Between the Bells

The local market has started the week in negative territory, closing Monday’s session down 0.21%, dragged lower by a sharp sell-off in consumer discretionary stocks amid the release of some disappointing half year results today. The energy sector on the other hand soared just under 2% today buoyed by an early rise in the price of oil amid reports Russia will cut production of the commodity.

Reporting season ramped up today with a number of big names reporting including JB Hi-Fi (ASX:JBH), Endeavour Group (ASX:EDV) and Carsales.com (ASX:CAR).

Endeavour Group (ASX:EDV) shares took flight following the release of the results as the company outlined its performance through the first restriction-free festive season in three years. For the first half of FY23, Endeavour Group reported group sales up 2.6% to $6.5bn, Group NPAT rose 17% to $364m which well exceeded consensus expectations, and a dividend per share of 14.3 cps was declared which is a premium of 14.4% on the PCP. CEO Steve Donohue attributed the strong results to customers returning to a more normal holiday period in December, and the return of domestic travel seeing regional and coastal town stores and hotels performing strongly.

Star Entertainment Group (ASX:SGR) tanked over 20% to an all-time low share price today after releasing disappointing, unaudited first half results and outlook this morning. The casino and hotel giant said it has been adversely impacted by several factors, in particular by increased operating restrictions from mid-September following the Bell Review and amendments to the NSW Casino Control Act. The company also blamed ongoing remediation actions and high costs for improved compliance, and increased competition for the poor results. For the half, The Star reported Sydney domestic revenue was down 13.5% on pre-COVID levels and will detail the full performance when the final results are released. The company did provide outlook for the remainder of FY23 with the expectation to report underlying EBITDA between $330m - $360m.

Monadelphous (ASX:MND) shares rallied today after the engineering group announced it has secured new contracts in the resources and energy sectors totalling around $200m, including with sector leaders like BHP Group (ASX:BHP) and Rio Tinto (AAX:RIO).

The winning stocks from today’s session were led by Insurance Australia Group (ASX:IAG) rallying 4.5% on the back of releasing H1 results, while Endeavour Group (ASX:EDV) added 4.11% and Coronado Global Resources (ASX:CRN) jumped 3.6% today. And on the losing end Star Entertainment Group (ASX:SGR) led the losses today plunging 20.8%, while Imugene (ASX:IMU) and Aurizon Holdings (ASX:AZJ) each fell 10.34% and 6.5% respectively.

The most traded stocks by Bell Direct clients today were BHP Group (ASX:BHP), New Hope Corporation (ASX:NHC) and Suncorp Group (ASX:SUN).

Taking a look at commodities oil has pivoted lower this afternoon to trade to trade at US$78.73/barrel on rate hike worries, while gold is down 0.32% at US$1858/ounce and iron ore is trading up 0.4% at US$126/tonne.

The Aussie dollar is buying US$0.69, 91.33 Japanese Yen, 57.32 British Pence and NZ$1.10.

Technology retailer JB Hi-Fi (ASX:JBH) released first half results this morning with performance coming in, in-line with Bell Potter and Citi expectations, but just short of Consensus expectations.

For the half, JB Hi-Fi reported total sales rose 8.6% to $5.28 billion driven by elevated demand for consumer electronics and home appliances INCLUDING well executed Black Friday and Boxing day sales. EBIT rose 14% over the half to $479.2 million, NPAT increased 14.6% to $329.9 million, and EPS rose 20.4% to 301.8cps. An interim dividend was announced, up 20.9% to 197cps or $1.97/share.

The company also owns The Good Guys which experienced a 7.3% rise in total sales to $1.54bn over the half, driven by key growth in Refrigeration, laundry, floorcare, visual and Audio sales.

Notably, the company failed to provide any quantitative outlook for the second half of FY23 which we have seen investors punish companies for on the share price front this reporting season already.

The company’s CEO Terry Smart said trading conditions starting to normalise following two-years of COVID-disruptions. “Our relentless focus on providing the best value and high levels of customer service every day, both in store and online, continues to resonate with our customers.”

As markets expect a decline in consumer spending on discretionary goods over the coming months in this high interest rate environment, we may see some headwinds faced for JB Hi-Fi to come over the second half of FY23.

The local market ended Friday’s session down 0.76% as every sector aside from consumer staples stocks ended the day in the red, heavily weighed down by a sharp sell-off in technology stocks. The local market suffered its worst trading week since September last week, ending the week down 1.65%, weighed down by a sharp sell-off in real estate and tech stocks.

