The Match Out: ASX ends July ~3% higher as we now embark on FY reporting

Markets @ Midday: Listen Here each day

The calm before the earnings season to start the week & end the month of July with the ASX higher on open, soft in the middle before a recovery into the close, ultimately ending the session little changed in aggregate and still only ~3% below all time highs. July has been a volatile month for equities with the ASX200 trading down to a low of 6998 on the 10^th before bouncing 474pts/6.7% to just shy of 7500. Clearly a lot playing out in markets from a macro perspective but once again, buying weakness has paid odd off in spades at the index level, while there continues to be some exceptional opportunities thrown up in individual stocks, both here and overseas.

• The ASX 200 finished up +6pts/ +0.09% at 7410
• The Healthcare sector was best on ground (+0.63%) while Industrials (+0.34%) & Consumer Discretionary (+0.23%) were also strong.
• Staples (-0.75%) and Utilities (-0.47%) the weakest links.
• FY23 Reporting starts tomorrow with Credit Corp (ASX: CCP) kicking things off– For a copy of the Market Matters Reporting Calendar – Click Here
• For the month of July, the ASX200 advanced 2.88% - a solid start to the new FY building on a solid performance in FY23 where the index added 14.78%.
• Energy the standout in July +8.84% & Financials +4.86% while Healthcare -1.54% and Staples -1.14% the only sectors to finish lower.
• Against that backdrop, the preliminary numbers for the Market Matters Portfolios generally look solid
• As an early insight (& subject to some change), the Flagship Growth is up ~5%, Active Income up ~2.5%, International Equities up ~5% while the laggard was the Emerging Companies which is likely to end the month down ~1.5%.
• More action from Beijing today as they announced further measures to boost consumption and support the property sector as economic data continues to underwhelm.
• That supported China facing stocks with the Hang Seng China Enterprises Index up ~3% adding to its 6% advance last week.
• Lynas (ASX: LYC) +2.59% rallied on the back of a decent quarterly update
• Silver Lake Resources (ASX: SLR) -20.08% was hit hard after downgrading FY24 sales guidance.
• Magellan Financial (ASX: MFG) +2.19% was solid and has now recouped a large portion of the declines experienced following their most recent (weak) FUM update.
• Ramsay Healthcare (ASX: RHC) +2.15% is another stock that has struggled in recent times that captured some attention today as money flow into the beaten up areas of the market.
• IGO -4.63% posted a 19% uptick in quarterly earnings with strong production, although prices achieved were soft . The pullback continues post their recent write-down of Nickel assets.
• AMA Group (ASX: AMA) +20.83% bounced off recent lows after they maintained FY23 EBITDA guidance at $60-68m, saying they think the mid-point is where they’ll land. The market was more bearish than that with the stock trading near 52-week lows.
• SmartGroup (ASX: SIQ) +2.61% enjoyed an upgrade from Macquarie to outperform and $10 PT – this remains on our ‘Hitlist’ for the Active Income Portfolio but unfortunately we had not pressed the BUY button – it’s been very strong in recently months.
• Oil is building momentum and is on track for its biggest monthly gain in more than a year on signs the market is tightening. This is the trend we have been writing about across the energy complex more broadly, which has been stubborn in recent months however we believe markets will tighten up and prices will rise.
• Iron Ore was ~0.50% lower in Asia today.
• Gold was flat ~US$1957 at our close.
• Asian stocks were solid Hong Kong 1.58%, Japan +1.5% while China was up +0.34%
• US Futures are flat.

ASX 200 Chart

Silver Lake Resources (ASX: SLR) 89c

SLR -20.18%: the gold miner slumped to long-term lows today after providing FY24 guidance for the first time. Their 4^th quarter production numbers were strong, but largely pre-announced with 261koz of gold sales in the year at an all-in sustaining cost (AISC) of $1,941/oz. The focus today was on the FY24 sales guidance of 210-230koz of gold, a ~15% drop on the year just gone, though costs are expected to remain flat. Silver Lake said their Sugar Zone operation in Canada will focus on exploration and logistics works with mining and processing operations put on care and maintenance for the year. Sugar Zone was impacted by recent wildfires in the region and the company taking the opportunity to improve the asset while it struggles with mining equipment. This issue overshadowed the strong outlook at both Mount Monger& Deflector, as well as a strong balance sheet with $67m cash generated in the quarter.

Lynas Resources (ASX: LYC) $6.73

LYC +2.59%: a better than feared update helped support shares of the rare earth minerals company today. Their mt Weld asset saw record production in the quarter of 4,475t of REO including 1,864t of NdPr, though cash receipts were down as the company held back sales given lower prices. They are currently in discussions with Malaysia for a further extension to their licence conditions which has allowed the company to maintain operations until next year. The company also expects first output from their new Kalgoorlie processing facility in September with final touches being put on the plant as we speak. This is largely in line with expectations. Lynas has faced a price headwind though, with the $38.90/kg selling price in the 4Q down more than 50% YoY. We expect prices to improve over the medium term and operationally Lynas looks to be on track to meet or beat expectations in FY24.

Sectors in July – Source Bloomberg

Stocks in July – Source Bloomberg

Broker Moves

• SmartGroup Raised to Outperform at Macquarie; PT A$10
• McMillan Shakespeare Raised to Outperform at Macquarie
• SiteMinder Ltd Cut to Market-Weight at Wilsons; PT A$4.61
• Webjet Rated New Overweight at Wilsons; PT A$9.02
• Flight Centre Rated New Overweight at Wilsons; PT A$26.19
• Corporate Travel Rated New Overweight at Wilsons; PT A$23.17
• Champion Iron Cut to Reduce at CLSA; PT A$6.20
• Maas Group Cut to Neutral at Goldman; PT A$2.90
• PointsBet Cut to Neutral at Credit Suisse; PT A$1.70

Major Movers Today

Have a great night
The Market Matters Team

Make informed investment decisions

At Market Matters, we write a straight-talking, concise, twice daily note about our experiences, the stocks we like, the stocks we don’t, the themes that you should be across and the risks as we see them. Click here for your free trial.

The Match Out will be available each day after the market close. Follow my profile to be notified when the latest report is live.