Australian Investment Blog

WHAT MATTERED TODAY

A reasonable way to start the week with the market opening lower before grinding higher through-out the session, the move thanks to positive comments from the Chinese Vice Premier re-confirming positive developments from US / China trade. US Futures traded marginally higher throughout our time zone while Asian markets were generally positive. The Real Estate sector was best of ground thanks to Stockland’s positive (SGP) update, more on that below with positive read throughs for others in the property sector. IT stocks once again the biggest drag with Wisetech (WTC) coming back on briefly before going into another trading halt – Harry covers below.

Overall, the ASX 200 closed marginally higher today up +2pts or +0.04% to 6652, Dow Futures are trading up +41pts/+0.15%.

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE;

Stockland (SGP) +6.49%: A strong session for the diversified property stock after they gave a more optimistic quarterly trading update. This flowed through to other housing related stocks with strong performances from the likes of Bingo (BIN) +2.19% to $2.33 and CSR +2.18% to $4.21. Stockland is a big diversified player and the trends they see is a good indication of what’s happening, particularly in the residential sector.

For the 3 months to 30 September across their residential book:

- Sales moderately above expectations and they’re we’ll on track to deliver 5k lots in FY20

- Enquiries up / deposits taken up, which is detailed in the chart from a geographical perspective - I think this gives a good insight into trends with NSW experiencing a big recovery relative to Q419

The rest of their business is tracking along well, coming off a weak base. Overall, a positive update from SGP and the shares responded accordingly. Another kick in the guts for the property bears! We own SGP in the MM Income Portfolio, while we also own CSR.

Stockland (SGP) Chart

Oz Minerals (OZL) +2.75%; was out this morning with an update regarding the Carrapateena copper-gold mine which is expected to produce their first parcel of saleable copper next month. Oz has pulled in junior miner Cobalt Blue (COB) to assess the technical viability of extracting the battery metal cobalt from the project as well with similarities being drawn to COB’s Broken Hill project. The agreement is for viability confirmation only and won’t extend to optimization so it may be some time before we see cobalt added to the production reports of Oz Minerals. We also saw an upgrade from Bells come through, going from buy to hold with a price target of $10.69 We recently added OZL to the Growth Portfolio for our bullish view on copper/resources.

Oz Minerals (OZL) Chart

Wisetec (WTC) -12.33%; briefly back online this morning, trading for almost the first hour of the session but long enough to turn over more than their average daily volume. The company was out with a rebuttal to the short thesis on Friday night which denied the main arguments presented by JCAP last week including no overstatement of accounts, confidence in the audit report and the founder’s alignment to shareholders interest. Shares still opened around 10% lower before recovering somewhat early in the session but JCAP was out with a follow up report and WTC was back in a halt before lunch was served.

The new report stood by initial claims and ramped up the aggressive tone calling the company’s response inadequate and further justifying the JCAP view. The report claimed channel checks with clients and competitors proved that Wisetec was having trouble integrating the huge number of acquisitions it had taken on and customers were leaving regularly while some of the larger ones were essentially getting the WTC products for free. The company has given themselves until Wednesday and may need a little more than 4 pages to refute the claims. We have no interest here.

Wisetec (WTC) Chart

Costa Group (CGC) +0.29%: The fruit and veg supplier has entered a trading halt today pending a trading update – not a good look following two previous downgrades and a warning at their last update that they saw “downside risk” to its May 2019 guidance for net profit between $57 million to $66 million on EBITDA between $140 million to $153 million – a downgrade is a distinct possibility. That said, recent price action has been positive and so has news flow. UBS recently put out a bullish note on CGC with a buy and $5.20 PT plus we’ve seen a regeneration of the major holders, with Lazard increasing to 6.46% and Schroders have come on the register buying 5.7% of the company in recent times

Major holders of CGC and movements

Costa Group (CGC) Chart

BROKER MOVES; Some bottom feeding in Ingham’s (ING) today with Citi turning positive the stock after it traded sub $3.

· Mt Gibson Raised to Hold at ICBC Research

· Ansell Rated New Hold at Jefferies; PT A$26.85

· Domino’s Pizza Enterprises Rated New Underperform at Jefferies

· Inghams Raised to Buy at Citi; PT A$3.40

· Qantas Cut to Neutral at Credit Suisse; PT A$6.40

· OZ Minerals Raised to Buy at Bell Potter; PT A$10.69

· ARB Raised to Buy at Baillieu Ltd; PT A$18.90

OUR CALLS

**International Portfolio 3 x NEW BUY Alerts**

We are adding 3 new international equity positions to the MM International Equities Portfolio that were covered in the weekend note as we look to build out our international holdings.

Large US bank looking poised for a breakout above long term resistance.

Bank of America (BAC.US) Chart

Cheap international fund manager that can also be purchased on the ASX under code JHG.

Janus Henderson Group (JHG.US)

Integrated US based health services provider that looks poised to re-test all-time highs.

United Health Group (UNH.US) Chart

**Growth Portfolio**

We added NRW Holdings (NWH) & Service Stream (SSM) to the portfolio today.

**Income Portfolio**

We sold Tabcorp (TAH) and added the ActiveX Ardea Bond Fund which is a listed bond fund that uses an actively managed relative value strategy.

Major Movers Today

Have a great night

James, Harry & the Market Matters Team

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