Market recovers from early weakness
The market was weak early on with a decent sell off in the futures putting some pressure on the large caps – the banks in particular were soft from the get go and looked like they may have started another leg down – however it was all one way traffic from 10.30am onwards with the market pushing up around +40pts from the session lows – buyers stepped into the banks, Westpac in particular which was sold on open after they offloaded $600m worth of BTT stock to insto’s at a big discount to market – they saw a low of $30.05 this morning only to close at $30.60 – a rally of +1.8% . ANZ finished best on ground adding +1.27% after Chair David Gonski wrote to shareholders, in part about the financial performance of the bank which has improved a lot, but more importantly around the impact of the new bank tax and how the third largest bank in Australia will handle it. We recently included a table from Shaw and Partners that estimated the impact of the tax and today ANZ confirmed their estimation of a $240m cost impost post tax. They also said they expect it to happen and they’ll have to work with Govt to deal with it. Here’s the table for those that missed it.
Source; Shaw and Partners
ANZ Daily Chart
The weak open this morning gave way to strength soon after with the market booking a range of +/- 41 points, a high of 5790 , a low of 5749 and a close of 5789, up +20pts or +0.36%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
A lot of company news out today, starting with Westpac sell down of BTT stock overnight. They offloaded 60 million shares – which is 19% of the BT shares on issue at $10.75 versus last trade of $12.18. It reduces WBC holding in BTT to 10% and they intend to sell the further 10% after May 2018 – and will do so at a 12% discount to the prevailing mkt price – so from that perspective, it may mean that investor demand on market is –softish over that period. We thought BT might have come back weaker than it did today when we penned our note this morning + there was the added complication of the HGG consolidation and shares trading deferred settlement (more on that below), so we left our idea of switching for now.
BTT was trading on 18.1 times ex-the upcoming 19c dividend which new investors get – and on the trade price of $10.75 it put it on 15.5x. Interestingly, the sale gives WBC CET1 capital of 10.3% - the best in the sector.
BT (BTT) Daily Chart
AMP held an investor day today and updated the market on a few things – they were light on details / numbers but articulated their strategy reasonable well. In a nutshell, they are going to skew towards higher growth less capital-intensive businesses, release and recycle capital in low growth business – which all sounds good in theory! They are going to expand in China and a few other international markets targeting $50m profits pa in 5 years – which would add 5% to profits. On a PE of 14.4x vs long term average of c15x, it’s a little cheap – but it’s just very hard to get excited on a business model likes theirs. It’s old world and facing a lot of headwinds….No real interest here other than to pick up dividends if we can scalp a free one!!
AMP Daily Chart
BIG Volume through ANN today following their sale of their condom business to a Chinese mob for $600m + the share price got a kick after they announced plans for a share buy-back. Two positive developments for ANN today and we’d now expect the stock to test it’s 12 month highs.
Ansell (ANN) Daily Chart
…and finally, Henderson Group (HGG), a stock we own completed a share consolidation today on a 1 for 10 basis, and now trade at $41.20 – however we now hold 10% of the volume of shares we held yesterday. No direct impact and the stock was good today from a low base early, however it will trade under code HGGDA given they are deferred settlement. HGG trades on ~14.5x compared to BTT which transacted at ~15.5x to institutions this morning. We think that’s about the right multiple for a fund manager at this point in time.
Have a great night,
The Market Matters Team
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