Wednesday 17th February – Australian Market Wrap | Beeks Downunder-Because not all financial news is boring!

The ASX 200 fell 32 points to 6885 (0.4%) as weak leads from overseas combined with profit taking in growth stocks weighed. A large upward move in 10-year yields also posing question marks on some valuations. The hot BNPL sector turned lukewarm with Z1P down 14.0% a casualty after a scorching run higher came to a shuddering halt. APT fell 3.7% with SZL down 10.0%. Banks were dominated by the WBC results which set off a short squeeze rallying another 4.6%. The Big Bank Basket steady at $159.24. Industrials weakened led by COL down 5.4% on outlook statement and WOW falling 4.6% in sympathy. One of the few bright spots was big miners in BHP up 3.4% following broker upgrades and RIO pregnant with after hours results. FMG fought back 3.0% after the sackings on the Iron Bridge project. Gold miners under serious pressure again, EVN down 10.0% on results and NST copping a hiding losing 7.6%. CSL back in the naughty corner falling 1.6%. Energy stocks modestly higher as the US cold snap disrupts supply. In more corporate news, EML bucked the trend up 16.4%, first-half profit $13.5m. 7c dividend. LYC up 13.4% as China mulls rare earths supply curbs. Travel and leisure names mostly firmer, WEB up 5.0%, on domestic recovery hopes. CTD rose 4.9% on similar grounds. DMP up 7.6% on upbeat results commentary and increased guidance. AHY up 4.8% after a renewed bid from Swedes, Essity. On the economic front, the Westpac–MI Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, rose from 4.24% in December to 4.48% in January. Big move today in 10-year yields pushing up to 1.39%. Dow futures down12 points. Asian markets mainly closed, Japan down 0.6%.

Today’s Highlights

ASX 200 drops 32 to 6885.
High 6938 Low 6863 Closes off lows.
Big Bank Basket steady at $159.24.
All Tech Index down 1.8%.
Dow Futures up 12 points.
Gold weaker at AUD$2313.
10-year yield rises to 1.39%
AUD slips to 77.53c
Bitcoin having another go at $50000. Again.
Asian markets mainly closed, Japan down 0.6%

MARCUS TODAY TEAM INSIGHTS

MARCUS STRATEGY – Busy day for results – WBC up 5% on theirs. Seems to be some switching out of CBA into the other banks after it went ex-dividend yesterday. RIO results after hours this afternoon. Some pandemic beneficiaries falling on results – NWL, BAP, SUL, CAR -) and some pandemic victims rising – WEB and CTD up today – end of Victorian lock down helps. It’s all about ETFs today as it turns out the MT ETF portfolio, without any hassle, is outperforming the Growth and Income portfolios effortlessly. A good reason to get that ETF SMA going as soon as possible. We look at the ETF benefits today. READ MORE

HENRY’S TAKE – Z1P continues to be a stand-out as results loom. Can expectations and emojis be satisfied? Seems not today Josephine. A look at the hunt for the White Whale with an early winner in a 3-bagger. Added OPY to the portfolio yesterday at the open and finished up 20% for the day. Crazy times indeed. Some thoughts and one to watch from a Resource Conference I ‘zoomed’ to yesterday, and as China flexes its rare earth muscles again a look back at an article from October 2019 on strategic metals and LYC in particular. No Ask the Analyst this week. READ MORE

STOCKS

Z1P -14.01% seems rockets go down too.
SZL -10.00% follows in sympathy.
EVN -10.04% acquisition talk spooks market.
APX -9.23% Macquarie downgrades.
EML +16.39% beats estimates despite lockdowns in Europe.
BET +15.27% Matt Tripp joins up, bets $25m.
LYC +13.36% Chinese talking dirty on Rare Earths.
NEA +6.95% brokers back US rollout.
DMP +7.57% Deep Pan results bring cheer.
CRO +16.16% huge volatility, big volume. Fintech optimism.
LVT +16.00% another win on the contract front with big US healthcare company.
FFG -33.33% turns turtle.
BD1 -14.05% profit taking.
RFX -13.40% run over for now.
BNO +19.15% JV feasibility assessment.
Speculative Stock of the Day : Province Resources (PRL) +457.69% huge move huge volume. Newsletter write up. Proposed issue of stock and project presentation. Green hydrogen acquisition. Shares directors with VUL.
Biggest Winners: PDN, EML, BET, LYC, DMP. RMC, NEA and ARB.
Biggest Losers: Z1P, EVN, SZL, APX, NWL, IMU, SWM and NST.

