MID MORNING MARKETS 31-7-18

The ASX200 is flat in mid-morning trade after being up 20 points. Consumer stocks lag, Telcos, Utilities, Materials and banks ok. CCP and FLN results, ORG Q report, Building approvals, Chinese PMI and BOJ today, big Euro data tonight #ausbiz

M3M4M5

TODAY

  • Economic data – HIA New Home Sales, Building Permits, Private Sector Credit,
  • Chinese data – NBS Manufacturing PMI, Non Manufacturing PMI
  • Japanese data – Household Spending, Unemployment Rate, Industrial Production, Construction Orders, Consumer Confidence, Housing Starts, BoJ Quarterly Outlook Report
  • BoJ Interest Rate Decision – The policy rate (-0.10%) not expected to change, but some easing targets could be altered

TONIGHT

  • European data – GDP Growth Rate Flash, Inflation Rate Flash, Unemployment Rate,
  • US data – Employment Cost Index, PCE Prices, Personal Income/Spending, S&P Case-Shiller Home Price Index, Chicago PMI, Consumer Confidence

COMPANY NEWS

  •  Credit Corp (CCP) – NPAY up 17% to $64.3 million; Consumer lending business NPAT up 30%; Inaugural full year profit from the US debt buying operation; and continued NPAT and collections growth from the Australian/New Zealand debt buying operation. Outlook – US debt buying and consumer lending businesses are expected to drive solid profit growth in 2019 in the range of 4% to 7%.

M1

  • Flight Centre (FLT) – Has signed a Letter of Intent with Serko Limited (SKO), a leader in online travel booking and expense management for business. SKO also raised its FY19 guidance range for revenue growth to 20% – 30% above FY18 (from 15% -30% previously). The LOI extends the existing partnership with FLT’s corporate brands across Australia, New Zealand and Asia through to April 2022 at a minimum, and also includes an expansion in territory across North America to include USA, Canada and Mexico.
  • Origin Energy (ORG) – Q production report. Record production from APLNG for the June 2018 quarter of 64 PJ (Origin share); Over FY2018, ORG share of APLNG production was 254 PJ, an increase of 11% and consistent with guidance of 245 – 265 PJ; Origin’s share of revenue over FY2018 was $2,054 million, an increase of 42 per cent; Origin received net cash flows from APLNG of $363 million over FY2018; APLNG expects to complete three separate planned maintenance shutdowns in the September quarter, with each resulting in a half train outage for approximately one week; Following a technical and commercial review of Gilbert Gully (ATP663), Australia Pacific LNG has recorded an exploration write-off and intends to divest the permit. Origin’s share of this divestment write-down is $41 million
  • MACA (MLD) – Has executed a contract extension with Regis Resources Limited (RRL) in relation to Open Pit Mining Services at the Duketon South Operations near Laverton. The contract for Duketon South Operations include Rosemont, Garden Well, Erlistoun, Baneygo, Toohey’s Well and other potential satellite projects in that region at Regis’ discretion. The tenure for MACA at Duketon South Operations will now be for a 5 year term from July 2018 with the option for a further 5 year extension. It is expected to generate approximately $590 million in revenue for MACA over the initial 5 year term adding $231 million WIH beyond what was previously contracted at Rosemont and Garden Well. MACA’s WIH for FY19 now stands at $430 million with total WIH at $1,282 million.
  • OneVue (OVH) – Q update. Fund Services managed funds admin items processed increased by 15.6% on previous quarter and 55% on PcP; Fund Services super member admin FUA reaches $4.37b up 123% on PcP; Platform Services gross inflows of $301m for the quarter takes annual gross inflows to $1.6b, up 33% on PcP; Platform Services achieves net quarterly inflows of $135m, up 20% on previous quarter, taking annual net inflows to $860m up 119% on PcP; Platform Services FUA of $4.39b, up 6.6% on previous quarter and 9.2% on PcP; Trustee Services grows by $2b over the year to reach $11.5b in FUT; Completed the acquisitions of; the KPMG Superannuation Administration business, (making OneVue the 4th largest provider in the market) and No More Practice Education, creating a contemporary education and distribution platform
  • Bubs (BUB) – Q4 gross sales up 531% to $8.89m on pcp 63% on the previous quarter; Q4 net sales up 620% to $8.51m on pcp and up 64% on the previous quarter; Q4 export sales to China grew 644% to $1.9m on pcp,  accounting for 22% of the group’s total quarterly gross revenue; Q4 sales of Bubs® infant formula grew 99% to $1.77m on pcp, accounting for 68% of Bubs® quarterly revenue; Q4 sales of CapriLac® milk powder up 133% to $4.52m on pcp, accounting for 72% of Nulac Foods® quarterly revenue; Domestic sales remain strong with new ranging of Bubs® infant formula and cereals in Woolworths, and Bubs® infant formula sales increasing by 21.2% in Coles, making it the fastest growing brand in value over the last 26 weeks versus last year
  • MetalsX (MLX) – Trading halt. $50m placement at 65c. Proceeds will be used to strengthen the balance sheet, providing enhanced financial flexibility as Nifty ramps up to target production levels, to accelerate exploration, and to fund growth projects
  • Australian Agricultural Limited (AAC) – AGM
  • Freelancer (FLN) – Revenue down 7.2% to $24.7m, Loss from ordinary activities grew 8.2 to $769K. No dividend declared
  • Infigen Energy (IFN) – 4Q report

