Three cracking results, the market rebounds strongly (NCK, TLS, QBE)
WHAT MATTERED TODAY
An impressive performance from the local market today after some very poor leads overnight. The index rallied strongly from the early morning low of -47pts / -0.74% before the banks and some recovery from the hard hit resources saw the index close less than a point lower. Telstra was the biggest addition to the index following a good result, adding 6.5pts on its own. Other holdings of ours QBE & Nick Scali also reported well – more on these names later on. On the flipside, Iluka was weak, as was Invocare and Origin.
Telstra the star today was the reason telcos strongly topped the leader board, while weakness in materials stemmed from soft oil and resource prices overnight.
Overall, the ASX200 fell -1 point today or -0.01% to close at 6328
Reporting will be a little quieter tomorrow with just Abacus and Goodman. For a full list of company reporting dates – click here
ASX 200 Chart
ASX 200 Chart
CATCHING OUR EYE
Broker Moves;
· ANZ Bank (ANZ AU): Downgraded to Hold at Morgans Financial; PT A$30
· Bellamy’s (BAL AU): Upgraded to Add at Morgans Financial; PT A$13
· Dexus (DXS AU): Downgraded to Neutral at JPMorgan; PT A$10.50
· Infomedia (IFM AU): Downgraded to Hold at Bell Potter; PT A$1.25
· Insurance Australia (IAG AU): Upgraded to Buy at Bell Potter; PT A$8.40
· Pact Group (PGH AU): Downgraded to Neutral at Credit Suisse; PT A$4.35
· Wesfarmers (WES AU): Upgraded to Neutral at JPMorgan; PT A$50
Telstra (TLS) $3.06 / +5.88%; Telstra’s result this morning lead to a wave of buying throughout the day, pushing the stock price through $3 again – congratulations to James for winning the pineapple in his office bet! The result itself was strong, beating recently downgraded guidance, and guidance was above market. Key to the result was an improvement in the mobile market, something Telstra has struggled with recently. EBITDA guidance for FY19 was set at $8.8b-$9.5b with consensus at $8.97b – a 2% beat to the mid-point.
Telstra (TLS) Chart
QBE Insurance (QBE) $10.89 / +6.76%; An ‘not bad’ result from QBE was taken well by the market after years of consistently disappointing investors. The half year result saw a tax break, premium rate rises, recommitment to buybacks, dividends and lowering gearing – all an investor asks for! The result, particularly the premium rate rising, shows the improving nature of the insurance market, and hopefully the improving ability for QBE to execute effectively, something they have failed to do for a while. The market’s reaction clearly showed the negative views on the stock took a big hit.
QBE Insurance (QBE) Chart
Nick Scali (NCK) $6.78 / +13%; a bumper FY18 result as Nick Scali once again under promise and over deliver – it is becoming habitual for the furniture retailer. The stock was sold off into the result as investors feared a housing downturn and soft retail numbers meant a soft result for NCK, however the result was a beat across most metrics. The market was also a big fan of lowering of costs – shown in the miss to revenue but big beat in EBITDA. No exact guidance was given, but commentary for general profit growth was taken well. The dividend beat was also great for the Income Portfolio which holds NCK.
Nick Scali (NCK) Chart
OUR CALLS
We sold Orocobre and added the USD ETF in the Growth Portfolio today. We are keeping a close eye on Mineral Resources. A view is slowly being built around yesterday’s result which will guide whether the position is cut or held.
Have a great night
Harry & the Market Matters Team
Disclosure
Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.
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