The Match Out: Stocks start May on the back foot ahead of RBA tomorrow, Qantas switches from defence to offence and rallies
The ASX fell today, around 1% to kick off the new week and new month following a bigger fall on Wall Street Friday thanks to weakness in technology/growth. The RBA is set to increase rates tomorrow, the only real argument being by how much, whether they’ll do 15bps or go by 40bps, the former being the consensus view, while tech stocks continued to drag.
- The ASX 200 finished down -88pts/ -1.18% at 7347, better than the fall of around 3% in the US plus the selling was far from aggressive if we look outside of tech.
- The Industrial sector was best on ground (-0.30%) while Utilities (-0.32%) and Energy (-0.54%) were relative performers.
- IT (-3.97%) and Real-Estate (-3.64%) were the weakest links, heavyweight Xero (ASX: XRO) -6.59% and Goodman Group (ASX: GMG) -7.17% had the biggest influence.
- Aussie bond yields all tracked higher today which was the main headwind for tech, 10-year yields +13bps to 3.26% the biggest mover.
- Qantas (ASX: QAN) +2.86% did well on a new plane order plus earnings have recovered quicker / stronger than originally thought.
- Aussie Broadband (ASX: ABB) -28% was hit hard following a slight downgrade.
- AGL Energy (ASX: AGL) -0.69% said EBITDA would be $1.23-1.3 billion down from prior guidance of $1.275-1.4 billion. The market didn’t really care, looking for more corporate activity around AGL with Cannon-Brookes apparently looking for a line of stock.
- Transurban (ASX: TCL) +0.49% held an investor day saying that the rising cost of living won’t deter the use of toll roads.
- PointsBet (ASX: PBH) +5.67% has rallied again following their good quarterly last week. It was a long way to go here however they’ve turned the corner on costs and we still think a takeover of PBH is a real possibility.
- HALO (ASX: HAL) +25% today to close at 70c up from the 56c close on Friday. The IPO price was $1.20 and it was only listed last week. That’s the quickest 50% decline post IPO I can remember – can anyone enlighten me on others I have forgotten?
- Kogan (ASX: KGN) -3.32% after saying that gross sales fell -3.8% year-on-year.
- Iron Ore was around 2.5% higher in Asia today providing support for the miners that were relative performers.
- Gold struggled trading at around US$1885 at our close.
- China and Hong Kong markets closed – Japan down a touch (-0.20%).
- US Futures are all up, around +0.60%
ASX 200 chart
Qantas (ASX: QAN) $5.76
QAN +2.86%: It was a strong session today for the flying Kangaroo as it officially moved from defence into offence, ordering a suite of new planes while also saying that 2H22 EBITDA would be $500 million, a long way ahead of the market expectations for $200 million. Debt levels have also fallen by around $1 billion and while they’ll still lose around $1.3 billion in FY22, they should return to profitability earlier than expected in FY23. QAN now has a better cost base to take advantage of the looming upswing with the next few years likely to be very strong for them.
Aussie Broadband (ASX: ABB) $4.00
ABB -28.06%: shares in the fastest growing telco were hit hard today after tightening guidance to the lower end for the full year. Connections were up 54,000 in the third quarter to 549,00 though a significant portion of that came from its white-label offering, which is expected to roll off in the fourth quarter. NBN CVC costs were higher than expected, as were promo discounting and higher customer service costs as their call centres experienced higher than expected volumes with connection issues and increased migrations onto white label products. As a result, connections guidance was tightened to 580-585,000 (from 580-590,000) and EBITDA guidance to between $27million and $28 million, noting this excludes Over The Wire (OTW) acquisition contribution and costs. We spoke to CEO Phillip Britt after the announcement, some key takeaways:
CVC costs are expected to normalise in the fourth quarter
- Pressure on the support team has eased which is expected to reduce customer churn
- Despite slightly increased churn rates, they continued to increase market share in the quarter
- They are working through the Over The Wire integration with a complete plan expected to be released around the full-year results later this year.
While today’s update was a miss to expectations, it’s priced similarly to other listed telcos despite a far superior growth profile. Today’s selling appears overdone.
Aussie Broadband (ASX: ABB)
- ResMed GDRs Cut to Market-Weight at Wilsons; PT A$30.69
- Regis Resources Raised to Outperform at Macquarie; PT A$2.30
- Silver Lake Cut to Neutral at Macquarie; PT A$2
- Reliance Worldwide Raised to Outperform at Macquarie; PT A$4.95
- Jupiter Mines Raised to Outperform at Macquarie
- Ramsay Health Cut to Neutral at Goldman; PT A$74
- Kogan.com Cut to Underperform at Credit Suisse; PT A$3.75
The Market Matters team.
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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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