Australian Investment Blog

WHAT MATTERED TODAY

The local market faced plenty of negative influences today and despite being down more than 1%, its fair to say it held up reasonably well in the face of plenty of pressure. A poor US lead which saw the three major indexes each finish more than -2% lower on the session had the ASX200 poised to open back below 5600 – which it did, before clawing its way back above that level and enjoying most of the afternoon above it, but finally succumbing on the death as some big futures orders hit the tape, forcing the index 17pts lower in the final 10mins. The banks felt the pinch today, both NAB & Westpac tumbled to new 6-year lows. Energy also dropped as global growth fears popped up again as well as analysts posting bearish notes on the oil price as more and more non-OPEC and low cost production comes online while the Tech sector was also on the nose. Resources though were reasonably well supported in a soft market.

Media names took a hit today as reports that advertising spend had fallen 10% year on year. The other half of the consumer services index, the telcos, were strong with traders looking for defensive names, and the telcos bouncing back from the recent ACCC infused weakness. On the corporate side the news flow continues to stay subdued as many start to take holidays. Fletcher Building (ASX: FBU) was active though, selling one of their international businesses which we discuss below.

Overall today, the ASX 200 closed down -68 points or -1.22% to 5589. Dow Futures are currently trading down -3 pts or -0.01%

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE;

Broker Moves; UBS kicked off coverage of one of our Growth Portfolio holdings today, slapping a buy on mining services company Orica (ASX: ORI). The thesis was developed around normalizing mining activity driving demand for Orica’s explosives, with the bank seeing the stock as a leverage play on any resources boom. According to the analyst, the company also has balance sheet capacity to drive earnings with M&A activity and internal investment. Some good press here for a holding of ours and ORI managed to eke out a 9c/0.52% gain in the session, outperforming the broader market, to close at $17.34. We remain bullish ORI

Orica (ASX: ORI) Chart

ELSEWHERE:

· Sigma Healthcare Upgraded to Neutral at UBS; PT A$0.58

· Incitec Rated New Neutral at UBS; PT A$3.70

· Orica Rated New Buy at UBS; PT A$18.86

· DuluxGroup Downgraded to Sell at Morningstar

· F&P Healthcare Rated New Neutral at JPMorgan; PT NZ$12.60

· Beacon Lighting Cut to Hold at Morgans Financial; PT A$1.34

· Accent Group Downgraded to Hold at Morgans Financial; PT A$1.46

· Domino’s Pizza Enterprises Raised to Hold at Morgans Financial

Fletcher Building (ASX: FBU) $4.69 / +2.4%; Construction product manufacturer Fletcher Building has bucked the market weakness to trade higher into the afternoon following the announcement of the sale of their Formica business. Fletcher will receive $US840m for the sale of the international laminates and panels business, that was deemed as non-core to the Fletcher business, to a Netherlands based holding company Broadview. While there are a few regulatory hurdles to jump, no hiccups are expected and the company intends to complete the sale early next year.

The deal has been seen as a positive for Fletcher with the sale price higher than the market could have expected. Just 4-weeks ago, the FBU share price fell significantly on soft guidance for FY19. The business was been squeezed by falling construction rates across Australia and New Zealand in both residential and commercial construction.

Fletcher Building (ASX: FBU) Chart

OUR CALLS

No changes today.

Have a great night

James, Harry & the Market Matters Team

Disclosure

Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.

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