MID MORNING MARKETS 19-02-19

The ASX is up 14 points in mid morning trade after a quiet night. Results dominate with BKL and COH the biggest disappointments. IFL surprises nicely (lessons for AMP), COL growth eases & ALU wins. RBA mintes and BHP ahead #asubiz

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TODAY

  • RBA meeting minutes
  • Results – BHP, Cochlear (COH), Coles Group (COL), Oil Search (OSH)
  • Ex-dividend – Computershare (CPU) 21.0c, IPH 12.0c, Magellan Financial Group (MFG) 73.8c, Zimplats Holdings (ZIM) 26.2c

TONIGHT

  • UK employment and wages data
  • European current account and ZEW economic sentiment
  • US NAHB Housing Market Index

COMPANY NEWS

  • Monadelphous Group (MND) Revenue $830.5m (in line with guidance provided), Significant increase in maintenance revenues, up 25%, Growing contribution from infrastructure markets; Net profit after tax $30.7m; Interim dividend 25 cps, fully franked; Secured approximately $770m of new contracts since beginning of financial year; High level of tendering for major resources construction projects. Outlook – the expected timing of resource construction opportunities, and the large revenue contribution earned from the Ichthys project in the prior period has resulted in the Company forecasting lower construction revenues for 2018/19. Total revenue for the financial year ended 30 June 2019 is forecast to be around 10 per cent less than the prior corresponding period.
  • IOOF (IFL) – Statutory NPAT up 200% to $135.4m; Underlying NPAT from continuing operations up 6% to $100.1m; Total FUMA up 10% in 6 months to $137.8bn; Net platform inflows up 12% to $688m; Cost to income ratio 52.4%, improved 2%; Fully franked dividend of 25.5cps
  • Coles Group (COL) – Group sales +2.6%. Group EBIT down 5.8% to $733m, primarily driven by lower Express EBIT and additional corporate costs associated with being a standalone ASX company; 30% online sales growth. Supermarkets +3.6%, liquor +0.6%, express -1.8%. Supermarket sales growth slowed in the December quarter to 1.3% form 5.1% in the September quarter on the Little Shop promotion ending. No dividend. Net profit down 29.4% (AFR)to $381m (but above expectations of $261m) and supermarket earnings down 26.7%.
  • Cochlear (COH) – Sales revenue +11% (6%cc) to $711.9m and net profit +16%; Cochlear implant units up 5% to 16,740; Reported net profit of $128.6m, up 16% (up 16% in CC), up 11% (11% in CC) adjusted for the impact of the deferred tax asset revaluation in HY18; Interim dividend +11%; AMF patent dispute disclosed as a contingent liability; Maintaining FY19 net profit guidance of $265-275 million, an 8-12% increase on FY18. Revenue growth to be driven by the Services business, with strong uptake of the Nucleus 7 Sound Processor, particularly in the first half; Expect a lower rate of cochlear implant growth across the developed markets for FY19; Emerging market growth rates over time continue to be strong, however, annual growth rates can be variable driven by the timing of tender based activity and macro-economic conditions; Continued investment to retain market leadership and drive long-term market growth with the target of maintaining the net profit margin; and Forecasting a weighted average AUD/USD exchange rate of 72 cents for FY19 (77 cents in FY18) and AUD/EUR of 0.63 EUR (0.65 EUR in FY18).
  • Blackmores (BKL) – Record revenue +11% to $319m; Continued investment in long-term strategic initiatives and brand; NPAT $34m, in line with the prior corresponding period; Announcing Business Improvement Program to target savings of $60 million over three years to fund additional future growth; Interim dividend of 150c. outlook is for modest full-year revenue growth. China sales in Q3 are being impacted by continuing changes to the way consumers purchase our products as well as higher inventory in the trade and a general softening of consumer sentiment. “As a result, we do not expect the second half profit performance to be ahead of the first half result.” Marketing and selling expences +31% and operating performance +12%
  • Oil Search (OSH) – NPAT up 13% to US$341.2 million, a strong result given the temporary shut-in of all production following the PNG Highlands earthquake in February 2018. Stronger global oil and gas prices, with the average realised oil and condensate price up 27% and LNG and gas price 31% higher. This more than offset a 17% decline in production and sales volumes resulting from the temporary shut-in of production, following the February earthquake in PNG, and resulted in a 6% increase in total revenue, to US$1,535.8 million. Unfranked dividend of US8.5c. Production is expected to rebound in 2019, to 28.0 – 31.5 mmboe
  • Seven West Media (SWM) – Strong Metro TV revenue share growth; 38.4% in 1H (36.4% in 1H18), despite softer 2Q ad market; Group operating expenses flat including cricket costs; Underlying EBIT of $146.8m, down 4% YoY excluding 53rd week in FY18; Increased cost out reduction target from $20-30m to $30-40m across FY19;  FY19 underlying EBIT growth target of 0-5%; Group net debt reduced $121m YoY to $589m at 1H; Targeting leverage ratio to reduce below 2x at FY19. Financial targets for FY19 include: Targeting underlying FY19 Group EBIT growth of 0-5%; Increased cost out to deliver $30-40m net group savings in FY19; Leverage ratio to reduce below 2x at end of FY19; Improved second half trend, but expect low single digit decline in metro TV ad market for the financial year; 2H performance to secure #1 ratings and revenue share; BVOD viewing share to grow Seven’s digital revenue by 50%; Seven Studios to deliver seventh consecutive year of EBIT growth
  • Aristocrat Leisure (ALL) – Manasa Thimmegowda (the Plaintiff) has filed a lawsuit in the US District Court for the Western District of Washington seeking redress against Big Fish Games, Inc., Aristocrat Technologies Inc., Aristocrat Leisure Limited and Churchill Downs Incorporated. Aristocrat understands that the Plaintiff alleges that certain games Big Fish Games offers for play are games of chance that are prohibited by Washington law. Aristocrat intends to vigorously defend the action.
  • Orocobre (ORE) – Recent rainfall at the Olaroz Lithium Facility has exceeded 2017 and 2018. There have not been any material production stoppages, nor disruption to the import of supplies or the export of finished product, but production has been lower due to dilution of the brine feedstock. Orocobre now expects FY19 production to be approximately the same as that achieved in FY18.

OVERNIGHT

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SPI FUTURES -3

Main themes

  • US market closed
  • Global trade developments the key influence

EUROPEAN MARKETS – Mixed. STOXX500 +0.23%, UK FTSE -0.24%, German DAX -0.01%, French CAC +0.30%.

CURRENCIES

  • The USD is little changed at 96.90.
  • The Aussie dollar is a little weaker at US71.32c.

BONDS – Market closed

COMMODITIES

  • Brent crude futures were down US17c at US$66.08, while US WTI futures were up US30c at US$55.89, supported by OPEC-led production cuts and US sanctions against Iran and Venezeula.
  • Gold futures were up US$7.30 or 0.5% to US$1,329.40 an ounce.
  • Iron Ore – IRESS reports iron ore unchanged at US$87.50 a tonne. The CommSec site shows iron ore up US$1.45c or 1.7% to US$88.80/a tonne.
  • LME metals – Mixed. Copper +1.00%, nickel +0.57%, aluminium -0.11%

ECONOMIC DATA, NEWS & POLITICS

  • Coca-Cola HBC (London) will buy Serbian biscuit and confectionery maker Bambi for €260m. After initial weakness, shares closed little changed.

QUOTE OF THE DAY

“It is a truth universally acknowledged that as soon as one part of your life starts looking up, another falls to pieces.” – Helen Fielding, British author born this day in 1958.

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