Market Matters Afternoon Report Thursday 2nd June 2016

Afternoon Report 02/06/2016

Market Matters Afternoon Report Thursday 2nd June 2016

Good Afternoon everyone

Market Data

What Mattered Today

Another soft day for the market – the third in a row with the ASX 200 now off more than -149pts from the recent high of 5427. Both banks and resources equally soft putting decent pressure on the overall index. The range was +/-57pts today. 5327 low, 5270 high and a close at 5278; down -44pts or -0.83%.

ALS Limited (ALQ) was back on the boards after rejecting Bain’s $2.7bn takeover bid which was lobbed at $5.30 a share v a $4.05 close the day prior. ALS reckon the deal ‘significantly undervalues’ the coy, which is pretty typical. Still, the stock was up +27% today on expectation of a higher bid – which seems plausible even though Brokers are not at all keen on the stock. 1 buy, 4 holds, 8 sells; avg PT A$3.63: Bloomberg data

Many in the market would remember the stellar performance of ALQ’s original name sake, Camphell Bros, when the share price hit $12.36 four years ago in the company’s heyday, and was consistently one the ASX200’s best performing stocks at the peak of the (resources) cycle. Now though, the minerals division is a drag on earnings while it’s the life science division that has most near term upside. The current Bid represents a multiple of 11.7x FY 17 EV/EBITDA based on market consensus forecasts – which is materially below the average trading multiple for global peers in the Testing, Inspection and Certification (TIC) sector of 12.5x….so, if Bain are serious, they can probably pay somewhere north of $6.30.

Bank of America Merrill Lynch put the skids under the Aged Care space today with Estia Health (EHE), Japara (JHC) and Regis (REG) all downgraded. The basis for them turning cold the sector seem to be changes to the Aged Care Funding Instrument (ACFI). In simple terms, changes to Govt funding mechanisms mean that it’s likely the providers will lose $$ - around $24 a day per resident according the BAML. They downgraded Japara and Estia to Underperform from Buy, and Regis to Underperform from Neutral. The stocks were down between 5% & 9% today, however we’re not yet interested.

Sectors Today

Source; Bloomberg

ASX 200 Movers

What Matters Overseas

We’ve spoken a lot about this Fridays employment data in the U.S and firming expectations for a June hike. One of the other market moving events this month is the UK referendum on continued EU membership on 23 June... Whether or not we’ll see a ‘Brexit’ and the potential flow on impact to markets.

At this stage, markets (and bookies) are not pricing much of a likelihood and therein lies the risk. We’ve seen many key organisations and world leaders warning about the dangers of ‘Brexit’ yet we’re not seeing this being priced as a major market risk at this stage. Certainly an area to watch over the coming weeks in the lead up to the vote

Global FUTURES Market as @ 4.34pm

Source; CNBC

Regards,

The Market Matters Team
Level 12 28-34 O'Connell St
Sydney, NSW 2000.

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 2/06/2016. 4:30PM.

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