The Match Out: ASX rallies, growth names lag, HUB24 (HUB) eyes another acquisition

James Gerrish

Market Matters

The ASX managed to start the week in the black despite a shaky start today thanks to ~1% gains in both financials and materials. Bond yields were climbing throughout our session however it didn’t have an impact on the broader market with value stocks holding up well. There was plenty of corporate news coming through with a number of takeover offers in play.

  • The ASX 200 finished up +19pts / +0.26% to 7381
  • Materials were the stand out with iron ore names finding their feet.
  • Rising bond yields put pressure on the growth end of the market, weighing on healthcare and tech
  • Aristocrat Leisure (ALL) spent the session in a trading halt today as they launched a take over of UK listed Playtech. The $3.8b deal puts Playtech on 11.4x EBITDA, funded in part by a renounceable entitlement offer at $41.85/sh, an 8.6% discount to last.
  • HUB24 (HUB) is looking to buy Class (CL1) – more on that below.
  • Zip Co (Z1P) failed to rally despite over 80% growth in revenue in the 1st Quarter.
  • Also covered below is a disappointing 1st Quarter update from Audinate (AD8)
  • Nickel Mines (NIC) rallied after they secured supply of limonite ore into their processing facility with product coming through before the end of the year.
  • Sydney Airport (SYD) takeover proceedings have yet to progress despite the due diligence process coming to an end. Discussions remain ongoing at this stage.
  • Plenty of data hit coming from China today – Q3 GDP @ +0.2% MoM missed expectations of +0.4% while Retail Sales printed at 4.4%, well ahead of expectations around the 3% mark.
  • Gold flat during Asian trade ~$US1765 at our close
  • Iron Ore Futures were down ~1%
  • In Asia, Hong Kong was down around -0.5% at the time of writing, Nikkei off -0.2%
  • US Futures down at the moment, S&P off -0.1% and Nasdaq futures down -0.3%

ASX 200

Zip Co (Z1P) $6.75

Z1P -1.46%: the BNPL company posted 1st quarter numbers with significant growth not enough to impress the market. Transaction Value toped $1.9b, up 101% for the year though this does come with a number of acquisitions contributing to the headline. International was strong, UK tracking to over $100m in annualised TV just a quarter after launching and USA up nearly 200% compared to the 1st quarter of 2021. Revenues came in at $132.8m, up 8% on pcp. It remains cheap vs peers, particularly Afterpay, though they are under a takeover offer. Zip will also have to contend with more and more competitors including Apple, as well as the big banks conjuring up new, more flexible products.

MM is neutral Z1P

Audinate (AD8) $8.95

AD8 -8.67%: Q1 update today for the audio/visual tech business. While the new financial year has started well, supply chain issues weighed on the stock today. Revenue was up to $US7.6m, +46% on pcp, a record quarter for the business. They did flag continued issues in sourcing silicon microchips out of Korea which has seen the backlog of orders grow to $US14.8m which is expected to impact through the second half of FY22. In an effort to limit the impact, Audinate have brought forward the next generation of product, though this won’t be available until the 4th quarter. The stock is not overly cheap still, though they have built a strong buffer ahead of their nearest competitors which should bear fruit once these issues pass.

MM is neutral AD8 here

Audinate (AD8)

Class (CL1) $2.92

CL1 +61.33%: the SMSF admin software company copped a takeover bid from HUB24 (HUB) today which sent the stock roaring. HUB has proposed a scheme of arrangement giving CL1 holders 10c per share in cash and 1 HUB share for every 11 CL1 held – a huge 72.4% premium to Friday’s close. From HUB’s perspective, the software makes strategic sense, adding another string to their bow coupled with $2m/yr in synergies though HUB has indicated the business will continue to run separately. MM holds HUB in the Flagship Growth Portfolio.

Class (CL1)

Broker Moves

  • Woodside Cut to Neutral at Macquarie; PT A$27.15
  • GPT Group Raised to Equal-Weight at Morgan Stanley; PT A$5.30
  • Carsales.com Reinstated Neutral at Goldman; PT A$26.40
  • Alumina Cut to Neutral at Credit Suisse; PT A$2.20

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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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