TODAY

Fletcher Building (FBU) +1.51% First half profit NZ$121m vs year-ago NZ$82m and consensus NZ$178.0m. Revenue NZ$3.99bn vs year-ago NZ$3.96bn and consensus NZ$3.96bn. EBIT ex-items NZ$323m vs year-ago NZ$219.0m and consensus NZ$270m. Interim dividend of 12cps. FY Guidance: FY21 Group EBIT (excluding significant items) to be in the range of NZ$610-660m. Current indicators point to core volumes in NZ and Australia remaining at present levels through H2, with robust demand for Residential housing in NZ. The board also expects to be in a position to approve a final FY21 dividend.
Brambles (BXB) +1.54% H1 underlying profit US$295.2m vs consensus US$337.5m. Revenue US$2.57bn vs consensus US$2.47bn. Underlying profit US$465M vs consensus US$464.2m. Interim dividend US$0.10, 30% franked. Outlook:A progressive recovery in the Automotive business. Sales revenue growth between 4-6% at constant FX rates, with improved Underlying Profit margins including an increase in US margins of ~1 percentage point. Free Cash Flow expected to fund dividends and core business capex to support growth, the impact of lumber inflation on pallet prices and investments to further develop digital and efficiency objectives. Dividend payout ratio between 45% to 60%, in line with Brambles’ dividend payout policy. The share buy-back programme to continue subject to the ongoing assessment of the Group’s funding and liquidity requirements in the context of increased economic uncertainty.
Crown Resorts Ltd (CWN) -0.72% Gaming and Wagering Commission of Western Australia formally recommends inquiry into Crown Perth operations.
HomeCo Daily Needs REIT (HDN) +1.50% H1 Funds From Operations (FFO) $3.1m. Reports H1: Revenue $6.8m. Adjusted EBITDA $4.1m. Net Profit after tax -$22.2m. $1.34 Net tangible Assets per unit versus $1.33 Oct-20 Product Disclosure Statement balance. First distribution of 2.4 cpu is scheduled for the 4 month period to 31-Mar-21 (100% tax deferred) and then transition to quarterly distributions. FY21 Guidance: FY21 FFO guidance of $20.5m (4.2 cents per unit) +9% vs prior Product Disclosure Statement FY21 FFO of $18.5m (3.9 cpu). FY21 PDS distribution per unit of 4.2 cents per unit is reaffirmed.
Treasury Wine Estates (TWE) +2.42% H1 Net Sales Revenue by region: Australia & New Zealand $323.8m vs year-ago $325.8m. Americas $535.1m vs year-ago $612.4m. EMEA $217.9m vs year-ago $190.4m. Asia $333.2m vs year-ago $407.5m. EBITS by region: Australia & New Zealand $75.3m vs year-ago $85.9m. Americas $83.1m vs year-ago $98.3m. EMEA $25.0m vs year-ago $32.0m. Asia $127.2m vs year-ago $175.5m.
Westpac Banking (WBC) +4.58%Q1 cash earnings $1.97bn. Q1 trading update: Statutory net profit $1.70bn. Net interest margin 2.06%, up 3bps from 2H20. Common equity tier 1 capital ratio of 11.9% at 31-Dec-20, up 74bps over the quarter and 111bps over the year. Assets: Stressed assets to total committed exposure fell 15bps. Total provisions to credit risk weighted assets of 158bps. Deferrals continuing to decline.
carsales.com (CAR) -1.58% First-half underlying profit $74m vs consensus $66.3m. Revenue $210m vs consensus $208.9m. Adjusted EBITDA $126m vs consensus $102.9m. Interim dividend 25c, fully franked. Outlook: Forecast moderate Adjusted revenue growth and solid Adjusted EBITDA and Adjusted NPAT growth in FY21, assuming a continuation of the current operating environment for the balance of H2 of the year.

