Market Wraps

Evening Wrap: ASX 200 falls, Pilbara Minerals lifts resource + ResMed's earnings miss

Mon 07 Aug 23, 5:13pm (AEST)

The S&P/ASX 200 closed 16 points lower, down -0.22%. 

The Index finished lower on Monday amid a relatively uneventful session, Healthcare stocks led to the downside led by ResMed, Nanosonics and CSL, Pilbara Minerals upgrades its Mineral Resource by 36% to 413.8 million tonnes, US inflation is set to rise as base effects end plus a few Citi notes of interest.

Let's dive in.


Today in Review

Mon 07 Aug 23, 4:27pm (AEDT)

Name Value % Chg
Major Indices
ASX 200 7,309.2 -0.22%
All Ords 7,519.9 -0.21%
Small Ords 2,852.6 +0.07%
All Tech 2,554.6 -0.56%
Emerging Companies 2,111.5 -1.05%
Currency
AUD/USD 0.6574 +0.07%
US Futures
S&P 500 $4,515.25 +0.38%
Dow Jones $35,254.0 +0.29%
Nasdaq $15,433.5 +0.52%
Name Value % Chg
Sector
Real Estate 3,100.1 +0.48%
Consumer Discretionary 3,073.6 +0.46%
Utilities 8,850.0 +0.40%
Communication Services 1,576.8 +0.29%
Energy 11,810.9 +0.26%
Industrials 6,866.3 -0.09%
Consumer Staples 13,168.6 -0.26%
Information Technology 1,910.4 -0.31%
Materials 18,059.0 -0.32%
Financials 6,383.8 -0.38%
Health Care 39,427.1 -1.08%

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ASX 200 Session Chart

S&P ASX 200 (LIVE DATA) Share Prices & Charts - Market Index
ASX 200 finishes slightly lower on Monday (Source: Market Index)

Markets

A bit of a lull session. The ASX 200 finished lower on Monday and continues to trade in this right 7,300 range for a second consecutive session. Healthcare led to the downside after ResMed (-4.2%) Q1 margins missed analyst expectations as well as weakness from Nanosonics (-3.3%) and CSL (-1.1%). The Index is settling after a sharp pick up in volatility last Wednesday and Thursday. We're still working through the tail end of US earnings season and the beginning of our own results season. US inflation data is due Thursday night, where consensus expects headline inflation to rise from 3.0% in June to 3.3% in July.

Economy

No major economic announcements.


Latest news


Market Insights: ResMed Earnings

ResMed posted its fourth quarter and full-year earnings last Friday, which triggered a 9.3% selloff to a six month low. The stock continued to fall on Monday, down 4.2% (but up from session lows of -6.5%).

The company reported robust top-line with quarterly revenue up 2.3% to $1.1bn. But this was overshadowed by a sharp reduction in gross margins, down 210 bps to 55.0%, which translated to net profit growth of just 7%.

Looking ahead, management said they expect gross margin improvement throughout FY24, driven by a decline in freight costs and reduction in adverse mix shifts. But analysts tend to disagree, with the view that a return to pre-Covid level margins could take several years.

Across 25 sell-side ratings, 76% are Buy rated and 24% a Hold. However, the average target price fell 5.5% post earnings to US$244.00 or approximately A$36.00.


Interesting news and movers

Trading higher

  • +13.1% Australian Strategic Metals (ASM)

  • +10.4% OreCorp (ORR) – Silvercorp to acquire at $0.60 per share

  • +8.5% Estia Health (EHE) – Bain Capital to acquire at $3.20 per share

  • +5.8% Magnetic Resources (MAU)

  • +5.4% Accent Group (AX1)

  • +4.5% GQG Partners (GQG) – Reports FUM

  • +3.9% GUD (GUD) – Divest Davey Water for $65m

  • +3.8% Pilbara Minerals (PLS) – Updates on Pilgangoora MRE

  • +2.6% De Grey Mining (DEG)

  • +2.4% Allkem (AKE)

  • +2.0% Sovereign Metals (SVM)

Trading lower

  • -18.6% Lake Resources (LKE) – ASX query

  • -15.0% Titan Minerals (TTM) – Capital raising

  • -12.8% Mesoblast (MSB) – Continuation selloff, down 57% in last three

  • -10.1% Block (SQ2) – Earnings (Fri)

  • -6.5% Aeris Resources (AIS) – Continuation selloff

  • -4.7% Sunrise Energy (SRL)

  • -4.2% ResMed (RMD) – Downgrade by JPMorgan

  • -3.9% Lindsay Australia (LAU)


Broker notes

A few Citi notes of interest:

Treasury Wine (TWE): Buy with $13.75 target ($11.78 at 4 Jul close)

  • “China's Ministry of Commerce (MOFCOM) has announced the removal of trade barriers on Australian barley from 5-Aug-23 due to "changes in the Chinese barley market”.

