Will A2 Milk make the Income Portfolio? (A2M, NAN, ALQ)
The tight range does little to describe the swings happening in the market today, a strong opening was given back, the market actually lower very briefly around midday, before buyers stepped up throughout the afternoon. RBA minutes today provided little new commentary, almost a copy and paste of last month’s report with wage inflation particularly lacklustre. All sectors finished higher today, utilities performed well on the back of dovish RBA comments, while energy was the weakest after oil did little in overseas trade.
Overall, a range today of +/-23 points, a high of 5969,a low of 5963, and a close of 5963, up 17pts or +0.3%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
A2 Milk (A2M) held it’s AGM today and commentary around the first few months of FY18 were taken well, with 4 month EBITDA of $NZ78.4mil, tracking to a full year EBITDA of $235mil – this is 3% above the most bullish in the market, and the stock popped accordingly. A weak NZD and better than expected growth in the Chinese market has driven earnings higher, once again proving naysayers wrong, more than offsetting increasing marketing costs. The result even lead to the CEO to comment on potential dividend payments – a huge call for a recently listed company still running on a PE of over 60x. Although the dividends would be unfranked and relatively low yielding, it would just add to the attractiveness of a company that has performed strongly since listing in 2015. We hold A2 Milk in the Growth Portfolio, the 5.5% jump today means we are now up over 15% on the position.
A2 Milk (A2M) Daily Chart
Nanosonics (NAN) was downgraded to a hold by Bell Potter, with no change to the price target, leading to a 2% fall in the stock today. We are holding NAN in the Growth Portfolio and holding tight for now, however appreciate this stock has a high mkt cap and low earnings, more a momentum play than anything, and although we remain happy to hold through some short term volatility, we’ll cut if buyers don’t step up shortly.
Nanosonics (NAN) Daily Chart
ALS Ltd (ALQ) disappointed with poor half year numbers after market yesterday. The analytical testing provider, although increasing profit to $70m for the 6 months, fell 5% short of market expectations, hitting the bottom end of guidance. The $7 mill restructuring costs also hindered the result, however the divestment of the oil & gas businesses helped the company launch a buyback of 4% of stock. ALQ finished down over 7% today at $7.55, which was a long way off lows of $7.02.
ALS Ltd (ALQ) Daily Chart
Have a great night
The Market Matters Team
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