The Match Out: ASX edges higher, the action was again under the hood

A solid session for the ASX today, although some late selling again took some of the sheen off the day. IT stocks continued on a volatile week where ~5% swings have become commonplace, while the results today ensured some big moves under the hood, unfortunately for Market Matters, we were on the wrong side of a couple today!

• The ASX 200 finished up +33pts/ +0.47% at 7182
• The IT sector was best on ground (+4.20%) while Financials (+1.04%) & Energy (+0.89%) were also strong.
• Consumer Staples (-1.09%) and Utilities (-1.05%) the weakest links.
• Magellan (ASX: MFG) -1.96% down after co-founder Chris MacKay sold 12m shares (6.6% of the company) at $9.40 (valued at $113m), Street Talk saying Phil King’s Regal Partners (RPL) was the buyer of most.
• Ramsay Healthcare (ASX: RHC) -11.95% whacked on a big miss to FY23 profit as costs rose, FY24 guidance also softer – RHC is our weakest link in the Flagship Growth Portfolio – more below.
• Whitehaven Coal (ASX: WHC) -5.08% down as they paused the buy-back, which implies they could soon be active on the acquisition side.
• Cleanaway (ASX: CWY) -4.14% fell despite a solid FY23 update, a further trading update to be provided on 20^th October.
• Ive Group (ASX: IGL) -8.75% was a ~1% miss on FY23 while their profit guidance for FY24 was around 8% below consensus.
• Northern Star (ASX: NST) +5.18% was strong as earnings increased 29% and were ahead of consensus + they extended the share buyback for a further 12 months.
• Tabcorp (ASX: TAH) +4.29% also beat and rallied.
• APA Group (ASX: APA) -3.35% back online after raising $675m in equity at $8.50 – first equity raise in 5 years. Stock closed $8.95.
• Qantas (ASX: QAN) +0.81% was flat after reporting an underlying pre-tax profit that was inline with estimates, the loyalty business and cost guidance were the main positives. We think it’s more a sell here.
• Insignia (ASX: IFL) -10.65% fell to a 14-year low as underlying profit missed the mark.
• Lovisa (ASX: LOV) -6.23% fell after saying FY24 sales were soft so far..
• Regal Partners (ASX: RPL) +5.49% saw revenue up and costs down, a good combo!
• Nine Entertainment (ASX: NEC) +0.49% gained market share on free-to-air, but the growth story remains squarely on Stan’s shoulders.
• Silver Lake (ASX: SLR) flat, maintained FY24 production & sales guidance.
• Calix (ASX: CXL) -3.3% talked a big game as they continue to progress towards a number of commercial applications, just a long lead time!
• Iron Ore edged higher again, +1% in Asia.
• Gold was up overnight to ~US$1917 before tracking another +US$5 in Asian trade today, settled $US1921 at our close.
• Asian stocks were all higher, Hong Kong up +2.2 %, Japan +0.80% while China was up +0.50%
• US Futures are all up led by the Nasdaq (+1.29%) thanks to NVIDIA.

ASX 200 Chart - Intraday

ASX 200 Chart - Daily 

Ramsay Healthcare (ASX: RHC) $48.71

RHC -11.95%: Hit hard today after their FY23 results missed the mark – a continuance of recent woes for the private hospital operator. While top-line revenue was a shade above consensus, as was underlying EBITDA and EBIT, higher than expected interest and tax led to a large miss for Net Profit After tax (NPAT) which came in at $271m vs consensus $348m, down 9% YoY. A fully franked final FY23 dividend of $0.25 was declared which was around half that expected. Management’s FY24 group outlook commentary is for mid-single top-line growth which is inline with expectations, however, they also expect margin recovery to be slowed by ongoing inflationary pressures, which will flow through to lower earnings.

• Our optimistic view of recovery has been wrong, as higher costs hurt earnings. While clearly weak, the large decline in share price should attract further interest from potential acquirers, and for that reason, we are likely to hold.

Whitehaven Coal (ASX: WHC) $6.92

WHC -5.08%: A strong year for the coal producer with underlying revenue of $6,06bn which was broadly inline with consensus, EBITDA of $3,99bn (v consensus $4bn) & an underlying net profit after tax (NPAT) of $2.7bn which was inline with expectations. The final dividend of 42cps fully franked was ahead of consensus, chalking up a FY dividend of 74cps. While these metrics look solid, and their reported net cash position of $2.65bn is a great foundation, they have temporarily suspended the buy-back as they look at their capital allocation framework, which implies they are readying themselves to buy something, with BHP’s coal assets the most obvious candidate.

• Solid result, growth rather than capital returns saw sellers emerge today.

Cleanaway Waste Management (ASX: CWY) $2.55

CWY –4.14%: Fell today despite a solid/inline result while longer term guidance (EBIT to $450m but FY26) is aligned with current market thinking. FY23 revenue of $3.56bn compared to consensus of $3.52bn, EBIT of $302.2m above $298.8m expected with Net Profit After Tax (NPAT) of $146.7m was inline. Two slight negatives were higher capex while they said a trading update would be provided on the 20^th of October (i.e. not today).

