APRA extends loan leniency (AWC, NST)
WHAT MATTERED TODAY
The Aussie market eventually gave in to the selling pressure today, coming well off the high in similar fashion to yesterday. There were small pockets of strength seen – the supermarkets which we discussed in today’s Income note were in the black, so were gold and telcos – but for the most part equities were broadly lower. The selling came on the back of further lockdown fears with economists rushing to amend numbers lower following the shutdown of Australia’s second largest city.
Banks were the main drag on news APRA would allow a further 4 months of leniency for borrowers looking to defer payments. The original offer was to defer payments through to September, but it had been widely accepted that some measures would be extended. On current data around 10% of mortgage holders have been approved for deferrals which is the equivalent of circa $50b in each of CBA & WBC’s loan books. Business loans have seen around 15% the total outstanding amounts offered repayment leniency.
Afterpay (APT) returned to the screens today and closed at $66 – the same price as they managed to get the raise/sell-down away at. Northern Star was the latest gold name to jump on production updates while Alumina was hit on the back of the ATO chasing additional taxes.
Overall, the ASX 200 ended down -92pt / -1.54% today to close at 6012 - Dow Futures are trading down -58pts / -0.23%
ASX 200 Chart
ASX 200 Chart
CATCHING MY EYE:
Northern Star (NST) +6.46%: jumped today after it followed St Barbara’s announcement yesterday and came out with a solid quarterly update of their own and managed to reinstate 7.5c their interim dividend. The gold miner pulled guidance in late March, at the peak of the crisis as a result of the added safety measures, and the complexity it brought to operations. With the year now complete, Norther Star managed 905koz mined, coming in marginally below the lower end of the withdrawn guidance of 920koz to 1,040koz. Despite the miss, the market was just happy to see a figure close to expectations, with the company managing to generate around $218m of cash in the quarter alone. With many in the market expecting the gold price to trend higher on low or negative real rates, investors should also be pleased to see Northern Star reducing the size of the hedge book, opening it up to increased profits on a strong underlying commodity. Just 15% of production over the next 3 years has been locked in. We are looking to pick up some gold exposure on the back foot and NST is on the shortlist.
Northern Star (NST) Chart
Alumina (AWC) -7.02%: Down sharply today on the back of an unfavourable tax ruling which hurts their dividend by around US1c in FY20. We won’t go into the details other than to say AWC think they are right, the ATO think their assessment is correct, experience suggests that dealings with the ATO don’t always end well with some/part payment likely. So, assuming that AWC will see some cash go out the door which will cap dividend payments in that period - in this case 3Q20 and US1c so far. A negative update from AWC today hence the fall in the stock. We hold in the growth portfolio; today’s news won’t change that.
Alumina (AWC) Chart
BROKER MOVES:
· Afterpay Cut to Neutral at Macquarie; PT A$70
· Wesfarmers Cut to Neutral at Macquarie; PT A$44.50
· JB Hi-Fi Cut to Neutral at Macquarie; PT A$41
· Domino's Pizza Enterprises Cut to Neutral at Macquarie
· Sandfire Resources Cut to Sell at Goldman
· Rio Tinto Cut to Neutral at Goldman
· Coca-Cola Amatil Cut to Neutral at Credit Suisse; PT A$9
· Nickel Mines Rated New Buy at Shaw and Partners; PT A$1.04
OUR CALLS
No changes today
Major Movers Today
Have a great night
James, Harry & the Market Matters Team
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