Domino’s Pizza Enterprises (DMP) +7.57% H1 underlying NPAT $96.2m vs year-ago $72.4m. Revenue $1.10bn vs consensus $1.08bn. Same store sales growth +8.5%. EBITDA $218.7m vs consensus $210m. Interim dividend 88.4c/share, 50% franked. FY21 trading update (first 7 weeks of H2): Network Sales Growth +20.9% y/y. Same-Store Sales Growth +10.1% y/y. New Organic Store Additions +11 stores. Changes in trading conditions, and the DMP’s ‘agile’ response to these changes, has lifted expectations for FY21 performance to be above 3-5 Year Outlook. 3-5 Year Outlook unchanged: +3-6% annual same-store sales growth. +7-9% organic new store openings annually. Annual net capex $60-100m.
EML Payments (EML) +16.39% First half revenue $95.3m vs consensus $90m. Profit -$25.7m vs year-ago $4.3m and consensus $3.8m. EBITDA $28.1m vs consensus $26.9m. FY Guidance (Jun 2021): EBITDA $50-54m vs consensus $52.8m.
Coles Group (COL) -5.39% H1 EBIT $1.02bn vs year-ago $910m andconsensus $929.9m. Revenue $20.57bn vs year-ago $19.05bn and consensus $20.52bn. Profit $560m vs year-ago $489m and consensus $497m. Interim dividend 33cps vs year-ago 30cps.
Cedar Woods Properties (CWP) +0.28%H1 Net Profit after tax (NPAT) $22.4m vs year-ago $10.2m. Reports H1: Revenue $169.2m vs year-ago $128.8m. At the end of December 2020, had $380m in presales vs year-ago $340m. Interim dividend $0.13/share (fully franked). FY21 Guidance: NPAT ~$29M vs consensus $26.6m. Outlook underpinned by presales of $380m.
Amplia Therapeutics (ATX) +5.56% commences multiple ascending dose study in the Phase 1 clinical trial of AMP945.
Netwealth Group (NWL) -9.10%H1 Net Profit after tax (NPAT) $27.6m vs year-ago $20.5m. Reports H1: NPAT consensus is A$25.6m. Revenue $72.4m vs consensus $71.3m. EBITDA $40.5m vs consensus $37.4m. Fully franked interim dividend of 9.06cps. Outlook: Netwealth expects to benefit from ongoing industry consolidation and change. FY2021 Funds under administration net inflows are expected to be in the range of $8.5bn to $9.0bn. As a result of the changes to pricing, do not expect Funds under administration fee income to increase significantly in 2H2021 compared to 1H2021.
Whitehaven Coal (WHC) -1.26% First half profit $94.5m vs consensus $74m, no dividend declared. Revenue $885.1m vs consensus $712.8m. EBITDA $37.2m vs consensus $44.0m. Due to the adverse impact of the significant contraction in coal prices has had on earnings for the period, the board has determined an interim dividend will not be declared. FY21 Guidance: Managed coal sales 19.0-20.0Mt, unchanged. Managed ROM coal production 21-22.5Mt, unchanged.
Evolution Mining (EVN) -10.04% H1 underlying profit $234.0m vs consensus $229.1m.Revenue $982.2m vs consensus $971.9m. EBITDA $514.6m vs consensus $493.8m. Interim dividend 7c, unchanged from last year.
Corporate Travel Management (CTD) +4.94% H1 underlying profit $26m vs year-ago $38.2m. Revenue $74.2m vs year-ago $222.3m. Adjusted EBITDA -$15.7m vs year-ago $64.5m. Outlook: not in a position to offer 2H21 guidance. Expectation that ANZ and EUR regions are profitable in 2H21.
Tabcorp Holdings (TAH) -1.12% First-half underlying profit $207m vs consensus $174.4m.Revenue $2.87bn vs consensus $2.80bn. Adjusted EBITDA $560m vs consensus $526.3m. Interim dividend 7.5c (fully franked).
Charter Hall Group (CHC) -6.97% H1 operating EPS (OEPS) 27.8c vs consensus 27c. Operating earnings $129.3m vs consensus $126.1m. Profit $173.2m vs year-ago $313.2m and consensus $126.1m. Total Distributions of 18.6cps, +6% vs year ago. FY21 Guidance: Post-tax OEPS of no less than 55.0 cps vs prior 53.0cps. Dividend growth of +6% y/y, unchanged.
St. Barbara (SBM) -4.78% First half underlying profit $39.9m vs year-ago $34.7m and consensus$56.5m. Revenue $359.4m vs consensus $355.7m. EBITDA $147.4m vs year-ago $135.4m and consensus $140.8m. Interim dividend 4c, fully franked.
Pacific Smiles Group (PSQ) +4.21% H1 underlying Net Profit after tax $10.4m vs consensus $7.5m. Reports H1: Revenue $78.4m vs consensus $78.3m. Adjusted EBITDA $21.2m vs FactSet $17.5m. Dividend $0.024, fully franked. FY21 Outlook: Underlying EBITDA growth +40-50% year on year vs prior +35-45%. Opening 15 new dental centres vs prior 14, 8 opened in H1 and 7 committed for H2. Patient Fee growth +25-30%. Dividend pay-out ratio within the policy range of 70-100% of NPAT.
Reject Shop (TRS) +2.02% H1 underlying Net Profit after tax (NPAT) (pre-AASB 16) $16.3m vs year-ago $11.1m. Reports H1: Statutory NPAT A$17.0m. Revenue $434.3m vs year-ago $435.7m. EBIT (pre-AASB16) $23.3m vs year-ago $16.1m. No interim dividend has been declared in 1H21. Outlook: 1H21 performance should not be used as an indicator for H2 of the financial year. Typically generates a higher proportion of full year sales in H1 and has reported H2 EBITDA and EBIT losses over the past two financial years. The same is expected in 2H21. COVID-19 continues to impact sales performance with January and February sales adversely impacted by the Brisbane, Perth and Victoria lockdowns, COVID-19 concerns in New South Wales, and changing State border restrictions. Stores in CBD locations and large shopping centres continue to be negatively impacted by reduced footfall.
Webjet (WEB) +5.02% First half underlying profit $50.4m ex-AA vs year-ago $55.1m.Revenue $22.6m vs year-ago $217.8m. Underlying EBITDA -$40.1m vs year-ago $87.3m. Webjet is not providing earnings guidance for FY21, and has not declared an interim FY21 dividend. Has deferred payment of its FY20 interim dividend payment, which was due to be paid on 16-Apr-21. It will be reviewed again following 1H22 results later this year. FY21 outlook: 2H21 YTD continues to be impacted by ongoing travel restrictions and border closures. Trading for the rest of FY21 is expected to be in line with 1H21.
Vicinity Centres (VCX) -1.56% H1 adjusted funds from operations (AFFO) per security (cps) 5.45 vs year-ago 8.10 and consensus 3.0. Net property income $344.m vs consensus $326.7m. Profit -$394.1m vs consensus $215.6m. Includes Property revaluations $512.1m. Interim distribution 3.4cps. Outlook: Despite the improvement in trading conditions there remains uncertainty due to the pandemic and as such full year earnings and distribution guidance for FY21 will not be provided at this time. FY distributions to be within payout ratio range of 95% – 100% of AFFO.
Super Retail Group (SUL) +1.99% H1 normalised profit $175.6m vs provisional $174-177m and consensus $172.4m. Revenue $1.78bn, in line with provisional. Segment EBIT $271.9m vs year-ago $128.1m and consensus $261.9m. Interim dividend 33cps, fully franked. Outlook: The group remains cautious on the outlook for H2 given the uncertain economic environment.
InvoCare (IVC) -3.73% To recognise $26.5m in pre-tax significant items in FY20. Expects FY: Operating EBITDA ex items $107.0-112m vs consensus $109.8m. Profit -$7.0m to -$12m. Ex-items $14-19m and consensus $35.2m.

