The Match Out: Energy higher while the rest of the market struggles, Webjet (WEB) reports well

James Gerrish

Market Matters

The ASX opened lower to start the day and there was little in the way of buying support for the rest of the session as the index rolled off another ~25pts intra-day. Materials were the main drag on performance with iron ore continuing its slide while Tech was also soft as it gave back some of the recent outperformance with growth concerns weighing on sentiment. Energy went against the grain ahead of the next OPEC meeting, one of only three sectors to trade noticeably higher today.

  • The ASX 200 finished down -46pts/ -0.63% at 7213
  • The Energy sector was best on ground (+0.70%) while Utilities (+0.36%) & Staples (+0.31%) were the only other sectors that were meaningfully higher.
  • Materials (-1.66%), Healthcare (-1.13%) and Tech (-1.06%) were the weakest links.
  • Energy stocks bounced following comments out of Saudi Arabia ahead of the next OPEC meeting. Last time the group met they unexpectedly cut production, leading to a relief rally supported by short covering from speculators. The Saudi Energy Minister said “watch out” in an ominous warning to speculators caught short.
  • The RBNZ hiked rates by a further 25bps today but the commentary that followed suggested they may be near the end of the hiking cycle across the ditch. Some had called for a 50bp hike which put pressure on the New Zealand Dollar on the announcement.
  • Interesting commentary from the Min Res (ASX: MIN) -2.99% Lithium boss today at a mining event in Perth about cashed-up tier 1 miners looking at the smaller players for growth. Obviously, this is always a talking point in mining however right now the big players have huge big cash piles and a need for de-risked growth opportunities.
  • The other aspect of this is around funding markets, it’s the reason why the small caps have underperformed the large cap in recent times. Companies at earlier stages of their life have a greater requirement for growth capital, which is becoming harder to find and more expensive, meaning they are more susceptible to bids as opposed to going it themselves.
  • We think there is a lot more to play out here in terms of the big getting bigger, similar to what’s playing out in global banking & technology.
  • The CEO of Liontown Resources (ASX: LTR) -1.09% was also talking up Lithium prices. We know that commodity companies will generally talk their own book, however like Tony Ottaviano, we too can remember when the market was saying that Iron Ore should be priced at a smaller premium versus the costs of production, something like ~$30/t, and now it has price support on any dips below $US100/t.
  • Webjet (ASX: WEB) +3.84% beat at their FY23 result, another travel stock doing well.
  • Universal Store (UNI) -23.91% the youth apparel retailer fell on weak guidance, flagging slowing sales in April & May. EBITDA guidance was a ~15% miss to expectations as customers cut back and competitors discounting activity picked up. Discretionary names were weak on the back of the announcement.
  • Qantas (ASX: QAN) +1.89% has been upgraded to a “buy” rating from “neutral” at UBS after their latest trading update beat UBS expectations.
  • Iron Ore was down -3.5% in Asia today sending Fortescue (ASX: FMG) to a near 6-month low.
  • Gold was u marginally today to $US1976 in Asian trade, gold stocks edged higher as a result.
  • Asian stocks were weak, Hang Seng -1.2%, Nikkei -0.89% and China -0.87%.
  • US Futures are off a touch

ASX 200 Chart

Webjet (ASX: WEB) $7.58

WEB +3.84%: reported a big turnaround in FY23 at their full-year results today, plus they confirmed the first 7 weeks of trade in FY24 have been solid, despite saying a more firm number on guidance will be given at their AGM in August. Reported sales today of $364m came in around 6% above consensus while underlying earnings (EBITDA) came in at $135m, about 9% above expectations. Clearly, the rebound in travel has been strong, although they did talk to capacity constraints amongst flight booking as an ongoing issue.

Broker Moves

  • Warehouse NZ Raised to Outperform at Macquarie; PT NZ$2.37
  • Qantas Raised to Buy at UBS; PT A$7.95
  • Technology One Cut to Hold at Shaw and Partners; PT A$15.70
  • Technology One Raised to Buy at Jefferies; PT A$18
  • Technology One Cut to Hold at Bell Potter; PT A$17.50

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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