Friday 20th November – Australian Market Wrap

The ASX traded in a very narrow range closing down 8 on the day at 6539. For the shortened week, the ASX 200 up 2.1%. All was looking positive until the US futures turned turtle on a spat between the Fed and Mnuchin. Increased lockdown in the US sapping some confidence ahead of Thanksgiving week. AGMs and business updates once again were the centre of attention. The Big Bank Basket firmed to $145.00 as CBA hit a multi month high up 1.4% on APRA handing back $500m. Miners mixed, BHP down again by 1.0%, NCM down 0.8% and BSL giving some back down 2.8%. Energy stocks eased, STO down 1.3% and WPL off 0.6% with OSH under pressure on a broker downgrade, down 5.1%. Industrials drifted off with ALL down 1.8%. Tech stocks flat too, the All Tech Index steady. In corporate news, SOL down 5.0% after REG up 23.4%as it rejected its 185c offer. MSB up 11.3% on its collaboration agreement with Novartis. LLC down 2.7%, H1 earnings expected to be ‘subdued’. IAG is in a trading halt, expects post-tax provision of $865m for potential business interruption claims. Launches $750m capital raising at 505c/share. AX1 up 6.5% on its trading update. ORI down 4.1%, after profit, revenue and EBITDA missed consensus. SYD down 0.7% on its traffic numbers. KGN down another 4.5%, receives strike on its remuneration report. Comments on a strong growth outlook at AGM. Preliminary retail sales revealed a 1.6% lift in October to be up 7.3% on a year ago. Nothing much on the economic front, though Fed and Treasury at odds in the states. 10-year yields fall to 0.85% with the AUD steady at 72.90c. Asian markets mixed again with Japan down 0.5% and China flatlining.

Today’s Highlights

  • ASX 200 down 8 to 6539.
  • High 6562 Low 6536.  Narrow range again.
  • Big Bank Basket rallies to $145.00. Huge rally off lows continues. CBA shines.
  • All Tech up 0.29%
  • Dow Futures down 200
  • Gold steady at AUD$2562
  • 10-year yields slip back to 0.85%
  • AUD steady at 72.90c
  • Bitcoin slightly higher at $18,057
  • Asian markets mixed again with Japan down 0.5% and China flatlining


STOCKS

  • FXL +12.39% Humming along in broker upgrades.
  • MSB +11.31% Novartis deal.
  • MIN +5.18% ambitious plans to double business.
  • FCL +4.80% bouncing back thankfully.
  • AMA -5.62% shares released from escrow.
  • OSH -5.09% broker downgrades on strategy day.
  • SOL -5.00% bids for REG.
  • KGN -4.53% first strike at AGM.
  • EML -4.72% book squaring.
  • URW -3.36%% wind rushing out.
  • 4DS -9.38% profit taking.
  • WBT +9.18%% onwards and upwards.
  • EHE +21.18% coat tails REG
  • 3PL +0.73% yet another bid muddies waters.
  • POS +7.14% positive drill results.
  • HZR +11.11% LCK +5.71% hydrogen plays.
  • Speculative Stock of the Day: Gateway Mining (GML) +50.00% AGM presentation and significant high-grade gold discovery at Gidgee.
  • Biggest Winners: FXL, MSB, SKO, RBL, NIC, HMC and AX1.
  • Biggest Losers: AMA, OSH, DEG, SOL, EML, ELO and KGN.

