The Match Out: Materials edge index higher, Star (SGR) earnings crunched

Another fairly flat session by the ASX today, although it’s looking tired and we wouldn’t be surprised to see a near-term top evolve with the first signs of money transitioning from the edgier, high-beta areas into the more defensive plays. Still, with negative market positioning (high cash levels + high bond ownership v equities) very obvious we wouldn’t be running for the hills, meaningful tops don’t often correlate with pessimistic positioning – but a pause, consolidation, and a shallow pullback could easily play out.

• The ASX 200 finished up +5pts/ +0.07% at 7365
• The Materials sector was best on ground (+1.10%) while Utilities (+0.10%) was the only other sector in the green
• Consumer Discretionary (-1.14%) and Real-Estate (-0.57%) the weakest links.
• According to a Bloomberg survey, Australia now has a 35% chance of a recession, down from a 40% chance last month.
• Star Entertainment (ASX: SGR) -7.35% had another shocker saying operating conditions have continued to deteriorate, now expecting operating EBITDA to be $280-$310m versus consensus of $345m, a 14% downgrade
• WA-based engineering group Decmil (ASX: DCG) +18.18% rallied on an earnings upgrade, they now expect income to be $470-$500m, +30% on FY22 – a rare upgrade after a tough recent history.
• AMP +3.65% was higher after reporting net outflows of $600m in the March quarter, down from the $900m in the prior corresponding period – the pain is getting less! On the bank side of things they slowed loan growth to protect NIM, likely taken as a positive by the market.
• The Lithium sector was on fire again today following a string or more positive analyst updates on the sector, HSBC Global Research the latest to paint a positive short-term picture – Pilbara (ASX: PLS) +3.28%, IGO +3.96%, Global Lithium (ASX: GL1) +4.06% and Min Res (ASX: MIN) +2.68% all enjoying a day in the sun.
• Iron Ore was ~0.25% lower in Asia today, though BHP, Rio and Fortescue (ASX: FMG) were all higher
• Gold fell back below $US2,000/oz in Asian trade, -0.65% to currently trade at US$1992. Broadly speaking most gold stocks were higher though.
• Asian stocks struggled, Hong Kong was down -0.90%, Japan -0.18% while China was down -0.50%
• US Futures are all down, Nasdaq the worst, off -0.55% while S&P pointing to -0.34% on the open tonight

ASX 200 Chart

Star Entertainment (ASX: SGR) $1.26

SGR -7.35%: the casino group struggled today, nearly trading below the price of the February equity raise after downgrading guidance. The group now expects EBITDA for FY23 between $280-310m, around 15% below prior guidance and consensus expectations, blaming regulatory restrictions and a deteriorating consumer environment. In an effort to recoup some of the lost earnings, Star is looking to add to their cost-cutting measures by letting go of 500 full-time equivalent jobs, freezing any non-EBA pay increases and cancelling any short-term incentives aiming to cut an annualized $60m in costs in addition to the $40m that was previously announced. In addition to the above, they have appointed bankers to conduct a strategic review of their assets, signalling a potential sale of their cornerstone Sydney Casino, right when Crown has started competing from the other side of Darling Harbour.

Broker Moves

• St Barbara Cut to Lighten at Ord Minnett; PT 48 Australian cents
• Core Lithium Rated New Hold at Morgans Financial Limited; PT A$1
• Evolution Cut to Lighten at Ord Minnett; PT A$2.60
• Northern Star Cut to Sell at UBS; PT A$13
• Deterra Cut to Sell at UBS; PT A$4.40
• Coronado GDRs Raised to Buy at UBS; PT A$2
• IPH Raised to Add at Morgans Financial Limited; PT A$9.20
• Radiopharm Rated New Buy at JonesTrading; PT 75 Australian cents
• Karoon Energy Rated New Positive at Evans & Partners Pty Ltd

Major Movers Today

Have a great night

The Market Matters Team

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