MID MORNING MARKETS 20-08-19

The ASX 200 is up 20 points in mid morning trade after another +ve night. Gold and Materials lag while Energy best. All about results. The good KGN, IPH & EHE, the bad BHP & SEK, the ugly AHY, MND. RBA minutes ahead.  #ausbiz

m1m2m3TODAY

  • RBA Meeting Minutes
  • Ex-dividend – Computershare CPU) 23.0c, HT&E (HT1)4.0c, Legend Corporation (LGD) 7.0c, Microequities Asset Management Group (MAM) 1.0c, Reverse Corp (REF) 2.8c
  • Results – BHP Group (BHP), SEEK Ltd (SEK), Estia Health (EHE), Oil Search (OSH), Senex Energy (SNX), Tassal Group (TGR), Sonic Healthcare (SHL), Charter Hall Group (CHC), Monadelphous Group (MND), Kogan (KGN), Seven West Media (SWM)

TONIGHT

  • Europe – Construction Output

UK – CBI Industrial Trends Orders


COMPANY NEWS

  • BHP Group (BHP) – Attributable profit of US$8.3bn, Underlying attributable profit +2% to US$9.1bn or -2% to $9.466bn on a continuing operations basis; Profit from operations of US$16.1 billion and Underlying EBITDA of US$23.2 billion at a margin(i) of 53% for continuing operations. Final div of US78c or US$1.33 for the year up 18%. Generally lower than expected.

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  • Tassal Group (TGR) – Record full year results Operating NPAT up 12.5% to $56.6m; operating cashflow +104.9% to $89.9m. Continued strong growth in salmon biomass and sales – Harvest up 7% to 33,036 hog tonnes; sales up 10.3% to 33,856 hog tonnes; Optimised salmon size (4.4kg hog); Live salmon value up 9.4% to $399.9m. Positive salmon fundamentals underpin expected strong growth. Demand again outpaced supply and this is expected to continue with a more gradual growth in supply over the short term, allowing Tassal to optimise pricing and increase salmon returns. Investment in prawns building on our success with salmon delivering diversification and a new growth platform with a shorter working capital cycle and, once established, lower capex requirements.
  • Kogan (KGN) – Gross Sales +12% to $551.8m, Revenue +6.4% to $438.7m; Gross Profit +12.5% to $90.7m; EBITDA +15.6% to $30.1m; NPAT +21.9% to $17.2m; Growth in Active Customer base +15.95 to 1,609,000; Fully franked final dividend of 8.2cps (total FY 19 14.3cps +10%). Update – 1HFY20 has started well with July 2019 unaudited management accounts showing YoY: Gross Sales growth of 18.3%; Gross Profit growth of 32.0%; Kogan Marketplace Gross Sales of $7.1 million
  • Monadelphous (MND) – Revenue $1.608 billion*, in line with guidance provided, Record revenue in Maintenance and Industrial Services; Strengthened position in water and renewable energy; Underlying net profit after tax $57.4 million#; Full year dividend 48 cps, fully franked; Secured $1.35 billion of new contracts and extensions. Generally positive outlook statement, but “A number of construction opportunities, however, are coming to market and advancing to execution later than expected. While growth prospects over the longer term are positive, revenue for the 2019/20 financial year will be dependent on the timing of the execution of work recently secured, as well as the value and timing of future successful awards of additional resources construction contracts.”
  • SEEK (SEK) – Strong revenue result alongside strategic investment. Revenue growth of 18% vs pcp; EBITDA growth of 6% vs pcp1 driven by SEEK ANZ, SEEK Asia and Zhaopin. Achieved guidance despite deteriorating macro conditions during FY19. Good growth in SEEK ANZ and SEEK Asia in weaker conditions; SEEK ANZ: Ongoing revenue growth particularly from depth products; SEEK Asia: Ongoing revenue growth and early integration benefits; SEEK Investments: Strong revenue growth in Zhaopin and across our Investments portfolio. Zhaopin: Strong revenue result across core and adjacent businesses, Early Stage Ventures (ESVs): Strong growth in revenue and operating metrics. Outlook. FY20 Guidance (excl. significant items) – Revenue growth in the range of 15% to 18% (FY20 v FY19); EBITDA growth in the range of 8% to 11% (FY20 v FY19); D&A in the range of A$135-A$140m; Reported NPAT in the range of A$145-A$155m.
  • Estia Health (EHE) – FY19 NPAT of $41.3 million, in line with FY18; FY19 EBITDA* of $94.0 million, up 4.3% on FY18;  FY19 Revenue of $586.0 million up 7.1% on FY18; Average occupancy rate of 93.6% for the year, with an increase in spot occupancy to 94.1% at 16th August 2019; Fully franked full year dividend maintained at 15.8 cents per share; Net bank debt of $110.4 million with $201.0 million in undrawn facilities; Capital investment of $93.8 million in expanding and enhancing the home portfolio; Well prepared for new quality standards, with investment in increasing resident amenity and improvements in quality and safety systems. Average occupancy rate of 93.6%, but at August 16 its occupancy rate had improved to 94.1%. Outlook – Excluding any potential impacts of the Royal Commission and new care home additions, FY 2020 EBITDA on mature homes $86-$90 million. Reflecting the new leasing standard is expected to be in the range of $132-$141m.
  • Sonic Health SHL) – FY2019 result in line with guidance – underlying EBITDA growth 6.7% (constant currency); Revenue growth 11.6% to A$6.2bn; EBITDA growth 13.3% to A$1.1bn; Net profit growth 15.6% to A$550 million; Final dividend up 4.1% to $0.51 per share (full-year dividend up 3.7% to A$0.84); Strategic acquisition of Aurora Diagnostics completed in January 2019; Strategic divestment of non-core GLP Systems completed in June 2019; Growth momentum strong – major opportunities ahead
  • Sydney Airport (SYD) – Traffic performance. Market condition subdued. Highlights – Malindo Air launched its inaugural Sydney flight on 15 August 2019, commencing a daily service to Kuala Lumpur via Denpasar, adding 120,000 seats annually; LATAM Airlines will commence a three per week, non-stop service from Santiago to Sydney from November 2019; Qantas has announced it will add an additional three return flights per week between Sydney and Santiago, transitioning from a Boeing 747 to a Boeing 787-9 Dreamliner. The daily service will add another 20,000 seats to the route annually from late June 2020.