The winning stocks on Friday were, Imugene Limited (ASX:IMU) rallying 7.41%, while United Malt Group (ASX:UMG) and Johns Lyng Group (ASX:JLG) each added 4.8% and 3.53% respectively. And on the losing end, New Hope Corporation (ASX:NHC) tumbled 8.61% on a fall in the price of coal. News Corp (ASX:NWS) and Capricorn Metals (ASX:CMM) each fell 6.8% and 6.3% respectively.

The most traded stocks by Bell Direct clients on Friday were Fortescue Metals Group (ASX:FMG), Arafura Rare Earths (ASX:ARU) and the BetaShares Geared Australian Equity Hedge Fund (ASX:GEAR).

Over in the US, Wall St closed mixed on Friday as investor optimism faded on the back of comments made by Fed Chair Jerome Powell about inflation in the region starting to cool but there still being a long way to go in terms of rate hikes to cool inflation to the target range. The Dow Jones rose 0.5% the S&P500 rose 0.22% but the tech-heavy Nasdaq fell 0.61%. Google parent, Alphabet’s, shares fell more than 4% on Friday as investors grow increasingly concerned about the rising competition in the artificial intelligence space, especially from new market entrant, ChatGP.

And in Europe, markets closed lower on Friday as investors in the region also keep a close eye on the US fed’s movements and commentary around further rate hikes to come. UK preliminary fourth-quarter GDP figures were also out on Friday showing the UK economy expanded by 0.01%, narrowly avoiding a recession. The FTSE100 closed Friday’s session 0.36% lower, while Germany’s DAX lost 1.39%, and the French CAC fell 0.82%.

What to watch today:

• Ahead of the local trading session, the SPI futures are anticipating the ASX to open flat to start the new trading week.
• On the reporting season calendar for today, Beach Energy (ASX:BPT), Endeavour Group (ASX:EDV) and JB HiFi (ASX:JBH) are all set to release first half results.
• In commodities, crude oil is trading 2.13% higher at US$79.72/barrel, coal is down 3.33% at US$218/tonne, gold is up 0.21% at US$1865.38/ounce and iron ore is up 0.4% at US$126/tonne.
• The Aussie dollar is buying US$0.69, 90.96 Japanese Yen, 57.3 British Pence and NZ$1.10.

Trading Ideas:

• Bell Potter has downgraded its price target on GrainCorp (ASX:GNC) from $8.25 to $8.00 but maintains a Hold rating on the company following the release of GrainCorp’s recent harvest update ahead of the company’s AGM. The recent update demonstrates receivals are lagging other large crop years, as well as spot Australian canola meal has moved from a premium to a discount compared to Canadian meal.
• Trading Central has identified a bullish signal on Neometals (ASX:NMT) following the formation of a pattern over a period of 71-days which is roughly the same amount of time the share price may rise from the close of $0.87 to the range of $1.04 to $1.08 according to standard principles of technical analysis.

The Aussie share market fell almost 1% (Mon-Thu), on the back of the RBA raising the nation's cash rate by 25-basis points to 3.35%. And reporting season opened with some of Australia’s biggest companies announcing their results.  

In this week's wrap, Grady covers:

• (0:30) How investors have reacted to company results
• (0:57) Suncorp, Boral, AGL Energy & Amcor's corporate earnings
• (4:25) The best performing stocks in the ASX200
• (5:50) The most traded stocks & ETFs by Bell Direct clients
• (6:23) Three economic news items to watch out for

New York edged lower overnight amid renewed rate-worry weakness. All three major benchmarks closed in the red, and all eleven of the S&P500 industry sectors closed lower. The Dow Jones is down 0.7%, the S&P500 down 0.9% and the Nasdaq down just over 1%.

Over in Europe however, equities rallied, with the STOXX 600 closing 0.6% higher, Germany’s DAX up 0.7%, France’s CAC up 1% and the FTSE 100 up 0.3%.

What to watch today:

• Following US equities overnight, the SPI futures are suggesting the ASX200 will drop 0.35% at the open this morning.
• In commodities, oil prices are down almost 1%, pausing a three-day rally as rising US inventories offered a bleak picture for domestic demand. Gold is also in the red again, after rebounding further from one-month lows. And iron ore is down 0.5% to US$124 per tonne.
• In economic news, today the RBA will release a statement on monetary policy.
• And companies reporting today includes News Corp (ASX:NWS) and REA Group (ASX:REA).
• United Malt Group (ASX:UMG) is set to hold its AGM today.

