Market Matters Afternoon Report Monday 18th July 2016

Afternoon Report 18/07/2016

Market Matters Afternoon Report Monday 18th July 2016

Good Afternoon everyone

Market Data

What Mattered Today

Eighth day of gains for the ASX with the index opening lower before sustained buying throughout the session pushed stocks higher into the close…Banks had a decent session, Westpac (WBC) the best of the big 4 up +0.63% to close at $30.30 while the miners were a touch weaker. A range of +/-34pts. 5428 low, 5462 high and a close at 5458; up +29pts or +0.53%..

As suggested in the Weekend Report, we remain bullish the ASX 200 as long as it stays over 5275 with the expectation that stocks will continue to grind higher over the coming months. There’s clearly a more positive bid tone for equities despite the raft of negative headlines that many thought would de-rail markets. That’s an interesting theme and one that plays out time and time again.

Markets/Stocks/Commodities whatever it is, tend to bottom out when negativity – concerning press – perceived risk – is high. Think about the market post BREXIT….we had huge amounts of negativity sweeping the markets, the ASX gaining prime position on the evening news yet the market is now +169pts or +3.19% above the pre-BREXIT level.

Woolworths (WOW) is a case in point here. Clearly the stock is under a significant amount of pressure, the news flow has been miserable, yet the stock has good price support in the low 20’s. It closed today at $21.95 – up +1.95%. WOW is on our radar.

Oil Search (OSH) topped the leader board today after the coy said its US$2.2b bid for InterOil has been trumped by a better bid from Exxon Mobil. Most analysts reckon the OSH deal to buy InterOil then sell off about 60% of its assets to Total would be marginally earnings dilutive while, if they end up being outbid they receive a break fee of $60m (20% goes to Total) + it highlights the perceived value of PNG LNG of which OSH remains the biggest player. Good result either way you’d think.

The rest of the Energy plays were higher today with Origin (ORG) putting on 5c to $5.83

A couple of other interesting stock moves that caught our eye today….Lend Lease (LLC) is ticking higher from oversold levels, ditto for QBE Insurance (QBE) which is being helped by rising Bond Yields in the States, while a smaller, newly listed stock called Shaver Shop (SSG) has come out of a blackout (where Analysts from firms involved in the listing cannot put out reports on the stock).

Shaw and Partners was one of those Brokers and they initiated today with a BUY recommendation and $1.45 price target v an open today of $1.07 and a close of $1.10. The issue price was $1.05 with the stock listed on the 1st July this year.

Here is the crux of their recommendation….

SSG is a very attractive retail story with strong underlying fundamentals (FY17 PE 13x, EV/EBITDA 8x). On any objective criteria or metrics relative to the 60 ASX-listed retailers, SSG is in the top quartile for LFL sales growth, stability of GMs, sales per sqm, new store roll-out and ROCE. This is augmented by a strong management team (we rate the CEO not only very highly but best-in-class with CEO peers at who we consider to be the best quality listed retailers in the country: Nick Scali [ASX: NCK], Dan Murphy’s [ASX: WOW] and Bunnings [ASX: WES]) and very unique exclusivity arrangements with key suppliers which is a key driver of organic growth

Interesting story in what seems to be a very well run small cap with a good pipeline of growth.

Sectors

Source; Bloomberg

ASX 200 Movers

Select Economic Data; Stuff that really Matters in Green

A lot of economic news simply fills the news wires and provides talking heads with content. We’ll aim to highlight the ones that matter here in Oz, China, the US, Europe & Japan and provide any commentary that seems relevant…

We’re a bit light on from an economic standpoint this week, although the RBA minutes tomorrow will be interesting. Look for deliberation around inflation as that’s the main game when it comes to future rates settings locally. The August decision is clearly a live one with the market pricing a 60% chance for a 25bp cut.

What Matters Overseas

…We saw JP Morgan report last Thursday, Citigroup report on Friday while we have Bank of America tonight and Goldman Sachs tomorrow…All have been better than recently downtrodden expectations

FUTURES in the green – just

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 18/07/2016. 5:00PM.

Reports and other documents published on this website and email (‘Reports’) are authored by Market Matters and the reports represent the views of Market Matters. The Market Matters Report is based on technical analysis of companies, commodities and the market in general. Technical analysis focuses on interpreting charts and other data to determine what the market sentiment about a particular financial product is, or will be. Unlike fundamental analysis, it does not involve a detailed review of the company’s financial position.

The Reports contain general, as opposed to personal, advice. That means they are prepared for multiple distributions without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself or if you require a personal recommendation, you can seek the assistance of a financial adviser. Market Matters or its author(s) accepts no responsibility for any losses or damages resulting from decisions made from or because of information within this publication. Investing and trading in financial products are always risky, so you should do your own research before buying or selling a financial product.

The Reports are published by Market Matters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports.

If you rely on a Report, you do so at your own risk. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence.

To unsubscribe. Click Here