The Match Out: Stocks retreat from early highs, close flat, NRW Holdings (NWH) upgrades

A strong open for the local market however the best of the session was seen before little lunch with the ASX ending flat on the day, closing ~46 points below the session high, back below the 7000 handle. IT stocks continued to perform, particularly the small caps while Energy & Materials fell.

• The ASX 200 finished down -1pt/-0.01% at 6974
• The IT sector was best on ground (+1.87%) while Communications (+1.78%) & Utilities (+0.79%) were also strong.
• Energy (-2.24%) and Materials (-1.06%) the weakest links.
• NRW Holdings (NWH) +10.94% upgraded earnings guidance
• Graincorp (GNC) -6.55% fell on a downgrade from RBC.
• Centuria Industrial REIT (CIP) +3.83% said FY22 earnings were slightly up on FY21, but guided to a slight decline for FY23 – not too bad at all.
• We reduced another tech holding in our Flagship Growth Portfolio today into strength – just trimming around the edges following a strong rally from recent lows.
• This morning’s Market Matters report looked at our plans from here with a specific focus on stocks we like if weakness does play out – Click Here to view
• Barrenjoey initiated on fund managers today, they like GQG Partners (GQG), are neutral Pendal (PDL) and Perpetual (PPT) and don’t like Platinum (PTM). Magellan (MFG) not covered given they own a chunk of BJ.
• We own Pendal (PDL) and Pinnacle (PNI) in the space.
• Citi put Qantas (QAN) on a SELL and $4.28 PT versus last of $4.56 – we tend to agree.
• Iron Ore was ~4% lower in Asia today weighing on the materials, Fortescue (FMG) down 2% & RIO -1.55%%
• Gold was flat at ~US$1771/oz.
• Asian stocks were higher, Hong Kong up +1.63%, Japan +0.87% while China was up +0.44%
• US Futures are basically flat.

ASX 200 CHART

Centuria Industrial REIT (CIP) $2.98

CIP +3.83%: This week we saw a downgrade from Centuria Office REIT (COF) which dragged down Centuria Capital (CNI) in the process, given their 17% holding. Today the Industrial focissed CIP reported full-year earnings that were a touch above expectations, Funds From Operations (FFO) $111.7 million up +22% yoy and ahead of consensus of $110.5 million – on a per unit basis this was $0.182 versus 0.18 expected while the dividend was solid at $0.1730. Total assets jumped by a third to $4.1 billion, reflecting $765 million in acquisitions during the year – a big year for them and this helped to push their Net Tangible Assets up 11% to $4.24 per unit, while their shares were down 28%. There is clearly a lot of bad news baked into this particular cake and while earnings will be lower in FY23, with FFO guidance of $0.17 and a dividend of $0.16, we think the share price has now factored in more than enough pain. NB: CNI which we recently bought in the Income Portfolio owns 14% of CIP.

NRW Holdings (NWH) $2.13

NWH +10.94%: The Perth-based mining & construction contractor was out with upgraded guidance today, with EBITDA now tipped to be $157m versus the prior guided range of $150-$155m. Revenue guidance remained at $2.4bn implying they’ve done better in terms of margins. More details to be provided when they report FY22 results on the 18^th of August, however, suffice to say, this inexpensive contractor is priced on sub 10x earnings and is performing better than the market had feared.

Broker Moves

• OFX Rated New Hold at Blue Ocean; PT A$2.60
• Pinnacle Investment Rated New Hold at Barclay Pearce Capital
• Challenger Raised to Overweight at Jarden Securities; PT A$7.65
• Stockland Reinstated Buy at Goldman; PT A$4.44
• Mirvac Group Reinstated Neutral at Goldman; PT A$2.38
• Technology One Cut to Neutral at Goldman; PT A$13.15
• Tabcorp Cut to Underweight at JPMorgan; PT 90 Australian cents
• GrainCorp Cut to Sector Perform at RBC; PT A$8.50
• Qantas Cut to Sell at Citi; PT A$4.28
• Pendal Group Rated New Neutral at Barrenjoey; PT A$4.10
• Platinum Asset Rated New Underweight at Barrenjoey; PT A$1.40
• Perpetual Rated New Neutral at Barrenjoey; PT A$36.50
• GQG Partners GDRs Rated New Overweight at Barrenjoey; PT A$2.30
• Orica Cut to Neutral at Credit Suisse; PT A$16.67
• CSL Cut to Hold at Jefferies; PT A$318
• Mesoblast Raised to Buy at Jefferies; PT A$1.10
• Neuren Cut to Hold at Jefferies; PT A$5.30

Major Movers Today

Have a great night

The Market Matters Team

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