Evening Wrap: ASX 200 flat, IGO's surprise dividend, China's manufacturing PMI edges higher

The Index finishes the month of August down 1.3%, China's manufacturing PMI improves to 49.7 in August but remains in contraction, shares in IGO rally after the Board declare an unexpected surprise dividend and Citi's take on recent results.

Let's dive in.

ASX 200 Session Chart

ASX 200 inches higher on Thursday (Source: Market Index)

Markets

A relatively short one today: The ASX 200 edged higher, extending its win streak to four. The rally is getting a little fatigued today, although several stocks were deceptively weak as the traded ex-dividend. This included heavyweight names like Woolworths, Tabcorp, Whitehaven Coal and Woodside.

The Index finished the tumultuous month down 1.3% versus historic averages of a 0.2% gain. We're heading into the seasonally weak month of September, where the ASX 200 has historically returned -1.20%. That said, we're heading into the month with China's issues in the rear view mirror (at least for now), positive macro data (cooler-than-expected Aussie inflation, softening US jobs data) and a recent reset in sentiment (CNN Fear & Greed Index at Neutral (51) from Extreme Greed (77) a month ago). Is a not-so-terrible September too much to ask for?

Economy

China’s Manufacturing PMI improved to 49.7 in August from 49.3 in the previous month.

• Above consensus expectations of a rise to 49.4

• The 50 point market separates expansion from contraction

• “The survey results show that insufficient market demand is still the main problem that enterprises are facing, and the foundation for the recovery and development of the manufacturing industry needs to be further consolidated.” – Senior NBS Official Zhao Qinghe

China’s services PMI eased to 51 in August from 51.5 in the previous month.

Latest news

Interesting news and movers

Trading higher

• +79.0% Healthia (HLA) – Takeover offer

• +41.5% Dreadnought Resources (DRE) – Drill results

• +17.3% 29Metals (29M) – Placement

• +12.1% Mesoblast (MSB) – Earnings

• +11.2% Dicker Data (DDR) – Upgraded by multiple brokers

• +5.5% IGO (IGO) – Earnings, unexpected surprise dividend

• +5.3% Temple & Webster (TPW)

• +5.2% Harvey Norman (HVN) – Earnings

• +5.1% EML Payments (EML) – Continuation rally, up 38% in last three

• +2.4% Austal (ASB) – Earnings

• +1.1% Tyro Payments (TYR) – Continuation rally, up 21% in last three

Trading lower

• -24.2% Peninsula Energy (PEN) – Lance project revision

• -22.7% Mayne Pharma (MYX) – Earnings

• -21.1% Legend Mining (LEG) – Drilling update

• -20.0% Next Science (NXS) – Earnings

• -9.4% Whitehaven Coal (WHC) – Ex-dividend

• -9.1% City Chic Collective (CCX) – Downgraded by multiple brokers

• -8.2% Bigtincan (BTH) – Earnings

• -6.1% Webjet (WEB) – Trading update

• -5.3% Chalice Mining (CHN) – Continuation selloff

• -2.0% Qantas (QAN) – ACCC launches legal action

Broker notes

Citi’s take on Brambles (BXB)

• Downgraded to Neutral from Buy with $16.00 target ($15.15 at 30 Aug close)

• “Year to date, BXB has outperformed circa ~30% as the combination of elevated issue fees, increasing pallet velocity and lower pooling capex has seen the company in the sweet spot of macro conditions.”

• “Given limited traction in either net new wins or shape of the future benefits in 4Q23, a fair valuation and a high double digit earnings hurdle, we see the risk reward as more balanced and downgrade to Neutral.”

Citi’s take on NextDC (NXT)

• Buy with $15.45 target ($13.33 at 30 Aug close)

• “We lower our EBITDA forecasts by -5% to -13% to reflect i) slower than expected billing ramp; ii) lower gross margins due to power prices; and iii) higher opex driven by increased hiring as well as overheads from new sites.”

• “However, with bookings stronger than expected we upgrade our medium to long-term earnings forecast and upgrade our target price by +4% to $15.45.”

• “Reiterate Buy as we see the current demand cycle being driven by customers accelerating the move to the cloud, with AI demand-cycle yet to come.”

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