CSL upgrades guidance – keeps the market in the black + Santos SPP
What Mattered Today
Another mixed bag on the market today with the optimism that was obvious in December / early January fading somewhat. For December the ASX 200 put on ~4% from 5440 before peaking on January 9 at 5827 – a run of +7% however the market is now in corrective mode and we’re somewhat 50/50 in the short term. Today’s close of 5692 (up +13pts) means the mkt is now down ~2.3% from the highs so nothing big / concerning. CSL rallied +12.49% today after upgrading earnings guidance (more on that below) and that added 18.6 index points to the 200. Without CSL, we would have been in red with both BHP and RIO reversing from their early highs, the banks down in aggregate and the Gold stocks pulling back after recent strength.
On the market, we had a range today of +/- 44 points, a high of 5720, a low of 5676 and a close of 5692, up +13pts or +0.24%.
ASX 200 Intra-Day Chart
ASX 200 Daily chart
CSL; Rallied hard today after upgrading earnings guidance from +11% profit growth (constant currency) to +18-20% profit growth, largely on the back of strong sales in a number of their products. Obviously good news for CSL and the Market Matters portfolio given we had a 10% allocation to the stock. We’ve used the strength to trim by half at $111.00 and will be holding for higher levels on the remaining allocation. CSL is a hard stock to trade given liquidity and a lot would have gotten bearish / short CSL when they missed market expectations for earnings back in August 2016. A high PE stock that misses / fails to deliver growth often becomes a target until they get back on track – which CSL clearly has done today.
CSL Daily Chart (CSL)
Bega (BGA); Nothing goes better than Cheese and Vegemite and Bega today announced a $460m deal to buy Vegemite and other Kraft branded products bringing the iconic brand back to Australia. It’s hard to see where the growth will come (other than normal population) growth given they’ve often failed when trying to leverage into new products (Cheesymite ring a bell!!). Anyway, BGA has been short of growth options with the stock price down 40% from October to the start of December – this deal should help and the market liked it sending shares up +15%.
Bega Cheese (BGA) Daily Chart
Santos (STO); Clarification from yesterday’s report; We outlined the metrics for the Share Purchase Plan (SPP) and omitted one important element of the offer. For clarification, the structure of the SPP includes a safeguard for retail investors with new stock being issued at the LESSER of a 2% discount to VWAP during the offer period or $4.06. The most therefore that a shareholder will pay is $4.06 per SPP Share. Importantly, this does not change our view on the stock.
Santos (STO) Daily Chart
Sectors
ASX 200 Movers
What Matters Overseas
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All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 19/01/2017. 4.45PM.
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