The ASX200 is up 41 points in mid-morning trade after continued Turkish turmoil. Banks and Materials both higher. Healthcare the worst sector. Bank updates ok, other results not so CGF, COH, DMP, ISU. AUD at 72.75x #ausbiz



  • Australian data – NAB Business Confidence
  • Ex-dividend – Magellan Financial Group (MFG) 90.0c, Reckon (RKN) 3.0c, Scentre (SCG) 11.1c
  • Chinese data – Fixed Asset Investment (YTD), Industrial Production, Retail Sales
  • Japanese data – Capacity Utilization, Industrial Production


  • UK – Employment Change, Unemployment Rate, Average Earnings incl. Bonus
  • Euro data – GDP Growth Rate, Industrial Production, ZEW Economic Sentiment Index
  • US economic data – NFIB Small Business Optimism Index, Import/Export prices


  • National Australia Bank (NAB) – Trading update. Cash earnings down 3% on pcp to $1.65bn (or 1% on last quarter). Reflected higher spending and credit impairment charges (up 9% to $203m). Revenue up 1%.  Net interest margin declined slightly, reflecting elevated short term wholesale funding costs and ongoing intense home loan competition. Expenses rose 2% due to higher compliance costs, investment spend consistent with the accelerated strategy, and increased depreciation and amortisation. Ratio of 90+ days past due and gross impaired assets to gross loans and acceptances steady at 0.71%.
  • Iselect Ltd (ISU) – FY18 underlying EBIT at $8.5m (within guidance). Revenue down 2% to $181.4 m; Statutory results reflect the impact of marketing and operational challenges in 2H18, which are now being rectified, and a $16.9 million one-off non-cash impairment of non-core asset Infochoice; EBITDA loss of $5.5mm (FY17: profit of $28.7m); EBIT loss of $12.9m (FY17: profit of $22.6m); Net loss after tax of $13.5 million (FY17: profit of $16.4m); Underlying business performance EBITDA of $15.7m (FY17: $28.6 million); EBIT of $8.5 was within guidance (FY17: $22.5m); Strong balance sheet with no debt and $33.0m cash
  • Dominos Pizza (DMP) – NPAT up 15% to $136.2m. Dividend up 15.5% to 107.8cps. SSS – sales in all markets were positive in Australia (+4.5%), Europe (+5.7%) and Japan (+0.9%), after compounding successive years of high growth. Australian sales performance affected by uncertainty prior to the introduction of modern award wages, now successfully implemented and lower than forecast sales in France, affected by increased food costs. Trading update – During the first 5 weeks of trade, Group sss were +4.4%. Australian stores have reported +3.9% SSS (compounding +7.2% in the pcp), Europe +1.6% (compounding +8.8% pcp), and Japan has recorded outstanding SSS growth at +12.0% (following -1.2% pcp). FY19 Guidance – Same Store Sales Growth – Group: +3-6%; New organic store additions – Group: +225-250 new stores; EBIT – Group: $227-247m; Net CAPEX – Group: $60-70m. 3-5 Year Outlook – Annual Same Store Sales Growth – Group: +3-6%; Annual Store Growth – Group: +7-9%; Annual Net CAPEX – Group: $60-70m
  • Cochlear Limited (COH) – Growth delivered across both developed and emerging markets in FY18; Reported sales revenue up 9% (9% in constant currency) to $1,351.4m; Cochlear implant units up 8% to 35,260 (units up 11% excluding Chinese Central Government tender units); Reported net profit of $245.8m, up 10% (up 10% in CC); Solid cash flow generation supports the 14% increase in the final dividend, with full year dividends up 11%; FY19 net profit guidance of $265-275 million, an 8-12% increase on FY18
  • Challenger Limited (CGF) – Group assets under management up 16% to $81bn; Record normalised NPBT up 8% to $547m; Record normalised NPAT up 6% to $406m; Statutory NPAT down 19% to $323m; Life book growth of $1.8 billion, up 37%; Funds Management net flows of $5.3bn; Normalised cost to income ratio of 32.7%, improved 70 bps; Full year dividend of 35.5c. Outlook – For FY19 Challenger is targeting normalised net profit before tax growth on FY18 of between 8% and 12%. The company continues to target an overall normalised pre-tax return on equity of 18%, with FY19 normalised pre-tax return on equity expected to increase from FY18 but not reach the target. Challenger targets a fully franked dividend payout ratio of 45% to 50% of normalised profit after tax, subject to prevailing market conditions and capital allocation priorities.
  • SG Fleet Group Ltd (SGF) – FY18 NPAT up 13.6% to $67.7m; EPS 26.38cps (up 11.9%); Fully franked final dividend of 9.958cps / FY18 total 18.738cps (up 11.5%); Growth in product & services penetration key driver of profitability; Increased contribution from UK and New Zealand businesses.
  • Elders (ELD) – Yesterday Nufarm (NUF) came under pressure after US agricultural  chemical company Monsanto was ordered to pay $US289m to a man who claims weedkiller Roundup (and the chemical glyphosate) caused his cancer. Glyphosate represents about a fifth of NUF sales and 10-15% of its gross profit, and Nufarm is a major distributor of Roundup in Australia. Elsers has said today that glyphosate is considered safe when used according to label instructions and is approved for use. ELD will continue to stock and sell products containing the chemical. ELD said glyphosate-related products represent approximately 6% of revenue and 4% of gross margin. Glyphosate-related product sales by Titan Ag represents less than $1m in gross margin earnings. Elders also affirmed EBIT to be $70-$74m as notified in its release to the ASX on 6 July 2018


