MID MORNING MARKETS 20-02-19

The ASX 200 is up 12 points in mid-morning trade after a quiet night. Results dominate. FMG special div, BHP miss but outlook ok, WOW struggling. Wages data today. #ausbiz

m7m8m9TODAY

  • Economic data – Wages data and Westpac leading indicator

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  • Results – Corporate Travel (CTD), Domino’s Pizza (DMP), Fortescue Metals Group (FMG), Sonic Healthcare (SHL), WorleyParsons (WOR), Woolworths (WOW), Wisetech Global (WTC)
  • Ex-dividend – AGL Energy (AGL) 55.0c, Class (CL1) 2.5c, Domain Holdings (DHG) 2.0c, Downer EDI (DOW) 14.0c, Newcrest Mining (NCM) 10.5c, Navigator Global Investments (NGI) 11.2c, Suncorp Group (SUN) 26.0c

TONIGHT

  • US economic data – Housing Starts, Building Permits
  • FOMC Minutes
  • Fed Speak – Cleveland Fed President (non-voter) Loretta Mester

COMPANY NEWS

  • National Australia Bank (NAB) – Update on Chairman and CEO arrangements. 2 special committees have been created to manage the selection process. Andrew Thorburn will leave on February 28.  And Phillip Chronican will start 1 March
  • BHP Billiton (BHP) – Underlying profit from continuing operationsUS$4.03bn, down 8% and slightly below consensus of $4.2bn. Revenue up 1%. Dividend unchanged at 55c. $US835m hit related to unplanned production outages at Olympic Dam, an iron ore train derailment in WA, and fires at its Spence plant in Chile and its Nickel West smelter. At current commodity spot prices, BHP estimates it will generate US$9bn of free cash flow across the full year (1H of US$3.6bn, leaving US$5.4bn in 2H). More optimistic on the Chinese economy.
  • Woolworths (WOW) –  Customer scores have remained strong reflecting Customer 1st Team 1st culture; Positive Christmas trading period despite market slowdown in both Australia and New Zealand; Good progress in digital and data, with Group online growth of 30% in H19; Improved sales performance at BIG W with comparable sales growth of 3.8% in H19; Sale of Petrol to EG Group expected to complete around the end of March; intention to return up to $1.7bn of capital. Supermarket sales growth improved in 2Q to 2.7% (market share from Coles). Outlook – “We expect a more subdued consumer environment to continue for the foreseeable future.” On Big W “Despite the improvement in sales momentum in BIG W, it remains a work-in-progress. We continue to expect a reduction in losses in F19 subject to no further deterioration in trading conditions; however, we are not satisfied with speed of translation of improved sales into profit. We are reviewing our store and DC network and further details are expected to be provided in the next four to six weeks.”

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  • Fletcher Building (FBU) – Outlook is for sharp decline in residential and commercial activity with highly competitive market, increased input costs, although infrastructure activity on Eastern Seaboard expected to remain robust. FY19 EBIT $650-700m

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  • A2 Milk (A2M) – Total revenue +41.0% to $613.1m; EBITDA up 52.7% to $218.4m; NPAT +55.1% to $152.7m; EPS +52.9% to 20.9c; Operating cash flow of $112.3m and a closing cash balance of $287.9m; Group infant formula revenue +45.3% to $495.5m – China label revenue up 82.6% and China consumption market share of 5.7%; and brand leadership in Australia at 35.7%; US milk revenue growth of 114.1% and distribution growth to over 10,000 stores; Australian fresh milk revenue growth of 11.7% and record market share of 10.8%; Increased strategic investment in consumer insights, brand and organisational capability. Expects 2H revenue growth to be continue broadly in line with 1H. The increased investment in brand building in 2H19 is expected to support revenue growth in FY20 and beyond. 2H EBITDA margins will consequently be lower than in the first half, with full year FY19 EBITDA as a percentage of sales expected to be approximately 31-32%.
  • Corporate Travel (CTD) – Positive guidance comment. EBITDA breakdown ANZ +18%%, North America +3.0% (or 15% on a lfl basis), Asia +34%, Europe +30%

