ASX 200 fell 79 points to 7352 (-1.1%) as banks fell sharply after CBA results prompted questions about the outlook. The Treasurer calling on the ACCC didn’t help. The Big Bank Basket fell to $180.92 (-5%) with CBA down 5.7% and NAB off 4.1%. Insurers slid a little, MPL up 1.3% and MQG down 0.4% with MFG getting a rare broker upgrade rising 7.1%. In the industrials, staples eased, WES reported good numbers and rose 1.3%, WOW slipped 0.8% and travel stocks were mixed as CTD delivered a sub-optimal result cratering 8.7%. Tech was mixed, WTC up 0.6% and CPU dropping 4.0%. Healthcare saw COH rising 7.8% on the kick-off of the buyback, CSL eased and SHL up 1.3%. REITs generally slightly firmer except GMG that fell 0.4%. In resources, BHP rose 0.5%, RIO up 1.5% but FMG delivered a slightly underwhelming number and dropped 0.8%. Lithium stocks depressed. PLS fell 2.7%, IGO off 2.0% and LYC slipped 2.4% despite brokers warming to the story. Gold miners sold off, NCM down 1.8% and NST falling 2.4%. Oil and gas fell too, WDS off 2.4% and STO doing slightly less worse off 0.7%. Coal stocks back in focus, WHC up 3.5%. In corporate news, results dropped think and fast. TWE fell 6.9% on some disappointing numbers, a slight miss, PME jumped 0.7% on its positive results. MYX restated FY22 revenue, PGH removed the interim dividend. NWL reported record earnings and VCX upgraded guidance. On the economic front, all eyes were on Phil Lowe who wore his best hair short to the Senate estimates. And banking arears according to S&P are on the rise. 10-year yields are steady at 3.76%. In Asia, Japan down 0.3%, HK off 1.3% and China down 0.3%. Dow Jones futures are down 98 points. NASDAQ futures are down 66 points.

HEADLINES

• Winners: SGR, GUD, COH, SMR, MFG, NHC, THL
• Losers: BRN, CTT, CTD, TWE, SYA, RNU, CBA, LKE
• Positive sectors: Coal. Tech. Healthcare. REITs. Iron ore.
• Negative sectors: Banks. Lithium. Gold miners. Oil and gas.
• High 7440 Low 7337
• Big Bank Basket: Slides to $180.92 down 5%
• All-Tech index: Down 0.3%
• Gold falls to $2652
• Bitcoin: Better at US$22,212
• Aussie Dollar: Back up to 69.93c
• 10-Year Yield: Steady around 3.76%.
• Asian markets: Japan down 0.3%, HK off 1.3% and China down 0.3%
• US Futures: Dow down 98 Nasdaq down 66

MAJOR MOVERS

• SGR +14.4% spin the wheel time.
• GUD +8.1% lived up to its name with results.
• COH +7.8% buy back kicks off.
• MFG +7.1% broker upgrade.
• SGF +3.5% continuing to kick.
• SMR +7.3% coal stocks up again.
• 88E +9.1% decent volume too.
• PNR -32.95% placement
• EUR -5.41% slipping again.
• JRV -9.09% sellers back.
• BRN -13.56% brain fade and ASX query. Pulls ‘Schultz’ defence.
• CTD -8.70% results beyond underwhelming.
• SYA -6.52% sayonara
• TWE -6.91% corked.
• CBA -5.72% as good as it gets.
• CTT -10.96% luxury concerns.
• Speculative Stock of the Day: Omnia Metals Group (OM1) +58.33% Update on Lac des Montagne project in Canada.
• Above Average Volumes: PTR, LGM, SIH, OAR, NZS, SMX