ECONOMIC NEWS

Between the week ending 14 March 2020 and the week ending 30 January 2021:

Payroll jobs decreased by 1.9%
Total wages decreased by 3.4%

Between the week ending 16 January 2021 and the week ending 30 January 2021:

Payroll jobs increased by 1.3%, compared to an increase of 4.1% in the previous fortnight.
Total wages paid increased by 0.4%, compared to an increase of 3.8% in the previous fortnight.

The six-month annualised growth rate in the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, rose from 4.24% in December to 4.48% in January. WBC economist Bill Evans had this to say, ” We expect progress on inflation and wages to be particularly slow. On the other hand the RBA Minutes assessed that there had been no signs of deterioration of funding and credit conditions in the financial system.”

The Comings and Goings

CV19 NEWS

Melbourne and Victoria reopen but masks still in place.
South Korea reported 621 new coronavirus cases, the most in six weeks.
U.S. hospitalisations from the coronavirus have plunged 39% from a winter peak less than four weeks ago.
New Zealand reported two new community cases of Covid-19.
Vaccine Tracker: 181m doses. 79 countries. US: 56.1m 1.67m doses a day.

BOND MARKETS

ASIAN NEWS

Quiet. Too quiet.
HKSE volumes now 4 times London’s.

US AND EUROPEAN HEADLINES

Bitcoin blast off

Cold snap continues in US. Disrupts vaccinations and oil supply. Another storm on its way. 73% of USA covered with snow.
Buffet reveals his three top buys. Has been a secret up until now. Verizon Communications Inc., insurance broker Marsh & McLennan Cos. and Chevron Corp. Bet Cathie is buying better.
US 10 year yields hit 1.3% highest in a year.
Citi loses bid to recover $500m sent to Revlon as a loan by mistake. Happy to give Citi my bank details if they are that generous.
Marriott CEO Soreneson dies at 62.

And finally….