The ASX200 is flat in mid-morning trade after being down 25. CBA ex-div $2.31 takes off 15 points. WES leads staples, Energy lags. Results include WES, CSL, WPL, IAG, AOG. Wages in line 0.6%qoq, 2.1%yoy. #ausbiz


  • Australian economic data – Westpac Consumer Confidence, Wage Price Index (expectations are for 0.6% growth in the quarter or 2.1% for the year, unchanged on an annual basis).
  • Ex-dividend – CBA Commonwealth Bank (CBA) 231.0c, Genworth Mortgage Insurance Australia (GMA) 12.0c, ResMed (RMD) 3.5c, Suncorp Group (SUN) 48.0c, Tabcorp (TAH) 10.0c
  • Chinese – House Price Index


  • UK – Inflation Rate
  • US economic data – Retail Sales, Productivity-Prel, Unit Labor Costs – Prelim, Empire Manufacturing, Industrial Production, Capacity Utilization, Business Inventories, NAHB Housing Market Index


  • Brambles (BXB) – Notes media reports that a Maurice Blackburn action was filed in the Federal Court yesterday morning. Brambles advises that it has not yet been served with any such action by Maurice Blackburn. The media reports suggest that Maurice Blackburn action will allege contraventions of continuous disclosure obligations relating to the timing of its revised FY17 outlook disclosures to the market in January and February 2017. Brambles strongly believes that it at all times complied with its continuous disclosure and all other regulatory obligations in relation to those disclosures.
  • Fairfax Media Ltd (FXJ) – Statutory Results: Revenue down 3.1% to $1,687.9m, Net loss after tax of $63.8m (a net profit of $83.9m in pcp), Significant items after tax totalling $188.7m loss. Underlying Results (excluding significant items): EBITDA up 1.2% to of $274.2m, EBIT down 5.6% to $217.4m, NPAT down 12.4% to $124.9m, EPS 5.4c down 12.4%. Balance Sheet & Dividend: Net debt of $135.7m with Fairfax 100%-owned entities’ net cash of $9.5m. Dividend of 1.8c (50% franked), bringing total dividends to 2.9cps (68.95% franked), a payout ratio of 54%. Domain delivered strong digital growth despite recent cyclicality in the property market. Metro has achieved its second consecutive year of EBITDA growth – with print showing signs of stability and digital advertising growth in H2. Our Radio business is lifting margin. Stan has broken through the 1.1 million active subscriber mark. Corporate overheads have been significantly reduced. Current Trading Environment & Outlook:  Trading in the first six weeks of FY19 H1 saw revenues around 5% below last year. Domain, Metro Media publishing and Macquarie Media achieved year-on-year revenue growth; Events revenue was impacted by timing changes in the events schedule; Stuff revenue reflected the closure of loss-making publications; Australian Community Media is seeing continuing softness in regional markets and the impact of drought conditions. Across the Fairfax Group we continue to implement cost savings measures.
  • Seek (SEK)- Result was pre-announced so shouldn’t be too much of an issue. FY19 Guidance (excl. significant items); Revenue growth in the range of 16% to 20% (FY19 vs FY18), EBITDA growth in the range of 5% to 8% (FY19 vs FY18), Investments in Early Stage Ventures of approximately A$35m to $40m, Reported NPAT (incl cost of investments in ESVs) to remain broadly similar to FY18 Reported NPAT. Andrew Bassat commented “Our FY19 outlook for aggressive investment reflects our high conviction view that SEEK is well placed to capture large growth opportunities. We are looking to allocate approximately 80% of the increase in Group Opex and c70% of Group Capex into our largest and highest performing businesses being SEEK ANZ, Zhaopin and SEEK Asia. We are confident these businesses will deliver strong FY19 results and that the aggressive investment will underpin strong returns for long-term shareholders.”


  • Woodside Petroleum (WPL) – NPAT of $541 million; underlying NPAT up 11% to $566m, sales revenue up 27% to $2,251m, operating cash flow up 25% to $1,540m, NWS Project and Pluto LNG unit production costs of $3.6/boe, Free cash flow of $363 million while investing in growth and completing the Scarborough acquisition, interim dividend of US 53cps.


