The Match Out: ASX rallies on results, ends flat for the week, not a bad effort – have a great weekend all!

James Gerrish

Market Matters

A strong end to what turned out to be a flat week for stocks, although a very busy one from a reporting standpoint. Energy the standout up 6% while the Staples sector fell by the same degree, around 10% of the ASX 200 moved by 10% or more showing the influence of results, the best of them coming from one of our holdings in Altium (ALU) while City Chic (CCX) took the gong on the other side, losing a quarter of its value.

  • The S&P/ASX 200 added +55 points / +0.79% to close at 7104
  • Energy (+1.32%) and Materials (+1.06%) led the line while Healthcare (+1.05%) also outperformed.
  • Communications (-0.31%) the only sector that fell.
  • Wesfarmers (WES) +0.65% beat FY22 earnings forecast and talked to positive momentum.
  • Bega (BGA) +11.76% gave some more concrete guidance for FY23 that was inline with consensus – the market liked the certainty.
  • Lynas (LYC) +1.03% missed FY22 expectations but commentary on future growth got a few excited.
  • Ramsay Healthcare (RHC) -3.32% fell on a softer than expected result, but more importantly, KKR pulled the all-cash bid – more on this below.
  • Oz Minerals (OZL) -0.76% talked a lot about their future growth pipeline today as they reported a softer FY22.
  • Austal (ASB) -2.26% had pre-realised their numbers so not a lot of new news at their result today.
  • Iron Ore stocks rallied as Iron Ore prices continue to defy gravity – Fortescue Metals (FMG) +3.81%.
  • Qantas (QAN) +6.58% was up strongly for a 2nd session following their results and AJ’s buy-back.
  • Iron ore futures were higher in Asia, up 2.3% supporting the material stocks.
  • Gold was flat – is showing tentative signs of looking more constructive trading US$1757/oz at our close.
  • Asian markets were all up, the Nikkei in Japan added +0.35%, while Hong Kong was up +0.89% and China put on +0.24%
  • US Futures are lower, down around 0.20% ahead of Jackson Hole tonight.

ASX 200 Chart

Results Today – a Snapshot - NB does not include all results

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Ramsay (RHC) $70.50

RHC -3.32% : Ended the session lower today after some mixed messages regarding KKR’s $88 bid. This morning it was reported that KKR had put forward an alternative structure that was unanimously rejected by the board given the overall value was lower. At that time it was also reported that the $88 remained on the table, however, RHC entered a trading halt and confirmed the all-cash $88 bid had been withdrawn. The new proposal is to separate the French operation and kick that back to shareholders with the KKR led consortium taking the rest with a value nearer $84. We believe the RHC board should engage with the bidders and continue to work toward achieving the best possible result for shareholders, including MM. Clearly, there is more to play out here and the bid speaks to the inherent value of the assets for those prepared to look through the pandemic-inflicted earnings blip that again shone through in this morning’s FY22 results that came in below market expectations.

Wesfarmers (WES) $47.95

WES +0.65%: A better than expected FY22 results from Wesfarmers today with all key metrics coming in ahead of consensus expectations with net profit after tax around a 5% beat. While FY22 profit was down 1.2% on FY21, that was a result of a tough 1H with 2H earnings growth of 13.1% showing a strong rebound. The 2H dividend of $1 was a beat and while no guidance was provided, which is customary for WES, they talked to positive trends playing out at the start of FY23. The vibe we got from today’s conference call was all positive and quiet the opposite to what we had with both Woolies & Coles this week.

Oz Minerals (OZL) $25.99

OZL –0.76%: A weak result from OZL today with sharply lower financials compared to 2021. These were well flagged in recent quarterly updates however they’re not the numbers to report when you’re trying hard to squeeze a higher price from suitor BHP. Key financial headlines included, 1H22 NPAT $109.2M vs year-ago $268.6M, Revenue $908.6M vs consensus of $938.6M & EBITDA $358.3M vs consensus of $368.2M. The numbers all a little soft however the CEO Andrew Cole spent most time today talking about the growth pipeline putting forward a very strong argument why BHP should be paying more than the $25 they initially proposed.

