Aussie economy in good shape, index back above 6000 (BHP, MTS, MYO, XRO)
WHAT MATTERED TODAY
The market continues to chop around the 6000 level as the market rallied back above that level today. Buying was spurred on by strong Aussie GDP data released late in the morning showing a growth of 1% for the quarter, and 3.1% year on year. It was the resource names taking the index higher as the commodity index rebounded from yesterday’s weakness, oil the biggest beneficiary of this. Banks were weak, CBA in particular which had a large range, initially opening higher before falling more than 1% to finish $69.23. Westpac, ANZ & NAB were also lower with Morgan Stanley talking down the dividends – we tend not to agree with this view, although NAB’s dividend seems most susceptible, a view we discussed for the income report three weeks ago here.
Hear James talk about state of the market in today’s Direct from the Desk here:
Overall, the market put on 30pts or +0.5% to close at 6025.
ASX200 Chart
ASX200 Chart
CATCHING OUR EYE
Broker moves; Morgan Stanley came up with an interesting call on the accounting software providers today, initiating Xero with a buy, and MYOB with a sell. MYOB has come under fire recently after their proposal to buy a portion of Reckon, another software provider, fell through due to regulatory delays. We wrote about this last week, identifying the outperformance XRO is having over MYO that was outlined by Morgan Stanley today:
MYOB’s business is getting creamed by the more aggressive competitor Xero (XRO) with the proposed deal to buy some of the Reckon Business seen as a way to claw back some lost ground, however regulators delayed the move and today MYO have walked – unable to come to terms on an extended time table. MYO dropped sharply today, clearly broke through support on big volume. We have no interest in MYO
· MYOB (MYO AU): Rated New Underweight at Morgan Stanley; PT A$2.80
· Xero (XRO AU): Xero Rated New Overweight at Morgan Stanley; PT A$50
Metcash (MTS) $2.70 / -2.17%; weak today following the announcement the company would take a $352m non-cash impairment charge, devaluing a number of assets within the Metcash portfolio. The review into assets and subsequent impairment charge follows the loss of a large South Australian customer in Drakes Supermarkets that was announced a fortnight ago. With the weakness today, the market seems to have double charged Metcash for the loss of a large customer and it is starting to look interesting here after a fall of ~25% in just a week or so.
Metcash (MTS) Chart
BHP Billiton (BHP) $33.39 / +1.99%; BHP rallied today, thanks to a tail wind from the commodity deck and rumours that their US Shale asset sale caught a number of bids in the first round. The reported bids fall between $US 7b and $US 9b which is slightly below what the market was expecting (up to $US 14b) however there are a few moving parts in the sale and the bids appear to exclude a number of assets within the portfolio. The market liked the ‘low ball’ bids as a number of players appear to be involved and BHP’s options are very much open at this stage. The company has flagged that all proceeds would return directly to the shareholder in the form of buy backs or dividends, a stock we like because of this.
BHP Billiton (BHP) Chart
OUR CALLS
We bought Eclipx in the income Portfolio, also looking to sell VCX above $2.70 (closed $2.69) and then buy IGL around $2.23 (closed $2.26). See income report here.
Have a great night
Harry & the Market Matters Team
Disclosure
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