Australian Investment Blog

WHAT MATTERED TODAY

The market powered on today, once again finding good buying early and sustaining the strength throughout the day. What was particularly significant was the outperformance relative to the US market which we spoke about in the morning report – it fell ~0.7% meaning we outperformed by ~1.4% in today’s trade alone, and US futures not showing too much excitement as we rallied- the outperformance continues!!! The big four, baring NAB, were higher, while resources also moved up in the day, our switch from Macquarie (+0.74%) to Independence Group (+4.29%) bearing fruit today.

The big Macquarie Conference continued to have a bearing on stocks prices today for those that have presented – pretty much the who’s who in the listed company space – SWM which presented yesterday added a further 11.86% today after yesterday’s +2.6%, Challenger (also yesterday) put on 7% today, Super Cheap Auto added a cool 8.61%, G8 Education put on 6.85%, Citadel up 6.14%, Oz Minerals added 2.81% and yesterday’s purchase IGO added another 4.29% - it appears only buyers were listening today, and most focus was targeted towards stocks that have been under pressure of late – perhaps an element of reassurance playing out after a liquid lunch….

Overall, the index added +0.80% today, up +48pts to 6098pts on the ASX 200 – now just 152pts from our 6250 target. We’d expect some short term consolidation from here after a stellar 5 days…

ASX200 Chart

ASX200 Chart

CATCHING OUR EYE

Broker Moves;

• Clean TeQ Holdings (CLQ AU): Rated New Buy at GMP; PT C$2
• Gage Roads Brewing (GRB AU): Rated New Speculative Buy at DJ Carmichael
• InvoCare (IVC AU): Cut to Equal-weight at Morgan Stanley; PT A$12.60
• Namoi Cotton (NAM AU): Downgraded to Hold at Morgans Financial; PT A$0.51
• Nine Entertainment (NEC AU): Raised to Outperform at Credit Suisse; Downgraded to Sell at Morningstar
• Seven West (SWM AU): Downgraded to Hold at Morningstar
• Sheffield Resources (SFX AU): Rated New Outperform at RBC
• Steadfast (SDF AU): Downgraded to Hold at Morningstar
• Woolworths Group (WOW AU): Raised to Hold at Morgans Financial; PT A$25.87

National Australia Bank (NAB) $29.39 / -0.64%; NAB reported this morning coming in slightly below expectations driven mostly by increased costs (+3%) and weak revenue growth, while also accounting for $755M of restructuring charges in the half. The cash earnings excluding one-off charges of $3.3bln represents a decline on the last corresponding period of 0.2%, only saved by low bad debt charges (which is good) – although the quality of loans seems to have deteriorated somewhat as past due loans increased ~8% to $2.427bil. Along with the result, NAB placed a for sale sign on MLC, their financial advice business, continuing their efforts to divest following the sale of 80% of their life insurance business in October last year as the bank looks to simplify operations.

NAB was weaker today as should be expected when a bank increases revenue by less than the increase in costs, however it wasn’t all bad news. The market isn’t looking for high loan growth numbers, as highlighted by the response to ANZ’s result earlier in the week, but efforts to reduce costs and simplify the banks will be rewarded. In this case the benefits will materialize slower than expected, hence the small move lower today. All-in-all a result that threw up little surprises barring the uptick in personnel costs, and a dividend that was in line with market expectations at 99cents, NAB looks like it’s on the right path (just)!

National Australia Bank (NAB) Chart

OUR CALLS

No changes to the portfolio’s today

Have a great night

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.

Disclaimer

All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 03/05/2018. 4.30PM

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