Austal (ASB) $2.60

ASB -2.26%: the shipbuilder announced a good set of numbers for their FY22 result today, though it failed to ignite the stock. EBITDA was in line with pre-guided numbers at $120.7m, up 5.3% on the back of the recently awarded OPC contract that could be worth up to $3.3b in revenue. It’s positive to see the new steel shipbuilding facility being put to work and generating new business with the company noting a larger pipeline of long-term contracts they are now available to submit tenders for. The order book grew to $3b, up from $2.5b and they guided to $100m EBIT for FY23, around 10% ahead of the market, though consensus had largely remained unchanged since the announcement of recent contract wins.

Lynas Rare Earths (LYC) $9.03

LYC +1.23%: results for FY22 looked like a miss from the rare earths company today, however, shares traded higher on positive growth commentary. Profit was $541m for the year, around a 5% miss to expectations however they have built up a cash balance of $965m putting them in a great position to grow. Construction of their Kalgoorlie processing facility remains on track and was 40% complete at the end of the period. They also noted continued strong demand for their products, taking advantage of both increasing production and strong commodity prices.

Bega (BGA) $4.18

BGA +11.76%%: it was hardly an unblemished report from Bega, however, the dairy products company has performed well despite a number of headwinds facing the business over the last 12 months. EBITDA jumped 27% despite higher mil costs, supply chain disruptions and flooding impacting performance throughout the year, meeting analyst expectations. They also provided EBITDA guidance of $160-190m for FY23, in line with analyst expectations. Investors clearly enjoyed having some firm commentary about the year ahead, despite only meeting expectations, and the result appeared better than feared, helping to push the stock higher today.

Sectors this week – Source Bloomberg

Stocks this week – source Bloomberg

Broker Moves

  • Eagers Cut to Market-Weight at Wilsons; PT A$13.20
  • Ardent Leisure Rated New Underperform at Barclay Pearce Capital
  • Judo Capital Rated New Hold at Barclay Pearce Capital; PT A$1.25
  • Nanosonics Rated New Underperform at Barclay Pearce Capital
  • Charter Hall Group Rated New Hold at Barclay Pearce Capital
  • Charter Hall Retail Rated New Hold at Barclay Pearce Capital
  • Pilbara Minerals Rated New Hold at Barclay Pearce Capital
  • AMA Group Rated New Buy at Barclay Pearce Capital
  • Perpetual Raised to Neutral at Jarden Securities; PT A$29.10
  • Flight Centre Raised to Neutral at Citi; PT A$16.60
  • Allkem Cut to Underperform at Credit Suisse; PT A$10.30
  • Viva Energy Raised to Outperform at Credit Suisse; PT A$3.14
  • Qantas Raised to Outperform at Credit Suisse; PT A$5.65
  • Regis Resources Cut to Neutral at Credit Suisse; PT A$1.60
  • Flight Centre Raised to Neutral at JPMorgan; PT A$16.50
  • Woolworths Group Cut to Underweight at JPMorgan; PT A$34
  • Whitehaven Cut to Neutral at Goldman; PT A$7.60
  • Appen Cut to Underweight at JPMorgan; PT A$3
  • Flight Centre Raised to Hold at Jefferies; PT A$16
  • Capitol Health Raised to Outperform at RBC
  • Allkem Cut to Hold at Jefferies; PT A$15
  • Whitehaven Cut to Neutral at Evans & Partners Pty Ltd; PT A$8
  • Regis Resources Cut to Sell at Citi; PT A$1.60
  • WiseTech Cut to Hold at Blue Ocean; PT A$62.50
  • Whitehaven Cut to Neutral at Citi; PT A$7.40
  • Appen Raised to Hold at Bell Potter; PT A$4.25

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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