The Match Out: ASX rallies as results impress, unemployment ticks up
It was a big day on the reporting front with more results than not topping expectations leading to good moves in many shares, while a higher-than-expected unemployment rate (3.7% v 3.5% exp) saw bond yields trickle lower, taking some pressure off the RBA.
- The ASX 200 finished up +58pts/ +0.79% at 7410
- The Consumer Discretionary sector was best on ground (+2.74%) while IT (+2.71%) & Property (+2.20%) all put on more than 2%.
- Financials (-1.44%) and Real-Estate (-1.24%) were the weakest links.
- Whitehaven Coal (ASX: WHC) -2.81% fell after the dividend was short of expectations – some conservatism playing out while the NSW government’s coal reservation policy was announced.
- Newcrest (ASX: NCM) -1.69% fell after rejecting the bid from Newmont, while 1H23 results were strong
- National Australia Bank (ASX: NAB) +0.66% gave a good quarterly update, their skew towards business banking clearly working.
- AMP Limited (ASX: AMP) -13.36% whacked as 1H23 results that missed the mark
- Telstra (ASX: TLS) +1.93% edged higher on an inline result, the 8.5cps dividend as expected, all going okay for TLS.
- Super Retail (ASX: SUL) +4.43% defied the gloom in retail posting stronger-than-expected trading for the first six weeks of 2H23 – a really good update here.
- Orora (ASX: ORA) +14.83% reported better profit and reaffirmed guidance, something the market was sceptical of. We like ORA here and covered it recently.
- The stock and animal feed supplements producer Ridley (RIC) +12.53% had a good 1H and said more to come.
- NRW Holdings (ASX: NWH) -5.41% was a rare one which missed their earnings numbers, but they have run hard into the result.
- Abacus (ASX: ABP)+7.37% announced plans to create a new exchange-listed self storage investment trust.
- Bapcor (ASX: BAP)+5.15% reported a solid set of 1H numbers, surprising the market which was fairly downbeat on expectations ahead of the release
- Evolution (ASX: EVN) -1.98% said first-half earnings were on the lighter side, however, the company stuck to FY guidance.
- Goodman (ASX: GMG) +2.12% reported a slightly soft 1H however, the guidance suggests this will be more than made up for in the second half, with FY23 EPS growth of 13.5% now expected (up from 11%).
- Magellan (ASX: MFG) +6.35% even though the reading was fairly bleak – we think UBS is right and the sum of the parts is worth more than ~$10
- Coal prices ticked higher, up ~1%, Iron Ore put on ~1.5% in Asia today
- Gold was flat at ~US$1837
- Asian stocks did well, Hong Kong up +2.18%, Japan +0.91% while China was up +0.77%
- US Futures are up a touch.
Whitehaven Coal (WHC) $7.96
WHC -2.81%: A very volatile session for WHC with 1H23 results, then an update on the Coal Reservation Scheme in NSW.
1. Results: Record revenue of $3.8bn thanks to an average coal price of A$552/t (compared with $1.4 billion revenue and A$202/t average price in the first half last year). That drove a record 1H23 Net Profit After Tax (NPAT) of $1,73bn which was a touch below consensus of $1,77bn, while the dividend of 32c was below consensus of 44c. The stock was down ~10% at its worst, the market was probably disappointed the dividend wasn’t higher, however on the call, CEO Paul Flynn commented that they are being conservative. It probably means the final dividend this year will be very large, we’re not sure what else WHC will do with its cash, which continues to stream in. They retained their FY23 guidance while unit costs are tracking towards the lower end of guidance. WHC held $2.5bn cash on their balance sheet at 31 Dec, while they have bought back 40.1m shares worth $367.4m equating to ~7% of issued capital. They have approval to buy back up to 240m shares, or 25% of issued capital before October, which is supportive.
2. NSW government’s coal reservation policy: This will have a small but negative impact on Whitehaven’s earnings. It is being forced to sell 5% of its coal into the domestic market at a price capped at A$125/t (compared to current export prices of US$220/t). The government clearly hasn’t thought this through. The logistics will make getting the coal to the power station very difficult – Whitehaven’s mines are set up for export, while the quality of Whitehaven’s coal is very high. It makes no sense to burn this high-quality coal in a power station not set up for high-quality coal. In any case, the certainty around what it will be is likely to be positive.
Whitehaven Coal (WHC)
Bapcor (BAP) $6.53
BAP +5.15%: the auto parts company reported a solid set of numbers for their 1H today, surprising the market which was fairly downbeat on expectations ahead of the release. Revenue was a record $1b, up 11% and a 5% beat to consensus, while EITDA and the dividend were marginally ahead of expectations. A strong wholesale and trade result offset weakness in retail and NZ, however, there were positive signs of progress here. The company guided to a marginal improvement in the second half vs the first, on track to beat consensus by high single digits. Shares were sold into the result on concerns margins will continue to slide, but the company was confident we have seen the low point and they should improve into year-end.
