Evening Wrap: ASX 200 falls to 1-month low, Beach Energy production miss, Lithium Universe debut

The S&P/ASX 200 closed 63 points lower, down -0.86%. 

The Index hit a 1-month low as one of China's largest property developers is on the bank of collapse, Carsales shares hit all-time highs on better-than-expected results and a strong guidance, Beach Energy reports a solid FY23 result but its guidance was well-below analyst expectations and Lithium Universe almost triples on its ASX debut.

Let's dive in.

ASX 200 Session Chart

ASX 200 sells off intraday to finish near session lows (Source: Market Index)

Markets

The ASX 200 finished lower and near worst levels on Monday. China's Country Garden, one of the country's top private property developers, said it could see a loss of up to US$7.6bn in the first half, bringing new pain to the already beleaguered property sector. The restructure fears weighed on the Materials sector, notably iron ore miners. Telcos outperformed thanks a better-than-expected result from Carsales. Energy was also green thanks as oil prices locked in a seventh consecutive week of gains last Friday. The Index is looking pretty heavy as it slumps to a fresh one month low. Can the market muster up a bounce? Or is there more downside risk as we move into the seasonally weaker months of August and September?

Economy

No major economic announcements.

Latest news

Market Insights

Quick bites on interesting stuff that happened today.

Building stocks continued to advance from extended levels.

• James Hardie (ASX: JHX) closed flat despite the Index selling off. It rallied 14.4% on the day of its results (8 August).

• Boral (ASX: BLD) added another 2.4%, now up 16.3% in the last three sessions.

James Hardie daily chart (Source: TradingView)

Boral daily chart (Source: TradingView)

Carsales (ASX: CAR) rallied to an all-time high after a double beat and solid guidance.

• Revenue +53% to $781m (vs. $774m expected)

• Net profit +43% to $278.2m (vs. $265m expected)

• Final dividend per share +33% to 32.5 cents per share

• "We expect to deliver very strong growth in Revenue and Adjusted EBITDA and strong growth in Adjusted NPAT in FY24."

Carsales daily chart (Source: TradingView)

Beach Energy (ASX: BPT) experienced quite the squeeze, down 3.6% from session lows of -8.4%. Its FY23 results were mostly in-line with expectations but FY24 was a little soft, notably:

• Capital expenditures of $850m to $1.0bn vs. $830m expected

• Production of 18.0 to 21.0 MMboe vs. Macquarie expectations 22.5 MMboe

Beach Energy daily chart (Source: TradingView)

Lithium Universe (ASX: LU7) made its ASX debut after successfully raising $4.5m at 2 cents per share. The stock opened a 4.8 cents as the market opened and finished at 5.7 cents.

The $22m market cap lithium explorer is developing the:

• Apollo Lithium Project, located on the same greenstone belts as Winsome Resources' Adina Project and Patriot Battery Metals' Corvette Project

• Adina Lithium Projects, located within close proximity to Corvette and Adina with similar geological characteristics

• Margot Lake (lithium), Lefroy (lithium) and Voyager (rare earths)

You can read more about the company here.

Interesting news and movers

Trading higher

• +10.4% Tuas (TUA) 

• +9.6% Baby Bunting (BBN) – Upgraded by Morgans

• +7.5% GWA Group (GWA) – Earnings

• +7.0% Carsales (CAR) – Earnings

• +3.6% Helloworld Travel (HLO) – Upgraded by Morgans

• +2.8% JB Hi-Fi (JBH) – Earnings

• Uranium sector move: Peninsula Energy (+10.0%), Alligator Energy (+5.3%), 92Energy (+4.4%), Elevate Uranium (+2.6%), Deep Yellow (+2.4%)

Trading lower

• -8.2% Australian Strategic Metals (ASM)

• -6.3% 29Metals (29M)

• -6.1% Elders (ELD) – Initiated Sell by Citi

• -6.0% Vulcan Steel (VSL)

• -4.6% Strike Energy (STX) – Strike and Talon enter Binding Scheme of Implementation Deed

• -3.6% Beach Energy (BPT)

• -3.0% Aurizon (AZJ) – Earnings

• -2.9% Bendigo & Adelaide Bank (BEN) – Earnings 

• -2.8% Lendlease (LLC) – Earnings

• -1.8% Costa Group (CGC) – Paine Schwartz undertaking due diligence

Broker notes

Citi initiates coverage of Elders (ELD)

• Sell with $6.85 target price ($7.54 at 11 Aug close)

• “Our cautious view is premised on: 1) Adverse seasonal conditions ahead; 2) Lower commodity prices and negative rural sentiment; and 3) more gradual growth in livestock exports ahead.”

• “Deteriorating crop production and yield should see less demand for crop protection and fertiliser products, less feed availability for livestock and increased urgency from ELD’s end-customers to offload livestock …”

• “We forecast FY23 underlying EBIT of A$181mn, at the bottom end of the guidance reflecting a sequential improvement on 1H and our cautious near-term outlook.”

A few Goldman notes on recent earnings:

Downer (DOW) – Neutral with $4.15 target ($4.10 at 10 Aug close)

• “DOW is on the right path with back to basics approach however earnings recovery takes time & isn’t a straight line.”

• “Relatively opaque outlook: DOW describes FY24 as a transition year and is targeting continued EBITA margin improvement.”

• “Neutral, $4.15 TP down from $4.40 reflecting lower earnings in FY24.”

Nick Scali (NCK) – Neutral with $12.20 target ($10.70 at 11 Aug close)

• “The Group delivered a GM% of 63.5% for FY23, up +250bps YoY and +150bps ahead of Macq. estimates.”

• “New written sales orders of -7.8% YoY on a Group basis, albeit noting a weaker 2H23, down -16.2% YoY.”

• “We expect NCK to continue to deliver solid GM%, with new Plush product expected to perform well. However, we continue to see the current macro environment of higher interest rates and slowing housing turnover a headwind for furniture retailers.”

News Corp (NWS) – Neutral with $32.00 target ($32.61 at 10 Aug close)

• “4Q FY23 EBITDA of US$341m was up 8% YoY and a 10% beat vs MRE (+22% vs VA). The variance was due to cost-out.”

• “Our view on cyclicals remains unchanged in that the appropriate time to purchase a cyclical is when the pace of advertising revenue declines is moderating (they are currently accelerating).”

• “News Corp is attractive on a risk/reward basis, but we think this is at least 12 months away given the Foxtel refinancing.”

Scans