Market Wraps

Evening Wrap: ASX 200 falls + Morgan Stanley's key reporting season pick

Tue 18 Jul 23, 5:17pm (AEST)

The S&P/ASX 200 closed 15 points lower, down -0.20%. 

Strength from the Big Four Banks was unable to offset weakness from the rest of the market, RBA minutes flags El Nino risks and potential future hikes, the S&P 500 is trading above its 5-and-10 year average PE ratio, Morgan Stanley is bullish on Corporate Travel heading into reporting season and a few ugly earnings updates from Annsell, Syrah and Aurizon.

Let's dive in.


Today in Review

Tue 18 Jul 23, 4:39pm (AEDT)

Name Value % Chg
Major Indices
ASX 200 7,283.8 -0.20%
All Ords 7,496.7 -0.20%
Small Ords 2,874.7 -0.57%
All Tech 2,519.0 -0.05%
Emerging Companies 2,150.2 -0.22%
Currency
AUD/USD 0.6812 -0.06%
US Futures
S&P 500 $4,552.0 -0.04%
Dow Jones $34,761.0 -0.01%
Nasdaq $15,824.25 -0.10%
Name Value % Chg
Sector
Health Care 40,024.0 +0.93%
Financials 6,373.4 +0.83%
Utilities 9,011.2 +0.36%
Information Technology 1,892.6 +0.22%
Materials 18,303.8 -0.63%
Consumer Staples 13,014.9 -0.76%
Energy 11,079.2 -0.85%
Consumer Discretionary 2,972.3 -0.92%
Industrials 6,786.2 -1.18%
Communication Services 1,550.9 -1.26%
Real Estate 3,102.6 -1.60%

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ASX 200 Session Chart

ASX intraday chart
ASX 200 lower but off worst levels (Source: Market Index)

Markets

The ASX 200 finished lower but off worst levels on Tuesday. The Big Four Banks, notably NAB (+2.0%) and ANZ (+1.7%) helped offset declines from sectors including Real Estate, Telcos and Industrials. The market continues to work its way through a bit of a pullback, which has so far been rather shallow (down 0.26% in the last two days as opposed to previous pullbacks where most of the gains are already gone by now). China's weaker-than-expected GDP data on Monday continues to weigh on Materials and Energy. A key commodity like Copper sold off 2.2% yesterday after briefly rallying to a 3-month high.

On a side note, the S&P 500 is trading at a forward PE of 19.3, above its 5-year average of 18.6 and 10-year average of 17.4. This means we want to see strong earnings (especially from the big tech stocks) follow through to justify the earnings multiple.

Economy

RBA minutes highlights:

  • Hike vs. hold was close: “The Board recognised the strength of both sets of arguments but judged that the case to hold the cash rate unchanged at this meeting was the stronger one.”

  • Hikes still on the table: “Members agreed that some further tightening of monetary policy may be required to bring inflation back to target within a reasonable timeframe, but that this depended on how the economy and inflation evolve.”

  • El Nino in focus: “Furthermore, the increased likelihood of an El Niño event in 2023/24 and an associated downgrade for agricultural production could put upward pressure on some food prices over the coming year.”


Latest news


Interesting news and movers

Trading higher

  • +7.7% Kogan (KGN)

  • +7.7% DGL Group (DGL)

  • +6.9% Boart Longyear (BLY)

  • +6.5% Anson Resources (ASN) – Acquires lithium project

  • +5.1% NRW Holdings (NWH) – Contract award (Mon)

  • +3.7% Cooper Energy (COE) – Q4 earnings

  • +2.8% AGL Energy (AGL) – Upgraded at JPMorgan

  • +2.3% Graincorp (GNC) – Move on Russia quitting black sea grain

  • +1.2% Regal Partners (RPL) – FUM update

Trading lower

  • -16.3% Syrah Resources (SYR) – Q2 earnings

  • -14.0% Ansell (ANN) – Guidance

  • -10.8% Antisense Therapeutics (ANP) – Upsizes placement

  • -5.0% Aurizon (AZJ) – Guidance

  • -4.9% Lendlease (LLC) – Plans to release 10% of staff

  • -4.6% Nickel Industries (NIC) – Q2 production

  • -4.4% Latin Resources (LRS)