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  • Domino’s Pizza (DMP) – Global food sales +14.6% to $1.43bn in 1H; +12.1% lift in EBIT to $108.3m; Overseas markets contributed more than half of EBITDA with $71m EBITDA2 contribution from Europe and Japan. Online sales +16.5%, +$132.2m on pcp. Australia/New Zealand – Network Sales +6.2% to $592.5m (+3.5% SSS), 13 new stores opened; Europe – Network Sales +17.4% to €349.9m (+2.3% SSS), 33 new stores opened; Japan – Network Sales +9.0% to ¥22,936m (+4.8% SSS), 31 new stores opened. Guidance – Store openings slightly lower than originally planned, but Japan and Belgium store outlook upgraded. Sales in first 7 weeks +6.9%. FY SSS to be within guidance, but at the mid-to-lower end of the +3-6% range. As a result, EBIT is expected to be at the lower end of guidance of $227m-$247m.
  • Western Areas (WSA) – Nickel production into concentrate 10.8kt (10.9kt); Strong, debt free, balance sheet with cash at bank of A$134.3m, plus A$16.6m in receivables; Increase in sales revenue to A$123.7m (A$115.8m);Average realised price of nickel (before payability) of A$7.45/lb (A$6.81/lb); EBITDA of A$30.6m (A$36.4m); NPAT of A$0.2m (A$3.5m); Odysseus Project DFS completed and decision to mine announced for a long life, low all‐in sustaining cost project; Bagging facility completed for the Mill Recovery Enhancement Project (MREP), enabling spot sales to commence during the half. Outlook – Full year guidance unchanged.
  • McMillan Shakespeare (MMS) – Revenue up 1.2% to $273.1m, underlying NPATA -3.9% to $42.6m. Dividend 34cps.
  • Graincorp (GNC) – AGM

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  • Sydney Airport (SYD) – Traffic performance. Total passenger growth of 4.9%. Flat domestic and 4.9% international due to timing of Lunar new year.
  • Seven Group Holdings – Trading revenue +45% to $2bn; Underlying EBIT DA +68% to $375m; Underlying NPAT +61% to $257m; statutory NPAT of $60m impacted by non-cash significant items including a $225m mark-to-market impairment of Seven West Media; Underlying EPS +59% reflecting strong operational performance coupled with effective capital management; FF dive  21cps; Operating cash flow +106% to $232m. Outlook – “We remain well positioned to capitalise on demand for mining production, infrastructure investment and domestic gas…supports our guidance of FY19 underlying EBIT to be approximately 25% on FY18.
  • Fortescue Metals Group (FMG)

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OVERNIGHT

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SPI FUTURES +11

US EQUITIES – S&P 500 +4 (+0.15%), Dow +8 (+0.03%), NASDAQ +14 (+0.19%)

Main themes

  • Shares recover from early losses – Trump hinted again he may move back the current deadline.
  • Wal-Mart result strong – ecommerce sales up 4.3% in the Q

EUROPEAN MARKETS – Mostly lower. STOXX500 -0.22%, UK FTSE -0.56%, German DAX +0.09% the exception, French CAC -0.15%.

CURRENCIES

  • The USD is weaker at 96.48.
  • The Aussie dollar is stronger at US71.74c.

BONDS – 2-yr: -3 bps to 2.49%, 3-yr: -2 bps to 2.47%, 5-yr: -2 bps to 2.47%, 10-yr: -2 bps to 2.65%, 30-yr: -2 bps to 2.98%

COMMODITIES

  • Oil – WTI futures were up US50c at US$56.09, the high for the year.
  • Gold futures were up US$21.50 or 1.6% to US$1,343.60 an ounce.
  • Iron Ore – IRESS reports iron ore unchanged at US$87.50 a tonne.
  • LME metals – Mostly stronger. Copper +0.89%, nickel +1.77%, aluminium +0.11%

ECONOMIC DATA, NEWS & POLITICS

  • US economic data – February NAHB Housing Market Index (actual 62; Briefing.com consensus 59; prior 58)
  • HSBC – Missed 2018 profit forecasts due to slowing growth in China and Britain. Said it may delay some investments this year as it
  • Trade talks – China’s Vice Premier Liu He is expected to visit Washington for trade talks at the end of the week.
  • RBA yesterday – Noted “significant uncertainties” on the economic outlook and forecast.
  • Brexit – British Prime Minister Theresa May is scheduled to once again meet with European Commission President Jean-Claude Juncker tomorrow. Mr Juncker has indicated an extension to extending the Brexit withdrawal date past March 29 might be possible.
  • Reuters reported that Greece is at risk of not receiving next month’s EUR750 million tranche of debt relief funds due to the lack of progress on reforms.
  • European data – February ZEW Economic Sentiment -16.6 (expected -18.2, previous -20.9). German ZEW Economic Sentiment -13.4 (expected -14.1, previous -15.0). The Current Conditions Index fell to 15.0 (expected 23.0, previous 27.6). The ZEW Institute noted that it does not expect a rapid rebound in Germany’s economic activity.

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