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  • Asaleo Care (AHY) – “The outlook for the remainder of FY19 remains unchanged, with Continuing Operations Underlying EBITDA forecast to be in the range of $80 – $85 million. We expect to see some benefits of continued easing in pulp prices, partially offset by the weaker Australian dollar. No interim dividend was declared.”

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  • IPH – Statutory NPAT +31% to $53.1m, Diluted EPS +29% to 26.7; Underlying EBITDA up 21% to $89.7m; Strong increase in earnings on ‘like-for-like’ basis: Asian business gains from ongoing network effect and short-term impact of client filing activity; Margin accretion in Australia/NZ from AJ Park improved performance; Final dividend of 13 cents per share, 60% franked; up 13%; DRP activated; Interim dividend received from investment in Xenith IP Limited of $576k included in underlying earnings; Successful completion of Xenith IP Group acquisition enhances competitive platform for growth, with compelling benefits for people, clients and shareholders
  • Clinuval (CUV) – Newsletter and Q report.
  • AGL Energy (AGL) – Resignation of Richard Wrightson from the role of Executive General Manager, Wholesale Markets
  • ANZ – APRA has confirmed it will implement its previously announced proposal to reduce limits for Australian ADIs’ exposures to related entities (reducing limits from 50% of Level 1 Total capital to 25% of Level 1 Tier 1 capital). Impact for ANZ Bank New Zealand Limited (ANZ NZ), ANZ could have limited capacity to inject capital into ANZ NZ. changes announced today are effective January 2021

OVERNIGHT

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SPI FUTURES +12

US EQUITIES – S&P500 +35 (+1.21%), Dow Jones +250 (+0.96%), NASDAQ +107 (+1.35%)

Main themes

  • Treasury yields rebounded – easing recession fears
  • US administration said it sees little chance of a recession.
  • Trump said he is “not ready to make a deal yet” with China.
  • US agreed to extend a temporary reprieve to Chinese telecom giant Huawei, extending a license for 90 days for existing customers.
  • Chinese interest rate reform
  • German economy – Finance Minster Olaf Scholz suggests Germany is preparing stimulus plans, and could spend EUR 50bn if there are economic issues,

EUROPEAN MARKETS – All higher. STOXX600 +1.14%, UK FTSE +1.02%, German DAX +1.32%, French CAC +1.34%.

CURRENCIES

  • The USD is a touch stronger at 98.35.
  • The Aussie dollar is a little higher higher at US67.67.

BONDS – 2-yr: +7 bps to 1.54%, 3-yr: +6 bps to 1.49%, 5-yr: +5 bps to 1.46%, 10-yr: + 6 bps to 1.60%, 30-yr: +9 bps to 2.09%

COMMODITIES

  • Oil – WTI futures were up UD$1.34 or 2.4% to US$56.21 after a weekend drone attack on a Saudi oil facility by Yemen’s Houthi forces. The attack caused a fire at a gas plant but oil production was apparently not affected. Offsetting this, OPEC cut its forecast for global oil demand growth in 2019 by 40,000bpd to 1.10mbpd and indicated the market would be in slight surplus in 2020.
  • Gold futures fell 0.97% to US$1,508.70.
  • Iron Ore – CommSec has iron ore down US85c or 0.9% to US$88.70 a tonne.
  • LME metals – Mixed. Cu +0.30%, Ni -1.55%, Al -0.28%.

ECONOMIC DATA, NEWS & POLITICS

  • Chinese interest rate reform – The PBOC aims to reduce financing costs to businesses. Changes the way the loan prime rate (LPR) is calculated. Companies now charged a rate based on the medium-term lending facility (MLF) rather than the official benchmark lending rate. Increase flexibility and transmission of monetary policy. Number of nanks that can submit bids increased from 10 to 18, increasing competition.
  • Trade dispute – President Trump repeated that US is not ready to make a trade deal with China, but talks are continuing. He also said action against Hong Kong protesters could harm trade talks. NEC Director Larry Kudlow says recent phone calls with China were more positive than first reported, but he did not cite anything specific.
  • Apple – Trump said CEO Tim Cook made a “good case” that it would be hard for Apple to pay tariffs, when Samsung does not face the same level of duties given its manufacturing in South Korea
  • Brexit – Leaked internal report by UK government discusses various disruptions that would likely be seen in event of no-deal Brexit on October 31.
  • German economy – Finance Minster Olaf Scholz suggests Germany is preparing stimulus plans, and could spend EUR 50bn if there are economic issues,
  • European economic data – Fina July CPI -0.5% (-0.4% expected; +0.2% prior) to be +1.0%yoy (+1.1% expected; +1.3% prior); final core CPI -0.6% (-0.6% expected; -0.6% prior) to be +0.9% yr/yr (+0.9% expected; +1.1% prior)

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