The ASX200 is up 19 points in mid-morning trade, with politics again a big deal (here and US). Cons Disc and H’care leading, Telcos ease. Stock specific stories. AGL CEO steps down. Results MPL, BXB, MYO. APT back online. Ex-div ANN 33.8c, PMC 6.0c. Econ quiet next week #ausbiz



  • Westpac (WBC) – Q update. NIM fell to 2.06% from 2.1% in 1H18, reflecting higher funding costs and a lower contribution from the Group’s Treasury. Every 5bp movement in BBSW affects the Group’s margins by around 1bp. Compared to 1H18, BBSW was on average 24bps higher in 3Q18, reducing the Group’s net interest margin by 5bps. The remaining 6bps margin decline in 3Q18 was attributable to: 4bps from a reduced contribution from Group Treasury, principally from less opportunities in markets in 3Q18 compared to 1H18; and 2bps from all other factors. These included ongoing changes in the mix of the mortgage portfolio (less interest only lending) along with lower rates on new mortgages. Deposit pricing changes only had a small impact on margins in 3Q18. Common equity Tier 1 capital ratio of 10.4% at 30 June 2018. The ratio was lower than at 31 March 2018 as capital generated over the quarter was more than offset by determination of the First Half 2018 dividend. Credit quality – stressed assets to total committed exposures down 1bp from 31 March 2018 to 1.08%. Mortgage 90+ day delinquencies were up 3bps over the quarter with most States recording some increase. Mortgage 30+ day delinquencies were flat over 3Q18 while properties in possession were lower at just 392.
  • AGL Energy (AGL) – MD and CEO Andy Vesey is leaving the company. Brett Redman stepping in as interim CEO. My Vesey will say in an advisory capacity until 31 December.
  • Macmahon (MAH) – FY18 revenue up 98% to $710.3m, FY18 EBIT of $41.2m (in-line with guidance), vs EBIT loss in FY17; FY18 EBITDA up 274% to $118.9m; FY18 operating cash flow up 236% to $101.9m; $1.1bn of new work and contract extensions; Record order book ~$5.4 billion; Strong tender pipeline of more than $7bn, FY19 revenue expected to be in the range of $950-$1,050m; FY19 EBIT expected to be in the range of $70-80m
  • Medibank Private (MPL) – Group NPAT of $445.1 million, down 1.0% from $449.5 million (at the bottom end of analyst range); Group operating profit $548.8 million, up 9.7%; Final div 7.2c to give full year dividend 12.7c; Health Insurance Operating profit $535.6m, up 7.7%, Premium revenue growth 1.2%, Management expense ratio 8.8%, down 30 basis points; Medibank Health Operating profit up by $11.6 million (32.5%) to $47.3m, Net investment income $95.6 million, down 31.4% principally due to lower market returns, 5bp market share growth. $5.3bn paid to customers. Outlook – Expect flat overall PHI market volume to persist, Targeting modest market share growth in FY19; Expect hospital utilisation growth to remain subdued and ancillary utilisation growth to be slightly lower; Increased productivity target by $10 million to $60 million during FY18-20. Management expenses are targeted to be modestly above those recorded in FY18.
  • Costa Group (CGC) – Revenue up 10.2% to $1,002m and Transacted Sales up 13.3% to $1,336m; Statutory NPAT of $115.2m (includes African Blue acquisition, including $48.3m gain from the consolidation of the 49% interest previously held); EBITDA before SGARA and material items +30.9% to $150.8m; NPAT before SGARA and material items up 26.3% to $76.7m. Final dividend of 8.5c, FY dividend of 13.5c (+22.7%). Key points
    • Value and resilience of diversified portfolio further proven, with Citrus category the standout, mushroom and tomato categories exceeding plan.
    • Ongoing establishment of avocados as vertically integrated fifth core produce category, with production footprint now spanning February to December.
    • Challenging weather conditions in Morocco during spring and early summer resulted in African Blue’s contribution being materially below expectations.
    • China berry plantings proceeding to plan with 100 hectares now planted.
    • Progress on Monarto, South Australia mushroom farm expansion which is on track for additional capacity progressively coming on stream from January 2019.
    • Continued strong cash flow generation and balance sheet position
    • Also announced approval to construct a further 10 hectares of glasshouse at existing facility in Guyra, northern NSW. Capital cost of $67 million, encompasses expansion of nursery capacity and will enhance produce packing capability. The 10 hectares will be dedicated to growing snacking and specialty variety tomatoes. Total planted glasshouse tomato area is now 75% snacking and specialty varieties, compared to 25% truss. The new production is expected to ramp up as from May 2020
    • Based on the current trading conditions, expects to generate low double digit NPAT-S growth in the year ahead to 30 June 2019.
  • Brambles (BXB) – We expect constant-currency sales revenue growth in the mid-single digits, primarily driven by the ongoing conversion of customers to pooled solutions and expansion across geographies. Looks to be at the top end of expectation and allays some concerns. Expects to deliver Underlying Profit growth in excess of sales revenue growth through the cycle. Will separate its IFCO RPC business through demerger (or sale)


