MID MORNING MARKETS 28-2-18

The ASX200 is down 30 points in mid morning trade, with most sectors under pressure. Cons Staples and Industrial outperforming.  Not a great day fro results. HVN, RHC and ABC all weaker. TLS ex-div 11c taking 4.6 points of the market.  #ausbiz

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TODAY

  • Ex-dividend – APN Property (APC) 1.3c, Carlton Investments (CIN) 51.0c, Enero Group (EGG) 1.5c, Event Hospitality and Entertainment (EVT) 21.0c, Fiducian Group (FID) 9.0c, Infomedia (IFM) 1.4c, IRESS (iRE) 28.0c, Kogan.com (KGN) 6.9c, MCP Master Income Trust (MXT) 0.7c, Navitas (NVT) 9.4c, Orora (ORA) 6.0c, Perpetual (PPT) 135.0c, Super Retail Group (SUL) 21.5c, Telstra (TLS) 11.0c,
  • Chinese PMI official numbers
  • Japanese – Industrial Production, Retail Sales, Construction Orders, Housing Starts

TONIGHT

  • European Inflation
  • UK consumer confidence
  • US data – Q4 GDP – Second Estimate, Chicago PMI, Pending Home Sales

COMPANY NEWS

  • Adelaide Brighton (ABC) – FY profit down 2.3% to $182m, one-off items offset a lift from higher prices and volumes, and major road-building projects. Underlying EBIT was up 7.8% to $288.8m on the back of price increases and strong demand for products. Dividend 12c and a special dividend of 4c. Headline miss but underlying profit looks ok. Impairments and energy costs up.
  • Ramsay Healthcare (RHC) – 1H results. ‘Core’ Net profit was up 7.5% on year to $288m (excludes a $23.9m restructuring charge for French hospitals). Headline profit down 3.7%. Revenue up 3% to $4.45bn, compared to consensus estimates at $4.63bn. EBITDA up 2.3% to $663.8m, also short of consensus of $709m. Aussie EBIT +9.1%. Outlook – Previous guidance reaffirmed of core EPS to grow by around 8-10% in the current fiscal year. Looks like a miss, although some analysts are more positive.
  • Freedom Foods (FNP) – Operating net profit -5.8% to $5m. Operating EBITDA up 0.4% to $12.9m. Net sales up 29% to $159.6m. Launch of Australia’s Own Dairy A2 Milk. Outlook – Sales expected to be at the upper end of the previously announced range $360-380m
  • Cromwell Property Group (CMW) – 1H net profit down 47% to $80.8m. Maintains operating profit guidance of 8.25c and distribution guidance of 8.34c.
  • Harvey Norman (HVN) – Underlying NPAT before tax up 0.8% to $296.08m. NPAT after tax up 1.4% ot $209.42 (underlying) . Property revaluation had a negative impact on the headline number. Also a recognition of a $20.67million impairment loss for the write-down of the equity-accounted investment in the Coomboona Holdings joint venture. Headline aggregate sales up 5.3%, comparable sales up 3.8%.
  • Vita Group (VTG) – Net profit down 48% to $11.2m. Revenue down 4% to $329.6m. Numbers are in line with upgraded company guidance announced in January which reflected strong DecQ. Revenue lower due to a lag in consumer demand for the new Apple iPhone and shipments. Total operating expenses down 11%. NIMA acquisition, Clear Complexions is on track to deliver $10m in revenue for FY18. Dividend 4.7c.
  • Virgin Australian (VAH) – Stat profit $270.6m. Revenue up 6% to $2.8bn, up 6%. The company said it improved its Revenue Passenger Kilometres by 2.4% and its Revenue Passengers by 2.3%. Increase in fuel costs was partially offset by the impact of favourable foreign exchange movements with a stronger AUD. Tigerair Australia was affected by the impact of its unscheduled exit from Bali last year. Virgin Domestic was strong, with segment EBIT up 91.4%. Virgin International Segment EBIT was flat, reporting a decline in Revenue Available Seat Kilometres of 1.2%. The company said it will not pay a dividend.

