The Match Out: ASX higher on mixed day of earnings
The daily Match Out for Thursday 10 August with James Gerrish of Market Matters.
A solid day for the ASX as reporting threw up some more interesting candidates from a broad cross-section of industries, some hits, misses and a few in between, while we saw some action amongst the energy stocks with Crude breaking higher and Coal prices finding some support.
- The ASX 200 finished up +19pts/ +0.22% at 7357
- The Energy sector was best on ground (+2.27%) while Consumer Discretionary (+0.60%) & Healthcare (+0.50%) were also strong.
- IT (-1.79%) and Utilities (-0.41%) the weakest links.
- Coal stocks a standout with Whitehaven (ASX: WHC) +4.34%, New Hope (ASX: NHC) +5.76% & Bowen Coking Coal (ASX: BCB) +29%.
- Tech leaders on the other hand, Xero (ASX: XRO) -3.72% and Altium (ASX: ALU) -2.08% fell, while WiseTech (ASX: WTC) has a rare day in the red.
- AGL Energy (ASX: AGL) -3.11% reported an inline FY23 result & reconfirmed FY24 guidance but the stock fell – not a lot of ‘new news’ in today’s update although we missed the conference call.
- QBE Insurance (ASX: QBE) -1.22% had a volatile session on a confusing 1H23 result that looked a big miss initially, but they reconfirmed FY guidance.
- Boral (ASX: BLD) +8.47% hit a new 5-year high on a ‘massive beat’ – better revenue + better margins = substantially better earnings.
- AMP (ASX: AMP) +4.55% had a volatile session, sold off initially as they withheld some capital instead of returning it to shareholders (as was expected), but the result was solid, and a beat to expectations – is the worm turning?
- Downer EDI (ASX: DOW) -6.39% fell on a messy FY23 result and their outlook was cautious
- Iron Ore was a touch higher in Asia supporting Fortescue (ASX: FMG) +1.37% & BHP (ASX: BHP) +0.62% while RIO -2.84% traded ex-dividend
- Gold fell overnight to ~US$1915 before tracking marginally higher today, settled $US1917 at our close.
- Asian stocks were mixed, Hong Kong down -0.20%, Japan +1.06% while China was up +0.24%
- US Futures are all up, around +0.40%
- Companies reporting earnings tomorrow: Newcrest (NCM), REA Group (REA) & Nick Scali (NCK) amongst others. Download the Market Matters Reporting Calendar Here
- Yeti Holdings (YETI US) reports tonight in the US– we own in our International Equities Portfolio, while The Trade Desk (TTD US) reported last night & fell – we covered here this morning.
- Go the Sea Eagles – season on the line tonight!
ASX 200 Intraday
ASX 200 Daily
AGL Energy (AGL) $11.22
AGL -3.11%: The first inline result for ages from AGL and it was initially taken favourably by the market with the stock up 1.5% before the conference call started at 11am, before it was sold off to finish down on the day.
The FY23 result was as per expected while guidance was unchanged for FY24, having flagged this at their investor day in June. FY24 EBITDA should be in the range of $1,875-2,175 million with NPAT $580-780 million. The dividend for the 2H23 of 23c/share was a whisker ahead of expectations (22c/share) and they may start to frank the dividend in FY25.
The focus today was on ‘what’s new’, and there wasn’t much since the June update. They are well underway on a huge realignment of the business, and they’re generating enough cash flow given favourable trends in the energy market to execute the strategy towards renewables.
There is some risk that pricing dynamics could change, and that could impact their ability to fund such a significant program, and we’re unlikely to get more information here until early in 2024. We should also be conscious of the possibility of regulatory invention, the government loves to meddle with energy policy.
We ensured our holding in AGL was brought back to our 3% target ahead of today’s results, and now we’re comfortable holders.
QBE Insurance (QBE) $15.41
QBE -1.22%: The same old story for QBE today, a messy/underwhelming 1H23 result which pushed the stock down on open then it recovers throughout the session as they talked favourably about the future, reconfirming FY23 guidance. 1H23 NAPT of $404 million compared to $500 million consensus while the interim dividend was also light on, at 14c/share v consensus of 24c/share.
The miss seemed to be driven by a higher tax rate however there was also a lot of complexity around a change in accounting standards, which frankly, confused us. We need more time to review the result before casting judgement.
AMP Ltd (AMP) $1.15
AMP +4.55%: the wealth management company announced 1H results this morning seeing a weak reaction from investors from the early sticker shock, however, shares ended higher as green shoots emerged digger deeper into the numbers and outlook.
EPS was a small beat to expectations at 3.8c/share, up 11.8% on last year, while NPAT was well ahead of the market on the back of a stronger than expected Wealth management result. The bank side of the business beat on Net Interest Margins (NIMs) at 139bps however guidance was a little soft, expecting to fall to 130-135 basis points in FY24.
The main concern for the market is the Buyer of Last Resort cases currently being contended in court with AMP provisioning $50m for compensation, and placing the third tranche of capital returns for shareholders on hold for the time being as they work through the issue. They will also spend $120-150 million over the next 2 years to cut their cost base by ~11% ($120 million p.a.), it would be a great result if they can pull it off. The business still has a number of issues ahead of itself though the result shows that they are starting to look like a capable company again.
Boral (BLD) $4.74
BLD +8.47%: FY results were out for the building materials company, coming in well ahead of the market with a particular surprise on margins. Revenue grew 17% while EBIT more than doubled as EBIT margins climbed from 3.8% to 6.7% for the year, and an impressive 7.7% in the second half.
Guidance was also strong, expecting EBIT of $270-300 million in FY24 while consensus had the lower end pencilled in. While the building industry may be faced with a slide in demand if economic growth slows, Boral has vastly improved their business with cost control while having a strong footprint driving pricing power as well.
Overall, a great result and shares deservedly hit long-term highs today.
Broker Moves
- Sims Cut to Sell at UBS; PT A$13.60
- Symbio Holdings Cut to Equal-Weight at Morgan Stanley; PT A$2.85
- IDP Education Cut to Underperform at Macquarie; PT A$21
- Newmark Property Cut to Neutral at Evans & Partners Pty Ltd
- Unibail GDRs Raised to Neutral at JPMorgan; PT A$4.60
- a2 Milk Cut to Reduce at CLSA; PT NZ$5.83
Major Movers Today
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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 Partners heading up a team that manages direct domestic and international equity & fixed-income portfolios for wholesale investors.
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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...
Expertise
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...
Expertise
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