Australian Investment Blog

Good Afternoon everyone

Market Data

What Mattered Today

A pretty good session really with CBA going ex-dividend $2.22 (and dropped just $1.96) taking 11 points off the index while the other banks were well bid – as were the resource stocks led by BHP which put on +3.26% to close at $20.91. The index traded up strongly after a weak open…

We had a range of +/- 31 points, a high of 5537, a low of 5506 and a close of 5535, up +3 points or +0.05%

ASX 200 Intra-Day Chart

Reporting continues to dominate trade and as per the recent trends, some big moves following results played out.

QBE Insurance (QBE) was weak as it should have been – dropping -8.33% to close at $10.24 after releasing 1st half results that were around 10% below expectations. – cash profit $287m, EPS 19.2cps and an interim dividend of 21cps.

QBE has been long touted as a macro story benefiting from a higher $US and higher US interest rates (whenever that happens) however; global commercial premium rates have continued to slide putting massive pressure on margins. A stock with a history of disappointment that certainly lived up to its reputation today.

We have no interest in QBE until it trades well under $10

Source; Shaw and Partners Research

QBE Insurance Daily Chart

BHP was back on the board's post results yesterday, and the stock rallied well – up by +3.26%. We wrote in the morning report today the following….

BHP Billiton (BHP) announced their profit numbers after market yesterday to produce some very negative tabloid style headlines - " BHP loses $US6.38 billion!" but importantly they forecast $US7 billion free cash flow for 2017 at current consensus commodity prices.

The term ‘consensus’ is key here as that number across most of BHP’s commodity complex is substantially below current spot prices. Should commodities remain firm (or even stable) then we’ll see upgrades to consensus commodity price forecasts which will drop directly into upgrades for BHP earnings.

Simply BHP has experienced an awful year, with some big one off painful hits but the clear feeling is that FY16 was the low point for BHP earnings. The toughest of periods is now behind them, and some clear skies and outperformanceis likely.

This chart looks at BHP share price versus earnings per share. Not rocket science, however, it clearly shows that share prices will track earnings. If conditions are ripe for a period of EPS upgrades, then the share price will follow.

Source; Shaw and Partners Research

BHP Billiton (BHP) Daily Chart

CSL Limited (CSL) reported full-year results this morning, and the stock was off sharply – by about 7% at its worst before closing down -5.06% at $110.84. The underlying earnings result was in line with expectations – the dividend was slightly higher however it was FY17 guidance that missed the market.

They guided to 11% growth in underlying net profit and 14% in operating profit for the coming 12 months which fell short of market forecasts of a rebound of about 18%. That was the main cause of the negativity, however, the drop provided an opportunity in early trade.

CSL Limited (CSL) Daily Chart

….Elsewhere, gold stocks were under pressure and continue to correct as expected with Newcrest (NCM) down another -5.47%...As written recently, we think a deeper pullback will play out before a good opportunity prevails.

Newcrest Mining (NCM) Daily Chart

Energy stocks were firm – Origin Energy (ORG) put on +1.74% while Woodside (WPL), a recent inclusion in the MM portfolio was also strong – adding +2.35% to close at $28.30.

Woodside (WPL) Daily Chart

Sectors

Source; Bloomberg

ASX 200 Movers

Reporting this week

NPAT = net profit after tax (consensus numbers)
EPS = earnings per share (consensus numbers)
DPS = dividend per share (consensus numbers)



Select Economic Data – This week; Stuff that really Matters in Green

What Matters Overseas

FUTURES pointing to a reasonable start in the US…



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