BROKER CHANGES

  • Select Harvests (SHV) – UBS has cut its target price by 2.7% to $5.00
  • APA – Morgan Stanley has upgraded to an Equal-weight (from Underweight)
  • Speedcast (SDA) – Macquarie has raised its target price by 46% to $5.31. UBS has raised its target price by 12% to $5.80.
  • Costa Group (CGC) – UBS has upgraded to a Buy (from Neutral) recommendation and raised its target price by 10% to $7.50
  • QBE – Macquarie has cut its target price by 3.6% to $10.70.
  • Iluka (ILU) – Macquarie has upgraded to a Neutral (from Underperform) recommendation and raised its target price by 19% to $10.50
  • Bingo (BIN) – Macquarie has raised its target price by 13% to $3.00.
  • Caltex (CTX) – Macquarie has raised its target price by 2.3% to $36.20.
  • Austal Boats (ASB) – Macquarie has raised its target price by  22% to $2.29.
  • Janison Education (JLG) – Bell Potter has raised its target price by 14% to $1.60

OVERNIGHT

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SPI FUTURES -35

US EQUITIES – S&P500 -35 (-1.27%), Dow Jones -299 (-1.16%). Nasdaq -91 (-1.23%)

Main themes –

  • Stocks stumble as Fed Chair Jerome Powell answers questions on Capitol Hill; says his economic projections have increased since December meeting, signals the Fed will keep raising rates to contain inflation.
  • During prepared remarks, Powell affirmed the Fed’s commitment to gradual rate hikes despite recent market volatility but gave no hint of a quickening of that pace, in light of the added stimulus of tax cuts and government spending.
  • Despite this, the implied likelihood of a fourth rate hike in December has increased to 33.8% from 24.4% yesterday.

EUROPEAN MARKETS – Mostly lower. STOXX -0.18%, UK FTSE -0.10%, German Dax -0.29%, French CAC -0.01%. Italy the exception, up 0.0.08%.

CURRENCIES

  • The US dollar was up 0.6% at 90.38.
  • The Aussie dollar is significantly, almost 0.8%, at US77.91c.

BONDS – 2-yr: +3 bps to 2.26%, 5-yr: +6 bps to 2.67%, 10-yr: +5 bps to 2.91%, 30-yr: +1 bp to 3.17%

COMMODITIES

  • WTI oil was down US90c or 1.4% at US$63.01 ahead of API inventory data which is expected to show a rise of around 2.7mb, still around their lowest levels in 3 years. US dollar strength also pressured most commodities.
  • Gold futures were down US$14.20 or 1.1% at US$1,318.60
  • Iron ore unchanged at$79.00.
  • LME metals were mixed – copper -1.04%, aluminium +0.33%, nickel +0.54%

ECONOMIC DATA, NEWS & POLITICS

  • Powell’s speech – The Fed is not concerned about the impact of higher interest rates and equity market volatility on economic growth. “The robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in U.S. exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment”
  • US economic data – Durable Orders -3.7% (consensus -2.0%; prior 2.6%), Durable Orders -ex transportation -0.3% (consensus 0.5%; prior 0.7%), and International Trade in Goods -$74.40bn (consensus -$72.20bn; prior -$72.30bn), December S&P Case-Shiller Home Price Index +6.3% (consensus 6.4%; prior 6.4%) and December FHFA Housing Price Index +0.3% (consensus 0.4%; prior 0.4%), Consumer Confidence 130.8 (consensus 126.5; prior 125.4).
  • Macy’s shares up 3.46% higher-than-expected same-store sales growth for the fourth quarter
  • Sky finished up 20.5% after a cash offer from US media company Comcast for £22.1bn. Comcast was weaker, down around 5%.
  • European economic data – Consumer confidence fell to 0.1, as expected, from 1.4. German February CPI +0.5% as expected (last -0.7%) to be +1.4% year-over-year (expected 1.5%; last 1.7%); French February Consumer Confidence 100 (expected 103; last 104)

QUOTE OF THE DAY

“The real danger with debt is what happens if lots of people decide, or are forced, to pay it off at the same time.” – Paul Krugman, American economist born this day in 1953.

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