The Match Out: Resources weigh on the index, small-caps get a reprieve, Austal lands a major contract

James Gerrish

Market Matters

The market opened well this morning, up more than 50 points at our high. But once again, US Futures traded lower throughout our time zone and Aussie stocks followed suit, closing only marginally higher. It was the resources that weighed significantly, most sectors finishing in the green despite the weaker index. Some of the more unloved parts of the market over the last quarter caught a bid today, with Real Estate popping 1.45% as just one example.

  • The ASX 200 finished down -28pts/ -0.43% at 6539.
  • Real Estate (1.45%) was the best on the ground, followed by the Utilities (+1.17%) and the Industrials (+1.15%).
  • Energy (-3.37%), Materials (-2.05%) and the telcos (-0.18%) were the only three sectors in the red.
  • Bond markets are now pricing in some economic pain ahead, this week US 10 year bonds have fallen back below 3%, having been as high as 3.47%, while the curve has flattened further.
  • Aussie yields have also pulled back, our 10-year now 3.56% having been as high as 4.2%
  • Andrew Forrest’s Wyloo has walked away from plans to significantly increase its stake in gold miner Regis Resources (ASX: RRL), failing to secure a 15% stake. The deal was all or nothing, and nothing won out! That didn’t stop the share price rallying today, RRL finishing up +7.69%.
  • Praemium (ASX: PPS), +22.58%, completed the sale of its UK business to Morningstar, and rallied hard (from a low base).
  • Shipbuilder Austal (ASX: ASB), +25%, won a contract they were not expected to win, hence the pop. They also upgraded guidance, though not putting an exact figure on it yet.
  • In this week’s Market Matters Video Update, Harry & James cover FY22 and what’s ahead for FY23 – Click here to watch
  • Iron Ore was around 7% down in Asia today which weighed on the bulk commodity miners, and the index. Fortescue (ASX: FMG) was the hardest hit, -3.02%.
  • Gold was also lower throughout our session, currently -0.5% to $1,798. Back through $US1,800 for the first time since February.
  • Asian stocks were soft today, Hong Kong down -0.62%, Japan -1.73% while China was down -0.36%.
  • US Futures are all in the red, S&P futures -0.9%, Nasdaq futures worse off, -1%

ASX 200 chart

Austal (ASX: ASB) $2.25

ASB +25%: the shipbuilder rallied to a 9-month high today after winning a lucrative US Coast Guard Contract. Austal will build an offshore patrol vessel at their upgraded Alabama facility in what could become a $US3.3b contract if they can secure the remaining 10 ships expected from the order. While the contract is for FY23, Austal said they will now exceed previous guidance to hit at least $107m in FY22. Austal wasn’t expected to be in the mix for this contract, so the win came as a surprise to the market. There are at least another 2 major contracts up for grabs this year as well to further boost their outlook.

Austal

Market Matters Weekly Video Update

This week James and Harry briefly cover FY22, discuss how new subscribers could be thinking about the Market Matters Portfolios, and chat stocks that are ‘recession-proof’.

Broker moves

  • Silk Laser Australia Rated New Buy at Shaw and Partners
  • Xero Rated New Add at Morgans Financial Limited; PT A$90.25
  • Sandfire Raised to Buy at Jefferies; PT A$5.80
  • Judo Capital Rated New Overweight at JPMorgan; PT A$1.70
  • Liberty Financial Group Ltd Cut to Neutral at Macquarie
  • Qualitas Rated New Buy at Goldman; PT A$3
  • Capricorn Metals Raised to Buy at Bell Potter; PT A$3.70

Major movers today

Have a great weekend,

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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