The ASX200 is down 9 points in mid-morning trade after mixed leads. Fed on hold but more hawkish, Materials hit on LME dive, Staples and banks OK. RIO disappoints, IVC acquisition, CVW director arrest, BofE tonight #ausbiz
- Economic data – Balance of Trade, Imports/Exports
- UK Construction PMI JUL
- BoE Interest Rate Decision– expected to increase official bank rate by 25 bps to 0.75%
- European data- PPI
- US economic data – Factory Orders
- ResMed (RMD) results tonight
- Rio Tinto (RIO) – Underlying earnings up 12% to $4.4bn. Interim ordinary dividend $2.2bn or US$1.27, represents 50 per cent of underlying earnings; Additional share buy-back of $1.0bn; Underlying EBITDA of $9.2bn and margin of 43%; Generated operating cash flow of $5.2bn, net of a $1.2bn ATO payment; CAPEX up $2.4bn, with $1.4bn of investment in growth including the AutoHaulTM, Amrun and Oyu Tolgoi projects; Underlying and net earnings of $4.4bn and free cash flow of $2.9bn; Ongoing reshaping of the portfolio with binding agreements for $5.0bn (pre-tax) of divestments announced in 2018 first half. The post-tax proceeds of $4.0 billion will be returned to shareholders; In addition, on 12 July 2018, the Group announced the signing of a non-binding Heads of Agreement to sell its interest in Grasberg for $3.5 billion.
- Invocare (IVC) – More acqusitions – Grafton & District Funerals and Clarence Valley Funerals, collectively known as Grafton & District Funerals based in Grafton, New South Wales. Two locations servicing the Clarence Valley region of NSW. The business conducts around 300 funeral services and generates revenue of circa $2.0 million per annum. The assets purchased includes two fully equipped funeral homes with mortuaries, freehold properties and prepaid contracts.
- Oil Search (OSH) July Drilling report.
- ClearView (CVW) – David Brown, a non-executive director of CVW, has been arrested in PNG. The charges concern claim by the Melanesian Trustee Services Ltd (MTSL) of an attempt to remove and replace the current fund manager of the Pacific Balanced Fund (PBF) by National Superannuation Fund (NASFUND).
- Money3 (MNY) – NPAT expected to be approximately $32m with final dividend of at lease 4.5c.
ANALYST CHANGES NEWS
- Rio Tinto (RIO $81.65)) – Underlying earnings up 12% to $4.4bn. Interim ordinary dividend $2.2bn or US$1.27,
- Macquarie has an Outperform recommendation with a target price of $91.00 (from $94.00). The result was weaker than the analyst expected. The main weak spots were higher costs for the alumina assets and weaker results at Escondida. They have cut 2018 earnings estimates by -7% while 2019 is largely unchanged.
- Morgans has a Hold recommendation with a target price of $80.67 (from $84.42). They thought the result was strong although margin pressure is starting to build. Legacy contracts disappointed as they held down realised alumina prices. They note a lack of diversification and low growth offset by high margins and low gearing. There seems no urgency for adding growth to its portfolio
- ALS (ALQ $8.30) – AGM and guidance. Seeing positive returns and growth in our Environmental, Food, Pharmaceutical, Geochemistry and Tribology businesses. Profits from the Asset Care business unit remain flat and conditions challenging. 1H underlying NPAT from continuing operations expected to be in the range of [$85 – $90m], compared with $71.9m in the first half last year on a like for like basis.
- Deutsche Bank has a Sell recommendation with a target price of $6.87. The analyst’s estimate was $85m.
- Macquarie has an Outperform recommendation with a target price of $8.60. The analyst notes the guidance supports consensus expectations, so an improved performance in life sciences is expected (following weakness).
- Genworth (GMA $2.81) – Results and commentary on housing market
- Macquarie has an Outperform recommendation with a target price of $3.55 (form $3.50). The result was better than the analyst had expected and they think it remains attractive – with a 10% div yield and excess capital. They expect buyback to be reactivated
- Impedimed (IPD 38c) – Morgans has an Add recommendation with a target price of $1.28 (from $1.43). The analyst notes that revenue in the June Q was similar to March. Annual recurring revenue was $1.3m and the main catalyst for the company is the release of two peer-reviewed publications for the PREVENT trial. The analyst likes the early heart failure data, and further trials are now being run to determine the medication changes that can be made to reduce hospitalisation.
