CBA in the crosshairs again…!
A soggy session for Aussie stocks today with what looked to be futures led (index selling) pressuring stocks early on and they failed to pick themselves up off the mat – until a slight whimper at the death. Iron Ore had a massive intra-day move today – up early and down late – a range of +6% to be trading -3% lower at time of writing . We talked about risk/reward in terms of Material stocks in todays Direct From The Desk recording (available below) and we continue to think that as the mkt has become bullish this space, we should be very vigilant about taking profits…
In terms of the overall index and as per comments in recent reports, the market remains range bound with the following technical levels playing out on the index;
1. Daily – Support 5629 – 5655 and resistance 5836 -5810.
2. Weekly – Support 5582- 5629 and resistance 5956 – 5909
Obviously reporting season has been key however looking from above, it’s been as per expected - nothing really out of the ordinary in aggregate terms. Shaw’s Head of research – Martin Crabb put it well in his Friday report…
1. Sales have come within 0.10% of consensus, EBITDA within 0.15%, NPAT within 0.70%. Yes there have been beats and misses, but at an aggregate level, earnings have been fine.
2. Not much change to 2018. Sales growth is expected to be 3.25% in FY18. It was 3.22% on June 30. 2018 EBITDA Margins have been revised from 26.47% to 26.15% and NPAT growth from 2.58% to 4.05% for the ASX300 since June 30 (and 3.70% on July 31).
3. Banks beat, miners missed, but no one cares because their cash generation was immense and they are not pi$$ing it up the wall for a change.
4. Most of the market’s growth is in the big banks and the small and mid caps.
The Banks are clearly in focus at the moment, and you’d be forgiven if thinking that the resources actually beat forecasts and the banks missed, however clearly banks are on the nose, CBA with the biggest stench that was amplified today with APRA becoming the latest regulator to zone in - Ian Narev will be counting down the days! CBA typically trades at a PE premium of more than 1 P/E point versus the sector. This time last month it was trading on 13.7x versus ANZ, which was the cheapest at 12.4x, NAB on 12.6x, BOQ on 12.7x WBC on 13.0x and Bendigo on 13.1x – Now we have CBA at a very slight premium to the sector = value. It’s typical PE premium is there for a number of reasons, but in short they get better, more consistent returns over time and history has shown they can justify it. CBA trading inline with its peers is a clear opportunity, despite the near term headline risk…
Source; Shaw and Partners
Commonwealth Bank Weekly Chart
On the broader market today, the Energy stocks were the only sector to trouble the scorer adding +0.68% courtesy of a hurricane impacted Oil price while wost weigh was felt in the Industrials - an overall range of +/- 47 points, a high of 5746, a low of 5699 and a close of 5709, off -34pts or -0.59%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Direct From The Desk – Reporting season trends - Sydney Property – Our Positioning
Have a great night
The Market Matters Team
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