  • APA ($9.87) – Board now recommends offer from CKI Consortium (CK Infrastructure Holdings Limited, CK Asset Holdings Limited and Power Assets Holdings Limited) at $11.00. Doesn’t affect final distribution, Deutsche Bank has a Buy recommendation with a target price of $11.00 (from $10.85). The analyst notes the bid still has a number of hurdles including approval from the ACCC and FIRB.
  • Bendigo and Adelaide (BEN $11.39) – Underlying cash earnings up 6.4% to $445.1m; Cash EPS up 3.6c to 92.1c; Fully franked final dividend up 1c to 35c. Highly competitive markets, margin growth (up 14bp to 2.36%), funding 80.2% form retail deposits. CET1 up 35bp. $17m returned to communities.
    • Credit Suisse has a Neutral recommendation with a target price of $11.50. The result was broadly in line with the analyst, who cites a stable margin, solid capital position and low bad debt expense as positives, and cost headwinds and sub-peer lending growth as negatives. They say regional banks appear more resilient to negative macro factors, and they’ve trimmed earnings forecasts slightly.
    • Morgan Stanley has an Underweight recommendation with a target price of $10.10. The analyst thought the result was strong, beating on mortgage repricing. BEN has forecast above-system mortgage growth and accelerating revenue growth but the broker is not so sure, noting strong competition for mortgages, pressure on fee income and stagnant non-housing volumes. Cost improvement is also considered unlikely, given the need to drive growth, software investment, and the fact that no cost program is in place.


  • Domain Holdings Aus (DHG $3.31) – Pro Forma Results (excluding significant items): Revenue up 11.5% to $357.3m, EBITDA up 12.5% to $115.7m; EBIT up 3.9% to $89.5m; NPAT up 7.7% to $52.9, EPS up 7.3% to 9.2c.
    • Credit Suisse has an Outperform recommendation with a target price of $3.50. The result was better than the analyst expected due mostly to a significantly lower printing cost. Core digital residential revenue was in line but Media, Commercial & Developer revenue was weak and slowed considerably through the half. They have trimmed forecasts but see ongoing depth penetration and prices increases in the core Syd/Melb markets as key growth drivers ahead.
    • Morgan Stanley has an Overweight recommendation with a target price of $4.00. The result was in line but the analyst noted softer listings for the first half 2019/20. Cost pressures also an issue. They recommend buying on cyclical weakness.
    • Morgans has a Reduce recommendation with a target price of $2.81 (from $2.66). The analyst thinks Domain is on track for solid growth in FY19, with the key risks being winding back the lost market share in Victoria as well as a new CEO’s agenda.


