The Match Out: Market higher to kick off a big week of reporting, what’s our take on Carsales?

A positive session to kick off the new trading week, one where reporting really starts to ramp up. Property & Consumer Discretionary stocks were the driving force today, clearly the outcomes being achieved here are better than feared and stocks are rallying from a low base, while Energy & Financials underperformed.

• The ASX 200 finished up +31pts/ +0.45% at 7064
• The Property sector was best on ground (+1.95%) while Consumer Discretionary (+1.38%) & Communications (+1.28%) were also strong.
• Energy (-0.83%) and Financials (-0.21%) were the weakest links.
• While only early days (20% of the market has reported) early signs are positive, and durability in the face of economic challenges is the key takeaway so far.
• Carsales ASX:CAR +5.77% guided to “good” growth and margin expansion in FY23.
• Bendigo Bank ASX:BEN -8.3% fell due to weak margins but more importantly, weak guidance.
• Beach Energy ASX:BPT  -11.08% dropped after reporting a ~40% uplift in earnings but higher costs and poor guidance hurt.
• JB Hi-Fi ASX:JBH -0.99% pre-released results so not a lot of new info however the conference call provided some more colour on retail – we cover some key points below.
• NearMap ASX:NEA +24.83% ripped the face off a few shorts today rallying on a takeover, around 6% of the register is held short.
• BHP ASX:BHP +0.23% reports FY23 results tomorrow, we will be very interested in comments around Oz Minerals ASX:OZL and M&A more broadly.
• Property stocks were strong today, GPT ASX:GPT +5.35% beat expectations for their 1H result plus guidance above market.
• We had John McBain and co in from Centuria ASX:CNI this morning to get more detail on their result. It’s tough in property but they remain very liquid / cashed up at the right time, and we remain comfortable with our recent purchase of CNI.
• Temple & Webster ASX:TPW -9.09% hit on a Credit Suisse downgrade.
• Adore Beauty ASX:ABY +10.16% went the other way, the market clearly liking the prospect of a new CEO – we concur.
• Iron Ore was down around 2.8% in Asia
• Gold was also lower, off $US10 to around US$1791
• Asian stocks were mixed Hong Kong down -0.41%, Japan +1.12% while China was off -0.10%
• US Futures are all down, around -0.20%

ASX 200 chart

Carsales.com (CAR) $22.90

CAR +5.77%: a strong end to the year for the auto online classifieds business, buoyed by the tailwind of a tight supply of new cars. Revenue of $509 million was above guidance, slightly ahead of consensus while net profit after tax (NPAT) was at the low end of the range at $161 million, though still up 23% for the year. Their buying service, Carsales Select, how shown strong growth after launching 12 months ago. Profit was also boosted by their purchase of US-based Trader Select. The company only provided general guidance, saying they expect to deliver “good growth in adjusted revenue and adjusted EBITDA” for FY23 across the business with the international growth strategy, in particular, showing strong positive momentum into the new year.

JB Hi-Fi (JBH) $45.10

JBH –0.99%: Had pre-guided this result so it was all known given their recent upgrade. The conference call provided some more insight into a few talking points in retail land:

• Inventory: They have minimal old stock and inventory in line with sales run-rates.
• Supply chain: They have flexibility over months not weeks where supply chain issues arise. Forecasting market to remain where it is at for a while – didn’t really address it succinctly.
• Traffic: CBD traffic still down – wages and rent the main costs, they are managing labour but rent more difficult – annual increases in them and linked to inflation (good for landlords!)
• Recent trends: 4Q22 very strong with traffic returning - as soon as stores re-opened, almost back to 100% quickly to where it was pre-COVID.
• Prices: Price increases have “stuck” and maintaining key price points. Suppliers are very fixated on market share and will adjust accordingly.
• Strong sales vs. weaker consumer confidence – how do you reconcile this? Deliver what customer wants instore = service, which they are confident in delivering.

All in all – a decent update from JBH, they had run ~20% higher into today’s results so not a new catalyst to push it up, BUT, good retailers are surviving, and some are actually thriving – think Lovisa (LOV)!

Nearmap (NEA) $1.885

NEA +24.83%: the advanced mapping company revealed a takeover bid was in play from tech private equity fund Thoma Bravo. The US-based $US100 billion fund put forward a $2.10/sh offer in early July, which was an 83% premium to the share price at the time. Shares have since rebounded, but the bid still represented a 39% premium to Friday’s close. Thoma Bravo will get first rights in the deal, currently working on exclusive due diligence to firm up the price and any funding needs, though other potential bidders are rumoured to be circling. The company’s performance has also rebounded. Annualized Contract Value (ACV) is expected to come in at $159.9 million for FY22, at the top end of guidance. Cash burn has also decreased with $93.7 million of cash expected to be on the balance sheet at the end of the period, running through recently raised capital at a slower rate than expected. There was 6% of the register short sold as of late last week, short covering assisting the squeeze to a tight discount of around 10% to the offer price today.

Bendigo Bank (BEN) $9.88

BEN -8.35%: The headline result from BEN looked solid on first pass with cash profit of $500.4m ahead of consensus at $485.4m and a dividend in line with expectations at 26.5c, however, the devil was in the detail. The Net Interest Margin (NIM) was weaker than it should have been at 1.74% and they are not getting leverage to higher rates as the other banks are. There are reasons for this however ultimately we’re likely to see FY23 downgrades as a consequence.

Bluescope Steel (BSL) $17.55

BSL +3.91%: A solid session for BSL although it did finish well off the session highs following a better-than-expected FY22 result. Their underlying profit for the full year came in at $2.7 billion versus $2.6 billion expected thanks to high US steel spreads however, guidance for FY23 was a touch light on with the company expecting $800-900m at the Ebit line. The final dividend of $0.25 was flat on last year while the Board approved an increase to the share buyback program to allow up to a further A$500 million to be bought over the next 12 months – obviously a positive.

Beach Energy (BPT) $1.645

BPT -11.08%: Fell hard today after reporting an underlying profit for the full year of $504.3 million, up around 40% for the year but well below consensus of $573 million. Expenses and other costs well above where we thought while FY23 guidance also underwhelmed due to a slightly lower production target and higher field operating costs. They now see FY23 production of 20 to 22.5 mmboe, capital expenditure $800 million to A$1.00 billion and unit operating cost per boe A$12 to A$1.

Broker moves

• Universal Store Cut to Underperform at Macquarie; PT A$3.50
• Dicker Data Rated New Neutral at JPMorgan; PT A$12
• ResMed GDRs Cut to Neutral at JPMorgan; PT A$36.50
• Temple & Webster Cut to Neutral at Credit Suisse; PT A$4.91
• ResMed GDRs Cut to Neutral at Citi; PT A$37

Major movers today

Have a great night,
The Market Matters team

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