Telstra (TLS) $4.22
TLS +1.93%: Reported 1H23 Net Profit After tax (NPAT) of $934m, which was in line with the consensus of $929m. The dividend was in-line with expectations at 8.5c. They largely reiterated their FY23 guidance except for total income guiding to the lower end of the previously guided $23-$25bn range, however, the market had already pencilled in a number nearer $23bn. They are making good progress on their T25 strategy, while the share price has now broken out to the upside, and looks strong.
Newcrest Mining (NCM) $23.90
NCM -1.69% : A very strong 1H23 result today for NCM reporting Net Profit After tax (NPAT) of $293m, which is well ahead of the consensus of $262m. The dividend of 35c is well ahead of expectations and includes a 20c special dividend. Guidance remains unchanged with NCM targeting the lower range of guidance 2.1 - 2.4moz.
They also rejected the bid from Newmont (NEM US) on valuation grounds, but are prepared to give them a look under the hood to try and entice a higher bid. Based on the latest Newmont share price and FX, the 0.38 scrip offer is down -7% to A$25.45/sh NCM vs A$27.45/sh week end 5-Feb close. Barrick Gold (ABX) have ruled out a bid for NCM, CEO Mark Bristow stating overnight “We're not going down that road at all" and “Getting big for the sake of getting big doesn't make much sense”. While there is more to play out here, NCM is also delivering operationally which can only be positive.
Newcrest Mining (NCM)
National Australia Bank (NAB) $30.51
NAB +0.66%: Released a 1Q23 trading update that was strong, particularly around revenue from higher rates while cost control was good. While this is only a quarterly, so a lot less detail, their Net Interest Margin (NIM) was up +4bps to 1.79% from Q4 22, benefiting from a rising rate environment partly offset by increasing home lending competition. Stronger markets & treasury income along with volume growth drove a +15% increase in revenue while costs were up +4%. Unaudited Cash Earnings of $2.15B (+18% QoQ) which well to FY23 consensus of $4.01bn i.e. this is about a 6.5% beat on face value and it seems that NABs skew towards business banking is working. Trading on 12.2x NAB is broadly in line with historical averages.
National Australia Bank (NAB)
Goodman Group (GMG) $20.23
GMG +2.12%: a slightly soft 1H for the industrial property company, however, the guidance suggests this will be more than made up for in the second half. Operating earnings were up 11% to $877m, which was a miss to consensus, however, EPS of 46cps was in line. The strong development result offset a slightly softer property investment in half. Momentum in December was key with rents accelerating and development yield expanding nearly 100bps to 6.7% in the second quarter vs Q1. Guidance was upgraded to 13.5% growth in Operating EPS, from 11%, though consensus had that priced in. The timing of performance fees should boost the second-half result and explains the slight miss today which the market appreciated.
Goodman Group (GMG)
Evolution Mining (EVN) $2.97
EVN -1.98%: First-half numbers for the gold/copper company were on the lighter side, however, the company stuck to FY guidance, setting up for a big second half. EBITDA was a 5% miss at $446m while NPAT was well below expectations on higher-than-expected Depreciation & Amortisation costs. Costs were higher in general, particularly labour which is up 5-6%, however, they remain within guidance levels. A resource upgrade at their Ernst Henry mine helped to soften the earnings miss and the company plans to announce early estimates for an extension at the site later this half.
Evolution Mining (EVN)
- Pro Medicus Cut to Market-Weight at Wilsons; PT A$71
- Cochlear Cut to Market-Weight at Wilsons; PT A$215.25
- Wesfarmers Raised to Neutral at Macquarie; PT A$56.70
- SkyCity Cut to Neutral at Forsyth Barr; PT NZ$2.80
- Pro Medicus Cut to Sell at Citi; PT A$61
- Wesfarmers Cut to Neutral at Jarden Securities; PT A$46
- Cochlear Cut to Neutral at Jarden Securities; PT A$224.71
- Pact Group Raised to Overweight at Jarden Securities; PT A$1.35
- Netwealth Cut to Neutral at Credit Suisse; PT A$13.70
- Treasury Wine Cut to Neutral at Evans & Partners Pty Ltd
- Corporate Travel Raised to Reduce at CLSA; PT A$16.50
- Cochlear Raised to Sector Perform at RBC; PT A$207
- Vicinity Centres Raised to Neutral at JPMorgan; PT A$2.10
- Vicinity Centres Cut to Sell at CLSA; PT A$1.88
- Pro Medicus Cut to Sell at Bell Potter; PT A$55
- Cochlear Raised to Equal-Weight at Morgan Stanley; PT A$214
Major movers today
Have a great night,
The Market Matters team.
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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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