TODAY

  • Washington H. Soul Pattinson (SOL) -5.00% SOL and Ashburn Pty submit an offer to acquire Regis Healthcare (REG) for 185c/share, reflecting a 25% premium to last night’s close. WHSP has proposed two alternative forms of consideration to Regis shareholders, being full cash consideration or a scrip alternative in a newly incorporated company, allowing Regis shareholders to retain an exposure to Regis as a privately operated business. Ashburn Pty Ltd controls 27.23% of Regis’ ordinary shares on issue. Funding is expected to be provided by cash, undrawn credit facilities and other liquid financial assets on WHSP’s balance sheet. Regis Healthcare rejects the proposal.
  • Mineral Resources (MIN) +5.18% CEO says MIN is set to double in size within three years. At the company’s AGM,CEO Chris Ellison noted plans to achieve iron ore export capacity of 92m tonnes a year, saying: “We believe without any doubt that over the next 2½ to three years we are going to double the entire Mineral Resources business,” “That is doubling in revenue, probably in the number of people we employ, the tonnes we shift and, more importantly, doubling the bottom line.”
  • OM Holdings (OMH) – To continue funding a further $500K of exploration in Bryah Basin Manganese JV, increases stake to 30%.
  • Accent Group (AX1) +6.46% Like-for-like (LFL) sales excluding Auckland and VIC stores up 15.7% vs year ago for the first 20-weeks of FY21. LFL sales including impacted stores up 1.3% vs year ago. Digital sales up 129% vs year ago. On track to open approximately 80 new stores, including new concepts, in FY2021. CEO comments: “With Victorian stores now open post lockdown, trade is strong and well ahead of expectations. We are continuing to see digital sales growth in excess of 100% and customers flooding back to Victorian physical stores since reopening at the end of October. The strength in trade in the other states and New Zealand as previously reported has continued. We do not expect that the recent lockdown in Adelaide will have a material impact on sales given our store footprint and demonstrated capability to pivot to online sales.”
  • City Chic Collective (CCX) -1.46% First 20 weeks of FY21 comparable sales growth of 7.9% vs year ago and 18.7% (ex-Vic).Like-for-like store sales growth (excluding online and Victorian stores) was positive to date in FY21, reflecting the return of consumer spending in stores as restrictions eased. All stores across Australia and New Zealand are now open except for 4 stores in South Australia which were temporarily closed this week following a government directed shutdown due to COVID-19.The strong momentum for ANZ online has continued into FY21.
  • Orica (ORI) -4.07% Full-year underlying profit $299m vs consensus $321.2m.Revenue $5.61bn vs consensus $5.69bn. Underlying EBITDA $956m vs consensus $960.8m. Final dividend 16.5c/share, unfranked. EBIT for the first half is expected to be lower than the pcp, followed by substantial improvement in H2, with overall EBIT growth for FY21. Expect initiatives from strategic priorities to deliver ~$40-50m EBIT benefit in FY21, weighted more to H2.
  • Atlas Arteria (ALX)-2.46%As expected, recent lockdown measures announced by the French Government have resulted in softer traffic at APRR’s French networks. Traffic during the first two weeks of this second lockdown has been more resilient than during the first lockdown earlier in the year. Warnow Tunnel – Germany: Since 2 November, traffic has been around 20-25% lower than 2019 traffic levels. Dulles Greenway – Virginia: Since Q3 when the company reported traffic at 44.8% below 2019 levels, there has been a slow but steady improvement in traffic.
  • Sydney Airport (SYD) -0.73% October traffic down 94.3% vs year ago.Domestic down 92.6% to 187K passengers. International down 97.4% to 38K passengers.
  • Redbubble (RBL) +9.47% Appoints Michael Ilczynski as CEO, effective 27 January 2021. Michael is former CEO of Asia Pacific and Americas for SEEK.
  • CBA (CBA) +1.43% Acknowledges outcomes of APRA’s review which found that CBA had made significant progress in implementing the Remedial Action Plan. As a result, the operational risk overlay imposed on CBA was reduced from $1bn to $500m with immediate effect. This reduction represents an increase in Common Equity Tier 1 capital of 17 bps. The next update will be provided in February 2021.
  • Mesoblast Limited (MSB) +11.31% Entered into an exclusive worldwide license and collaboration agreement with Novartis for the development, manufacture and commercialization of Mesoblast’s mesenchymal stromal cell (MSC) product remestemcel-L, with an initial focus on the development of the treatment of acute respiratory distress syndrome (ARDS), including that associated with COVID-19.
  • Lendlease Group (LLC) -2.69% Confident in pipeline despite COVID-19 impact. H1 earnings expected to be ‘subdued’. Has work in progress with an end value of ~$8.5bn on 30 June. Expects construction margins to recover in FY21. However, subdued new work secured is expected to provide a challenging revenue environment.
  • Insurance Australia Group (IAG) – Expects post-tax provision of $865m for potential business interruption claims. Launches $750m capital raising at 505c/share. As outlined at the AGM, Q1 saw low single digit gross written premium (GWP) growth, seasonally low incidence of natural peril events in the period, and underlying profitability similar to that seen in H2 of FY20. Excluding the earnings impact of today’s announcement, these GWP growth and underlying margin trends have continued into October. As of 20 November, IAG has identified other items which may be recognised in its reported earnings for H1. Collectively, these have the potential to result in a pre-tax charge in the range of $70m-$90m, or $50m-$65m post-tax. Following completion of the capital raising, and after recognition of the additional business interruption provision, IAG’s CET1 ratio is expected to increase to ~1.15 times the prescribed capital amount
  • Kogan.com (KGN) -4.53% To receive a strike on the remuneration report. Trading update (Jul-Oct): Gross sales up 99.8% vs year ago. Gross profit up 131.7% vs year. Adjusted EBITDA up 268.8% vs year. Sees enormous opportunity for further growth in our existing businesses and in the expansion of our portfolio, including potential M&A. Anticipate further growth in Exclusive Brands portfolio business, continued scaling of the Kogan Marketplace and continued expansion of New Verticals.