  • -2.3% Cettire (CTT)

  • -3.8% IGO (IGO) – Downgraded by multiple brokers

  • -2.9% Monash IVF (MVF) – Downgrade by Jefferies


Broker notes

A few standalone Morgan Stanley notes of interest:

Corporate Travel Management (CTD)

  • Rating and target price: Overweight and $28.60

  • "Ahead of Aug/Sep results, we highlight key small/mid-cap ideas where we have conviction into earnings and on out-/ underperformance into FY24. Key Idea #1 – OW CTD."

  • “While travel peers were undertaking emergency capital raising to survive, CTD was widening its scale advantage at depressed multiples.”

  • “If CTD delivers on FY24 guidance of A$265m EBITDA it implies c.10x EV/EBITDA and 16.5x FY24e P/E (c.40% discount to LT average). So meeting FY24 guidance is not priced in.”

Endeavour Group (EDV)

  • Rating and target price: Underweight and $5.80

  • “We reduce our hotel revenue growth assumption to 0% in FY25/26 to capture potential EGM spend weakness under a tighter regulatory regime, however acknowledge downside risk to these assumptions as more details of reforms are decided upon.”

IGO (IGO)

  • Rating and target price: Equal-weight and $14.70

  • The WSA writeoff is equivalent to 7.5% of IGO’s market cap

  • “We expect the stock to fall to a level around our PT of A$14.70 (our Base Case is A$11.60/sh).”

Whitehaven Coal (WHC)

  • Rating and target price: Overweight and $7.95

  • “4Q ROM production was 6% ahead of MSe with costs 2% lower. Strong build of ROM stocks at Maules a good setup into FY24 as Narrabri also moves to shallower domains allowing more predictable production.”


Scans 

Top Gainers

Code Company Last % Chg
IDA Indiana Resources... $0.072 +75.61%
HFY Hubify Ltd $0.03 +57.90%
SOV Sovereign Cloud H... $0.15 +53.06%
AJX Alexium Internati... $0.018 +28.57%
FGL Frugl Group Ltd $0.014 +27.27%
View all top gainers

Top Fallers

Code Company Last % Chg
MRI My Rewards Intern... $0.016 -23.81%
BXN Bioxyne Ltd $0.016 -20.00%
RGL Riversgold Ltd $0.012 -20.00%
ASP Aspermont Ltd $0.013 -18.75%
AHK Ark Mines Ltd $0.30 -16.67%
View all top fallers

52 Week Highs

Code Company Last % Chg
IDA Indiana Resources... $0.072 +75.61%
KAT Katana Capital Ltd $1.15 +27.07%
CLA Celsius Resources... $0.025 +8.70%
KGN Kogan.com Ltd $6.16 +7.69%
EOS Electro Optic Sys... $1.23 +7.42%
View all 52 week highs

52 Week Lows

Code Company Last % Chg
RGL Riversgold Ltd $0.012 -20.00%
SYR Syrah Resources Ltd $0.745 -16.29%
ANN Ansell Ltd $23.88 -14.01%
CPM Cooper Metals Ltd $0.125 -13.79%
FBR FBR Ltd $0.02 -13.04%
View all 52 week lows

Near Highs

Code Company Last % Chg
IHD Ishares S&P/ASX D... $13.20 -0.15%
IRE Iress Ltd $10.76 -1.38%
BILL Ishares Core Cash... $100.56 +0.01%
SLA Silk Laser Austra... $3.29 -0.30%
AVH Avita Medical Inc $5.93 -0.17%
View all near highs

Relative Strength Index (RSI) Oversold

Code Company Last % Chg
NXD Nexted Group Ltd $1.28 +6.67%
EDV Endeavour Group Ltd $5.69 +0.89%
CSL CSL Ltd $264.57 +2.22%
BDM Burgundy Diamond ... $0.23 0.00%
SDG Sunland Group Ltd $1.05 +0.48%
View all RSI oversold

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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