The Match Out: ASX rallies, HUB24 tops the boards, Dominoes tanks

James Gerrish

Market Matters

Risk was back on today with the market rallying 0.60% led by the recently under pressure technology stocks while the more defensive areas (Utilities and REITs) lagged. It’s often true that the threat of something eventuating is more harmful to prices than the actual event itself and that could well be the case for the current geopolitical mess. At the corporate level, earnings are dominating – a huge day today and another tomorrow with a handful of our stocks delivering results.

  • The ASX 200 finished up +44pts/+0.62% at 7205.
  • The IT sector was strong – the first time we’ve written that in a while – adding +2.17% supported by the Telcos (+1.85%).
  • Utilities (-0.70%) and Real-Estate (-0.28%) were the only sectors in the red.
  • The Small Ords bounced back today up +1.48% after a tough period outpacing the large caps by a factor of two.
  • I was on AusBiz this morning chatting results from HUB, WOW, GEM, WOW, DMP and WTC – The recording can be seen here.
  • Dominoes (ASX: DMP) -14% fell after missing 1H22 profit + said sales growth was below par for the start of CY22.
  • Woolworths (ASX: WOW) +1.36% beat 1H22 profit expectations and said 2H should be better. That implies consensus upgrades for FY22.
  • Regulated utility APA Group (ASX: APA) -1.38% delivered a solid inline result.
  • Calix (ASX: CXL) +10.96% took the opportunity to talk up its pipeline of opportunities despite recording a bigger loss. We own and discuss below.
  • Wisetech (ASX: WTC) +4.13% increased EBITDA guidance by 4% relative to current consensus.
  • HUB 24 (ASX: HUB) +9.85% finally enjoyed a fitting response to its strong set of results yesterday.
  • Altium (ASX: ALU) +5.55% also bounced today with MM having added to our position this morning in the Flagship Growth Portfolio – we also cover ALU in the Weekly Video Update below.
  • Iron Ore was up a touch in Asia today around 1%
  • Gold was flat at $US1896 at our close.
  • Asian stocks were up Hong Kong +0.57%, Japan +0.83% while China was up +0.78%.
  • US Futures are all higher, Nasdaq the best of them +0.70%.
ASX 200

Weekly Video Update

This week James and Harry discuss the good, the bad and the misunderstood so far this reporting season.
Be sure to subscribe to the Market Matters YouTube Channel & ‘Like’ the video if you do. The guys are fickle and love reassurance!

Dominoes (ASX: DMP) $86.13

DMP -14.02%: A tough session for DMP today following a miss on their 1H22 results. Profit for the half was around 6% below expectations while same-store sales growth for the start of CY22 is tracking at 1.77%, below their long term target of 3-6% range. Worth noting they are coming off a strong comparable period and it was widely expected that SSS would miss, just not by that margin. In any case, DMP has fallen from around $165 to now trade sub $90, we would have thought a portion of today's result was factored in however the SP decline clearly shows otherwise. While we don’t think this is the time to be stepping up and buying misses, DMP looks interesting and is certainly now back on the MM hit list.

Dominoes

APA Group (ASX: APA) $10.01

APA -1.38%: A strong inline result is a good way to describe the APA result today even through underlying profit was a strong beat to consensus. The beat came from a lower tax expense however offsetting that marginal positive was an increase in their CAPEX guidance to $1.4bn over FY22-24. The interim dividend of 25cps had been pre-announced however they did reconfirm FY22 DPS guidance of 53cps. We own APA in the Income Portfolio and remain happy holders collecting a ~5% yield.

APA Group

Calix (CXL) $5.67

CXL +10.96%: 1H22, purely via the numbers, was a miss, however, the opportunity for the mineral processing technology business is what it’s all about. Sales revenue was up around 6.5% but total revenue fell given lower R&D incentives and grant income. Operating profit swung into a $5.2m loss with the lower revenue and higher costs, particularly sales & admin. From an outlook perspective though the update was solid with a ‘rapidly growing pipeline of opportunities in the CO2 and sustainable processing business’ and flagged meaningful agreements in the near term. We have a call with management now.

Calix

Woolworths (WOW) $35.68

WOW +1.36%: A beat for Woolworths today, following on from the decent first half report seen by Coles (COL) earlier in the week. Sales were in line while NPAT came in around 6% better than expectations at $795m. Costs were well controlled despite the difficult conditions caused by supply chain and labour issues. The second half has started strongly as well with Australian food sales up 5% on the prior corresponding period for the first seven weeks of the year, though there has been some normalization in recent weeks. They said all things being equal, the 2H should be better so expect upgrades to follow for FY22 numbers.

Woolworths

Wisetech Global (WTC) $44.58

WTC +4.18%: the logistics technology business delivered a beat for the first half with improved margins lifting FY guidance. Revenue was up 21% to $288m while EBITDA jumped more than 50% to $137.7m, with better outcomes from cost out initiatives coming through. Revenue guidance for the full year was maintained but EBITDA guidance was up around 4% at the midpoint v current expectations to $275-295m on higher margins. They’ve done well to pass on price increases to customers, particularly on the CargoWise business with the rollout of Large Global Freight Forwarder.

Wisetech

Pilbara Minerals (PLS) $2.85

PLS +2.15%: a strong 1H for the lithium miner driven by improving realised prices overshadowing the departure of the CEO today. They swung into profit for the first time with NPAT of $114m with lithium spodumene attracting an average selling price of $US1,250/dmt. Prices have continued to surge with some agencies seeing spot prices more than 3x what Pilbara were receiving in the first half. The result came with the announcement that CEO of Pilbara Ken Brinsden would be leaving the company by the end of the year after 7 years in charge.

Pilbara Minerals

Broker moves

  • APA Group Rated New Hold at Barclay Pearce Capital; PT A$9.19

  • Ingenia Raised to Buy at Moelis & Company; PT A$6.22

  • Xero Raised to Neutral at Macquarie; PT A$100

  • ARB Raised to Outperform at Macquarie; PT A$48

  • Virtus Health Cut to Neutral at Macquarie; PT A$7.35

  • G8 Education Raised to Buy at Canaccord; PT A$1.42

  • Johns Lyng Raised to Buy at Canaccord; PT A$8.51

  • Johns Lyng Raised to Buy at Bell Potter; PT A$8.70

  • Super Retail Raised to Overweight at Jarden Securities

  • Monadelphous Cut to Neutral at Jarden Securities; PT A$10.10

  • HUB24 Raised to Overweight at Jarden Securities; PT A$28.55

  • Cooper Energy Raised to Overweight at Jarden Securities

  • Cochlear Raised to Equal-Weight at Morgan Stanley; PT A$208

  • ARB Raised to Neutral at Credit Suisse; PT A$40.60

  • HUB24 Raised to Neutral at JPMorgan; PT A$26

  • Cochlear Raised to Buy at Goldman; PT A$237

  • Coles Group Raised to Buy at Jefferies; PT A$19.50

  • Uniti Group Raised to Overweight at JPMorgan; PT A$4

  • Cochlear Raised to Add at Morgans Financial Limited; PT A$233.20

  • Jumbo Interactive Raised to Positive at Evans & Partners Pty Ltd

Major movers today

Enjoy your 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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