ECONOMIC NEWS

Business Indicators

Key statistics

  • In November, 24% of businesses reported an increase in revenue compared with 16% in October.
  • One in five (22%) businesses reported having capital expenditure plans for the next three months.
  • The proportion of businesses reporting economic uncertainty as a factor influencing their capital expenditure has halved since August, falling from 59% to 29%.

BONDS

COVID – 19 NEWS

  • Gilead’s Remdesivir no use in CV19 cases after all.
  • Retired Brigadier General Anthony Tata, a top Pentagon official, tested positive for Covid-19.
  • Mexico reported 576 new Covid-19 deaths Thursday night, now the the fourth country whose toll from the virus has surpassed 100,000.
  • South Korean Prime Minister Chung Sye-kyun urged citizens to stay home and cancel gatherings.
  • India hit 9m total Covid-19 cases.
  • South Australia will lift its lockdown early after one worker lied. Not the most popular man in SA this weekend.
  • EU could give vaccines greenlight in second half of December.

ASIAN NEWS

  • Joyy shares have surged after it disputed allegations of fraud by Muddy Waters. The stock rose 17% in U.S. trading Thursday, the largest gain in three years.
  • Joyy said Muddy Waters’s 71-page report contained “numerous errors, unsubstantiated statements, and misleading conclusions” and showed its “lack of a basic understanding of the live streaming industry.
  • Vietnam threatens to shut down FB over content.
  • The Chinese market regulator is expanding its investigation into a state backed coal miner that has defaulted on its payments recently. The probe revolves around deals for Yongcheng Coal & Electricity Holding Group Co., whose missed payment last week rocked the Chinese credit market.

EUROPEAN AND US HEADLINES

  • Fed and Treasury at loggerheads after the Trump administration publicly disagreed over whether to extend the pandemic programs. Mnuchin has said lawmakers should redirect unspent stimulus funding, including money he’s pulling back from the Federal Reserve, to buoy the economy as the U.S.
  • Buzzspot buying Huff post.
  •  Obama’s new memoir sold 887,000 books on day 1. Those CV19 restrictions helping sales.
  • US existing home sales up more than 26% since last year. High end sales have doubled. Seachange destinations going nuts. ‘Unprecedented’ times.
  • Trump campaign pushes ahead with legal challenges.
  • CDC says don’t be a turkey and travel for Thanksgiving.
  • Former Wirecard CEO won’t answer questions in parliamentary inquiry says regulators not to blame.
  • Amazon lays off workers at drone program. These aren’t the drones you’re looking for.
  • 17m Americans now suffering from ‘food insecurity’. Means no food and relying on Foodbank.

And finally…

Clarence

XXXX

Gone fishing back on Dec 2nd…