Australian Investment Blog

Good Afternoon everyone

Market Data

What Mattered Today

You’d be forgiven if you thought it was a fairly mundane session for the ASX with the index bouncing around a pretty tight range however the banks offset weakness in the miners, stocks that reported well surged while those that didn’t….didn’t!

A range of +/- 35 points, a high of 5545, a low of 5510 and a close of 5540, up +9 points or +0.16.

ASX 200 Intra-Day Chart

Ansell (ANN) led the mkt higher storming up by +17.74% - again, another stock that delivered ‘less bad’ numbers, the market was negative on – had been building up on the short side then bang…shorts cover in a reasonably illiquid stock and we see a very strong move to the upside.

Ansell (ANN) Daily Chart

Consensus, was weak an ANN and most were expecting a fairly soft result. The result in itself was a beat to expectations – which in fairness were low, however the market seemed to get most excited about restructuring talk, particularly the spin-off of the sexual wellness business (condoms) after they hired Goldman Sachs to start the process.

Shorts have been building here….up to 6.19% from just 1% in September 2015. Brokers on the whole have been negative with the consensus price target sitting at $18.92 – about -18% below today’s closing price. These numbers will be revised tomorrow however it highlights why such a big pop…

Newcrest (NCM) was also out with numbers today and it was slight miss on some of the major metrics however they beat on the ones that really matter. For instance, revenue was 1% below consensus, EBITDA was a 2% miss, EPS was a 2% miss, dividend of 7.5c was a 25% beat however at that level we’re talking semantics (and they shouldn’t have declared one anyway given current debt levels) while probably the biggest element that mkt was focussing on – gearing – was better with net debt of $US2.107bn v the mkt at $US2.189bn.

Free cash flow was a massive beat coming in at $858m vs $658m consensus. At current spot gold price, NCM would be generating an additional >$300m pa FCF than the $858m in FY16 – NCM now has clear options; (i) (further) Deleveraging, (ii) capital management and (iii) growth – capex and exploration. Dividend reinstated.

A result that shows good progress – even though it seemed the mkt was caught up today on some of the elements that were a tad light on. We like NCM but at lower levels…

Newcrest (NCM) Daily Chart

National Australia Bank (NAB) had a quarterly trading update and although these don’t have a lot of detail in them, they provide a reasonable look at trends for the bank. NAB was OK with cash profit of $1.6bn (2% less than some thought), bad debts $228m (inline) , margins lower (which was pretty well flagged), revenue flat, costs down 1%, Common Equity Tier 1 at 9.5%.

So looks a little light on however not by much. The capital was OK and NAB is the cheapest of the big 4 trading on 11.6 times – so the result was enough to push the stock up +0.93% to $27.20.

National Australia Bank (NAB) Daily Chart

JB Hi-Fi (JBH) continued to be bid up today with the stock hitting another all-time high of $30.09 – up 9.90%. The coy beat market expectations on most metrics and smashed their own company guidance benefitting from the wind up of Dick Smith + the ACCC approval for the potential acquisition of the Good Guys….A hard result to fault really and the stock continues with its impressive run….

Total Sales +8.3% to $3.95bn
Comparable Sales up +5.4%
Gross profit up +8.4%
EBIT up 10.1% to $221.2m
NPAT up +11.5% to $152.2m
EPS up +11.5% to 153.8cps

….an exceptional result.

JB Hi-Fi (JBH) Daily Chart

Nick Scali (NCK) is another quality – if not smaller retailer – that gave a great set of numbers on Friday showing that bricks and mortar retailing – if done well can still be very rewarding. They reported profit up +53% on the prior period and the stock is now benefitting from higher liquidity after the sell down from the Scali family. A stock we’ve covered before in the MM morning reports…

Nick Scali (NCK) Daily Chart

On the flip side, Aurizon (AZJ) was soft today with the freight operator missing mkt expectations on their full Year result + guidance was below market expectations. On FY17 numbers consensus was for EBIT of $975m – they’ve guided to $900m-$950m so at the midpoint of that ($925m) it’s about a 5.1% miss. The stock was -6% today.

Aurizon (AZJ) Daily Chart

…and finally a smaller company for all those inclined that looks very interesting. We saw the management from FirstWave Cloud Technology (FCT) last week - it’s a company on focused on security solutions for cloud based applications and they have an existing deal in place with Telstra (TLS) to piggy back off their sales/distribution channels. Sellers dried up today and the stock popped +17% to close at 39.5c. A very interesting story indeed!!

FirstWave Cloud Technology (FCT) 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 – Today & Tomorrow; Stuff that really Matters in Green

What Matters Overseas

FUTURES pointing to a reasonable start…

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