The Match Out: ASX up for 3rd straight week, Energy + Materials the main support, Healius (HLS) falls on weak update

James Gerrish

Market Matters

A strong session to end the week with the ASX 200 +0.90% higher ahead of US payrolls data tonight. Gains were fairly broad-based with ~75% of the index up, resource stocks leading the way led by a bounce-back in the battery metals space after a tough period. The retailers the only sector to finish in the red today despite a strong session overseas.

  • The ASX 200 finished up +62pts/ +0.88% at 7238
  • The Material sector best on ground (+2.62%) while IT (+2.26%) & Energy (+1.04%) were also strong.
  • Consumer Discretionary (-0.07%) and Communications (flat) the weakest links.
  • While it doesn’t feel like it, the ASX is now up for the past 3 weeks straight as the bearish rhetoric fades into the background.
  • We remain reasonably bullish short term however continued strength into EOFY will see us become more cautious.
  • Tech is a sector we think can bounce ~20% very quickly from extreme oversold levels while we’re also looking to increase resources exposure – our more recent purchase being in IGO.
  • Woodside (WDS) +0.16% edged higher after a strong session yesterday. We think WDS will play performance catch up to the other local energy names now the BHP deal has complete.
  • Interest rates in focus on Tuesday with the RBA tipped to hike, either by 0.25% or a more aggressive 0.40%. We think they’ll take the more aggressive stance in the short term, though rates will plateau at lower levels than current market expectations.
  • Market pricing is for the cash rate to be 2.9% by the end of the year, which is clearly very aggressive.
  • Healius (HLS) -8.65% out with a poor update today guiding to EBIT ~8% below where the market was positioned. Their pathology business was a big COVID beneficiary so they are comping off some very strong numbers. We expect more disappointment here.
  • Iron Ore stocks were hot today, the Iron Ore price enjoying a more open China – Fortescue Metals (FMG) +4.12%, BHP +2.52% & Champion Iron (CIA) +8.14%.
  • Lithium stocks bounced back after being hit early this week following a bearish report from Goldmans (they think prices have peaked), weaker reference pricing in Argentina & talk of a big Chinese production push – Pilbara (PLS) +7.46% the best of the locals today while our position in IGO put on 3.97%. Keep an eye out for details of an upcoming Market Matters Webinar with a focus on battery metals - James Gerrish hosting with analysts Peter O’Connor & Michael Clark.
  • Iron Ore was up again today trading ~2% higher.
  • Gold was up overnight to ~US$1870 before trading flat during Asian trade today.
  • Hong Kong & Chinese markets were closed while Japanese stocks put on more than 1%.
  • US Futures are all marginally higher.

ASX 200 Chart

Sectors this week

Source: Bloomberg

Stocks this week

Source: Bloomberg

Healius (HLS)

HLS -8.17%: the medical centre and pathology operator struggled today after a poor trading update. Medicare data has shown both pathology and imaging have fallen more than 8% in the four months to April, and while Healius is said to be tracking at better levels, the fall has weighed on earnings. COVID testing has also fallen dramatically, now running at 15,000 tests per working day as RATs become the go-to method. Staff infections have caused their own issues as well as absenteeism costs bite. Overall, the company expects EBIT for the first 11 months of the year to be $473m, and while it is more than double the same period in FY21, it’s well behind consensus for the FY of $553m with just one-month remaining.

Broker Moves

  • Tabcorp Cut to Neutral at Evans & Partners Pty Ltd
  • Cooper Energy Raised to Neutral at Macquarie
  • Pro Medicus Rated New Overweight at Wilsons; PT A$51
  • APA Group Reinstated Hold at Jefferies; PT A$10.30
  • Ansell Cut to Underperform at Credit Suisse; PT A$24
  • Lottery Corp. Rated New Add at Morgans Financial Limited

Major Movers Today

Have a great 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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