ASX higher but the best of it was seen early, Results dominate ahead of US Inflation data tonight
- The ASX 200 finished up +13pts/ +0.18% at 7430
- The IT sector was best on ground (+1.27%) while Communications (+1.15%) & Healthcare (+0.62%) were also strong.
- Industrials (-0.39%) and Energy (-0.38%) the weakest links.
- CSL (ASX: CSL) +0.90% edged higher after reporting strong plasma collections and re-affirmed FY23 guidance.
- James Hardie (ASX: JHX) -4.25% fell after downgrading FY23 guidance, a ~6% downgrade versus consensus
- Temple & Webster (ASX: TPW) -26.87% fell the most in over 2 years as sales in the first five weeks of the 2H declined.
- Challenger (ASX: CGF) +4.41% roared higher after reaffirming guidance, a sign of how little confidence the market had in them in meeting their numbers.
- Dexus (ASX: DXS) +2.41% beat on 1H23 earnings and increased FY23 distribution guidance, still trading ~40% discount to NTA.
- Breville (ASX: BRG) -4.70% lower on a revenue miss while earnings were ahead. Some concerns around inventory levels were also at play.
- Ansell (ASX: ANN) -8.72% struggled after lowering guidance, demand a lot softer than expected – COVID tailwinds seem a lifetime ago for ANN.
- Sims Group (ASX: SGM) +7.08% up on a strong 1H beat on both sales and profits.
- Speculation that Star Entertainment (ASX: SGR) -13.47% will need to raise equity.
- Coal Futures fell, the March contract down ~3.5%
- Iron Ore was ~0.5% lower in Asia, Fortescue (ASX: FMG) +0.18%% while Rio Tinto (ASX: RIO) fell -0.67% & BHP (ASX: BHP) was -0.31%. Mineral Resources (ASX: MIN) hit hardest on a broker downgrade.
- Gold was up a touch, trading ~US$1858 at our close.
- Asian stocks quiet, Hong Kong down -0.15%, Japan +0.50% while China was off -0.13%
- US Futures are all marginally, around -0.10%
- A big day of reporting tomorrow: Cochlear (ASX: COH) | Commonwealth Bank (ASX: CBA)* | Corporate Travel (ASX: CTD) | Fletcher Building (ASX: FBU) | Fortescue (ASX: FMG) | GUD Holdings (ASX: GUD) | Netwealth (ASX: NWL) | Pact Group (ASX: PGH) | Redbubble (ASX: RBL) | Seven Group (ASX: SVW) | Treasury Wines (ASX: TWE) | Wesfarmers (ASX: WES)* | Vicinity Centres (ASX: VCD)
CSL Limited (ASX: CSL) $307.75
CSL +0.90%: edged higher today after reporting strong plasma collections and reiterated its full-year guidance for FY23 underlying net profit at about $2.7-$2.8 billion in constant currency terms, which was a touch ahead of current consensus. The momentum in collections (+38%) should drive growth into FY24 and margins were solid, particularly in Seqirus while Vifor is running slightly above expectations. A good update from CSL - keeps us positive.
James Hardie (ASX: JHX) $30.40
JHX -4.25%: Fell today following their quarterly update which was a touch soft, but more importantly, they downgraded FY23 guidance down from an underlying profit of $650-$710m to $600-$620m. The market was already sceptical of their prior guidance with consensus before today’s update sitting at $649m, i.e. just below the bottom end of the range. At the mid-point of today’s new guidance (~$610m), it’s a 6% downgrade but there were a few bulge brackets that were already nearer ~$600m – in other words, it wasn’t as bad as it looked. The miss came from a combination of lower volumes and lower realised price increases.
Dexus (ASX: DXS) $8.50
DXS +2.41%: A beat and bump today for the much-maligned office REIT, with 1H23 Funds From Operations (FFO) of $389m above consensus of $367m while they increased FY23 distribution guidance to be at the top end of the previously flagged range of 51-51.5c. Occupancy levels have held up in Office (95.3% versus 95.6% in FY22) and remain strong in Industrial (97.4%), gearing at 25.6% is below their targeted 30-40% range while external revaluations of property assets were fairly benign, resulting in a 27c or 2.2% decrease in net tangible asset (NTA) per security during the period, which sits at $12.01 as at 31 December – or ~40% above today’s closing price. Priced at an Est PE of 12.2x and yielding 6%, we are happy holders of DXS in our Active Income Portfolio.
Temple & Webster (ASX: TPW) $3.62
TPW -26.87%: the e-commerce furniture retailer struggled today following some sour comments at the half-year result. The numbers themselves were largely as expected with revenue of $207m just 2% below consensus while EBTIDA of $8.5m was a ~20% beat. Margins improved into the end of the year as the company benefitted from high supplier inventory and lighter-than-usual promotional offers. Supply chain costs were up, but less than expected and marketing expense margins fell substantially as the company cut costs. The concern came with forecast numbers where the company dropped the “double-digit growth” target over the medium term. Sales for the first 5-weeks of 2023 were down 7%, blamed on elevated comps as a result of the Omicron outbreak in January 2022. Their venture into an online bunnings competitor is also chewing through cash faster than expected without the results coming through. Overall it seems e-commerce is struggling to keep up with the competition of bricks and mortar operations with an online presence.
Breville Group (ASX: BRG) $20.68
BRG -4.7%: a mixed set of results for the appliance manufacturer today with the market focussing on the negatives. Revenue was a big miss on weak Europe, Middle East and Africa (EMEA) as the distribution contribution out of Ukraine constrained sales. Revenue of $888m was a ~5% miss, but EBIT was a small beat, up 8% to $121m showing cost control was key. Guidance of FY EBIT of $165-172m was close enough to consensus at $170m, however, there are some concerns with inventory levels as sales peter out.
Challenger (ASX: CGF) $7.58
CGF +4.41%: the investment manager posted a reasonable set of 1H numbers, headlined by a small beat at the profit line as higher interest rates create a tailwind for their core annuity offering. Net Profit Before Tax (NPBT) was a small beat at $250m, though the statutory number missed on weak investment outcomes. The Life business was key to the beat with strong sales coming through in the half. Their Funds Management arm was weaker than expected though, however, this is a small portion of earnings. Guidance was in line, NPBT for FY23 expected to be $485-535m vs consensus at $517m, the market will be more comfortable with expectations following the strong first half with the bulk of earnings already in the back pocket.
- Nanosonics Raised to Add at Morgans Financial Limited; PT A$5.19
- Propel Funeral Partners Raised to Buy at Moelis & Company
- Perseus Raised to Outperform at Credit Suisse; PT A$2.30
- Carsales.com Cut to Reduce at CLSA; PT A$24
- Fletcher Building Cut to Equal-Weight at Morgan Stanley
- Aurizon Raised to Add at Morgans Financial Limited; PT A$3.72
- Deterra Cut to Neutral at Credit Suisse; PT A$4.70
- Lendlease Cut to Reduce at CLSA; PT A$8.09
- Integral Diagnostics Raised to Neutral at JPMorgan; PT A$2.70
- Mineral Resources Cut to Neutral at Credit Suisse; PT A$84
- Star Entertainment Cut to Reduce at CLSA; PT A$1.60
- SkyCity Cut to Reduce at CLSA
- South32 Raised to Outperform at Exane; PT A$5.47
- Universal Store Raised to Buy at Citi; PT A$6
- Endeavour Group Raised to Add at Morgans Financial Limited
- Healius Raised to Hold at Jefferies; PT A$2.60
- JB Hi-Fi Raised to Add at Morgans Financial Limited; PT A$53
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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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