The ASX200 is up 6 points in mid-morning trade after losing earlier gains. US has late rally despite trade issues flaring. Materials under pressure, banks flat, consumer stocks up. Broker upgrades for FXL and SIG, acquisitions for IVC an SHL. RBA today. RC continues in Darwin. #ausbiz


  • Domestic economic data – TD-MI Inflation Gauge, Building Permits
  • Ex-dividend –  HGL (HNG) 1.5c
  • RBA Interest Rate Decision. No rate increase expected. In fact, there isn’t an increased factored in for the entire 2019 year (only 75% chance by December)



  • UK – Construction PMI
  • European – PPI, Retail Sales
  • US Factory Orders
  • US treasury market closes early tonight ahead of July 4 holiday. Then market closed on Wednesday.


  • A2Milk (A2M) – Extension of supply agreement with Synlait. The key components of the revised agreement are: a two-year extension to the term of the agreement, effectively providing for a new minimum term of five years to 31July 2023; an increase in the volume of infant formula products over which Synlait already has exclusive supply rights; increased committed production capacity from Synlait; pricing terms that reflect the commitment on the part of both companies to an ongoing market-competitive pricing regime
  • Sonic Healthcare (SHL) – Has acquired Pathologie Trier, one of the largest and most respected anatomical pathology practices in German, with annual revenue of ~€20 million and ~160 staff, including 24 pathologists. The group operates four laboratories in three West German cities. No price was disclosed but SHL said the initial acquisition price was funded in Euro from its existing debt facilities. The initial ROIC exceeds Sonic’s cost of capital, and the transaction is EPS accretive by 1-1.5%. ROIC and EPS accretion will increase as synergies, mainly relating to procurement and logistics, are achieved.
  • Invocare (IVC) – Conditional sales agreement to buy Lester & Son in Albury-Wodonga. It’s the 5th acquisition this year (JA Dunn Funerals, Southern Highlands Funerals, Hope & Sons Funeral Directors and Whitestone Funerals). Lester & Son is a well-established, successful business performing circa 460 funerals, 200 cremations per annum and generating revenue of approximately $3.5 million. The purchase price (not disclosed) will be funded from its existing financing facilities.
  • Domain Group (DHG) – Jason Pellegrino appointed Managing Director and Chief Executive Officer (CEO), effective 27 August 2018. Jason is from Google (Managing Director Australia and New Zealand since May 2016 and a member of the Asia-Pacific regional leadership team).
  • Independence Group (IGO) – Has entered into tenement purchase and joint venture agreements (the JV Agreements) with three entities owned and controlled by Mark Creasy (the Creasy Group). IGO will pay $21.0 million to earn a 70% managing interest, comprising approximately $5.3 million in cash and approximately $15.7 million in IGO shares at an issue price equal to the 20-day volume weighted average price to 28 June 2018. IGO will manage and fund all exploration expenditure through to a feasibility study and thereafter standard dilution mechanisms apply. The maximum interest that IGO can earn under the JV Agreements is 95%.


  • Automotive Holdings (AHG $2.60) – HNA International (HNA) has terminated the agreement announced on 23 November 2017 to acquire the AHG’s Refrigerated Logistics business. There were delays with FIRB approval and discussions on transaction terms (AHG says HNA had liquidity problems). AHG said it was disappointed but logicstic business could now focus on running the business.
    • Macquarie has a Neutral recommendation with a target price of $3.00 (form $3.30). The analyst said the proceeds would have given AHG greater capital-management flexibility and removed a low-performing asset heading into weaker market conditions in WA and NSW. They’ve cut the target price but also added 2% to FY EPS estimates. They see little upside catalysts.
    • Morgans has a Hold recommendation with a target price of $2.74 (form $3.32). The analyst’s main concern is that it affects AHG’s strategy to divest, consolidate and return shareholder capital, an issue given sales in WA remain weak and no further guidance has been provided.


  • AMP ($3.56) – Credit Suisse has an Outperform recommendation with a target price of $4.80. The analyst thinks the potential impact from regulatory changes with regard to financial planners is overdone. Although it is the largest planner in the country, very few planners actually salaried (acts as licensee) and most of its wealth management revenue comes from its platform. They see the greatest risk RC is brand damage, rather than regulation related. Technicvally, AMP is starting to look very interesting. The MACD indicator (the blue bars) are moving back into positive territory (a move to positive is a buy signal) but a move higher in the RSI (crossing the 30 level is a buy signal)  is needed to get more excited.


  • Flexigroup (FXL $2.18) – Credit Suisse has upgraded to an Outperform (from Neutral) recommendation with a target price of $2.45 (from $1.85), although the analyst says it’s really “no more downgrades”. They think FXL may meet forecasts, with flat to moderate growth in FY19 and caution that even with low growth, there are still risks. The technical picture is not so positive and suggests the recent rally is losing momentum. But this upgrade could be enough for another push higher.