  • CSL – Outlook. “We continue to anticipate strong demand for CSL’s plasma and recombinant products…Continued margin expansion is forecast as the mix of plasma therapies shift towards higher value products and specialty and recombinant products grow. New entrants into the Factor VIII market will continue to intensify competition…We expect to again outpace the market in growing plasma collections but supply of this important raw material remains a limiting factor. In FY19 we plan to open between 30 and 35 new collection centres and forecast a modest increase in plasma costs, tempering overall margin growth…Seqirus is expected to continue tracking to plan…CSL’s net profit after tax for FY19 is anticipated to be in the range of approximately $1,880 to $1,950 million at constant currency. This represents growth over FY18 of 10-14%.  Result was ahead of expectations.


  • Wesfarmers (WES) – Financial results reflect a year of significant change, with continued growth in continuing operations. Retail earnings (from continuing operations & excluding significant items) increased 5.2% during the year, with Bunnings Australia & New Zealand (BANZ), Department Stores and Officeworks achieving very strong results. $2.9bn was slightly ahead of consensus $2.78bn). Industrials earnings from continuing operations were also higher, supported by strong contributions from Chemicals, Energy & Fertilisers (WesCEF) and Bengalla. Final dividend of $1.20 (fully-franked) per share; full-year ordinary dividend of $2.23 per share, in line with prior year. $1.4 billion in losses and write-downs from discontinued operations including Bunnings UK and $300m write down in the value of Target. Double-digit profit growth at Bunnings, Kmart and its remaining industrial businesses offset a weak first-half result at Coles


  • Dexus (DXS) – NPAT of $1.73 billion, up 36.8% on FY17, Funds from Operations (FFO) of $653.3 million, up 5.8% on FY17, Distribution per security of 47.8 cents and AFFO per security of 47.7 cents, both up 5.1% on FY17, Return on Contributed Equity2 of 7.6% and Return on Equity3 of 19.8%, Gearing (look-through)4 of 24.1%. “From an asset value perspective, we expect further cap rate compression of circa 10 to 15 basis points over the next 12 months, driven by continued investment demand, combined with strong property fundamentals in Sydney and Melbourne and improving conditions in Perth and Brisbane. Our market guidance for the 12 months ending 30 June 2019 is to deliver distribution per security growth of circa 5%.”
  • Aveo Group (AOG) – Statutory PAT up 44% to $365.1m; underlying NPAT up 17% to $127.2m; EPS up 16% to 22.0c; funds from operations (FFO) in line with settlements at $115.4 million ($163.9 million in FY17); and NTA up 16% to $3.92.


  • Challenger Limited (CGF) – Record normalised NPAT up 6% to $406m; 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 technical picture isn’t particularly encouraging.
    • Citi has a Buy rc $13.00 (from $13.60). The analyst was disappointed and has cut estimates for EPS in FY19 by 8% and FY20 by 10%. The broker questions whether the guidance for FY19 net profit of around $591-613m includes low quality assumptions.
    • Credit Suisse has downgraded to a Neutral (from Outperform) recommendation with a target price of $12.00 (from $13.20). The result was 4% below the analyst. Margins fell 22bp due largely to gyrations in capital markets. There was also a one-off loss of income on Insurance Linked Securities. They expect asset yield pressures to continue into FY19, and Challenger’s guidance flags a higher tax rate.
    • Deutsche Bank has a Hold recommendation with a target price of $11.30 (from $11.20). The analyst has downgrades forecasts because of lower margins amid expectations that tax will be higher. 12.5% for FY19 and FY20 EPS.
    • Macquarie has an Outperform recommendation with a target price of $12.40 (form $13.00). The result missed the analysts expectations but they point to the 10% pre-tax earnings growth profile, favourable regulatory backdrop and benign credit environment. They also note capital intensity is also continuing to unwind.
    • Morgan Stanley has an Underweight recommendation with a target price of $10.50 (from $11.20). The analyst notes margins are being affected by lower yields and the shift in mix while cost benefits are also elusive. Theey have rolled forward lower-than-expected product margins, a higher tax rate and assumes the net book growth in life is 13.2%.
    • Morgans has a Hold recommendation with a target price of $12.74 (from $13.17). The result was 4% below consensus on margin pressure. The analyst has cut FY19-FY20 EPS estimates by 4-6% to reflect weaker annuity sales and common operating environment margin forecasts. Long-term, thy still like the stock and think it
    • UBS has a Neutral recommendation with a target price of $11.65 (from $12.65). The result was below the analyst’s estimates, reflecting lower life earnings and reduced spread margins and they suggest stagnating annuity sales are unlikely to improve over FY19. They’ve cut FY19 estimates for EPS by 8.8% and find little near-term appeal.


