Stocks succumb to virus headlines (QAN)
WHAT MATTERED TODAY
The market opened lower this morning, attempted to rally from the early sell-off before rolling over and sliding into the close The top losers told the risk off story with travel companies front and centre. Qantas dominated the news today (and I suspect that will be the case tonight) as they cut jobs and tapped the market for $1.9bn in fresh equity – Harry covers this below.
The news flow has clearly turned in the last 24 hours with the stats around the virus deteriorating, while more focus domestically is on the impact of reduced stimulus in September. Alan Joyce talked down the timing of the recovery while Wesfarmers CEO Rob Scott was vocal today on the need for further stimulus to fill the gap when Job Keeper etc rolls off in September.
Energy & growth-related stocks hardest hit today while CSL edged up, supporting the broader healthcare space as a result. One area catching my eye is the BNPL stocks, their strong recent run came to an end today with some decent selling kicking in, Z1P down ~7% to $5.49, starting to look interesting again while minnow Openpay (OPY) fell by 9%.
Overseas, US Futures traded down during our time zone while Asian markets were also soft.
Overall, the ASX 200 fell -148pts / -2.48% today to close at 5817 - Dow Futures are trading down -142pts/-0.56%
ASX 200 Chart
ASX 200 Chart
CATCHING MY EYE:
MOVES: The table here looks at moves for key markets over 1 day, 3 months & 1 year. The 3-month rally in the local tech index is a huge 62% hence the profit taking that came in today. Health stocks & consumer staples have lagged the 3-month rally however both sectors love a more risk off environment.
Market Moves
Source: Shaw and Partners
Qantas (QAN) unch: launch a chunky $1.4b institutional placement along with a $500m share purchase plan today with the airline bringing in sweeping changes to keep the businesses in operation and hopefully come out of the crisis in better shape. Institutions were offered stock at $3.65 a share, a healthy but not excessive 12.9% to yesterday’s close. The raise will add 25% to shares on issue with the cash being put to work to support the recovery plan and sure up the balance sheet. Ahead of the full year result, the flying kangaroo managed expectations at the result guiding the market to a small underlying profit for the full year while also releasing $2.8b worth of significant items as outlined below.
Source; Qantas
Qantas will sack 6,000 staff, with another 15,000 furloughed as it continues to operate on drastically reduced flight numbers. Domestic travel is starting to see more demand with flights now back to 15% of pre-COVID levels, however the company does not expect international flights to see any significant rebound for another 12 months. Alan Joyce is aiming fir $15b worth of savings in the business to be stripped in the next three years with the CEO committing to the roll through to FY23. The raise draws a line in the sand for Qantas as it is forced to become a drastically different business. The price looks on the full side for ours with the 13% discount on the tight side considering the number of unknowns still out there.
Qantas (QAN) Chart
BROKER MOVES:
· AusNet Raised to Sector Perform at RBC; PT A$1.75
· Qube Cut to Neutral at UBS; PT A$2.80
· Reliance Worldwide Cut to Sell at CCZ Statton Equities Pty Ltd.
· Adbri Cut to Hold at CCZ Statton Equities Pty Ltd.; PT A$3
· GWA Group Cut to Hold at CCZ Statton Equities Pty Ltd.; PT A$3
· IDP Education Cut to Neutral at Evans & Partners Pty Ltd
· IGO Reinstated Sell at Ord Minnett; PT A$3.70
· Mirvac Group Cut to Hold at Jefferies; PT A$2.58
· FlexiGroup Cut to Neutral at Credit Suisse; PT A$1.50
· Ramelius Cut to Sector Perform at RBC; PT A$2
· Qube Cut to Hold at Ord Minnett; PT A$2.95
· Sonic Healthcare Cut to Hold at Morgans Financial Limited
OUR CALLS
No changes today
Major Movers Today
Have a great night
James, Harry & the Market Matters Team
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