Trading Ideas:

• Bell Potter maintain a BUY rating on DDH1 (ASX:DDH) following a strong set of preliminary earnings results. They have increased their price target from $1.44 to $1.47, and at DDH’s current share price of $0.99, this implies 48.5% share price growth in a year.
• Trading Central have identified a bearish signal in Perseus Mining (ASX:PRU) indicating that the stock price may rise from the close of $2.04 to the range of $1.63 - $1.71, over 62 days, according to the standard principles of technical analysis.

The overnight retreat on Wall Street weighed down the local stock market, with the ASX200 closing the day 0.53% lower. The utilities sector led the fall on the back of the weak half year result from AGL Energy. It’s shares dropped 9.6% as it halved its dividend and lowered the top end of its annual guidance ranges. Underlying NPAT fell 55% year-on-year to $87 million, and underlying EBITDA fell 16% to $604 million. The company reported a statutory loss after tax of $1.1 billion, which includes $706 million of impairment charges (post-tax) from AGL’s accelerated decarbonisation plans.

Technology stocks tracked the softness of their US peers – Megaport (ASX:MP1) dropped more than almost 6%, after reporting promising results. The company finished the period with an EBITDA margin of 6%, and total revenue was up 38% to $70.7 million.

Financials were mixed today, after ANZ reported a solid first quarter. Its shares closed higher, while its major rivals were lifted about 0.2%.

Taking a look at commodities, well the first Australian coal cargoes have arrived in China and are awaiting customs clearance. Two vessels carrying Australian coal have reached China for the first time since an unofficial ban on imports was introduced over 2 years ago and several more are on the way. They are being closely monitored by coal traders as they are keen to see how smooth Chinese customs procedures will be.

And the winning stocks today were De Grey Mining (ASX:DEG), IDP Education (ASX:IEL) and Downer (ASX:DOW). The stocks that declined the most were AGL Energy (ASX:AGL), Coronado Global Resources (ASX:CRN) and Whitehaven Coal (ASX:WHC).

And the most traded stocks today by Bell Direct clients were BHP(ASX:BHP), Argosy Minerals (ASX:AGY), Whitehaven Coal (ASX:WHC), AGL (ASX:AGL) and ANZ (ASX:ANZ).

Lastly, the Australia dollar is slightly higher, with $1 buying US$0.70, 57.93 British Pence, 91.42 Japanese Yen and NZ$1.10.

US stocks slid at the closing bell of the midweek session as investors shifted focus back to corporate earnings reports and away from dovish comments by Fed Chair Jerome Powell about the future of US cash rate hikes amid slowing economic growth.

Lumen Technologies tanked more than 20% after reporting a fourth-quarter loss of US$3.1bn and provided guidance for the year that fell well short of Wall St expectations. Disney on the other hand reported results after the closing bell that topped analysts’ expectations including a loss of US$1.05bn which was less than Wall Street had predicted, earnings per share of 99 cps, well above the expected 78 cents per share, revenue of US$23.61bn and total Disney+ subscriptions of 161.1m which declined by around 2.4million on the back of a recent price increase. The Dow Jones fell 0.61%, the S&P500 tumbled 1.11%, and the Nasdaq lost 1.68% on Wednesday.

Over in Europe markets rallied on Wednesday following dovish comments from Fed chair Jerome Powell as well as investors digesting mixed corporate earnings reports. Jewellery company Pandora rose 12% on upbeat earnings results including quarterly sales hitting 9.9 billion Danish Crowns or $1.43 billion dollars, and annual sales around 26bn in 2022. The UK’s FTSE100 hit an intraday record high before paring back gains to close the day up 0.3%. In Germany, the DAX added 0.6% while the French CAC fell 0.18% on Wednesday.

 What to watch today:

• Taking a look at commodities today, crude oil is trading 1.57% higher at US$78.35/barrel, gold is flat at US$1874/ounce and iron ore is trading down 0.8% at US$124.50/tonne.
• The Aussie dollar is buying US$0.69, 90.97 Japanese yen, 57.56 British pence, and NZ$1.10.
• Ahead of the local trading session the market is expected to open 0.42% lower following the sell-off on Wall St overnight.
• On the economic data front today, there is no local economic data out today however investors will be awaiting the release of the RBA statement on Monetary Policy out tomorrow.

