Aussie stocks start week on front foot
A decent session to kick off the week with clarity around the French election (no surprises) and a strong overseas lead, particularly in the material / resources / energy space had buyers out in force early on before the market trickled into the afternoon. Westpac delivered an ‘inline’ result on most metrics and put on +0.65% to close at $34.08 while ANZ went ex-dividend by 80c and dropped by 70c closing at $29.95.
On the broader market today we had a range of +/- 41 points, a high of 5885, a low of 5844 and a close of 5871, up +34pts or +0.59%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Westpac (WBC); No real surprises in the WBC result today with cash earnings coming smack in-line with expectations, the dividend of 94cps was in-line, Capital was slightly ahead at 10% v 9.6% expected and Net Interest Margin at 2.07% versus 2.10% consensus, however we saw a trend that is likely to continue in the banks for the foreseeable future. Top line revenue was a tad weak however they offset that by better discipline on costs and a better bad debt charge – so one could argue that the quality of the result was weak, but not concerning and certainly reflective of industry pressures.
The issue is the regulator (APRA) has been very forceful in curbing loan growth for investor loans + interest only lending so we’re likely to go into a period of low volume growth but expansion of margins as recent repricing has an impact. So, if we think about 3-4% loan growth plus margins expansion it’s easy to see 4%-5% revenue growth. If they continue to manage costs well as they have then 5% earnings growth is very achievable if bad debts stay well behaved.
Add to that a 5.5% dividend gets you a 10% return - OK in this type of mkt. The other interesting aspect specific to WBC is that loan re-pricing is largely focussed on investor and interest only loans and WBC have the biggest investor (42% book) and interest only (50% book) portfolios in the market, so will see most margin expansion.
Westpac (WBC) Daily Chart
Newcrest (NCM); Hit today and was down -2.49% to close at $19.58 following a very bearish note from UBS on the stock. They have a SELL and $12.98 price target and are by far the most bearish in the market. That’s not a new thing for UBS having a sell on Newcrest, they’ve maintained that call from below $15 all the way to above $25. Consistency is good at least however they are outliers by a long way with the consensus target sitting at $22.08…
The yellow line tracks the evolution of their price target on the stock. We hold NCM and maintain comfortable in the position, given our overall portfolio stance.
Newcrest (NCM) Daily Chart
Our Moves; today we sold ANZ and increased our weighting to NAB. ANZ went down after we sold and NAB went up after we bought. This means very little on the day however the move has given us an increased cash position, now up to 33.5% and a reduced exposure to the banks, which we like. Flexibility into May / June continues to be important and cash increases that flexibility.
NAB Daily Chart
Have a great night,
The Market Matters Team
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