The Match Out: Stocks hit on Russian ruse, HUB 24 (HUB) beats, ditto for Cochlear (COH) – it’s not all doom & gloom!

James Gerrish

Market Matters

A volatile session for Aussie stocks today with the market moving in a ~100pt range on news this morning President Putin ordered his defence ministry to despatch Russian troops to ‘maintain peace’ in eastern Ukraine’s two breakaway regions. This was viewed as a significant escalation in the crisis over Ukraine and stocks quickly lost any semblance of support until late in the session where buyers stepped up to the plate. Understandable to see Energy +1.94% on the news given Russia is 13% of global oil production while better than expected results from Coles (ASX: COL) supported the staples sector. Counter to that was a 3.2% decline in IT and a 2.67% fall in the retailers. While the market was clearly weak, it’s not falling apart, or at least not in the large caps.

  • The S&P/ASX 200 fell -72points / -1% to close at 7161.
  • Energy (+1.94%) & Consumer Staples (+1.82%) led the line while IT (-3.20%) and Consumer Discretionary (-2.67%) were weak.
  • Another big day on the reporting calendar with a few standouts on both sides of the ledger.
  • Nanosonics (ASX: NAN) -13.14% fell to its lowest since March 2020 after earnings missed expectation by ~20% due to rising operating expenses.
  • Fruit and veg supplier Costa (ASX: CGC) +8.67% up after earnings increased 16% YoY.
  • Cochlear (ASX: COH) +9% was a standout retaining its full-year profit forecast which the market was very sceptical on.
  • HUB 24 (ASX: HUB) +4.84% impressed by not experiencing the same margin pressure as their comps (ASX: NWL & ASX: PPS) – we own and like.
  • Coles (ASX: COL) +3.17% has been under pressure of late, todays decent 1H22 results should allay some concerns – not a bad place to hide although we already own Metcash (ASX: MTS).
  • Alumina (ASX: AWC) -3.29 a touch light on for their FY21 earnings scorecard today, profit a slight miss, dividend below the mark but may just be a timing issue.
  • 4WD accessory business ARB Corp (ASX: ARB) –1.58%. probably the stock I like most that I don’t own had a good half however flagged a few supply chain challenges they are dealing with.
  • Iron Ore Futures up +2.4% in Asia.
  • Gold was higher, up $US11.50 at US$1910 at our close.
  • Asian markets were a drag, Japan down -1.89%, Hong Kong down -3.17% & China off -1.5%, we were best of the region.
  • US Futures are lower, S&P is down -1.6% & the Nasdaq is down -2.35%. Dow Futures on our close yesterday were +280pts, no trade in the US overnight and they tracked -760pts from where we closed yesterday to be down 480pts on our open. Right now -423pts so slightly up from where they were this morning.

ASX 200 Chart

HUB24 (HUB) $24.68

HUB +4.84%: Delivering a great set of results on a day when the market gets clobbered is never going to get the outcome it deserves, however HUB finished up ~5% in a market that fell -1% within a sector that led the decline down by -3.20%. This morning HUB released 1H22 results that were broadly in line at revenues ($81.6m) and well ahead of expectations in terms of underlying EBITDA ($29.7m up 76% YoY) and net profit ($14.2m up 80% YoY). They also increased their Funds Under Administration (FUA) target to $83bn - $92bn by FY24 (previously $63bn - $70bn by FY23. Importantly, margins also rose in an environment where competitors margins fell. 

Our Shaw Analyst James Bisinella said: HUB has been indiscriminately lumped in with other platform providers who have seen operating expenses track ahead of market expectations, mainly due to aggressive headcount growth (HUB traded down 8% on NWL result). HUB in our view deserves to trade well higher in light of today’s result which beat our estimates whilst the market was likely pricing in a miss, plus platform FUA target was upgraded and platform revenue margins flat.

