ASX higher as buyers re-emerge from the clouds of negativity (DDR, WEB)
WHAT MATTERED TODAY
Bottom left to top right went the intra-day chart of the ASX today as the bulls recaptured control and pushed the index back up through 6000. The period of consolidation we’ve been highlighting on the daily chart below has now given way and buying momentum has accelerated, as we’ve suggested in recent notes, with such negativity across the market right now with concerns ranging from COVID-19 to excessive valuations, even bubbles in some parts of the market as the AFR speculated today when referring to the Buy Now Pay Later (BNPL) space, it still seems to me the direction of most pain is likely up and we squeeze higher into a FOMO style top.
All sectors ended the session higher today with the risk on IT names doing best led by the Afterpay (APT) juggernaut which is now knocking on the door of $70 putting it on a current market cap of more than $18bn, not bad for a company that listed in 2016 valued at ~$165m. Other stocks in the IT space also shone, our recent buy of Bravura Solution (BVS) added 4.84% while it was also nice to see Lend Lease (LLC) up 6% after their market update yesterday which saw the stock open sharply lower. While I didn’t get a chance to cover LLC yesterday, the update was confirmation of a few things we felt were likely (and already priced in) – we remain bullish the stock from here!
Gold remains a focus for us and although we’re still only holding a small exposure through Oz Minerals (OZL), Newcrest (NCM) is now threatening to break out of its recent range and remains on our radar, cash a slight problem for us at the moment with the domestic portfolio ‘s pretty much fully invested.
Overall, the ASX 200 added +98pts / +1.66% today to close at 6032 - Dow Futures are trading up +102pts/ 0.40%
ASX 200 Chart
ASX 200 Chart
CATCHING MY EYE:
Dicker Data (DDR) +9%: A good session for the IT distributor after updating the market on 1H20 run rates, with a big +18% increase in revenue dropping down to a pre-tax profit increase of 25%. While they’ll put more meat on the bones at their upcoming AGM on the 23rd July, the numbers below put it on a solid run rate to smash current market expectations for the full year (FY revenue exp of $1.87bn), although this stock doesn’t have a lot of analyst coverage. All in all, a good update and the stock looks bullish for new highs.
Dicker Data (DDR) Chart
Webjet (WEB) -2.8%: the rest of the travel stocks were broadly higher today, but Webjet slipped from the pack, falling nearly 3% after pricing up a €100m convertible note deal. The proceeds will be used to reduce debt stress on the balance sheet, with $50m of near term debt repaid and the remaining facility extended out to 2022. The deal was on the cheap side for Webjet at just 2.50% out to 2027, but it continues to raise concerns about the ongoing viability of the company while travel remains under pressure given they raised equity just a few months ago. We prefer other names in the space to get leverage to an “early” reopening of travel.
Webjet (WEB) chart
BROKER MOVES:
- Freedom Foods Cut to Neutral at Goldman; PT A$2.60
- Newcrest Cut to Sell at Morningstar
- Magellan Financial Cut to Sell at Morningstar
- Orora Raised to Buy at Morningstar
- Magellan Financial Raised to Neutral at Credit Suisse; PT A$55
- Saracen Mineral Cut to Neutral at JPMorgan; PT A$5.40
- Suncorp Cut to Hold at Morgans Financial Limited; PT A$9.40
- Star Entertainment Cut to Neutral at Credit Suisse; PT A$3.40
- Paladin Reinstated Buy at Shaw and Partners
- Suncorp Cut to Underperform at Credit Suisse; PT A$8.75
OUR CALLS
Nothing today
Major Movers Today
Have a great night
James & the Market Matters Team
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