M2


ANALYST COMMENTARY

  • Ardent Leisure (AAD $1.95) – Update on results and performance. Revenue of $545-550 (from $585m), EBITDA -$50–$55. NPAT loss $84-94 (from loss of $63m.
    • Deutsche Bank has a Hold recommendation with a target price of $1.95. The analyst saw an improved 2H at Main Event and a return to top-line growth. The note the recovery at Dreamworld continues to be challenging, in line with expectations.
    • Macquarie has a Neutral recommendation with a target price of $1.90 (from $2.05). The update was weaker than the analyst had been expecting, with significant impairments being flagged. They see continued downside risk, with Main Event momentum questionable and the recovery in theme parks difficult to see. They think an improved operating performance is needed for re-rating.
    • Citi has a Buy recommendation with a target price of $2.40 (from $2.35). The analyst notes the slowing sales momentum at the end of FY18 at Main Event. They have lowered FY19 forecasts but expect Main Event to deliver sales growth of 1%, supported by an improved US casual dining sector. The think theme parks may have found a base and earnings should improve, although there are risks from ongoing coronal inquest, management changes and loss of share to Village Roadshow

C1

  • Healthscope (HSO $2.21) – Will sell its Asian Pathology operations in Singapore, Malaysia and Vietnam for $279m to TPG Capital Asia.
    • Deutsche Bnak has a Hold recommendation with a target price of $2.30. The transaction is expected to generate a pre-tax gain of $165m and be completed by August 18. Proceeds will be used to pay down debt and fund expansion
    • Citi has a Neutral recommendation with a target price of $2.20. The analyst notes net debt will reduce in FY19 resulting in net debt/EBITDA of around 2.8x. Following the divestment, Australian hospitals will contribute around 86% of operating earnings and NZ pathology around 14%. Healthscope is also completing a strategic review of the hospital property portfolio.
    • Credit Suisse has a Neutral recommendation with a target price of $2.36. The analyst thought it was a reasonable price and has reduced forecasts by 5% to account for lost earnings.
    • Morgan Stanley has an Equal-weight recommendation with a target price of $2.23. The analyst notes the deal ameliorates the risks to the balance sheet, but they still expects challenges to earnings in the private hospital segment in FY19. They suggest near-term fundamentals will take a back seat compared to the reorganising of assets.

C2

  • HUB24 (HUB $11.44) – Credit Suisse has an Outperform recommendation with a target price of $13.20 (from $14.10). The analyst thinks the price cuts from BT’s Panorama were larger than expected, followed by AMP. They still see growth for the emerging platforms, but price competition will lead to churn and margin compression.

C3

  • Rio Tinto (RIO $80.45) – Macquarie has an Outperform recommendation with a target price of $94.00. The analyst is expecting 1H underlying earnings of US$4.8bn (results tomorrow) and iron ore is expected to account for around 60%. Net debt is expected to remain around US$4bn and, as cash from asset sales is still pending, an increase in the buyback is considered unlikely.

C4

  • AMP – JPMorgan has upgraded to an Overweight (from Neutral) recommendation but cut its target price by 7.1% to $3.90
  • Amcor (AMC) – Morgan Stanley has upgraded to an Overweight recommendation with a target price of $15.80 (from $14.80). The analyst outperformance, with the growth outlook is returning to more normal levels after a disappointing fiscal 2018.

C5.png

  • Suncorp (SUN) – JPMorgan has downgraded to a Neutral (from Overweight) recommendation with a target price of $15.00 (up 5%)

OVERNIGHT

M10M11

SPI FUTURES -3

US EQUITIES – S&P500 -16 (-0.58%), Dow Jones -144 (-0.57%), Nasdaq -107 (-1.39%).

Main themes

  • Tech sector underperforms again – Twitter -8.03%, Netflix -5.7%, Facebook -2.19%, Microsoft -2.15%, Amazon -2.09%.
  • Energy outperforms
  • Caterpillar (-1.97%) despite beating earnings

EUROPEAN MARKETS – Generally weaker. STOXX 600 -0.30%, UK FTSE -0.01%, German DAX -0.48%, French CAC -0.37%.

CURRENCIES

  • The US dollar was 0.3% lower at 94.37
  • The Aussie dollar is a little stronger at 74.12

BONDS – 2-yr: UNCH at 2.67%, 5-yr: UNCH at 2.85%, 10-yr: +2 bps to 2.98%, 30-yr: +2 bps to 3.11%

COMMODITIES

  • WTI crude futures rose US$1.44 or 2.1% to US$70.13 on signs off tightening supply as Saudi Arabia suspended shipments through Bab el-Mandeb Strait after Houthi rebels in Yemen attacked a pair of oil tankers in the Red Sea.
  • Gold futures were down US$1.70 at $1,221.30.
  • Iron Ore – IRESS reports iron unchanged at US$67.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was down US40c at US$66.95/dry ton. (CFR Tianjin port)
  • LME metals – Mixed. Cu -0.75%, Ni +0.00% and Al +1.11%.

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – June Pending Home Sales (actual 0.9%; Briefing.com consensus 0.2%; last -0.5%)
  • European data – July Business and Consumer Survey 112.1 (expected 112.0; last 112.3); German CPI +0.3% (expected 0.4%; last 0.1%) to be +2.0%yoy(expected 2.1%; last 2.1%); Spanish July CPI -0.7% (last 0.3%) to be +2.2%yoy (expected 2.3%; last 2.3%).
  • UK data – UK’s June Mortgage Approvals 65,620 (expected 65,500; last 64,680). June Mortgage Lending £3.85bn (expected £3.95bn; last £3.77bn).

QUOTE OF THE DAY

“Is it really true that political self-interest is nobler somehow than economic self-interest?” – Milton Friedman, American economist born this day in 1912. Died 16 November 2006.

M12

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s