Markets breakout on further government support – tech leads the way (BHP, OSH)
WHAT MATTERED TODAY
A very bullish day for stocks today with the ASX keying off positive vaccine results overnight, a move higher in Asian markets + US Futures that ticked up throughout the day, however it was news around the extension of Job Keeper / Seeker payments that seems to have gotten the bulls firing and despite the supports tapering somewhat post September, they are being extended in what seems to be a fair and orderly way – those who need it, will still get the majority of it – or at least that’s my first read of it.
I provide a quick wrap of trade today on a 3 min recoding below:
Today’s move higher was naturally broad based, only 16 stocks closed down and that was mainly in the more defensive areas of the market, on the flip side, it was unsurprising to see technology stocks shine after the Nasdaq stormed higher overnight
Overall, the ASX 200 added 151pts / +2.53% to close at 6156. Dow Futures are trading up +153pts / +0.57
ASX 200 Chart
ASX 200 Chart – the break away from the 6000 handle is now bullish
CATCHING MY EYE:
BHP Group (BHP) +1.09%: performed in line with peers – which underperformed the market – on the back of their 4th quarter production numbers. For the bulk, they were largely as expected, particularly in the key profit drivers. BHP’s largest earner is Iron ore with around 60% split at the EBIT level and the company delivered as expected here with 67mt produced for the last 3 months for their best quarter of the year. Copper, the next cab off the rank in terms of EBIT contribution, was marginally below the streets number though BHP was given some wiggle room here given COVID shutdowns impacting their Peru mine. The other two key copper mines – Escondida & Olympic Dam – both saw higher production rates in the quarter to make up for some of the shutdown with 1,724kt of copper scraping in to the lower end of previous guidance. The two smallest earners – petroleum and coal – finished the year with a miss and a beat respectively, but largely uncared for by the market. For the most part it was a good set of numbers from the big Australian. FY21 guidance does look light on but not a huge concern for investors at the moment. Eyes will be on the full year results out in a matter of weeks – a record quarter of iron ore sales in Q4 could see BHP once again beat dividend expectations – a positive thing in a market which has been starved of yield. We remain bullish BHP
BHP Group (BHP) Chart
Oil Search (OSH) +4.32%: while energy names were broadly higher today, Oil Search stood out above the pack on a decent quarterly. While production fell 1% in the second quarter, revenue was smashed 26% for a first half total of $US625.6m, 19% on last year given the steep slide in energy prices in the period. They maintained full year production guidance of 27.5-29.5mmboe but lowered cost guidance but $US1-2/boe which the market liked given the boost it gives earnings in a low oil price environment.
At just $US9.5-10.5/boe, OSH is an extremely low-cost producer and is in good shape to weather another slide in oil prices if it comes, particularly after raising near $US700m in the half. While CAPEX is also being pinned back there was not changes to the current Alaskan and PNG project timelines, though Oil Search will likely look to push out production start dates for both projects at the strategic review later in the year. Overall a good quarter in a tough environment, but we prefer others (BPT, WPL) in the space for now.
Oil Search (OSH) Chart
BROKER MOVES:
· Dexus Cut to Neutral at Macquarie; PT A$9.23
· Netwealth Cut to Sell at Ord Minnett; PT A$9.55
· Helloworld Raised to Buy at Ord Minnett; PT A$2.45
· Star Entertainment Raised to Equal-Weight at Morgan Stanley
· CSR Raised to Overweight at JPMorgan; PT A$4
· Boral Cut to Underweight at JPMorgan; PT A$3.25
· Whispir Cut to Neutral at Evans & Partners Pty Ltd; PT A$2.85
OUR CALLS
No changes today
Major Movers Today **TPG Code change needs correcting**
Have a great night
James, Harry & the Market Matters Team
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