 Trading Ideas:

• Bell Potter has increased the price target on Microba Life Sciences (ASX:MAP) from $0.40 to $0.60 following the execution of an exclusive distribution agreement with Luminary Health Centres to distribute a microbiome test powered by Microba’s testing technology, to consumers in the US. Bell Potter sees the deal has locked in revenue for the next 12-months and is the driver of the price target increase for Microba.
• Trading Central has identified a bullish signal on Race Oncology (ASX:RAC) following the formation of a pattern over a period of 36-days which is roughly the same amount of time the share price may rise from the close of $2.05 to the range of $2.15-$2.19 according to standard principles of technical analysis.

The ASX rallied 0.35% today, rebounding from yesterday’s rate-driven sell-off as investors piled into financial and material stocks today, while selling out of health care and consumer staples stocks.

Boral (ASX:BLD) shares took flight today, adding over 12% after the building and construction materials supplier released first half results including revenue up 12% to $1.681bn, EBIT up 15% at $95.3m, NPAT increased 53% to $56.8m and adjusted EPS rose 50% to 5.1c/share. New Boral CEO Vik Bansal said RBA rate hikes haven’t crimped customer demand for cement, asphalt and gravel.

Suncorp (ASX:SUN) shares jumped 4.5% today after the Queensland-based financial conglomerate released first half results including group net profit up 44.3% to $560m, and cash earnings up 62.9% to $588m. The company also boosted its dividend payout to 33 cents per share, representing a 71% payout ratio of cash earnings. Group operating expenses fell 3.1% to $1.349bn, largely reflecting efficiency benefits from the strategic program of work, and the company reaffirmed its FY23 financial targets which investors have been looking for companies to share this reporting season.

Strike Energy (ASX:STX) has accepted Hancock Prospecting’s takeover offer of Warrego Energy for $0.40/share, over its own one-for-one scrip offer for the takeover of Warrego. Strike said despite not acquiring control of Warrego, it has achieved a number of key milestones over the last 6-months including share price appreciation of 40%, $116m in immediately available cash funding following the acceptance of Hancock’s offer, and Strike’s joint venture partner will be controlled by a credentialed, well-funded and motivated counterparty to pursue development activity in respect of the West Erregulla gas project.

The winning stocks today were led by Boral (ASX:BLD) soaring almost 13%, Imugene (ASX:IMU) rallying 7.7% and Suncorp (ASX:SUN) climbing 4.6%.

And on the losing end of the market, Elders (ASX:ELD) fell more than 5.8% after the company was sent a price query from the ASX today, while Healius (ASX:HLS) fell 5.4% and Ramelius Resources (ASX:RMS) lost 4.12% today.

The most traded stocks by Bell Direct clients today were Macquarie Group (ASX:MQG), Pilbara Minerals (ASX:PLS) and Tennant Minerals (ASX:TMS).

On the commodities front this afternoon, crude oil is flat at US$77.16/barrel, iron ore is down 0.8% at US$124.50/tonne and gold is up 0.13% at US$1876.33/ounce.

The Aussie dollar is buying 70 US cents 91.32 Japanese Yen, 57.24 British Pence, and 1 New Zealand Dollar and 10 cents.

Over in the US today, stocks closed higher as investors digested Fed Chair Jerome Powell’s speech to gain insight into just how long the Fed will continue raising interest rates to tackle inflation in the US. Jay Powell once again made dovish comments in his speech, reassuring markets that the disinflationary pressures have begun, particularly in the goods sector, while also saying that the Fed has the strategy in place to bring down inflation to its target 2%. At the same time, Jay Powell acknowledged the robust January jobs report but mostly shrugged it off.

Stocks recovered from an early sell-off after Powell’s speech, with the Dow Jones closing Tuesday’s session up 0.8%, the S&P500 adding 1.29% and the tech-heavy Nasdaq jumped 1.9%.

US trade balance data for December was also released yesterday showing the US trade deficit widened to US$67.4bn in December, the lowest level since September 2020, and down from US$61bn in November. Exports in the region fell 0.9% for the month while imports rose 1.3%.

In Europe, markets closed mostly lower as investors look to the latest slew of economic data and interest rate outlook. The euro zone PMI index showing business activity in a single currency returned to growth in January for the first time in 6-months, while the US jobs report last Friday came in much stronger than expected. Germany’s DAX fell 0.16%, the French CAC fell 0.07% and, in the UK, the FTSE100 rose 0.36%.

