Australian Investment Blog

WHAT MATTERED TODAY

The ASX continues to oscillate around the 6000 level down mildly today with twice as many stocks in the red, energy, telecommunications and industrials suffering the steepest declines. This week see’s the mini-budget out on Thursday with some more detail around how the various support packages will be rolled out post September, while RBA Governor Phillip Lowe speaks tomorrow on "COVID-19, the Labour Market and Public Sector Balance Sheets" – this should be an interesting update.

US Futures were softer during our time zone today while in Asia, it was green across the screen with China the star adding +2.4%

Overall, the ASX 200 fell -32pts / -0.53% to close at 6001. Dow Futures are trading down -120pts / -0.48%

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE:

HUB24 (HUB) -0.16%: started with a bang, finished with a whimper though still marginally outperformed the broader market after providing a FUA update for the July quarter, rounding out FY20. It was a record year for HUB with further inflows in the final quarter, and the benefit of a strong market increasing FUA by 14% to $17.2b – an increase on $2.1b with a near even split between inflows and market performance.

Advisor numbers continue to grow adding to market share which came in just below the 2% level in a market still dominated by the bank aligned platforms. With a number of brokers signing up through the quarter, and advisors moving away from the old models, we expect market share to continue to climb with HUB the market leader of the independent names.

HUB24 (HUB) Chart

BlueScope Steel (BSL) +3.02%: found some supporters in the analyst department with a number of brokers pushing price targets higher after pre-releasing FY20 results late last week. The company guided 2^nd half EBIT to “around $260 million” which would be -48% on last year, taking full year EBIT to around $560m, off ~60% on FY19. The market’s initial reaction to sell on Friday was more than reversed by today’s move higher. The market had taken a knife to earnings after BlueScope withdrew guidance in March, though today’s announcement has come in just 7% below the previous figure.

The company said that Australian demand was little changed on the first half, and while demand from car manufactures had fallen with shutdowns, the North Star site had maintained utilisation rates above 90%. North America saw the benefit of an improved manufacturing performance and while performance in Asia was mixed, it doesn’t look as poor as first feared. It is another example of the panic that COVID brought far outweighing the impact to the business and the market being forced to boost estimates. They also commented on the start of FY21, saying that steel spreads had tightened while continuing to flag further impacts of COVID. BlueScope is in a good position to benefit from a broader economic recovery though and one to keep an eye on for global growth exposure.

BlueScope Steel (BSL) Chart

BROKER MOVES:

Steve Anastasiou at Bell Potter downgraded Service Stream (SSM) from a buy to a hold and $2.05 PT, down from $2.50. Steve is the No 1 rated analyst on the stock hence the share price weakness today. SSM resides in the growth portfolio but has been a real disappointment in recent times – Bells rationale for the downgrade is based on lower BNB activations. Given the backdrop of a decline in nbn activations, no more nbn construction revenue, and the re-introduction of stage 3 restrictions in Victoria, we believe it will be difficult for SSM to deliver an FY21 result that matches its FY20 performance. With median market consensus expecting SSM to do just that, we are of the view that current market expectations may be too high.

Broker Forecasts for Service Stream (SSM)

Source: Bloomberg

· ALS Raised to Buy at Jefferies; PT A$9

· REA Group Cut to Neutral at UBS; PT A$107

· Codan Rated New Outperform at Macquarie; PT A$9

· OceanaGold GDRs Raised to Outperform at Macquarie; PT A$3.70

· Coles Group Cut to Neutral at Credit Suisse; PT A$18.70

· CBA Cut to Neutral at Citi; PT A$71

· Bendigo & Adelaide Cut to Neutral at Citi; PT A$7.25

· CSR Cut to Underweight at Morgan Stanley; PT A$3.10

· ARB Cut to Sell at Morningstar

· Ramsay Health Raised to Buy at Jefferies; PT A$74

· Ansell Cut to Hold at Jefferies; PT A$43.15

· Japara Raised to Hold at Jefferies; PT 50 Australian cents

· Helloworld Raised to Add at Morgans Financial Limited

· Service Stream Cut to Hold at Bell Potter; PT A$2.05

OUR CALLS

We added to our position in Z1P today in the growth portfolio.

Z1P Co (Z1P) Chart

Major Movers Today

Have a great night

James, Harry & the Market Matters Team

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