The ASX200 is again flattish in mid-morning trade after a quiet US session. Consumer sectors the best, banks ok, Utilities worst. Results: JHX a bit hit, BBN and REA +ve. RBA SOMP today, US CPI tonight. #ausbiz
- RBA Statement on Monetary Policy
- Ex-dividend – BKI Investment Company (BKI) 3.7c, Janus Henderson Group (JHG) 48.5c, Oceania Healthcare (OCA) 2.0c
- Japanese data – GDP Growth Rate has jumped to 0.5% for the quarter (or 1.9% annualised), higher than the 0.3% expected, PPI, Tertiary Industry Index
- UK data – Balance of Trade, Construction Output, GDP Growth Rate, Manufacturing Production, Industrial Production
- US data – CPI, Core CPI, Treasury Budget
- James Hardie (JHX) – Net operating profit +29% to US$79.9m; EBIT +21% to US$107.1m; Sales +28% to US$651.0m for the quarter, North America Fiber Cement Segment volume increased 5% for the quarter, compared to pcp; North America Fiber Cement Segment net sales of US$433.8m for the quarter, an increase of 10%; North America Fiber Cement Segment EBIT margin of 24.7% for the quarter; Asia Pacific Fiber Cement Segment EBIT margin of 24.2% for the quarter; and Europe Building Products Segment Adjusted EBIT margin excluding costs associated with the acquisition of 11.9% for the quarter. North America Fiber Cement segment EBIT margin to be in the top end of our stated target range of 20% to 25% for fiscal year 2019. Notes the range of analysts’ forecasts for FY19 of US$313-358m. JHX expects US$300-340m.
- REA Group (REA) – Outlook – the target is for the rate of revenue growth to exceed the rate of expense growth, however this will not be the case in every quarter due to the different timing of some expenses.
- Baby Bunting (BBN) – FY18 results: Total sales up 9.0% to $303.1m with comparable store sales flat (pcp) when our 4 largest specialty baby goods competitors entered administration; Gross profit income up 5.9%, gross margin impacted by price deflation at 33.3% (FY17: 34.3%); Pro forma EBITDA down 18.9% to $18.6m; Statutory NPAT was down 29.1% to $8.7m; Pro forma NPAT was down 25.9% to $9.6m; Return on average funds employed (ROFE) of 15.5%; Fully franked dividend of 2.5 cents per share. FY19 trading and outlook: Strong trading for the first six weeks of FY19 with comparable store sales growth of 9.8%; Gross profit margin expected to recover to be +34% in FY19; FY19 EBITDA expected to be $24-27m (growth of around 30-45%
- Charter Hall Long WALE REIT (CLW) – Operating Earnings of $58.4m; Statutory Profit of $83.3m; FY18 EPS and DPS of 26.4 cents, reflecting 3.9% annual growth1; NTA per unit increased to $4.05, reflecting 2.9% growth in the 12 month period; Balance sheet gearing of 30.6%, within the target 25% to 35% range.
- Infigen Energy (IFN) – Monthly production report
- Bega Cheese (BGA) – The ACCC has approved the purchase of the Koroit dairy processing facility in Western Victoria from Saputo.
- AGL Energy (AGL $21.11) – FY results. Statutory Profit after tax up 194% to$1,587m; Statutory EPS up 201% to 242.0c; Underlying NPAT up 28% to $1,023m; Underlying EPS up 30% to 156.0c; Net cash provided by operating activities up 140% to $2,134m; Dividends 117cps (up 29%), ROE 13%, up 2.8 percentage points. Guidance: AGL expects Underlying NPAT in FY19 to be $970-$1,070m
- Morgan Stanley has downgraded to an Underweight (from Equal-weight) recommendation with a target price of $19.44 (from $22.88). The analyst thinks AGL’s earnings will peak in FY19, hence the downgrade. Catalysts are the NEG, the ACCC recommendations and any direct intervention with Liddell. There is significant policy risk but they see them as manageable. The company has guided to a flat result in FY19 and MS sees downside risk to FY20 and FY21 estimates.
- BHP Billiton (BHP $33.96) – Macquarie has an Outperform recommendation with a target price of $41.00. The analyst considers the shale sale is a major positive and will boost free cash flow yields to 18% in FY19. They expect a relatively benign earnings result and continue to forecast BHP’s iron ore cash costs trailing peers.
- Flight Centre (FLT $65.90) – Citi has downgraded to a Sell (from Neutral) recommendation with a target price of $59.00 (up 9%). The analyst notes the positive industry’s cycle with higher oil prices driving up airfare prices and hence revenue. But they still see a focus cost-out, and think the share price is already factoring in material upside. Despite the downgrade, forecasts have been lifted by 3-4%.
- Magellan Financial Group (MFG $27.60) – Profit after tax up 37% to $268.9 million; Total dividends up 57% to 134.5 cents per share; New dividend policy increases ongoing payout ratio by 20% to 90-95%
- Macquarie has an Outperform recommendation with a target price of $30.50 (from $28.00). FY18 results were ahead of the analyst’s estimates due to higher management fees, elevated other revenue and distributions from principal investments. They think the revised dividend pay-out ratio (to 90-95% from 75-80%) could drive a re-rating of the stock. MFG now has a 5.9% dividend yield.
