The ASX200 is up 15 points in mid-morning trade after another strong overnight session (despite Brexit and trade risks). Energy and Materials lead, banks mostly ok, Staples and utilities lag. VLW guidance upgrade, MHJ trading update, CKF and MTS ex-div, Chinese CPI. $A 74.75c #ausbiz



  • Ex-dividend – Collins Foods (CKF) 9.0c, Metcash (MTS) 7.0c
  • Economic data – NAB Business Confidence
  • Chinese data – Inflation Rate, PPI
  • Japanese data – Machine Tool Orders


  • UK – Balance of Trade, Monthly GDP, Construction Output, Manufacturing Production, Industrial Production
  • European data – ZEW Economic Sentiment Index
  • US data – NFIB Small Business Optimism Index, JOLTS – Job Openings


  • Villa World (VLW) – Now expecting FY18 NPAT of $42-44m, inclusive of ~$2.6 million contribution from the recent strategic sale of an englobo parcel. Compares to previous guidance of $41.6m. Sales momentum has continued across the house and land sector in which it operates. 1,678 sales were recorded for the full year, with projects selling ahead of expectations particularly during Q418. target a FY18 dividend of at least 18.5cps fully franked (1H: 8cps; 2H: expected at least 10.5cps).
  • Michael Hill (MHJ) – Trading update. Group revenue up 3.3%, same store sales growing by 0.4%; The Michael Hill brand, excluding the US, delivered total store sales growth of 4.1% and same store sales growth of 0.3%; Michael Hill same store sales improved 2.2% in New Zealand and by 3.5% in Canada, while Australian same store sales declined by 0.9%; 17 stores were opened and 5 under-performing stores were closed within our core Michael Hill segments; 9 Michael Hill US stores and 24 Emma & Roe stores were closed as part of the Company’s strategic refocusing on our core business. There were 312 stores trading as at 30 June 2018, comprising 306 Michael Hill stores and 6 Emma & Roe stores (which have been announced as closing in the coming months); eCommerce sales (included in the segment numbers below) increased by 61.9% to $11.1m for the year and represent 1.9% of total sales for the Group.


  • Xero (XRO) – Management changes. Chief Operating and Financial Officer Sankar Narayan will leave Xero at the end of December 2018 to pursue other opportunities. Chief Accounting Officer, Kirsty Godfrey-Billy, will be appointed Chief Financial Officer effective 1st October 2018
  • Spark (SPK) – Has completed the first phase in the major upgrade of voice communications in NZ.
  • Stockland (SGP) – Has tightened its earnings guidance to approximately 6.5% growth in FFO per security for the June 2018 financial year. This is at the top end of its previous guidance range of 5-6.5%. SGP also reaffirmed the estimated distribution for the June half 2018 of 13.5 cents per ordinary stapled security.
  • Pendall (PDL) – Pendall Australia saw net inflows of $0.4bn, BT/WBC saw outflows of $0.4bn relating to the reconfiguration of the MYSuper portfolio. JOHCM had net outflows of $1.1bn led by segregated mandate redemptions in the Global Select strategy (-$0.5bn), and net outflows in European (-$0.7bn) and Asian (-$0.3bn) OEIC funds. The effect of the net flows during the June quarter on Pendal Group revenue is a decrease to annualised fee income of $5.8m. Performance fees for the year ended 30 June 2018 were $6.9m compared to $9.4m for the 2017 financial year.


  • Regis Resources (RRL) – June 2018 quarter production was 92,008oz, taking FY2018 gold production to an annual record of 361,373 ounces, which is at the top end of FY18 guidance range of 335,000 – 365,000 ounces.
  • Elsters (ELD) – Notes article in The Australian today titled “Elders set for $300m raising as it circles PGG Wrightson”. Elders has responded, saying it has not made any definitive proposal to acquire PGG Wrightson. Elders evaluates all possible opportunities against a range of factors and will only pursue acquisitions that make compelling strategic and financial sense for our shareholders. Elders will update the ASX in due course if appropriate to do so.


  • Michael Hill (MHJ) – Trading update. Group revenue up 3.3%, same store sales growing by 0.4% (see full details above.
    • Citi has a Neutral recommendation with a target price of 92c (from $1.00). The analyst notes a decline in implied like-for-like sales growth across all regions and think this was due to distractions associated with the closure of the US business and Emma & Roe as well as a new promotional strategy. The weak consumer environment in Australia and competition in Canada are also not helping. They would like to see improving execution before becoming more positive.
    • Morgans has a Hold recommendation with a target price of $1.04 (from $1.16). The analyst thinks a full exit from Emma & Roe is positive, removing losses and allowing full focus on the core. They remain cautious, given a deteriorating sales performance in 4Q and the requirement for investment in the near to medium term.