On the commodities front, oil is trading 3.5% HIGHER at US$76.71/barrel, gold is down 0.51% at US$1877.39/ounce and iron ore is down 0.8% at US$125.50/tonne.

What to watch today:

• Ahead of the local trading session here in Australia, the ASX is poised to open 0.46% higher following the rally on Wall St overnight.
• The Aussie dollar is buying 69 US cents, 90.99 Japanese Yen, 57.24 British Pence and 1 New Zealand dollar and 10 cents.

Trading Ideas:

• Bell Potter has maintained a buy rating on luxury online fashion retailer Cettire (ASX:CTT) following the release of the company’s first half results yesterday. For the half, Cettire reported sales revenue of $187.7m, up 65% on the PCP and a strong start to the second half with 80% sales revenue increase in January. Bell Potter has also increased its price target on Cettire to $2.40 from $2.30 on the belief that Cettire will continue to outperform its peer group consisting of global luxury retailers and local e-commerce players given its less than 1% market share in a large and growing market which could remain more resilient than other discretionary categories.
• Trading Central has identified a bullish signal on Medibank Private (ASX:MPL) following the formation of a pattern over a period of 74-days which is roughly the same amount of time the share price may rise from the close of $3.03 to the range of $3.21-$3.25 according to standard principles of technical analysis.

The RBA today announced the nation’s cash rate will increase by 0.25% or 25 basis points, to 3.35% in a move widely expected by the markets. RBA governor Philip Lowe said ‘global inflation remains very high’ and warned further rate hikes will be needed in coming months to bring inflation back to the target range.

The ASX tanked immediately after the announcement following warnings from Philip Lowe that further rate hikes are needed in coming months, despite the rate hike today meeting market expectations, which saw the usual rate-hike sensitive suspects including REIT stocks sold off post the announcement as investors anticipate further impact to REIT stock balance sheets on the back of this next interest rate hike.

For the day though, the key index ended the session down 0.46%. Hot takeover target Nitro Software (ASX:NTO) received a proposal from Potentia Capital to engage with Nitro in relation to gaining access to due diligence, with a view to potentially increase its current $2/Nitro share off-market takeover offer to the range of $2.20 to $2.30 per share. Nitro shareholders are cautioned that there is no certainty Potentia will increase its offer for the Nitro takeover, and the current $2/share bid from Potentia is inferior to the Alludo takeover offer of $2.15/share that is set to expire on 3rd March. The Nitro board is currently seeking advice from its external financial and legal advisors.

Nuix (ASX:NXL) skyrocketed 40% today after the investigative analytics and intelligence software company announced the Federal Court of Australia has delivered its judgement in relation to the proceedings brought by former Nuix boss, Edward Sheehy against Nuix. The Federal Court this morning dismissed Mr Sheehy’s claims and said there is no requirement for Nuix to amend its options register and that Mr Sheehy is not entitled to any monetary compensation from the company. The initial claims Mr Sheehy made were him being owed options and entitlement of shares to the value of $183m plus interest, which today was dismissed.

The winning stocks today were led by New Hope Corporation (ASX:NHC) rallying 3.70%, Link Administration (ASX:LNK) adding 3.43% and Magellan Financial Group (ASX:MFG) ending the day up 3.36%.

And on the losing end ARB Corp (ASX:ARB) tanked more than 12% after Macquarie responded to the companies half year trading update, downgrading ARB to neutral. Lifestyle Communities (ASX:LIC) fell 5.7% today and Centuria Capital (ASX:CNI) lost 5.58%.

The most traded stocks by Bell Direct clients today were Newcrest Mining (ASX:NCM), Telix Pharmaceuticals (ASX:TLX) and New Hope Corporation (ASX:NHC).

Australia’s trade balance data for December was also released today, showing the country’s trade surplus declined to $12.237bn for the month, down from $13.475bn in November. The trade surplus decline was larger than economists were expecting and mainly driven by surging cost pressures on exports against imports growing amid China’s easing of tough COVID restrictions. Exports for the month fell 1.4% from November, while imports rose 1% from November. Overall, Australia posted its fifth straight year of trade surplus buoyed by robust sales of key commodities like iron ore and natural gas.

Taking a look at commodities, oil is trading almost 1% higher at US$74.78/barrel, gold is up 0.32% at US$1873.11/ounce and iron ore is down 0.8% at US$125.50/tonne.