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COMPANY NEWS

• Commonwealth Bank (CBA) has reported half-year cash profit up 9% to $5.1bn, driven by a net interest margin increase of 18 basis points to 2.1%. The bank’s return on equity also increased by 80 basis points to 14.1%. CEO Matt Comyn attributed the higher profit to volume growth and margin recovery. CBA will pay an interim dividend of $2.10 per share, up 20%. However, the bank’s operating expenses increased by 5% over the corresponding period, and it recorded $511m in loan impairment expenses.
• G.U.D Holdings Ltd (GUD) reported revenue growth of 55.7% and a Statutory NPAT of $45.6m, up 88.7% increase versus pcp, driven by the strength of the core automotive businesses, coupled with acquisitions. The company’s financial metrics indicate stability, and the outlook for the company appears positive with the industry normalising, new vehicle supply momentum expected to improve through FY24, and the Davey operational reset on track.
• Wesfarmers (WES) – Solid results from WES, Net profit for H1 up 14.1% to $1.4bn on the back of a 27% increase in sales to $22.6bn. The company’s retail businesses saw solid sales and earnings growth, boosted by COVID-related lockdowns in the prior period. Bunnings continues to be a star performer as comparable sales growth in the company grew 2.8% despite wet weather conditions impacting trading. Kmart had comparable sales growth of 17.1%, gaining benefits from the closure of target stores.
• Fortescue Metals Group Ltd (FMG) reports NPAT of US$2,368m and EPS of 77 US cents for 1H23. Supported by record shipments of 96.9Mt combined with strong price realisation led to the financial performance. EBITDA was US$4,352m, down 9% to pcp due to a reduction in the realised iron ore price by 9% to US$87/dmt and an increase in C1 cost to US$17.43/wmt in H1 FY23 from US$15.28/wmt in H1 FY22. FMG has strong financials but is overvalued and trading at a ~30% premium.
• Pro Medicus Limited (PME) achieved an after-tax profit of $27.19m, up 31.5% to pcp, with revenue from contracts with customers up 28.3%. Underlying profit before tax also up 30% to $37.22m, driven by growth in the North American market and the successful rollout of contracts with Healius and I-MED in Australia. The company’s cash reserves up 4.4% to $94.53m, allowing it to fund anticipated growth from internal sources.
• Corporate Travel Management (CTD) has forecast a full-year EBITDA of $160m to $180m and underlying profit before tax of $120m to $140m. The company expects a higher revenue/EBITDA margin in the second half. However, despite what appear to be positive results, CTD’s stock price has only risen by less than 1%. CTD faces competition from all fronts, with QAN reporting positive results and trading higher. Nevertheless, CTD has not yet reached pre-pandemic levels of travel, as many businesses continue to hold online meetings.
• Treasury Wine Estates (TWE) – reported a 1.4% rise in revenue to $1.3bn in H1 2022, while net profit rose 72.5% to $188.2m. The company announced an interim dividend of 18 cents per share, up 16.7% from the prior year, and expects to deliver strong EBITS growth and margin expansion in FY23.
• SkyCity Entertainment (SKC) – Reported a net profit of NZD22.8m, up 167.8%, boosted by recovering tourism. Meanwhile, its Adelaide casino’s EBITDA more than doubled to NZD22.8m.
• Fletcher Building (FBU) reported that its net profit fell by 46% to NZD 92m for the first half, which included NZD 150m in flagged construction provisions, while revenue rose by 5%. The company’s EBIT margin increased to 8.4% from 8.2%, and it confirmed its guidance of NZD 800m to NZD 855m for FY23 EBIT. The firm’s interim dividend remains at NZD 18 cps.
• Cochlear Limited (COH)1HY23 financial results show sales revenue up 9% but underlying net profit was down by 10%, primarily due to continued investment in growth activities and an increase in cloud computing-related expenses. COH has a strong financial position with a net cash balance of $505m and has maintained its FY23 underlying net profit guidance range of $290-305m. The interim dividend was $1.55 per share, representing a 72% payout of underlying net profit. COH holds 60% of the global market share with over 40 years of experience in providing hearing solutions they have a strong track record of delivering sales revenue and profits.
• Netwealth Group Limited (NWL) reports FUA up 10.2% to pcp. As of 13 Feb, FUA was $65.1bn, total income up 18.9% to pcp, and underlying EBITA of $47.4m. NWL’s successful acquisition of licensee relationships and partnerships has facilitated the development of platform features and enhancements, further strengthening its market position. Notably, NWL continues to gain market share while the top four institutions that makeup 65.9% of the market share are losing ground.
• Seven Group Holdings (SVW) has reported strong financial results with 1H23 with revenue of $4.6bn up 16%, EBIT of $595m up 16%, and EPS of $0.94, up 18%. The performance was supported by activity in the resources, infrastructure, and construction sectors, which drove material growth in the Group’s Industrial Services businesses. The earnings growth of more than 20% at WesTrac, Coates, and Boral was particularly pleasing.

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ECONOMIC & OTHER NEWS

Key points from Reserve Bank of Australia (RBA) Governor Philip Lowe’s appearance before the Senate:

• Lowe dismissed any notion of a coordinated attack on the bank’s independence and suggested that raising interest rates was unpopular in some quarters of the community. He said that the rapidly rising rents were not due to higher interest rates but to a supply-demand imbalance created by insufficient dwelling construction.
• He also acknowledged that a lot of people were suffering from cost-of-living pressures and expressed sympathy with their plight but said that if inflation was not contained, it would lead to even higher interest rates and more unemployment and said he intended to serve out his seven-year term and added that decisions were made collaboratively by the Reserve Bank board.
• Dr Lowe noted that the central bank’s role was to control inflation and to ensure that inflation expectations did not adjust and stressed that monetary and fiscal policies were not working in opposite directions and that specific measures in particular industries could have an effect on prices.
• Lowe said that monetary policy was acting to slow the Australian economy, which was evident from the decline in house prices and a slowing in the rate of home building.

• Federal Treasurer Jim Chalmers has asked the competition regulator ACCC to investigate banks’ behaviour paying interest on deposit accounts.
• Australian loan arrears in December rose to 3.2% compared with the previous month’s 2.66% as the cash rate climbed, a S&P report says.
• Cboe Australia has announced the retirement of its CEO Vic Jokovic

ASIAN MARKETS

• Preliminary economic data indicate overall growth isn’t yet roaring back since mainland China ended its Covid controls in early December. Road and subway traffic in cities is back above pre-pandemic levels in 2019, a Nomura report said, citing mid-February data. Turnover in freight transport is still down from a year ago, the report said.
• Official loan data for January showed year-on-year growth in loans to businesses, but a sharp drop in that to households.
• Kazuo Ueda is set to become the next governor of the Bank of Japan

US AND EUROPEAN HEADLINES

• Western Intelligence (is that an foxymoron) is reporting that Russian aircraft are amassing on the Ukraine border just in time to celebrate the anniversary of the invasion.
• Berkshire Hathaway has cut its Activision stake as the Microsoft takeover flounders around. Berkshire sells TSMC shares too.
• Nikki Hailey to challenge Trump for GOP nomination.
• Air India places ones of the biggest airplane orders ever from Boeing for 220 and 250 jets from Airbus.

Clarence

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