  • Sigma Health (SIG 49c) – Will not be an extension of SIG’s contract with My Chemist/Chemist Warehouse Group (MC/CW). Revising guidance in line with softer economic conditions to underlying EBIT, citing particularly weak trading conditions in May and June, while the introduction of the June PBS price adjustment had a much more significant impact than expected and was equal to the full year impact of PBS adjustments in April and October. FY19 earnings guidance $75m from $90m, FY20 guidance of $40-50m. SIG said its balance sheet will be improved by the return of over $300m as the current MC/CW payment terms unwind. Also confirmed its intention to continue to pay a high proportion of profits as franked dividends. The chart looks ugly but this could be an interesting opportunity from a technical perspective. Today we will see an RSI buy signal triggered..but the negative MACD indicator ( blue bars moving to negative) suggests its a high risk position.
    • Citi has double upgraded to a Buy (from Sell) recommendation with a target price of 55c (from 70c). The analyst has cut EPS estimates for FY19 by15%, FY20 34% and FY21 by 17% to reflect new guidance arising from the news. They think capital management and acquisitions remain upside risks given the slowing in the underlying revenue.
    • Credit Suisse has a Neutral recommendation with a target price of 52c (from 82c). The analyst says the valuation will then depend on what Sigma does with the $300m working capital release. M&A would suggests a higher valuation, but if the money stays on the balance sheet, valuation is lower.


  • Furniture – The Citi analyst points to Steinhoff’s furniture operations in Australia (Freedon and Fantastic Furniture), where lfl sales fell 9.2% in the March quarter. They are concerned about the sector given the slowing housing market, particularly given the acceleration in the decline. They note that Nick Scali (NCK) could be in the running to acquire Steinhoff’s Australian operations and this could create an upside surprise
    • Harvey Norman (HVN $3.34) – Citi has a Sell recommendation with a target price of $3.10. It’s not a buy on the chart at this point.
    • Nick Scali (NCK $6.66) – Citi a Neutral recommendation with a target price of $7.00. Shares are resting on the uptrend support line. While it’s the preferred in the sector, a move higher is really needed to be more comfortable.





US EQUITIES – S&P500 +8 (+0.31%), Dow Jones +36 (+0.15%), Nasdaq +57 (+0.76%).

Main themes

  • US stocks closed well off the lows
  • Trade concerns – President Trump said he won’t back down on China tariffs; EU threatens $300bn worth of retaliatory tariffs on US goods. Trump said U.S. and EU officials will be meeting fairly soon to try to “work something out.”
  • Crude oil prices were lower after President Trump tweeted about a deal with Saudi Arabia’s King Salman to boost production by up to 2mbpd
  • Technology and Financials sectors outperform
  • Materials weaker – BHP and RIO weaker in London and New York (BHP -2.88%, RIO -2.74%)

EUROPEAN MARKETS – All lower. STOXX 600 -0.84%, UK FTSE -1.17%, German DAX -0.55%, French CAC -0.88%.


  • The US dollar was up 0.25% at 94.87
  • The Aussie dollar is significantly weaker at US73.38c.

BONDS – 2-yr: +3 bps to 2.56%, 5-yr: +2 bps to 2.75%, 10-yr: +2 bps to 2.87%, 30-yr: +1 bp to 2.99%


  • WTI oil futures closed down US21c to US$73.94. Factors includes increasing production from Saudi Arabia after Trump tweeted that the Saudis agreed to produce more oil “maybe up to 2mbpd”. Increasing trade tensions between the US and other countries is also weighing on prices.
  • Gold futures were down US$12.80 at US$1,241.70.
  • Iron Ore – IRESS reports iron unchanged at US$67.00 a tonne. The CommSec site says China Import (Fines 62% Fe) was down 65c at US$63.80/dry ton. (CFR Tianjin port)
  • LME metals – Lower. Cu -1.55%, Ni -2.35% and Al -1.64%.


  • US economic data – June ISM Index 60.2 (consensus 58.5; last 58.7) and May Construction Spending 0.4% (consensus 0.6%; prior 0.9%). There was continued strength in the manufacturing sector, with its Prices Index sitting just below its best level in more than seven years.
  • European politics – The euro was weaker ahead of a coalition meeting in Germany, where Chancellor Angela Merkel is trying to keep Interior Minister Horst Seehofer (CSU) from resigning. Mr Seehofer has threatened to quit over the inability to reach common ground on immigration policy.
  • European data – June Manufacturing PMI 54.9 (expected 55.0; last 55.0) and May Unemployment Rate 8.4% (expected 8.5%; last 8.5%); German June Manufacturing PMI 55.9 (as expected, last 55.9); French June Manufacturing PMI 52.5 (expected 53.1; last 53.1); Italian June Manufacturing PMI 53.3 (expected 52.6; last 52.7) and May Unemployment Rate 10.7% (expected 11.1%; last 11.0%); Spanish June Manufacturing PMI 53.4 (expected 53.6; last 53.4)
  • UK data – June Manufacturing PMI 54.4 (expected 54.1; last 54.3)
  • Chinese data yesterday – Caixin manufacturing index was slightly weaker than expected, following weaker official data over the weekend.


  • CoreLogic House prices out yesterday. Prices down 0.2% overall. Recent trends continue. Capital underperforms regional. Losses dominated by Sydney and Melbourne. Apartments (-0.2) outperform houses (-0.3%)



“The labor of women in the house, certainly, enables men to produce more wealth than they otherwise could; and in this way women are economic factors in society. But so are horses.” – Charlotte Perkins Gilman, American writer born this day in 1860. Died 17 August 1935


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