  • Gateway Lifestyle (GTY $2.33) – UBS has downgraded to a Neutral (from Buy) recommendation with a target price of $230 (from $2.10). Hometown’s latest bid is $2.30 and it now holds 18.2% of the company. The analyst doesn’t rule out a counter bid from Brookfield but this would be pushing shares into overvalued territory


  • IPH ($4.62) – Morgans has an Add recommendation with a target price of $5.13 (form $4.82) – The analyst has raised earnings forecasts for FY18 by 1.0% and FY19 by 5.5% based on the company’s filings. They calculate IPH’s growth in filings of 5.1% was well in excess of 1.4% market growth


  • Magellan Financial (MFG $23.70) – Total FUM +3.2%. Net inflows were $218m, which included net retail inflows of $4m and net institutional inflows of $214m. MFG distributions $755 million in July, which will be reflected in the FUM figures in next month’s announcement. Performance fees $40m for FY18.
    • Credit Suisse has an Outperform recommendation with a target price of $28.00. They note that net inflows continue, with $880m in 2H, predominantly driven out of the institutional channel. They say this highlights the capacity reserved for existing investors, despite the soft close of some products at the end of 2017
    • Morgans has downgraded to a Hold (form Add) recommendation with a target price of $26.05 (from $28.30). The analyst notes that flows weakened over the second half, as expected. They think the balance sheet and the acquisition of Airlie provide options for growth, with Airlie raise retail funds in the near term, although they also believe the US low-carbon strategies need to attract meaningful flows, or further acquisitions may be required.
    • UBS has a Buy recommendation with a target price of $28.00. The analyst notes that stronger markets, alongside the Airlie acquisition, provided support, suggesting stronger than expected performance fees. The stock is trading at its lowest forward PE on record, which they find compelling despite the business maturing.





US EQUITIES – S&P500 +24 (+0.88%), Dow Jones +320 (+1.31%), Nasdaq +68 (+0.88%).

Main themes –

  • Banks perform well ahead of results season which kicks off on Friday
  • Brexit crisis – Boris Johnson and David Davis resign.
  • President Trump said China may be “exerting negative pressure” on the US-North Korea deal. North Korean officials accused the US of being “gangster-like” in its demand for denuclearisation following two days of talks with Secretary of State Mike Pompeo.
  • Twitter (-5.4) after Washing Post suggested a crack down on fake accounts would pressure user growth

EUROPEAN MARKETS – All stronger. STOXX 600 +0.58%, UK FTSE +0.92%, German DAX +0.38%, French CAC +0.42%.


  • The US dollar was a little stronger at 94.06
  • The Aussie dollar was also stronger at US74.69c.

BONDS – 2-yr: +4 bps to 2.57%, 5-yr: +3 bps to 2.75%, 10-yr: +3 bps to 2.86%, 30-yr: +3 bps to 2.97%


  • WTI crude futures closed up US5c to US$73.85. Key factors included sanctions on Iran, falling production in Libya and Venezuela and news some production from Syncrude in Canada would be back online in July (sooner than expected).
  • Gold futures were up US$3.80 at $1,259.60.
  • Iron Ore – IRESS reports iron down US50c at US$66.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was up 60c at US$63.25/dry ton. (CFR Tianjin port)
  • LME metals – Mostly stronger. Cu +1.72%, Ni +1.94% and +1.97


  • US economic data – May Consumer Credit $24.6bn (consensus $12.4bn; prior $10.3bn)
  • UK politics – Foreign Minister Boris Johnson, Brexit Minister David Davis, and Parliamentary Private Secretary to the Department of Transportation Chris Green have resigned from government due to ideological differences with Prime Minister Theresa May.


  • European data – Eurozone July Sentix Investor Confidence 12.1 (expected 9.0; last 9.3); German May trade surplus €20.30bn (as expected, last €19.00bn). May Imports +0.7% (expected -0.3%; last 2.6%) to be +1.8%yoy (expected 0.8%; last -0.3%)


“Our virtues and our failings are inseparable, like force and matter. When they separate, man is no more.” – Nikola Tesla, Serbian-American inventor born this day in 1856. Died 7 January 1943.


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