The Match Out: ASX higher, Newcrest gets takeover, so does Invocare (IVC)

The daily Match Out report for Monday 15 May with Market Matters' James Gerrish.
James Gerrish

Market Matters

A solid (~30pt) fightback from early weakness (again) today pushing the ASX 200 into the black by the close. Some corporate activity plus some buying in the recently weak materials & energy stocks supported by an ongoing recovery amongst the REITs offset the drag from the financials with ANZ & MQG trading ex-dividend.

  • The ASX 200 finished up +10pts/ +0.14% at 7267
  • The Property sector was best on ground (+0.85%) while Materials (+0.78%) & Energy (+0.63%) were also strong.
  • Financials (-0.85%) and Staples (-0.06%) the only sectors that fell.
  • Newcrest (NCM) +1.52% accepted the takeover offer from Gold giant Newmont (NMT US) creating the world’s biggest Gold producer.
  • Invocare (IVC) +12.08% rallied after Private Equity firm TPG Capital came back to the table with a $13 bid.
  • Elders (ELD) -13.25% whacked as 1H results missed the mark sending shares to a 3-year low.
  • ResMed’s (RMD) -0.48% lower after CFO Sandercock sells $2.93m of Shares.
  • Calix (CXL) -7.68% struggled on no news today, word is an international holder was selling down. Volume was significantly up on the recent average, some buyers stepped up in the afternoon to stem the weakness.
  • Pointsbet (PBH) -21.14% tanked after the wagering company has agreed to sell its US operations for $US150m with plans to return the money to shareholders.
  • ANZ & MQG traded ex-dividend.
  • Downgrades flowing through for QBE post Fridays update, top line growth solid, just cat costs were higher – the market still likes it though.
  • REA Group (REA) -1.69% was down more early after Fridays quarterly - UBS saying the result was okay, they’re just expensive for what you get here and now.
  • We had John Story (UBS Banks Analyst) in for lunch today – reiterating key picks in ANZ & MQG, plus we had a deep dive in the sector – lots going on.
  • Iron Ore was ~3% higher in Asia today supporting BHP Group (BHP) +0.85%, Fortescue (FMG) +1.39% & RIO +0.93%.
  • Gold was up -US$4 in Asian trade today, settled $US2015 at our close.
  • Asian stocks were solid Hong Kong down +2%, Japan +0.85% while China was up +0.96%.
  • US Futures are all up, around +0.20%

ASX 200 Chart - Intraday

ASX 200 Chart - Daily

Newcrest Mining (ASX: NCM) $28.68

NCM +1.52%: Have agreed to be bought by Gold giant Newmont (NMT US) creating the world’s biggest Gold producer with mines across the Americas, Africa, Australia and Papua New Guinea. The deal has been recommended by the NCM Board and consists of 0.40 NMT shares for every 1 NCM share plus a $1.10 fully franked dividend. The total value of the deal equates to $29.24 inclusive of the franking benefit on the $1.10 proposed special dividend, however the value will change inline with the Newmont share price and the AUDUSD cross rate.

  • We think the deal is a good one and are reflecting on our NCM position, one of our largest portfolio weightings.

Invocare (ASX: IVC) $12.43

IVC +12.08%: Rallied today after Private Equity firm TPG Capital came back to the table with a $13 bid for the funeral provider, which now has the boards support. It seems like both parties had a bit to lose here and some middle ground was found. No doubt IVC would have been shopping around for a higher price (first bid was $12.65) but clearly, given the +2.8% premium versus the initial tilt that ‘undervalued’ them , they had no luck. TPG already owned 19.9% of IVC, so they wanted something to happen. As they say, if you can find a horse called self-interest, back it! We thought a deal was likely – as discussed here – and that has now played out.

Dexus (ASX: DXS) $8.16

DXS +1.12%: One of our contrarian ‘income’ calls has been around property – and the deep value that’s on offer in a sector that is priced for some fairly dire outcomes, with Office front and centre. The call is yet to really work however the sector is starting to (tentatively) move higher. No new company specific news on DXS today, however the stock is starting to edge higher. We own from ~$8.02 and have picked up 1 dividend – a frustrating position to date but better times ahead we suspect – looks good technically.

Elders (ASX: ELD) $7.20

ELD -13.25%: 1H numbers from the Agricultural business were weak today sending shares to a 3-year low. EBIT for the half fell -38% to $83m, around 10% below expectations as weak livestock and fertilizer prices weighed. As a result of the decline in earnings, the company cut their dividend ~18% to 23cps at the half. While earnings are expected to improve in the second half as some markets normalize, guidance for the FY of $180-200m was around 8% below consensus.

PointsBet Holdings (ASX: PBH) $1.455

PBH -21.14%: the wagering company has agreed to sell its US operations for $US150m with plans to return the money to shareholders along with the bulk of the cash on the balance sheet. The deal ends PointsBet’s ~5-year push into the US which has been bleeding money in a fragmented and competitive market. The company will continue to run the Australian & Canadian segments which they expect to be EBITDA breakeven at the time the deal completes later in the year, however, they remain open to bids on what is left. They expect to return up to $1.10/sh in cash after the deal settles with Fanatics Better and Gaming.

Broker Moves

  • Nanosonics Cut to Underweight at JPMorgan; PT A$4.30
  • Region Group Cut to Equal-Weight at Morgan Stanley; PT A$2.70
  • REA Group Cut to Hold at Morgans Financial Limited; PT A$145
  • Eagers Cut to Neutral at Macquarie; PT A$15
  • Santos Raised to Overweight at JPMorgan; PT A$8.10
  • Technology One Raised to Buy at Bell Potter; PT A$17

Major Movers Today

Have a great 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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