Australian Investment Blog

WHAT MATTERED TODAY

Looking at the top movers today it was clearly risk back on, perhaps more so than the underlying +1.3% index gain would imply. The likes of Webjet (WEB) +20%, IVE Group (IGL) +20%, Katmandu (KMD) +15%, NRW Holdings (NWH) +12%, AP Eagers +10% versus Fisher & Paykel Health (FPH) -1.89%, Spark Infrastructure (SKI) -1.99%, Woolworths (WOW) +0.12% & CSL +0.32% - some clear rotation out of the relative performers up the risk curve into those names that were/are at the pointy end of the CV-19 shutdowns.

Banks underperformed today, CBA best +0.91%, NAB worst -0.62% while Macquarie (MQGH) was the clear standout adding more than +6% after they launched a new Hybrid Security Offer – more on that below.

Today the ASX 200 added +70pts / 1.30% to close at 5461 - Dow Futures are trading up +67pts/+0.28%

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE:

New Macquarie Hybrid: MQG this morning launched a new Hybrid offer to raise $400m, it’s a longer dated tier 1 security with first call in 8.5 years’ time. They’re offering a margin over the bank bill rate of 4.7-4.9% and we would assume the lower end of the range. The table here shows the current listed financial hybrids, the longest of which is the CBAPI paying 4.01% over bank bill for 6.9 years. Macquarie is obviously a slightly higher risk, and slightly longer tenor hence the higher yield, however it looks a good rate. The security was bid very well, and the book build opened and closed today only.

Existing Financial Hybrids on Issue

Source: Shaw and Partners

To read the full Listed Debt Hybrid Rate Sheet click here (5 pages)

Tyro Payments (TYR) +8.85%: We’ve talked about Tyro Payments in notes through this pandemic as a proxy for spending and this morning they providedtheir latest weekly trading update. As a reminder, Tyro is/was one of the fastest growing payment terminal providers in Australia. As we flagged at the time, the turning point in terms of daily payments through their machines looks to have passed with transactions now on the up = bullish indicator.

Key takeout’s

· TV in May of $315m. This equates to $39.4m a day to start April and is up 29% on the last week of April for TYR and 16% more broadly for the month on last month;

· YoY growth rate now -20% and in April bottomed at -43%; and

· Expect this to continue comping higher as offline opens up (TYR has a bias towards).

Source: Shaw and Partners

Incitec Pivot (IPL) Trading Halt-: the fertilizer & mining explosives business raised capital alongside their half year report today. The report was better than expected with a ~7.5% beat to expectations on the EBIT line to $159m, up 34% on last year. The beat was driven by the decent growth in explosives in both Australia and the US while pressure from agriculture commodity prices weighed on that half of the business. The company is seeking to raise $600m through the institutional placement, and an additional $75m through an SPP for existing holders.

The raise has been called pre-emptive with IPL having substantial liquidity in the balance sheet in place. They trumpeted long term trends in both Ag and mining, though short-term hits to capex spend might choke earnings. The raise will take the net debt/EBITDA level to 1.9x, with $1.28b drawn of $3.45b available in facilities. At $2/share, the deal represents an 8.7% discount to Friday’s close, adding around 18.6% of shares on issue.

Incitec Pivot (IPL) Chart

Cochlear (COH) +5.14%: was feared as one of the key losers to COVID with cutbacks on non-urgent procedures, Cochlear today confirmed the impact the various shut downs had on activity. They noted revenue had fallen 60% in April, while in developed markets it was down closer to 80% in the month. The impact appears to be short term, with the company noting a number of countries have recommenced hearing aid implant procedures as part of the reopening process. They have cut back on capex while the revenue run-rate recovers with China already at pre-COVID levels implying that it may be another 3-6 months before it full returns – better than some expected.

Cochlear (COH) Chart

BROKER MOVES:

• Reject Shop Raised to Buy at Goldman; PT A$4.75
• GUD Holdings Raised to Buy at Goldman; PT A$10.50
• Dacian Gold Raised to Outperform at Macquarie
• Macquarie Group Raised to Neutral at Citi; PT A$110
• CSR Cut to Neutral at Citi; PT A$3.45
• REA Group Cut to Neutral at Macquarie; PT A$95
• Monadelphous Cut to Hold at Morningstar
• REA Group Cut to Sell at Morningstar
• Appen Rated New Overweight at JPMorgan; PT A$33
• Macquarie Group Cut to Neutral at Credit Suisse; PT A$107.50
• REA Group Cut to Neutral at Credit Suisse; PT A$94.50
• Home Consortium Ltd Raised to Outperform at Credit Suisse
• APA Group Raised to Buy at Citi; PT A$12.51

OUR CALLS

No changes

Major Movers Today

Have a great night

James, Harry & the Market Matters Team

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