The ASX 200 rallied to a 44-point rise to 7206 (+0.6%) as some confidence returned. Closing on highs. Iron ore prices in Asia pushed higher helping BHP up 0.6% and RIO up 1.2 %. RIO results after hours with a monster dividend of 1040c. BHP is ex-dividend tomorrow and its 210c payout equates to 30 odd points in the index. Base metals and lithium stocks found friends, S32 up 3.4% and PLS up 2.2% after its results. AKE rallied 6.8% with MIN a winner on two fronts up 2.5%. Energy stocks were mixed despite crude rises, KAR up 3.2% on results, WPL slid 1.3% ahead of its dividend tomorrow and STO up 0.6%. Gold miners paused and slipped slightly. NCM down 2.1% and EVN off 3.5%. In the banks and financials, a mixed session with the Big Bank Basket at $178.14 (+0.2%). MQG slipped again but insurers were firmer led by QBE up 1.7% and SUN up 2.0%. MFG ex-dividend. Healthcare better with COH gaining positive broker chatter up 5.1%, CSL up 0.7% and RMD up 2.8%. Industrials firm with results dominating, WOW up 1.4% on better results, TLS up 2.3% finding some friends, Travel stocks better too, QAN up 3.9% and FLT up 3.2%. Tech better led by results from WTC up 4.2% and a bounce in oversold BNPL stocks ahead of Z1P numbers tomorrow, 8.4%. The All-Tech Index rose 2.2%. In corporate news, results dropping thick and fast. PXA did well up 13.9% on numbers, CXL rallying off lows up 11.0% as it presented to shareholders. DMP fell 14.0% on a fall in same-store sales but looks overdone. SCG fell 4.4% disappointing numbers and executive changes. On the economic front, Wage price index (WPI) was up 2.3%. NZ raised rates to 1%. 10-year yields popped up to 2.25%. Asian markets better. Japan closed for a holiday. China up 0.6%, HK up 0.7%
End of Day Podcast – Wednesday, February 23
- Winners: PXA, CXL, HUB, CTT, VUL, PDN, AVZ
- Losers: DMP, CGC, ZIM, AGG, JBH, AEF, UWL
- Positive sectors: Banks. Iron ore. Base metals. Uranium. Lithium. Healthcare. Staples.
- Negative sectors: Gold miners.
- High 7206 Low 7145
- Big Bank Basket: Rises to $178.14 (+0.2%)
- All-Tech index: Up 2.2%
- Gold: Falls to $2623
- Bitcoin: Rises to US$37974
- Aussie Dollar: Steady at 72.31c
- 10-Year Yield: Rises to 2.25%
- Asian markets better. Japan closed for a holiday. China up 0.7%, HK up 0.9%
- US Futures: Dow up around 160 Nasdaq up 111. Euro Stoxx Futures up 0.4%
On the Desk Podcast – Wednesday, February 23
Stocks on the Move
- PXA +13.93% half-yearly results.
- CXL +10.96% results and investor presentation.
- HUB +9.85% broker upgrades.
- TYR +8.62% bounces, broker upgrades.
- CXO +7.28% lithium on the turn.
- PLS +2.15% results and CEO retirement.
- Z1P +8.41% SZL +8.36% BNPL bump. Results and deal tomorrow?
- AVZ +9.03% lithium back in favour.
- CTT +9.52% bargain hunters.
- VMY +9.68% BMN +11.43% PDN +9.09% uranium stocks finding a base.
- DMP -14.02% stuffed crust for now on higher input costs.
- CGC -8.59% broker rethink.
- AEF -4.47% FUM disappoints.
- ICT -10.71% half-yearly results.
- Speculative stock of the Day: Castle Minerals (CDT) +33.33% widespread anomalous lithium at Woodcutters. Decent volume for a change. Risk is back?
In the News
- Domino’s Pizza Enterprises (DMP) – first-half underlying profit of $91.3m missed consensus of $95.5m. Revenue $1.21bn vs consensus $1.16bn. Interim dividend 88.4c (70% franked) vs consensus 89.1c. The pipeline of new store openings remains strong, with the group on-track to expand its network by +500 stores during FY22 (including Taiwan acquisition). Food inflation anticipated in the second half, maintains it is well-positioned to mitigate impacts.
- St. Barbara (SBM) – first-half underlying profit sinks to $15.1m vs year-ago $39.9m. Revenue lower as well at $325.6m vs year-ago $358.1m. No interim dividend was declared.
- Worley (WOR) – first-half underlying EBITA $251m vs consensus $246.3m. Revenue $4.66bn vs consensus $4.46bn. Interim dividend of 25c (unfranked) vs consensus 24.2c. Expects EBITA margins to be sustained into the second half. Notseeing material COVID related impacts on supply chains, site access or project deferrals and cancellations.
- Woolworths (WOW) – first-half profit of $795m and revenue ahead of consensus. Interim dividend of 39c fully franked vs consensus 41c. Inflation has continued to trend upwards with shelf prices in the second half increasing by +2-3% on the prior year reflecting cost pressures experienced by suppliers. Assuming a continued normalisation in the operating environment during Q3, WOW expects improved performance in the second half. BIG W is expected to see a challenging half but is predicted to report a profit in the second half. Like Coles, the soft half is likely to be looked past with performance expected to improve in the second half of the year.
