ASX down but shows resilience, Westpac settles for $1.3b (WBC, BKW, GMG, LLC)
WHAT MATTERED TODAY
Obviously a weak session locally coming on the back of a decent sell-off overseas, however considering the +140pts we added yesterday independent of US leads plus the ~2% decline that played out overnight & another -0.40% in US Futures during our time zone today, the ASX off by -0.81%/-48pts feels like a win. As we’ve written umpteen times over the past couple of months, the markets 5700/6200 trading range remains intact and while it does, we need to be respectful of it. Of course, there’s been a lot more action under the hood, today it was decent underperformance from the IT stocks thanks largely to news that Afterpay (APT) was transitioning its CFO (never taken well by the market), the sector down -2.71% while the broader Industrials & Financials were off -0.13% & -0.20% a piece i.e. relative outperformers.
The banks were interesting today, they opened lower and did better throughout the session, the sticker shock of Westpac’s $1.3bn settlement announced this morning prompted selling early however as we suggested this morning, it was within the realms of expectations and importantly, it’s now behind them – Harry covers more on it below.
Property stocks caught a bid today, particularly Abacus (ABP) +3.61% which resides in the MM Income Portfolio. We’ve recently increased our exposure to the sector and now hold both ABP and CLW as more defensive yield style investments - both continue to look good for further gains.
Asian markets were lower across the board today, Japan down -1.11% the best of them while Hong Kong shares lost -1.83%. US Futures opened down -0.50% around our open, rallied to be slightly higher before rolling off into our close.
By the close, the ASX 200 was off -48pts / -0.81% to 5875. Dow Futures are trading down -111pts/-0.42%
ASX 200 Chart
ASX 200 Chart
CATHCING MY EYE
Westpac (WBC) -0.12%: traded largely in line with the rest of its big 4 peers today – a good result on the day it was hit for the largest fine in corporate history. Westpac settled its dealings with AUSTRAC today for a whopping $1.3b, admitting to 23 million breaches of the money laundering and terrorism financing laws 6 months after the issues were raised.
The fine is $400m more than the bank had provisioned for in the first half of the year – the market was largely prepared for that though and while it’s a little more than hoped, it also means a line in the sand has been drawn, the bank can move past the distraction and the market has one less thing to concern itself over. It remains a tough environment out there for banks with little change in sentiment despite the rebound in the economy. Westpac declined to pay a half year dividend but could now look to pay one at the full year results out later in the year given the fine is not crippling the capital position, which remains strong
Westpac (WBC) Chart
Brickworks (BKW) -0.95%: reported a largely inline result today – EBITDA at $281m vs the market at $277.2m was a beat despite the fall of 19% on FY19. The building materials manufacturer noted local demand had remained supported throughout the year even throughout COVID lockdowns while September has seen sales increase as stimulus measure targeted at construction come into effect. US earnings were higher, though largely driven by an acquisition which more than offset temporary shutdowns at their Pennsylvanian plant. While operationally the report was solid, earnings were still driven by strong contributions from the property portfolio. Looking ahead, Brickworks looked to alleviate fears over US expansion which has seen it undertake a number of acquisitions over the last few years. While COVID may have slowed progress on some fronts, they have worked to upgrade plants to improve earnings as we come out of the pandemic. An interesting business, leveraged to the rebound in economic activity, one to watch.
Brickworks (BKW) Chart
BROKER MOVES
Goldman’s penned a bullish note on Lend Lease (LLC) yesterday saying that their plan to alter capital allocation and return targets should see it generate a sustainable growth rate in line with peer Goodman Group. Goodman is obviously a very strong comp in the sector and the performance gap is stark (as shown below). Goldmans went on to say they see an EPS growth rate of about 7%/yr. They have a $16.37 PT on the stock. Plenty of upside if LLC can capture the GMG growth trajectory!
Goodman Group (White) – Lend Lease (LLC) Orange
Elsewhere:
· Service Stream Raised to Buy at Bell Potter; PT A$2.30
· Domain Holdings Cut to Sell at Morningstar
· AusNet Cut to Sell at Morningstar
· Treasury Wine Raised to Outperform at Credit Suisse; PT A$12.30
· Resolute Mining Raised to Buy at EL & C Baillieu; PT A$1.32
OUR CALLS
No changes today
Major Movers Today
Have a great night
James / Harry & the Market Matters Team
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