- Morgan Stanley has an Underweight recommendation with a target price of $21.50 (from $20.00). The analyst has upgraded FY19 estimates by 7.5% but the remain concerned about the flow momentum in retail funds, forecasting $30m in monthly outflows in FY19
- Morgans has a Hold recommendation with a target price of $28.64 (from $26.05). The result was ahead of consensus and the analyst notes FUM at the start of FY19 were 18% above the average level of FY18. The excitement relates to the dividend payout ratio increase but they see no key drivers in FY19, meaning it is dependent on market performance.
- Orora (ORA $3.46) – FY results. Outlook – Expects to continue to drive organic growth and invest in innovation and growth during FY19, with constant currency earnings expected to be higher than reported in FY18, subject to global economic conditions
- Citi has a Neutral recommendation with a target price of $3.70. The analyst thought the results was sold and in line. North America was the disappointing part but they think a few factors mask the improvement that is occurring beneath the surface (Point of Purchase, POP). They have cut forecasts slightly but expect organic growth initiatives and improving POP contributions to drive yet another solid performance in FY19. The next catalyst could be an acquisition, suggest the analysts.
- Macquarie has an Outperform recommendation with a target price of $3.70 (from $3.59). The analyst thought the result was in line but not the beat needed to justify the price. They think a potential acquisition is the next likely catalyst and the base case is for two acquisitions in the next 12 months.
- Morgan Stanley has an Equal-weight recommendation with a target price of $3.60 (from $3.50). The analyst thought the result was broadly in line and they note intentions to pursue M&A in North America, saying the absence of any development could disappoint the market.
- Morgans has an Add recommendation with a target price of $3.70 (from $3.87). The result was in line with the analyst, with a 2% earnings beat from Australasia offsetting a 5% miss from North America. They note lack of M&A in FY18 as ORA bedded down its new cloud-based system. With that now in place, a solid pipeline of opportunities looms in FY19 and ORA has balance sheet strength to exploit. They have trimmed FY19 forecasts
We have local employment data Thursday, wages data and Westpac consumer confidence Wednesday, Major overseas data includes UK employment and inflation, Eurozone GDP and inflation, and US retail sales
Earnings Seasons continues. Some of the key ones next week.
- Monday – Bendigo and Adelaide (BEN), BlueScope Steel Ltd (BSL), JB Hi-Fi Limited (JBH), Seven West Media (SWM)
- Tuesday – Challenger Limited (CGF), Cochlear Limited (COH), Domino Pizza (DMP)
- Wednesday – Computershare Ltd (PU), CSL, Fairfax Media Ltd (FXJ), Wesfarmers Limited (WES), Woodside Petroleum (WPL)
- Thursday – Origin Energy (ORG), Primary Health Care (PRY), QBE Insurance Group (QBE) Telstra Corporation (TLS), Treasury Wine Estate (TWE)
SPI FUTURES +10
US EQUITIES – S&P500 -4 (-0.14%), Dow Jones -75 (-0.29%), Nasdaq +3 (+0.04%).
Main themes –
- Nasdaq positive due to strong tech sector Apple 0.79%, Amazon +0.64%
- Another quiet day of range-bound trading
- Earnings – Viacom +6.0%, Roku +21.3%, Yelp +26.7%. 90% of S&P 500 companies have reported, with 76% beating earnings estimates and 24% 2Q earnings growth.
- Tesla (-4.8%) fell following reports that the SEC is intensifying its probe
EUROPEAN MARKETS – Mostly higher. STOXX 600 +0.09%, UK FTSE -0.45%, German DAX +0.34%, French CAC +0.01%.
- The US dollar was up 0.6% at 95.61
- The Aussie dollar is much lower at 73.80
BONDS – Strong performance. 2-yr: -2 bps to 2.65%, 5-yr: -3 bps to 2.81%, 10-yr: -4 bps to 2.94%, 30-yr: -4 bps to 3.08%
- WTI crude futures down US13c to US$66.81, settling after big falls on Wednesday after news about Chinese tariffs on US imports (including oil and LNG) and a smaller draw in US crude stockpiles.
- Iron Ore – IRESS reports iron ore unchanged at US$70.00 a tonne. The CommSec site says China Import (Fines 62% Fe) was down U10c at US$69.40/dry ton. (CFR Tianjin port)
- LME metals – Mostly higher. Cu -0.03%, Ni +1.44%, Al +3.34% the highlight
ECONOMIC DATA, NEWS & POLITICS
- US economic data – PPI 0.0% (consensus 0.3%; prior 0.3%), core PPI 0.1% (consensus 0.2%; prior 0.3%), weekly Initial Claims 213K (consensus 220K; prior 219K), and Continuing Claims 1755K (prior 1726K); Wholesale Inventories 0.1% (consensus 0.0%; prior 0.3%)
- Chinese inflation yesterday
QUOTE OF THE DAY
“Poverty was the greatest motivating factor in my life.” – Jimmy Dean, American actor born this day in 1928. Died 13 June 2010. Ah yes, the power of money…or lack thereof.