The Match Out: ASX flat, Lendlease (LLC) to cut 10% of staff globally

A steady flow of corporate news across the ticker today to keep things interesting while the RBA minutes released at 11.30 am prompted a sharp sell-off before a grinding recovery ensued – the index closing only marginally lower.

• The ASX 200 finished down -14pts/ -0.20% at 7283
• The Healthcare sector was best on ground (+0.93%) while Financials (+0.83%) & Utilities (+0.36%) were also strong.
• Real-Estate (-1.60%) and Communications (-1.26%) the weakest links.
• The Reserve Bank’s minutes showed they still expect to increase interest rates this year if inflation is not brought under control – not new news given their data-dependent stance.
• Goldmans have re-cut their expectations around the probability of a US recession down to 20% from 25% after the lower-than-expected inflation report last week. It seems there is growing optimism that a soft landing could actually be achieved!
• I was listening to a podcast with London-based James Aitken this morning – eldest brother of Charlie – who runs a well-regarded macro advisory business in the UK, and he raised a very good point around banks and why they keep lending given the the yield curve and how they fund themselves. The role of the Fed is clearly at play here and perhaps we’re all underestimating the liquidity that remains in the system that continues to support asset prices.
• Aurizon (ASX: AZJ) -5% fell after saying it expected group underlying EBITDA in the region of $1.42-$1.47bn in FY23, which was in line with expectations, however, FY24 guidance of between $1.59-1.68bn was a whisker light versus $1.64bn consensus.
• NRW Holdings (ASX: NWH) +5.1% rallied after their Goldings business won a $113m flood recovery contract.
• Lend Lease (ASX: LLC) -4.91% sold off after announcing large-scale job cuts – more on this below.
• Praemium (ASX: PPS) -1.65% slightly weaker after reporting net inflows of $1.4bn in FY23 to take total funds under administration to $44 billion, up 9%.
• HUB24 (ASX: HUB) -0.93% also out with flows today reporting $2.1bn of net inflows in the June quarter, down 14.7% on the prior corresponding period while they said total funds under administration (FUA) sat at $80.3bn by June 30, up 11. 1% on the same time last year.
• AGL Energy (ASX: AGL) +2.79% rallied on an aggressive upgrade from JP Morgan to BUY at $14.30 PT – we’ll cover this in tomorrow’s Portfolio Report. We remain long AGL.
• Transurban (ASX: AGL) -1.77% continues to struggle and is now back on our Hitlist for the Active Income Portfolio having sold at higher levels, mid $13’s will look interesting again.
• CSL Limited (ASX: CSL) +2.22% up today on the back of some positive broker notes.
• Syrah Resources (ASX: SYR) -16.29% plumbed 2-year lows on a weak 2Q production update given production was paused at their Balama asset in May. Sales were down -50% qoq and inventory is at capacity.
• Iron Ore was ~0.50% higher in Asia supporting Fortescue (ASX: FMG) +0.98% although RIO fell -0.82%
• Gold edged higher up, trading at ~US$1959 at our close.
• Hong Kong came back online after the typhoon and was down -1.95%, Japan was flat while China fell -0.33%
• US Futures are little changed.

ASX 200 Chart

Lend Lease (ASX: LLC) $8.13

LLC -4.91% Hit today after they announced large jobs cuts across their business, totalling ~10% of the global workforce (~740 jobs), with ~5% of jobs to go in Australia. The move is part of their transformation strategy to improve returns by ramping up funds management, focussing more on the development projects with lower risk and higher margins, all delivered through a leaner operating structure. It’s being reported the move will save them $80-100m annually from FY25, which is meaningful when held up against their expected ~$250m profit likely in FY23. LLC has been a struggling business for a long time with paper-thin margins and a risky model susceptible to large project losses. Today’s move is another step in the right direction to improve the operating metrics, and as recent shareholders, we view this as another incremental positive on their way to better performance from next year onwards, despite todays price action saying otherwise!

CSL Limited (ASX: CSL) $264.57

CSL +2.22%: Has been soft in recent weeks as a combination of weaker FY24 guidance (relative to consensus) and the prospects of rising competition weighed on shares. In terms of competition, one of their blood plasma rivals named Argenx posted positive phase 3 data for a trial into chronic inflammatory demyelinating polyneuropathy (CIDP) – a bit of a mouthful, and while the read-through for CSL is a negative one, the market reaction does seem overdone. Brokers talked down the impact today, with both Citi & UBS reiterating their positive stance and $340 PT.

Praemium (ASX: PPS) 59.5c

PPS -1.65%: the investment platform dipped today despite what looked like a reasonable Funds Under Administration (FUA) update. FUA grew 9% for FY23 to $44b, split reasonably evenly between Platform inflows, portfolio administration inflows and overall positive market moves. The numbers suggest Praemium have at least held its ground while working through an improved structure, bringing in new technology and governance executives as well as a revamped sales team which we expect to improve performance from here. Cash balances increased slightly in the SMA side of the Platforms business, however, this was offset by a larger drop in balances held on Powerwrap accounts which is likely to reduce the overall cash margin income Praemium sees in FY23, a slight headwind to earnings.

Broker Moves

• Domain Holdings Cut to Neutral at UBS; PT A$4
• CSL Raised to Buy at CLSA; PT A$313
• 29Metals Rated New Sector Perform at RBC; PT 90 Australian cents
• Monash IVF Cut to Hold at Jefferies; PT A$1.25
• AGL Energy Raised to Overweight at JPMorgan; PT A$14.30
• IGO Cut to Sell at Canaccord; PT A$14.25
• Endeavour Group Cut to Hold at Morgans Financial Limited

Major Movers Today

Have a great night

The Market Matters Team

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