- Wisetech (WTC) – Revenue and operating earnings up 18% and 54% respectively. EBITDA and underlying profit consensus expectations were blown out of the water. Upgraded guidance, now expects EBITDA growth between 33-34% from 26-38% prior. WTC’s signature product CargoWise revenue up 29% on the back of new customer wins, price and increased existing customer usage. Margins up 12bps helped by cost reduction and strong revenue growth. CEO comments, “from WiseTech’s perspective, whilst higher freight rates do not result in immediate revenue growth, we are benefitting from the acceleration of the longer-term structural changes they are driving.”
- Nickel Mines (NIC) – full-year profit of US$176m and revenue both well ahead of consensus. A final dividend of 2c, unfranked was declared.
- Stockland (SGP) – enters into a binding agreement with Mitsubishi Estate Asia to establish Stockland Residential Rental Partnership. Forecast to be accretive to FFO per security from FY23.
- Coronado Resources (CRN) – said profits during the 2021 financial year totalled $189.4m after a loss of $226.5m last year. The company is readying a war chest for M&A activity. Eyeing consolidation of coal assets on the sector. Dividend of US9c, while it has set aside a further $100m to buy back senior secured debt.
- Technology One (TNE) – Founder to step down.
- Schaffer Corporation (SFC) maintained its fully franked interim dividend of 45¢ a share and announced profit after tax of $6.5m for the first half.
- Karoon (KAR) -underlying net profit after tax for the first half of FY22 of $US21.1m, up from $US9.4m. Sales revenue increased from $US23.8m in the pcp to $US186.5m. Production guidance for FY2022 has been narrowed to 4.4m to 4.6m barrels.
- 29Metals (29M) – full-year revenue increased 38 per cent to $600.8m and it reported net profit of $121m, including IPO costs. No final dividend was declared.
- Universal Stores (UNI) – Universal Stores posted an interim dividend of 11¢ a share and a decline in gross profit to $61.2 from $67.9m for H1 FY2022. Sales dropped 8.2%compared with H1 FY21.
- Propel Funeral Partners (PFP) – reported a 14.9% increase in total funeral volumes in the first half. Revenue increased 15.2% to $68m and pro forma operating EBITDA rose 17.8% to $18.4m. The company declared a fully franked interim dividend of 6c.
- The composition of the ASX 200 has shifted radically in the past few months, with the top 20 stocks now comprising close to 60% of the index by market capitalisation when just two months ago, they comprised just 51%. BHP Group alone represents 11.5%.
Economic News/Bond Markets
- Australia hits Putin with sanctions.
- Wage price index (WPI) was up 2.3% on a year ago vs estimates of 2.4%. The RBA sees wages growth hitting 3% in June 2023, minutes last Tuesday highlighted the modest level of wages growth, they argue It is likely to be some time before wages growth will be sustainably at the bank’s target. The RBA wants to see annual wages growth accelerate to at least 3%. The chart below goes back to 1998 when wages growth was ~3.3%. Wages growth bottomed in September 2020 at 1.4% but the pace of improvement has slowed down recently in the December quarter.
- Despite the improvement in nominal wages, real wages which accounts for inflation is still in negative territory.
- Construction work done in the December quarter 2021 fell 0.4% well behind estimates of 2.5%.
- The Reserve Bank of New Zealand raised its official cash rate to 1%. Also agreed to start the gradual reduction of its bond holdings under the Large Scale Asset Purchase (LSAP) program.
- Steel production slumped 11% from last year to 81.7m tons in January, according to estimates from the World Steel Association. The latest numbers from the China Iron & Steel Association shows declining output extending into early February as pollution curbs around the Winter Olympics affected industrial activity.
- China is still trying to put pressure on its coal industry to keep prices stable and prevent a repeat of the power crunch which we saw last year.
- LNG gas prices in China have surged to a record as temperatures plummet.
US and European News
- There are 53,000 people in hospital in the US with CV19.
- US pension giant Calpers has hired a Canadian Nicola Musicco as CIO for the US$478bn fund.
- India is facing an IT skills shortage.
- VW in advance talks to float Porsche. Some have already floated on the ship on fire off the Azores.
- Eyes on Home Depot in the US after results. Predictions of slowing growth weighs.
- RIO Results in London seem to have beaten expectations on some metrics. Net Profit $21.1bn. Dividend 1040c in total includes a 247c special dividend.
A Scotsman (wearing his kilt and a bonnet) walks into offices of private bankers Coutts & Co in the Strand, London (Bankers to the Royal Family since 1820) and asks to speak to the manager.
He informs him that he is going abroad on business for two weeks and needs to borrow £5,000.
The Manager tells him that Coutts & Co would only be delighted to meet his requirements, but that he should understand that since he is not a client of the Bank, it would need some modest security for the loan.
So the Scotsman opens his sporran, takes out the keys and documents of a brand new Ferrari parked in front of the bank and hands them to the manager saying “Will this do?” He also produces the car’s log book and after a phone call everything checks out fine.
The manager agrees to accept the car as collateral for the loan; the cashier hands out £5,000 while bank’s porter drives the Ferrari into the bank’s underground garage for safe keeping.
Over lunch manger tells his colleagues the amusing little story of how a simple-minded Scot from North of the Border secured a loan for £5,000 offering a £120,000 Ferrari as collateral and they all enjoy a good chuckle as they sip their Port.
Two weeks later, the Scotsman returns, repays the £5,000 and the interest, which comes to £125.41.
The manager says, “Sir, we have been more than happy to have had your business and this transaction has worked out very nicely, but we are just a little puzzled. While you were away, we checked you out and found that you are in fact a wealthy property investor. What puzzles us is why would you bother to borrow £5,000 from us?
“The Scotsman replies: “Where else in London can I park my Ferrari for two weeks for only £125.41 and expect it to be still there when I return?”