- Janus Henderson (JHG $40.25) – Results. Net income fell 15% to $US140.6 million. Negatives performance fees and fund outflows (Global Head of Distribution Phil Wagstaff also resigned so that could exacerbate) Positives – buy-back and cost performance. Average performance. Management change – Former Janus chief executive Dick Weil will assume full control of merged funds management giant Janus Henderson with co-CEO Andrew Formica resigned.
- Credit Suisse has a Neutral recommendation with a target price of $45. The analyst thought the result was weak but inline. AUM growth was flat due to ongoing outflows and revenue margins were stable. The move to a single CEO was a shock, but Dick Weil’s appointment could assist firm up of the relationship with Dai-ichi, which the broker notes is a large growth opportunity. While not expensive, they see few near term catalysts.
- Macquarie has an Outperform recommendation with a target price of $48 (from $50.00). The analyst was disappointed. Lack of flows was the key concern and the risk of a return to poor performance. The $100m buy-back should mitigate some downside risk.
- Xero (XRO) – Has acquired Hubdoc, a data capture solution that helps accountants, bookkeepers, and small businesses to streamline administrative tasks such as financial document collection and data entry. Macquarie has a Neutral recommendation with a target price of $37. The analyst notes the acquisition is small but the impact is considered 9% accretive to FY19 operating earnings estimates. (XRO only recently delivered its first positive EBITDA result.)
SPI FUTURES -26
US EQUITIES – S&P500 -3 (0.10%), Dow Jones -81 (-0.32%), Nasdaq +35 (+0.46%).
Main themes –
- US market responded to news of increase rate of tariff on $200bn of Chinese imports.
- Federal Reserve left interest rates unchanged
- Tech sector outperforms due to rally in Apple (+5.89%) on earnings
- Energy lags with another oil price fall
- Tesla (+9.5% in after-hours trade) after releasing earnings result, will build a US$2bn factory in Shanghai
EUROPEAN MARKETS – Lower. STOXX 600 -0.28%, UK FTSE -1.24%, German DAX -0.53%, French CAC -0.23%.
- The US dollar was 0.2% higher at 94.66
- The Aussie dollar is weaker at 74.09
BONDS – 2-yr: +1 bp to 2.68%, 5-yr: +3 bps to 2.88%, 10-yr: +4 bps to 3.00%, 30-yr: +5 bps to 3.13%
- WTI crude futures fell US$1.10 or 1.60% to US$67.66, after oil inventories rose 3.8mb last week. Trade tensions and signs that a supply disruption in the Bab al-Mandeb Strait in the Red Sea could be resolved also weighed on prces.
- Gold futures were down US$6 at $1,227.60.
- Iron Ore – IRESS reports iron unchanged at US$68.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was down US$1.10 at US$66.45/dry ton. (CFR Tianjin port)
- LME metals – All hit. Cu -2.03%, Ni -3.14% and Al -1.39%.
ECONOMIC DATA, NEWS & POLITICS
- FOMC – Left interest rates unchanged at 1.75-2.0% but the tone was hawkish. The Fed also upgraded its assessment of the U.S. economy on Wednesday, noting that “economic activity has been rising at a strong rate.”
- US economic data – ADP Employment Change 219K (consensus 175K; prior 177K); Construction Spending -1.1% (consensus 0.2%; prior 0.4%); ISM Index 58.1 (consensus 59.4; prior 60.2); Weekly MBA Mortgage Index -2.6% (prior -0.2%)
- European data – Germany’s July Manufacturing PMI 56.9 (expected 57.3; last 57.3); Italian Manufacturing PMI 51.5 (expected 53.1; last 53.3); French Manufacturing PMI 53.3 (expected 53.1; last 53.1); Spanish Manufacturing PMI 52.9 (expected 53.1; last 53.4)
- The Reserve Bank of India increased its repurchase rate by 25bp to 6.50% and the reverse repurchase rate was increased by 25 basis points to 6.25%. This was the second consecutive rate hike, matching expectations.