The Match Out: ASX struggles again, NAB reports solid FY21 result, Newcrest makes a good acquisition

James Gerrish

Market Matters

It was another session where the ASX looked strong(ish), but hit the skids at key resistance and sold off into the afternoon. It was sector rotation again to the only real game, with the batten changing daily. Yesterday, Energy led the line on the upside while IT was weak. But the opposite played out today, plus the heavyweight Financials also copped some selling.

  • The ASX 200 finished down -18pts/-0.24% today at 7436

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  • IT was up +1.07%, Financials and Energy fought it out and both closed down 1.02%

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  • The ASX failed to embrace the upside last month for US stocks and now we wobble at the first sign of futures-led selling in the US, which is slightly frustrating, with the ASX 200 knocking on upside resistance

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  • As we suggested this morning, from a technical perspective, the picture is getting clearer by the day. When (or if) the ASX 200 closes above 7475, it’s a great buy targeting fresh highs, with stops under 7440 – this is an excellent risk/reward for the trader.
  • National Bank (ASX: NAB) -0.76% had a volatile session following its FY21 results this morning. While the results were a beat on most metrics, the underbelly was a little soft – more on that below

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  • Newcrest (ASX: NCM) -1.58% announced a good acquisition, the stock was down around 4% early and recovered some of that, a new share issuance to blame for the weakness. But we like the move to buy Canadian-listed Pretium

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  • PointsBet (ASX: PBH) +6.27% rallied strongly on news it has been recommended for a mobile wagering license in the state of New York. Official approvals are still pending but the company expects to be up and running in early 2022.
  • IGO (ASX: IGO) +4.84% rallied as Barrenjoey initiated coverage, with an overweight and $13 PT

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  • CSR Limited (ASX: CSR) -4.11% traded ex-dividend for 13.5 cents.
  • Uranium stocks rallied hard overseas and that filtered into the local sector today - Paladin (ASX: PDN) +7.03% trading back up above $1 – we’ll cover our plans towards uranium in the morning note tomorrow, building on our existing position in Paladin.

  • Overnight, The Trade Desk (TTD US) which is held in the International Portfolio, reported strong quarterly results and rallied around 30%.

  • Gold was flat in Asia, trading at around $US1824 at our close.
  • January Iron Ore Futures were down around 1% in Asia

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  • Asian markets were mostly lower, Nikkei -0.58%, Hong Kong -0.09% while China was flat.
  • US Futures are down around 0.20%.

ASX 200

National Australia Bank (ASX: NAB) $28.89

NAB -0.76%: The third and final of the Big 4 banks reported FY21 results today, NAB confirming a very strong bounce-back post-COVID, with cash earnings up 38.6% to $6.558 billion. This was a slight beat to market expectations, while the 67 cents a share dividend was also a beat, taking the full-year dividend to $1.27. Capital levels are also very strong, a CET1 capital ratio of 12.25% well above the APRA 10.5% “unquestionably strong” threshold. There is also a $2.5 billion share buyback underway, with $2 billion remaining, so why was the stock down? Markets and treasury income declined by $228 million in the second half, resulting in net operating income reducing from $8,884 million in FY20 to $8,367 million in FY21. Net interest margin also declined from 1.78% to 1.69% (FY21 versus FY20) with NAB expecting a similar number in FY22 before a recovery in FY23. All in all, it was a strong recovery, but that half on half trajectory has softened and margins remain under pressure.

MM is neutral NAB preferring BOQ at current prices.

National Bank

Newcrest (NCM) $

24.96

NCM -1.58%: The gold miner has been given its blessing to buy Canadian listed Pretium (PVG.TSX) by its board, in a $2.8 billion deal. Newcrest has offered Pretium shareholders either $CA18.50/sh or 0.8084 NCM shares for each PVG held, equivalent to a 22.5% premium to the last close. Pretium’s Brucejack mine in British Columbia is a tier 1 asset which produced 348koz last year, with costs below $US1,000/oz. Much of the criticism aimed at Newcrest is the lack of near-term production, a problem this acquisition solves, adding around 15% to the group’s production out to 2030 – and reserve upside could see that extended further. The stock was under pressure today, given the scrip offer will likely lead to an overhang of unnatural holders in NCM, but the deal is a good one.

MM is long and bullish NCM.

Newcrest

Broker moves

  • REA Group Cut to Sell at UBS; PT A$170

  • IGO Rated New Overweight at Barrenjoey; PT A$13

  • Pro Medicus Rated New Sell at Citi; PT A$45

  • Incitec Cut to Neutral at Citi; PT A$3.20

  • Clinuvel Cut to Market-Weight at Wilsons; PT A$33.19

Major movers today

Have a great night,

James, Harry and 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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