• Solid result that does not change our view

Ive Group (ASX: IGL) $2.19

IGL -8.75%: Hit today as FY23 results came in a touch light v expectations while it was FY24 guidance that prompted the sell-off. FY23 Revenue of $970m was a ~1% miss, as was EBITDA ($119m v $120m exp) and NPAT $39.7m v $40.6m expected while the final dividend of 8.5cps was a beat. For FY24, they said we should expect NPAT of $40-43m versus consensus of $45.3m. This implies only low single-digit growth and is an 8.3% miss to consensus – hence the weakness.

• A soft update and weak guidance, however the share price reaction was too large in MM’s view.

Nine Entertainment (ASX: NEC) $2.04

NEC +0.49%: FY23 results showed the headwinds being faced by traditional media sources, however, the numbers weren’t as bad as feared. Revenue was largely in line while EBITDA fell 16% to $591.2m, a small miss to expectations. The company also reduced their final dividend to 5cps, down from 7cps. Free-to-air TV was actually better than expected despite facing significant margin pressure. A softer advertising market was offset by an increase in market share with Nine’s portion at a 20-year high. The more exciting part of the business is its investment in Stan which managed to expand margins while seeing revenue growth of 12%. Price increases have helped drive growth here with little issue in retaining subscribers, the business is also expected to see a bump from a number of sporting events in the next few months. The company said the ad market has continued to face headwinds, however the start of FY24 has shown signs these headwinds are easing.

• An okay FY23 for NEC, it’s cheap and seems to be doing well given the cards being dealt from a macro standpoint

Calix (ASX: CXL) $4.39

CXL -3.3%: FY23 results today show the progress Calix is making in commercializing a number of green industrial solutions, supported by a strong balance sheet as they come to market. Revenue was up 42% to $29.6m with margins up, driven by their water business. The opportunity is elsewhere though, mainly in cement & lime as well as chemical processing. They signed their first licence agreement for Leilac with a second project on the way and plenty of others in the pipeline. The company recently agreed to a deal with Pilbara Minerals (PLS) for a midstream lithium processing plant, supported by a $20m Australian Government grant while Pilbara will contribute an oversized share of the capex. The company has ~$75m in cash which supports further investment in new and existing projects as they start to commercialize the technology.

Regal Partners (ASX: RPL) $2.50

RPL +5.49%: The fund manager announced strong 1H23 numbers today with Net Profit up 98.5% to $13.1m, covering more than half of the FY23 consensus numbers in the process. Costs fell 10.7% as they realised synergies following the VGI Partners merger completed last year. Flows have been strong, FUM was up 23% in the last 12 months largely thanks to strong performance numbers in new and alternative investment options. They had $234m cash in hand at the end of the period, making up about a quarter of the value of the business and supporting plans for more M&A.

Broker Moves

• Reece Cut to Lighten at Ord Minnett; PT A$16.50
• National Storage Raised to Buy at Moelis & Company; PT A$2.41
• Ingenia Cut to Hold at Moelis & Company; PT A$4.18
• Cedar Woods Cut to Hold at Moelis & Company; PT A$5.80
• IDP Education Raised to Neutral at Macquarie; PT A$26
• HMC Capital Cut to Sell at CLSA; PT A$4.54
• Perenti Raised to Buy at Citi; PT A$1.25
• Domino's Pizza Enterprises Raised to Neutral at Citi; PT A$57.95
• Lottery Corp. Raised to Neutral at Jarden Securities; PT A$5.46
• SkyCity Raised to Accumulate at CLSA
• McMillan Shakespeare Cut to Reduce at CLSA; PT A$22.60
• National Storage Raised to Reduce at CLSA; PT A$2.21
• National Storage Raised to Neutral at Macquarie; PT A$2.30
• Domino's Pizza Enterprises Cut to Underweight at JPMorgan
• Macquarie Technology Gro Cut to Underperform at RBC; PT A$60
• Domino's Pizza Enterprises Cut to Accumulate at CLSA; PT A$63
• Collins Foods Cut to Neutral at Citi; PT A$11.25
• SG Fleet Cut to Reduce at CLSA; PT A$2.70
• Pepper Money Cut to Neutral at Citi; PT A$1.45
• Reece Cut to Reduce at Morgans Financial Limited; PT A$15.50
• Premier Investments Rated New Buy at Unified Capital; PT A$30.36
• Monash IVF Rated New Buy at Unified Capital; PT A$1.50
• Woolworths Group Raised to Add at Morgans Financial Limited
• IDP Education Raised to Add at Morgans Financial Limited
• SiteMinder Ltd Raised to Add at Morgans Financial Limited
• PolyNovo Raised to Accumulate at CLSA; PT A$1.70
• Iluka Raised to Buy at Citi; PT A$10
• Cedar Woods Cut to Hold at Bell Potter; PT A$5.30

Major Movers Today

Have a great night

The Market Matters Team

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