The Match Out: stocks rally most since early August, Energy leads, Telstra outlines their T25 strategy

James Gerrish

Market Matters

Energy stocks were back in favour today underpinning strength in the broader market as 123 stocks in the ASX 200 finished up on the session delivering the markets best gain since early August. 

Consumer discretionary was the only sector to finish lower while the materials were a mixed bag. Options expiry today always busy on the desk so a short & sharp note this afternoon.

  • The ASX 200 finished up +43pts / +0.58% to 7460
  • Energy stocks all up north of ~2% the standout from a sector perspective – we’re bullish here and expect Energy stocks to close the gap with Oil prices
  • Telstra (TLS) +0.51% held a good strategy day, we suspect upgrades to come on the back of it – more on that below
  • Whitehaven Coal (WHC) +2.65% rallies on approval for their Vikery extension
  • Lithium stocks pullback from recent highs – Pilbara (PLS) -4.9%, Orocobre (ORE) -4.09%
  • Uranium was strong overnight and that saw the sector pop early – Paladin (PDN) +10% early hitting a high of $1.12 before closing a touch lower. Like Lithium, we think Uranium has now hit a high and consolidation / pullback is our favoured move from here
  • Gold was ~0.4% lower during Asian trade ~$US1787 at our close
  • Iron Ore Futures were down ~5%
  • Asian markets down, stocks on Hong Kong hit -1.8% the worst of them
  • US Futures all marginally lower

ASX 200

Telstra (TLS) $3.95

TLS +0.51%: Held a strategy day to announce their T25 strategy which sounds impressive and the update was. This is clearly a company with better times ahead and the tough decisions taken in recent years are starting to pay off. Their key targets are for mid-single digit underlying EBITDA and high-teens underlying earnings per share (EPS) growth out to FY25 and to maximise fully-franked dividends which will grow over time. They also guided to a further reduction in costs and a bunch of other net positive things from an operational perspective. While TLS is now fully valued in our opinion, hence our recent reduction in weighting for the income portfolio, we like their approach and the trajectory of the business. I suspect we’ll see upgrades on the back of today’s briefing.

MM is neutral TLS around $4.00

Telstra (TLS)

Broker Moves

  • Myer Rated New Underperform at Barclay Pearce Capital
  • South32 PT Raised to A$3.80 from A$3.50 at Citi
  • Brambles Cut to Underweight at Jarden Securities; PT A$11.60

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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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