Banks surge, CSL stalls (WBC, CSL, BKL, STA)
WHAT MATTERED TODAY
We talk a lot about sector rotation at MM and today there was no clearer example as investors sold into the sectors that have been working well and bought into the beaten up banks, ANZ +8.6%, WBC +8.04%, NAB +7.81%, CBA +4.88% leading a 5% rally in the sector. The big 4 alone added +58points to the index today while on the flipside healthcare lost 5% thanks to a decent sell off in CSL which showed how influential that stock now is detracting -28pts from the index.
Overall the market was down early however fought back admirably – banks the main catalyst however by the close we ended marginally down. It seems like the market is due a rest here which makes sense around the 5800 level / 50% retracement of the recent decline.
Overall, the ASX 200 fell -5pts / -0.09% today to close at 5775 - Dow Futures are trading up 142pts/+0.57%.
ASX 200 Chart
ASX 200 Chart
CATCHING MY EYE:
Banks go bang!: A strong session today for the sector which rallied between +8.6% (ANZ) & +4.88% (CBA). While there was no new news out today the trend of better economic outcomes post the virus has finally trickled through to the banks today. We continue to hear that Institutions remain underweight the sector and if we actually start seeing the economic recovery that is being priced in by other stocks / sectors, then banks have further upside, however it’s also a likely reflection of how mature the current recovery is. i.e. no net buying, just rotation out of strength into weakness.
Westpac (WBC) Chart
CSL -6.38%: Hit hard today as one of its competitors (NASDAQ listed Argenx Therapeutics) announced positive topline data from their Phase III ADAPT trial assessing Efgartigimod in patients with Myasthenia Gravis (MG) – a mouthful. The product is a potential threat to CSL’s IVIG segment in the Myasthenia Gravis, Primary Immune Thrombocytopenia (ITP), and Chronic Inflammatory Demyelinating Polyneuropathy (CIDP) indications in the future. Without going into further specifics, this sort of announcement + reaction from the share price today shows the susceptibility of CSL to ‘less positive’ developments. The move also highlights a shift away from growth into deeper value stocks, a move we’ve been discussing in recent notes.
CSL Chart
Blackmores (BKL) Halted-: kept in a trading halt today as they try to raise around $115m to “accelerate growth initiatives” in an effort to produce more sustainable and profitable growth according to the announcement. The raise comes 3 months after a disappointing half year result where expectations were reset despite seemingly receiving a boost in demand on immunity products. This demand has continued, while other parts of the business has been held back by “lower shopping traffic and supply chain constraints.”
Probably most disappointing was that Marcus Blackmore, who owns around 18.5% of the shares of issue, stated he would not participate in the capital raise. With such a large holder on the sidelines, it doesn’t instill a great deal of confidence in the capital raise. The institutional placement of $92m is underwritten, getting the SPP up to size may be a harder task. New shares will be issued at $72.50/share, around 8% below the last traded price. BKL presented to us a few weeks ago and I left the presentation unimpressed. Certainly not one we want to own.
Blackmores (BKL) Chart
Strandline Resources (STA) +6.67%: down the smaller end of the resources spectrum, Strandline is working to develop mineral sands projects in WA and Tanzania. The company presented today at a junior miners conference, particularly talking up their Coburn site in WA. Shaw & Partners’ Head of Research Andrew Hines is pretty keen on the stock, talking up the offtake agreements in place which secures around two thirds of revenue over the first 5 years, providing a great deal of surety to the project in order to get funding in place.. The final feasibility study is just around the corner, while Strandline is working to secure $100m in grants through the Northern Australia Infrastructure Facility. The site is expected to produce 230kt of heavy metal concentrate a year for over 22 years, so with the grant, some debt finance and a small capital raise, Strandline will look cheap once operations are up and running, though still 2 years from turning a dollar. A speccy that might have legs!
Strandline Resources (STA) Chart
BROKER MOVES:
· GrainCorp Reinstated Neutral at Goldman; PT A$4.02
· Newcrest Raised to Neutral at UBS; PT A$33
· Metcash Raised to Buy at UBS; PT A$2.85
· Navigator Global Raised to Outperform at Macquarie; PT A$1.65
· Coca-Cola Amatil Cut to Neutral at Macquarie; PT A$9.30
· Insurance Australia Cut to Hold at Morningstar
· BHP Cut to Sell at Morningstar
· Cleanaway Cut to Sell at Morningstar
· Qantas Cut to Hold at Morningstar
· Sydney Airport Cut to Hold at Morningstar
· Seven Group Cut to Hold at Morningstar
· Scentre Group Cut to Hold at Morningstar
· Coca-Cola Amatil Raised to Neutral at Goldman
· Accent Group Raised to Add at Morgans Financial Limited
· SeaLink Cut to Hold at EL & C Baillieu; PT A$4.30
OUR CALLS
No changes to portfolios today.
Major Movers Today
Have a great night
James, Harry & the Market Matters Team
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