HUB 24 (HUB)

Coles (COL) $17.27

COL +3.17%: A good set of 1H22 results today for Coles, particularly in the context of where the share price has traded over the past 6 months, down from ~$19 to below $16 on concerns around supply chain issues. Group sales were $20.5bn for the half up 1% on last year while EBITDA of $1,762bn was 2.2% down on 1H21 which shows the additional covid related costs they’ve had to wear (equated to about 28bps). The interim dividend of 33cps was a shade above market expectations of 32.2cps. In terms of their outlook/guidance, they said total sales growth for the 1st 6wks of this year indicated a strong start before moderating. All in all, a good solid result as you’d expect.

MM is bullish the supermarkets into recent weakness.

Coles (COL)

Alumina (AWC) $2.06

AWC -3.29%: Released their FY21 financial results today reporting a net profit of $226mn which was a shade below the $231mn expected by the market. The 6.2cps dividend was also a miss versus the 6.9cps expected however this looks to be more a timing issue than anything reflecting a lag in the timing of cashflow from the alumina JV. Looking forward, FY22 should be a much better year in terms of earnings and thus dividends, with the alumina price currently tracking well ahead of CY22 alumina price forecasts, when that is sustained, upgrades follow and if earnings expectations are going up the share price normally does too.

Alumina (AWC)

ARB Corp (ARB) $41.62

ARB -1.58%: 1H22 result for the 4WD accessories business today, reporting a +26.5% jump in revenue with growth across all segments. Profit was also up 27.6% in the first half supporting dividend growth. Cash flow was weak though with the company looking to build inventories to negate supply chain issues. While demand for products remains robust the company is facing a global shortage of new vehicles, labour shortages and issues with getting new stock.

MM likes ARB into current weakness

ARB Corp (ARB)

Costa Group (CGC) $3.26

CGC +8.67%: the fruit and veg producer was out with full year results today which were ahead of expectations. EBITDA-S jumped +10.6% in the year, near to the top end of the guidance range and 1% above consensus expectations. The result was driven by strong performances in berries, mushrooms and tomatoes while the recent acquisition of 2PH has progressed well will all customers staying on. The new year has started well with the company noting solid early season volumes and pricing in both domestic and international markets. A rare bit of clear air for CGC it seems.

Costa Group (CGC)

Cochlear (COH) $207.37

COH +9%: A stronger than expected sect of 1H22 results from the hearing implant company today driving the share price sharply higher. While there has been intermittent restrictions impacting operating conditions around the world, Cochlear have still managed to grow both revenue and margins, particularly in developed markets, with a surprise fall in operating expenses. Guidance was maintained for the full year, looking for net profit of $265-285m however it now includes COVID costs and cloud computing expenses, so really around a 5% increase to what the market had pencilled in.

Cochlear (COH)

Whispir (WSP) $1.89

WSP -5.5%: the cloud communications business posted a strong 1H22 result this morning however the stock was weighed on by weakness across the small ords. Revenue jumped 70%, helped by a strong transactional performance. This did weigh on margins though, but EBITDA was still ahead of expectations at a loss of $3.7m. They noted a ramp up in average reoccurring revenue (ARR) in North America while churn rates remain low (-1.8%). Guidance was maintained however it is looking extremely conservative and implies very little transactional revenue and ARR growth in the second half. They also expect margins to return towards 60% with a greater portion of sales coming from platform while the recent Singtel partnership should continue to boost performance.

Whispir (WSP)

Broker Moves

  • Tyro Payments Raised to Outperform at Macquarie; PT A$2.15
  • Reliance Worldwide Cut to Neutral at Macquarie; PT A$5.40
  • Qualitas Rated New Outperform at Macquarie; PT A$2.64
  • Bluescope Raised to Overweight at Morgan Stanley; PT A$25
  • Lendlease Raised to Equal-Weight at Morgan Stanley; PT A$11.40
  • Altium Raised to Sector Perform at RBC; PT A$34
  • Viva Energy Cut to Hold at Morgans Financial Limited; PT A$2.60
  • Super Retail Raised to Add at Morgans Financial Limited
  • Sonic Healthcare Cut to Hold at Morgans Financial Limited
  • PWR Holdings Raised to Positive at Evans & Partners Pty Ltd
  • Sonic Healthcare Cut to Hold at Jefferies; PT A$35.30

Major Movers Today

Enjoy your 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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