The Match Out: Some hits a few big misses as reporting season heats up

A soft start to the new trading week which sees the vortex of local company results with the next 3 days seeing a significant number of company updates. There was certainly volatility at the stock level today with Iress (IRE) -35% & A2 Milk (A2M) -13.56% on the wrong side of it, while strong updates from Premier Investments (PMV) +12.23% and Breville (BRG) showed there is life left in retail!

• The ASX 200 finished down 32pts/ -0.46% at 7115
• The Consumer Discretionary sector was best on ground (+0.83%) while Energy (+0.65%) was also up on the day.
• Consumer Staples (-1.34%) and IT (-1.32%) the weakest links.
• Audinate (ASX: AD8) +10.68% rallied hard on a good result and solid guidance – although it was up more early. We own.
• Premier Investment (ASX: PMV) +12.23% traded near 5-month highs today following a positive trading update. We own.
• Elders (ASX: ELD) -10.81% hit on a downgrade to guidance for FY23, around 6.5% below consensus, Sept year-end. We own.
• Westpac (ASX: WBC) -3.06% reported lower margins at their quarterly update.
• Charter Hall (ASX: CHC) +3.56 reported FY23 results that were ahead of expectations.
• Nib (ASX: NHF) +4.5% rallied the most in a year as it reported FY23 earnings that were up 45% year on year.
• Iress (ASX: IRE) -35% on the other hand dropped like a stone on weaker profit and cancellation of the dividend as they address balance sheet concerns.
• Reliance Worldwide (ASX: RWC) -8.25% down after it expects group revenues to decline with lower sales in most markets.
• UBS upgraded their PT for Magellan (ASX: MFG) -0.96% to $11.50 from $10 – Jarden fell on their sword and upgraded from sell equivalent to neutral.
• Uranium stocks are on the up again – Paladin (ASX: PDN) +2.6% punched through 80c before closing just below. We like the sector
• Iron Ore was ~1% higher in Asia today supporting the miners.
• Gold was flat at ~US$1890.
• Asian stocks were mostly lower Hong Kong down -1.97%, Japan flat, while China was off -1.16%
• US Futures are flat
• Download the Market Matters Reporting Calendar Here

ASX 200 Chart - Intraday

ASX 200 Chart - Daily

Premier Investments (ASX: PMV) $24.41

PMV +12.23%: the retail group traded near 5-month highs today following a positive trading update, a corporate review and the departure of their CEO Richard Murray. Premier will report FY23 numbers next month for July year-end with EBIT between $355-357m according to today’s update, ~3% ahead of consensus and at least 6% above FY22. Their audited financials are due out at the end of September, with the current CEO now expected to leave on the 15^th of September. The company has also engaged corporate advisor to look into the structure of the group which contains Smiggle, Peter Alexander, Apparel Brands (Just Jeans, JayJays and several others) and their investments in Myer (MYR) and Breville (BRG). The review will look into potentially splitting the group into 2 or more entities by way of a demerger as it looks to unlock value for its shareholders.

Audinate (ASX: AD8) $11.40

AD8 +10.68%: the audio-visual company hit all-time highs today after posting record numbers in FY23, and hitting free cash flow positive in the second half. Revenue grew 40% to $US46.7m, around 7% ahead of consensus. EBITDA in Aussie dollar terms was up more than 150% to $11m, well ahead of consensus at $8.1m. The beat came down to strong market penetration in chips where the company has maintained an impressive market share being 12x their nearest competitor in the audio space. Video continues to grow substantially and adoption is increasing while software has quickly grown to make up around a quarter of revenue which will likely support margins moving forward. Supply chain challenges have eased, however, Audinate still see near-record levels of backlog which provides visibility for more growth to come.

• A standout result for the company which we have backed for nearly 2 years.

Elders (ASX: ELD) $6.35

ELD -10.81%: Fell today after downgrading earnings guidance for FY23 by ~6.5% relative to consensus. ELD (September year-end) are now guiding to underlying EBIT in the range $165m to $175m, 11% below their previous guidance range, although the market was at the lower end of that expecting $182m in underlying earnings. They sighted Lower than forecast Rural Products sales in recent weeks, greater than forecast pressure on margins especially in crop protection products & further weakness in the prices of cattle and sheep with a lower than forecast offset from volumes traded.

Distilling this down, clearly a negative update and the ELD turnaround is still taking shape, however ELD is trading at circa 9.7x FY24 PER, well below its peers at around 16.8x, with the next potential catalyst in November when it unveils its next three-year strategic plan.

MM remains long ELD in our Flagship Growth Portfolio, and may average on a move to ~$6

Westpac (ASX: WBC) $20.62

WBC -3.06%: A quarterly update from Westpac today showed some weakness for the quarter, although they look likely to hit current full year consensus. Unaudited cash earnings came in at $1.8bn, which implies WBC need a run-rate around the same to reach expectations. Core NIM was 1.86% down 4bps from 1H23 while expenses for second half 2023 were up 5%. Overall, not a bad update, and similar to the other banks, although margins were slightly worse and bad debt provision seems a bit light on.

A2 Milk (ASX: A2M) $4.27

A2M -13.56%: FY23 results out today for the milk products business were largely as expected, however, shares struggled on weaker guidance, falling to 12-month lows. Revenue was up 10% to $1.59b and EBITDA grew 12% to $219m which were both in line with consensus numbers. Margins were slightly below expectations but this was largely offset by lower marketing spend. The China infant formula market is expected to decline in FY24, in part offset by market share gains that are expected to come through. Th company is also facing higher cost headwinds. As a result, A2 expects low single-digit revenue growth whereas consensus was looking for high single-digit growth in FY24, while EBITDA margins are expected to be flat into FY24 vs a small increase expected by the market. We suspect this leads to downgrades of ~10% to consensus EBITDA numbers.

Broker Moves

• Magellan Financial Raised to Neutral at Jarden Securities
• Centuria Capital Raised to Overweight at JPMorgan; PT A$1.80
• Core Lithium Raised to Neutral at Goldman
• Dexus Raised to Buy at Jefferies; PT A$9
• PWR Holdings Raised to Buy at CLSA; PT A$11

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.