The Aussie market rebounds on energy, ore (Z1P, MYO)
WHAT MATTERED TODAY
Aussie stocks rebounded in line with overseas markets as the threat of an Italian implosion subsided leaving Bond King Bill Gross licking his wounds! On our market today, banks were left out of the optimism with three of the big four ending unchanged while it was the iron ore names that benefitted most courtesy of strong Chinese data which showed signs of steel inventories falling. Oil names also benefitted today following easing concerns of supply ramping up in the Middle East. Retail Food Group gave back some of the gains we discussed in yesterday’s note, while MYOB was punished on the announcement the Reckon acquisition (they were buying some parts of it) will no longer go ahead after regulatory delays – it fell -8.17% and is down 22% year to date!
Overall the market added 27 points or +0.45% to 6011.
ASX200 Chart
ASX200 Chart
CATCHING OUR EYE
Broker moves; Goldman’s new retail analyst was busy today, reinstating the big three supermarkets to ratings, not fazed by the recent rally’s by Wesfarmers & Metcash, preferring them over Woolworths. We have no interest in WES and WOW at current levels, however MTS looks interesting into recent weakness / relative valuation.
· Lovisa (LOV AU): Downgraded to Hold at Bell Potter; PT A$12.80
· Metcash (MTS AU): Reinstated at Goldman With Buy; PT A$3.30
· Orocobre (ORE AU): Upgraded to Buy at Cormark
· SmartGroup (SIQ AU): Downgraded to Hold at Morgans Financial; PT A$11.60
· Wesfarmers (WES AU): Reinstated at Goldman With Buy; PT A$50
· Woolworths Group (WOW AU): Reinstated at Goldman With Neutral; PT A$27
Zip Co (Z1P) $0.85 / +3.03%; Zip announced the signing of Super Retail Group today in a massive addition to the money lender’s reach. Super Retail turnover over $2.5bil annually across over 600 stores through brands such as BCF, Super Cheap Auto and Rebel. After shooting to a high of $1.34 in February, Zip fell over 40% in about 2 months following scrutiny by regulators of their competitor After Pay (APT, $7.82). The industry is young, and regulation has been slow to catch up, however Zip appears to have strong checks and balances in place, and are adding large retailers to the list of partnerships monthly. We like ZIP, we have previously looked to buy but have been picky with the price due to concern that greater regulation may be around the corner.
Z1P Co (Z1P) Chart
MYOB Group (MY0) $2.81 / -8.17%; MYOB’s business is getting creamed by the more aggressive competitor Xero (XRO) with the proposed deal to buy some of the Reckon Business seen as a way to claw back some lost ground, however regulators delayed the move and today MYO have walked – unable to come to terms on an extended time table. MYO dropped sharply today, clearly broke through support on big volume. We have no interest in MYO
MYOB (MYO) Chart
OUR CALLS
No changes to the portfolios today.
Have a great night
Harry / James & the Market Matters Team
Disclosure
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Disclaimer
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 31/05/2018. 4.30PM
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