  • “Initial impact of a return to China: P/E multiple re-rating & slightly higher prices. Supply of Penfolds luxury wine would need to be rebuilt with this expected to take time (re-engaging contract growers & 3yr wine cycle).”

Macquarie (MQG): Buy with $196.00 target ($175.44 at 4 Jul close)

  • “MQG delivered a weaker than expected 1Q 24 trading update, with three out of its four operating divisions weaker than expected.”

  • “We have cut our cash EPS forecasts for FY24/25/26E by -7%/-6%/-6% and our Price Target is decreased from $200.00 to $196.00 (-2.0%).”

  • “FY24 consensus EPS for MQG has been cut ~20% since the Q1 24 trading update (share price down 5%), with the next formal catalyst 1H 24 results due on 3 November. MQG is confident of a stronger H2 24 and the market expects MQG to grow earnings ~15% over the next two years.”

Rio Tinto (RIO) – Sell with $95.00 target ($114.83 at 4 Jul close)

  • “We attended RIO’s roundtable where the focus was more on strategy and less so on the 1H23 result. Risk around spend is increasing and investors will need comfort that management will be able to build projects in challenging conditions.”

  • “We were impressed by RIO’s recent improved performance and are constructive on its disciplined approach to growth (eg: cautious large Li M&A), but with iron ore (and coupled with our negative view) the majority of near-term earnings, we remain Sell rated.”

Macquarie’s take on Banks:

  • “The margin outlook has improved from reduced mortgage competition and rising yields, suggesting risk to earnings has diminished.”

  • “• We continue to see ~1-5% downside risk to FY24 earnings from lower margins and higher costs, but the gap to consensus has narrowed.”

  • “We are neutral on the banks sector and prefer NAB over ANZ in business overweight banks and WBC over CBA in mortgage overweight banks. We also prefer BEN over BOQ within regionals.”


Scans 

Top Gainers

Code Company Last % Chg
LIT Lithium Australia... $0.055 +66.67%
BDX Bcal Diagnostics Ltd $0.145 +38.10%
MRZ Mont Royal Resour... $0.26 +33.33%
SCT Scout Security Ltd $0.02 +33.33%
G1A Galena Mining Ltd $0.12 +31.87%
View all top gainers

Top Fallers

Code Company Last % Chg
CLA Celsius Resources... $0.016 -27.27%
NSM North Stawell Min... $0.066 -25.84%
NYR Nyrada Inc $0.031 -24.39%
OLI Oliver's Real Foo... $0.014 -22.22%
NUC Nuchev Ltd $0.18 -21.74%
View all top fallers

52 Week Highs

Code Company Last % Chg
VMM Viridis Mining an... $0.72 +20.00%
AW1 American West Met... $0.34 +17.24%
FGL Frugl Group Ltd $0.018 +12.50%
CPV Clearvue Technolo... $0.335 +11.67%
EHE Estia Health Ltd $3.08 +8.45%
View all 52 week highs

52 Week Lows

Code Company Last % Chg
NSM North Stawell Min... $0.066 -25.84%
SER Strategic Energy ... $0.013 -18.75%
LKE Lake Resources N.L. $0.175 -18.61%
POS Poseidon Nickel Ltd $0.022 -15.39%
BLU Blue Energy Ltd $0.019 -13.64%
View all 52 week lows

Near Highs

Code Company Last % Chg
AN3PI Australia and New... $104.97 +0.39%
PCI Perpetual Credit ... $1.025 0.00%
AW1 American West Met... $0.34 +17.24%
WVOL Ishares Edge MSCI... $36.43 -0.06%
WBCPI Westpac Banking C... $104.00 +0.19%
View all near highs

Relative Strength Index (RSI) Oversold

Code Company Last % Chg
LEL Lithium Energy Ltd $0.61 -3.18%
RXL ROX Resources Ltd $0.21 -6.67%
CXO Core Lithium Ltd $0.605 -5.47%
92E 92 Energy Ltd $0.29 0.00%
RMD Resmed Inc $29.40 -4.24%
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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