  • Cochlear (COH) – 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); FY19 net profit guidance of $265-275 million, an 8-12% increase on FY18
    • Morgans – Hold recommendation with a target price of $177.84 (from $153.60)
    • Macquarie – Underperform recommendation with a target price of $162.00 (from $166.00)
    • Citi – Neutral recommendation with a target price of $195.50 (from $196.50)
    • UBS – Sell recommendation with a target price of $175.00
    • Credit Suisse – Neutral recommendation with a target price of $195.00 (from $161)
    • Deutsche Bank – Hold recommendation with a target price of $182.00 (from $185)
    • Morgan Stanley – Equal-weight recommendation with a target price of $182.00 (form $184)




US EQUITIES – S&P500 +18 (+0.64%), Dow Jones +112 (+0.45%%), Nasdaq +51 (+0.65%).

Main themes

  • Emerging market currencies rebounded after recent weakness, boosting sentiment. The Lira was up about 7.4% after the finance minister said he will talk to foreign investors.
  • Trump tweet-tantrum – Trump says former FBI agent Peter Strozok should be criminally investigated, while increasing his attack on former aide Omarosa Manigault Newman, calling here a “dog and a “crazed, crying lowlife”.

EUROPEAN MARKETS – Mixed. UK FTSE -0.40%, German DAX 0.00%, French CAC -0.16%


  • The US dollar was up 0.3% at 96.71
  • The Aussie dollar is again lower at 72.38.
  • Euro at another 13-month low

BONDS – 22-yr: +3 bps to 2.63%, 5-yr: +2 bps to 2.78%, 10-yr: +2 bps to 2.90%, 30-yr: +2 bps to 3.06%


  • WTI crude futures closed up US11c at US$67.31, after earlier reaching US$68.37. Saudi Arabia reported that crude output had fallen 200,000bpd to 10.29bpd in July, while OPEC said it expects non-OPEC oil production to increase 2.13mbpd next year (30,000bpd more than 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 US$1.25 at US$67.50/dry ton. (CFR Tianjin port)
  • LME metals – Weaker. Cu -1.78%, Ni -0.96%, Al -0.58%


  • US economic data – July NFIB Small Business Optimism Index 107.9 (prior 107.2); Import Prices 0.0% (prior -0.4%), Import Prices ex-oil -0.3% (prior -0.3%), Export Prices -0.5% (prior 0.3%), and Export Prices ex-agriculture 0.0% (prior 0.4%).
  • European data – Q2 flash GDP +0.4% (expected 0.3%; last 0.3%) to be+2.2%yoy (expected 2.1%; last 2.1%). Industrial Production -0.7% (expected -0.3%; last 1.4%) to be +2.5% yoy (expected 2.6%; last 2.6%). ZEW Economic Sentiment -11.1 (expected -16.4; last -18.7); German ZEW Economic Sentiment -13.7 (expected -20.1; last -24.7) and ZEW Current Conditions 72.6 (expected 72.3; last 72.4). Q2 GDP +0.5% (expected 0.4%; last 0.4%) to be +2.3%yoy (expected 2.5%; last 1.4%). July CPI +0.3% (as expected, last 0.3%) to be +2.0%yoy (as expected, last 2.0%); French Unemployment Rate 9.1% (expected 9.2%; last 9.2%)
  • UK data – Average Earnings Index + Bonus +2.4%yoy (expected 2.5%; last 2.5%). July Claimant Count Change 6,200 (expected 3,800; last 9,000). June Unemployment Rate 4.0% (expected 4.2%; last 4.2%)
  • Chinese data yesterday was weaker than expected.



“If you are successful, it is because somewhere, sometime, someone gave you a life or an idea that started you in the right direction. Remember also that you are indebted to life until you help some less fortunate person, just as you were helped.” – Melinda Gates, American businesswoman born this day in 1964.


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