Strong week for stocks as reporting heats up…Review of HGG result
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Another good session today with the market pushing up through 5700 on the ASX 200. Our expectation has been that the market would trade would between 5600 and 5725 however a clear break over 5735 will target at least the 5800 area in the short term. We haven’t yet broken that level with the index hitting a daily high of 5721 today, however we’re clearly within striking distant. 5600 provided a good level of support earlier in the week and we’ve subsequently bounced strongly from it.
We had a range today of +/- 48 points, a high of 5721, a low of 5673 and a close of 5720, up +pts or +0.99%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
For the week, the ASX 200 was higher in aggregate adding +1.33% with the Real Estate & Healthcare Sectors adding more than 3% a piece as we continue to see some of the beaten down high PE / high yield type plays that have been on the nose in the last few months. Stocks that caught our attention this week included; Star Entertainment (SGR) which put on +6.81% to finish at $5.02, Transurban (TCL) bounced +6.52% after reporting very good numbers early in the week and upgrading guidance, Carsales.com (CAR) added +8.34% on the back of a good report in terms of growth, but as we said at the time, falling margins remain a concern while Henderson Group (HGG), who reported overnight was up +0.86% for the 5 days (more on HGG below).
On the flipside Genworth (GMA) reported inline/slightly better but the outlook to us remains a major concern – the stock was the worst performer for the week down -14.86%. Resources were also under some pressure despite a good result from RIO, which goes to show how much positivity is already baked into the resource cake; BHP (BHP) lost -4.29% for the week while, Fortescue (FMG) lost -4.14%.
(Source Bloomberg)
Reporting really kicks into gear next week with more than 60 companies in our universe delivering results.
Henderson Group (HGG); Reported overnight and the result was broadly in-line with consensus, however on the conference call, the CEO was downbeat about prospects for 2017. To recap, HGG has clearly had a tough FY 16 for a variety of reasons. The BREXIT earlier in the year prompted a huge amount of nervousness around European equities, HGG’s funds had a tough time performance wise which hit their performance fee revenue with both of these things leading to an outflow of funds, particularly from retail funds which are higher margin (more profitable for them).
The only really negative surprise in the results was around the uptick in outflows in Q4 – and that’s one of the elements that is a bit troubling for us at the moment. That said, when we distil it all down, and overlay the price action we saw on the market today despite a number of broker downgrades, it seems that a lot of this ‘bad news’ was already in the price. Clearly a higher risk play but we remain comfortable holding at current levels.
The stocks closed down -2.78% to $3.50 but is up slightly for the week
Henderson Group (HGG) Daily Chart
REA Group (REA); Reported 1st half numbers today which were below consensus, however given the backdrop of very low listings in Australia, the result was actually OK – and management are doing a good job in a tough environment. That said, trading on 30x with a lack of visibility around when listing volumes will pick up seems a risk to us…
Aconex (ACX) has had a cracking week up +21.58% - Myer (MYR) also looks interesting here as does Sims Metal (SGM).
Have a great Weekend & watch out for the Report on Sunday,
The Market Matters Team
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