Evening Wrap: ASX 200 lower, Qantas dives despite $1.4bn profit, US futures higher

The ASX 200 falls third straight session, iron ore majors weigh on the market, the Bank of Soth Korea pauses rate hikes for the first time since August 2021 and heaps of broker notes.

Let's dive in.

ASX 200 Session Chart

Markets

I'm starting to sound like a broken record, calling every session 'challenging' and 'heavy'. But honestly, it was. The ASX 200 is down 3.6% since its February 3rd peak. Over the 14 sessions that have passed, only four have been positive. It's one of those scenarios where the market is becoming increasingly oversold and as we get more oversold, the likelihood of a bounce increases. That said, momentum has clearly taken a turn for worse.

• Healthcare outperformed thanks to gains from CSL (+1.0%), Sonic Healthcare (+1.6%) and better-than-expected results from Ramsay Healthcare (3.0%)

• Utilites was another result driven sector, with APA Group (+1.4%)

• Technology was lifted by Wisetech (+4.2%) which reported results on Wednesday

• Materials led to the downside amid weakness among heavyweights BHP (-3.4%) and Rio Tinto (-1.7%)

Economy

New York Federal Reserve President John Williams spoke at an event earlier today, highlights include:

• Although goods prices have come down in the last several months, there are signs this may not go as quickly as hoped

• We have demand that exceeds supply, labour market is extraordinarily strong

• Monetary policy must bring demand and supply back into balance

The Bank of South Korea kept interest rates unchanged at 3.50%, in-line with expectations.

• This marks the first pause since the tightening cycle began in August 2021, after 300 bps worth of hikes

• Consensus expects interest rates to remain unchanged throughout 2023

Latest news

Interesting news and movers

Trading higher

• +12.0% ClearView Wealth (CVW) – 1H earnings

• +9.0% Eagers Automotive (APE) – 1H earnings 

• +8.7% QUB (QUB)

• +8.5% Service Stream (SSM) - Upgraded to Buy from Neutral at Citi

• +8.1% Universal Store (UNI) – 1H earnings

• +7.4% SmartGroup (SIQ) – 1H earnings with special dividend

• +6.5% Medibank (MPL) – 1H earnings

• +5.4% Kelsian (KLS) – 1H earnings

• +3.7% Lovisa Holdings (LOV) – Upgraded to Overweight from Neutral at Barrenjoey

• +3.7% Perseus Mining (PRU) _- Upgraded to Outperform from Neutral at Macquarie

• +3.2% Auckland Airport (AIA) – 1H earnings

• +3.0% Ramsay Healthcare (RHC) – 1H earnings

Trading lower 

• -22.9% Red 5 (RED) – Capital raising

• -16.9% Platinum Asset Management – 1H earnings

• -14.4% Talga Group (TLG) – Capital raising.

• -7.8% Bega Cheese (BGA) – 1H earnings

• -7.3% Humm Group (HUM) – 1H earnings

• -6.8% Qantas (QAN) – 1H earnings

• -6.6% Blackmores (BKL) – 1H earnings

• -6.2% Zip (ZIP) – 1H earnings

• -5.4% Pexa Group (PXA) – 1H earnings

• -3.6% IDP Education (IDP) – 1H earnings

• -3.4% BHP (BHP)

• -2.9% Nine Entertainment (NEC) – 1H earnings

Broker updates 

Macquarie's first glance on companies that reported on Thursday:

Kelsian Group: Outperform with $8.10 target price

• "YoY revenue growth reflects rebound in domestic tourism (Marine & Tourism) and contract indexation hedging for majority of the bus business."

• "KLS has delivered another solid result. This has been supported by effective operational management and response to inflationary and resourcing pressures, in addition to contract mechanisms absorbing inflation."

Medibank: Neutral with $3.35 target price

• "As long as uncertainty remains on the ramifications of MPL’s cyber incident we will retain our Neutral recommendation."

Ramsay Healthcare: Neutral with $69.50 target price

• Net profit was 10% below Macquarie estimates

• UK region impacted by inflation and increased staff costs

• "On balance, improved operating trends into 2H23 for Australia, with inflation/labor constraints impacting UK/Europe."

Goldman’s takeaways for companies that reported on Wednesday:

Flight Centre: Neutral with $16.10 target price

• 1H23 was in-line with pre-reported expectations

• “We remain positive on the growth outlook for the Corporate segment while we expect risks in leisure growth, especially post full reopening. Overall, trading momentum in travel remains positive on both the leisure and corporate segments.”

• There was a preference from a risk reward perspective for Corporate Travel and Webjet over Flight Centre 

Lovisa Holdings: Neutral with $30.25 target price

• “result. This was a strong update demonstrating execution on the global store roll out strategy with an acceleration in new store openings.”

• “LOV trades on 29.0x FY24E P/E vs. peers trading on 13.0x (median of A/NZ discretionary retailers). We view risk around a global store roll out as very high.”

Domino’s Pizza: Neutral with $57.60 target price

• “Regionally, ANZ was a slight beat at EBIT though Europe and Asia both missed GSe by >20%.”

• Management did not reaffirm their full-year guidance announced on 2nd November, Goldman expects Domino’s to likely miss their full-year outlook

Rio Tinto: Buy with $131.70 target price

• Final dividend of US$2.25 per share was above estimates of US$1.97

• Rio stated its capital allocation will now focus more on growth and decarbonisation

• Notable targets was doubling copper growth to 1Mtpa by 2030 and 1.3Mtpa beyond 2030

Woolworths: Buy with $41.00 target price

• Woolies comp food sales was 5.0% vs. Coles’ 7.4%, marking the second quarter where Coles outperformed. Market share is becoming a key risk into 2H23 and FY24

• “We continue to reiterate Buy due to resilient top-line, ecosystem growth options and clear margin improvement opportunities to deliver ~10% EPS FY22-25e.”

Scans