The Match Out: Flat end to a tough week for markets, Magellan (MFG) rallies ~13%

A flat end to a tough week for markets with a lot to digest: Better US data drove bond yields higher, China property concerns as news of defaults linger pushed miners lower, while local reporting underpinned rising volatility across the board. Phew, it’s Friday!

• The ASX 200 finished up +2pts/ +0.03% at 7148
• The property sector was best on ground (+1.68%) while Utilities (+1.16%) & Materials (+0.80%) were also strong.
• Communications (-1.89%) and Consumer Discretionary (-0.97%) the weakest links.
• Buying today was focused in the previously weak miners with BHP +1.46%, RIO Tinto (RIO) +1% and Mineral Resources (MIN) offsetting a market where losers trumped winners by ~20%.
• Stocks continue to follow through in both directions after strong and weak results e.g. Cochlear (ASX: COH) +4.3%, GUD Holdings (ASX: GUD) +2.8% Telstra (ASX: TLS) -3.2% and ResMed (ASX: RMD) -2.7% i.e. no hurry to pick tops & bottoms.
• Magellan (ASX: MFG) +13.26% on a report that was inline, but includes a surprise special dividend and better cost guidance for FY24.
• Abacus Group (ASX: ABG) +10% rallied on better distribution guidance for FY24
• Centuria Capital (ASX: CNI) -5.92% fell after reporting inline for FY23 but guiding lower for FY24 on lower development earnings.
• Goodman Group (ASX: GMG) +7.28% on the other hand ripped for a 2^nd straight day – we’ll have nightmares about this!
• Iron Ore was ~3% higher in Asia today supporting the miners after a tough week.
• Gold was down overnight to ~US$1890 before tracking up US$2 in Asian trade today.
• Asian stocks were lower, Hong Kong down -1.67%, Japan -0.63% while China fell -0.67%
• US Futures are all up, around +0.40%  

ASX 200 Intraday

ASX 200 Daily

Magellan Financial Group (MFG) $10.42

MFG +13.26%: Rallied today on FY23 results that came in largely as expected from an earnings perspective (NPAT of $174 million), while they announced a final dividend of 39.8¢. What drove the positive reaction was a 30c/share special dividend and cost guidance for FY24 that was pleasing. 

As we’ve written in recent notes, performance will drive flows, and capital management (given strong balance sheet) provides optionality for management. In the 6-months to June, their Global equity strategy outperformed, hopefully, that is retained, and they leverage that performance into 1) Stemming outflows (seems to be happening) and 2) attracting inflows & launching new products.

We bought Magellan (MFG) recently, targeting a move like this. We think it’s worth ~$12.

Centuria Capital (CNI) $1.43

CNI -5.92%: the property fund manager released FY23 results today which were largely in line with expectations, however shares slumped on soft guidance. Operating profit of $115.6m and Operating EPS of 14.5c were pre-announced, so no surprises there. 

Assets Under Management, also released last month, fell -0.9% to $21 billion. The company noted $811 million of transactions were settled in the year with just $34 million yet to settle as at 30 June which compares to $403 million at the end of FY22. This drop highlights the lack of volume moving through the real estate market which weighs on the Fund Manager’s earnings.

Interest costs were also slightly higher than expected, and given where rates have moved they will likely weigh on FY24 results as well. As a consequence, guidance was soft, looking for Operating EPS of 11.5-12c vs 13.5c expected, and Dividends of 10c, 10% short of expectations. We expect some of these headwinds to ease, and see this guidance as likely to be conservative.

Sectors this week

Stocks this week

Broker Moves

• BLX AU: Beacon Lighting Raised to Buy at Citi; PT A$2.10
• EVN AU: Evolution Raised to Reduce at CLSA; PT A$3.50
• GMG AU: Goodman Group Raised to Buy at CLSA; PT A$28.04
• IPH AU: IPH Cut to Hold at Morgans Financial Limited; PT A$8.90
• ORA AU: Orora Cut to Hold at Jefferies; PT A$3.85
• SHL AU: Sonic Healthcare Raised to Neutral at Macquarie; PT A$32
• SHL AU: Sonic Healthcare Raised to Buy at UBS; PT A$36.50
• SUL AU: Super Retail Cut to Underweight at JPMorgan; PT A$13
• SUL AU: Super Retail Cut to Accumulate at CLSA; PT A$15
• TLS AU: Telstra Group Cut to Hold at Morgans Financial Limited

Major Movers Today