  • JB Hi-Fi Limited (JBH $23.38) – Total sales up 21.8% to $6.9bn; EBIT up 14.5% to $350.6m; NPAT of $233.2m, up 12.3% on underlying NPAT in the pcp; EPS up 9.2% to 203.1 cps; FY19 Guidance: Open five JB HI-FI Australia stores, two The Good Guys stores and close one JB HI-FI New Zealand store; Total Group sales to be circa $7.1bn, comprising: JB HI-FI Australia $4.75bn, JB HI-FI New Zealand (NZD) $0.22bn; and The Good Guys $2.15bn.
    • Credit Suisse has an Underperform recommendation with a target price of $25.56. The analyst thinks FY19 will be a year of downgrades for JB Hi-Fi. Due to flat sales, increased marketing, and higher costs increase. They believes the uniqueness of The Good Guys has faded.
    • Macquarie has an Outperform recommendation with a target price of $28.80. The result was slightly above the analyst’s estimates. They think FY19 guidance for sales growth of 3.6% and net profit growth of 2.6% is skewed to the upside. They expect a multi-year merger synergy tailwind from The Good Guys will sustain earnings growth.
    • Morgan Stanley has an Overweight recommendation with a target price of $32.00. The analyst expects an improvement in JB Hi-Fi margins and believes the market has underestimated the stock’s earnings potential.
    • Morgans has a Hold recommendation with a target price of $25.68. The FY18 results and FY19 guidance were in line with Morgans estimates. They expect underlying productivity on costs to broadly offset the need for price cuts, but the competitive environment is uncertain and there is exposure to housing.







US EQUITIES – S&P500 -11 (-0.40%), Dow Jones -125 (-0.50%), Nasdaq -19 (-0.25%).

Main themes

  • Continued focus on Turkey and other emerging markets

EUROPEAN MARKETS – UK FTSE -0.32%, German DAX -0.53%, French CAC -0.04%


  • The US dollar was up slightly at 96.39
  • The Aussie dollar is again lower at 72.58.
  • The Euro hit a fresh 13 month low

BONDS – 2-yr: UNCH at 2.60%, 5-yr: +1 bp to 2.74%, 10-yr: +2 bps to 2.86%, 30-yr: +2 bps to 3.04%


  • WTI crude futures closed down US43c or 0.6% at US$67.20, after earlier hitting a low of US$65.71. The latest OPEC monthly report forecast 2019 oil demand of 32.05mbpd, down 130,000 bpd from last month’s forecast.
  • Iron Ore – IRESS reports iron ore unchanged at US$69.500 a tonne. The CommSec site says China Import (Fines 62% Fe) was down U65c at US$68.75/dry ton. (CFR Tianjin port)
  • LME metals – Mixed. Cu +0.80%, Ni -1.92%, Al -1.09%


  • Turkey – Turkish shares fell 10.6% after falling more than 14% on Friday. The Turkish central bank tried to allay global investors’ fears, stating it will provide as much liquidity as needed to the country’s banks and monitor the situation closely. The Turkish economy has been reeling recently as its inflation rate reached 16% last month, well above the central bank’s 5 % target.
    • From AMP –  Impact will beo on on Eurozone banks that are exposed to Turkish debt (which will keep the ECB cautious), but it’s unlikely to be economically significant. More fundamentally Turkey is not indicative of the bulk of emerging countries. Its currency has crashed 42% this year because of current account and budget deficit blowouts, surging inflation, political interference in its central bank, economic mismanagement generally and political tensions with US following the imprisonment of an American pastor followed by US sanctions on Turkey including tariff hikes.
    • Debt emergencies in Greece, Cyprus, Italy and other euro zone countries other crises have been fueled primarily by government debt, Turkey’s is more of a corporate story, making a buyout more problematic. In total, there’s some $220 billion in foreign debt for Turkish companies and financial institutions and over half is denominated in foreign currencies It creates moral hazard in using IMF funds to bailout corporate interests. A strong US dollar coupled with weakening emerging market currencies is fuellingfuel the problem, and US president Trump has made things worse by increasing tariffs on Turkish imports of aluminium and steel.
    • Things could resolve – there was a Twitter rumour earlier that Brunson was being released from house arrest helped shore up markets at least momentarily
  • The Central Bank of Argentina raised its policy rate by 500 bps to 45.0% and cancelled its daily dollar auctions. The Argentine peso fell to a new record low of 30.12 against the dollar.
  • European data – Italian CPI +0.3% (as expected, last 0.3%) to be +1.5%yoy (expected 1.4%; last 1.5%)
  • Italian president of the lower house budget committee Claudio Borghi warned that the euro is at risk of a collapse unless the ECB guarantees to cap yield spreads in the eurozone.


“I was not naturally talented. I didn’t sing, dance or act, though working around that minor detail made me inventive.“ – Steve Martin, American comedian born this day in 1945.


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