  • Mayne Pharma (MYX) – “Following a challenging first half, the Company’s performance was substantially stronger in the second half with revenue up 18%, adjusted EBITDA up 35%, adjusted NPAT up 171% and operating cashflow up 53%. Generic Products and Specialty Brands improved results were driven by a stabilising generic market, new product launches, cost savings from in-house manufacture of select products, portfolio optimisation and growing share of key marketed products. As expected, the extraordinary one-off items we reported in the first half for stock obsolescence and Doryx® returns have normalised to industry standard levels in the second half” Significantly improved trading in 2HFY18 with adjusted EBITDA up 35% to $95m on 1HFY18, driven by the rebound of generic products; Positive operating cash flow of $121.5m with 2HFY18 operating cashflow up 53% on 1HFY18; Expanded Specialty Brands field team to 114 sales representatives which has contributed to the growth of Fabior® and Sorilux® in the second half; Launched six generic products in the US, filed eight products with the US Food and Drug Administration (FDA) including generic NuvaRing® and a New Drug Application (NDA) for SUBA®-Itraconazole anti-fungal capsule; Metrics Contract Services delivered three consecutive years of double digit revenue growth in USD and received its first commercial contract manufacturing revenues; Strategic manufacturing investments at Salisbury, South Australia and Greenville, North Carolina now complete with several generic products transferred in-house during the year which have contributed to improved product margins in the second half


  • National Veterinary Care (NVL) – Revenue growth of 26.0% to $84.2m, Underlying NPAT +6.5% to $6.29m, EPS +2.17c to 10.63c. Top end of guidance given in July. Trading update – General practice organic growth for July 2018 (4 weeks of trading, like for like) is 2.50%. Guidance Measure FY2019 Guidance: Underlying Revenue 25% above FY2018, Gross margin In line with FY2018, Underlying EBITDA margin 16%
  • MYOB (MYO) – Revenue +7.1% to $218m, NPAT -6% to $46m, underlying EBITDA +3% to $93m. Added 186k online subscribers in the last 12 months, on track to add over 200k in 2018. Online subscribers up 61% to 500k. Reaffirming guidance for FY18 and beyond. Medium term target; Online subscribers, 1m by 2020; Total revenue growth, double digit; Organic revenue growth, high single-digit; Underlying EBITDA margins >45% from 2022; R&D investment: <16% from 2022; Free cash flow >$200m from 2022


NEXT WEEK – It’s a pretty quiet one.

  • Australia – CAPEX on Thursday along with building permits
  • China – Official PMI numbers on Friday
  • Japan – household spending and retail sales on Thursday, unemployment and IP on Friday.
  • US – Second estimate of GDP, PCE prices, Chicago PMI

Results – Some of the big names next week. Appen Group (APX), Harvey Norman (HVN), Bellay’s (BAL), Bega Cheese (BGA), Virign (VAH), Ramsay Health Care (RHC).







US EQUITIES – S&P500 -5 (-0.17%), Dow Jones -77 (-0.30%), Nasdaq -11 (-0.13%).

Main themes

  • US trade tensions escalated. Tariffs on $16bn worth of Chinese imports took effect on Thursday (there was hope these would be delayed) and China retaliated with fresh tariffs on $16 billion worth of US imports.
  • US President Trump’s legal situation also weighted on markets.

EUROPEAN MARKETS – All weaker. UK FTSE -0.15%, German DAX -0.16%, French CAC -0.02%.


  • The US dollar was up 0.5% at 95.65, bouncing after 5 consecutive days of losses.
  • The Aussie dollar is lower at 72.51.


BONDS – Not much action! 2-yr: UNCH at 2.60%, 5-yr: UNCH at 2.71%, 10-yr: UNCH at 2.82%, 30-yr: -1 bp to 2.97%%


  • WTI crude futures closed down 3c at US$67.83 a barrel.
  • Iron Ore – IRESS reports iron ore unchanged at US$67.50 a tonne. The CommSec site says China Import (Fines 62% Fe) was down US95 at US$65.95/dry ton. (CFR Tianjin port)
  • LME metals – Mixed. Cu -0.31%, Ni -1.85%, Al +0.48%


  • US economic data – Weekly Initial Claims 210K (consensus 217K; prior 212K) and Continuing Claims 1727K (prior 1729K); June FHFA Housing Price Index 0.2% (prior 0.2%); July New Home Sales -1.7% 627K (consensus 645K; prior 638K)
  • European data – Manufacturing PMI 54.6 (expected 55.1; last 55.1) and Services PMI 54.4 (as expected, last 54.2). August Consumer Confidence -1.9 (expected -0.7; last -0.6); German August Manufacturing PMI 56.1 (expected 56.5; last 56.9) and August Services PMI 55.2 (expected 56.5; last 56.9); French Manufacturing PMI 53.7 (expected 53.5; last 53.3) and August Services PMI 55.7 (expected 55.1; last 54.9). August Business Survey 110 (expected 108; last 109). Q3 Industrial Investments +4.0% (last 5.0%)


“The chief problem with the individual investor: He or she typically buys when the market is high and thinks it’s going to go up, and sells when the market is low and thinks it’s going to go down. Harry Markowitz, American economist born this day in 1927

“Next we consider the rule that the investor does or should consider expected return a desirable thing and variance of return an undesirable thing.”


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