Evening Wrap: ASX200 fails to capitalise on overseas leads, Elders short squeeze

The S&P/ASX 200 closed 27 points lower, down 0.40%.

What about me? It isn’t fair. That tune had to be playing on Aussie investors’ minds as they lamented the utter lack of follow through from those massive gains in major US indices on Friday. Just one, yep, one of the major ASX indices traded higher today in a dismal display by local stocks.

Let's dive in.

ASX 200 Session Chart

ASX 200 failed to fire today despite positive overseas leads (Source: Market Index)

Markets

The S&P/ASX 200 (XJO) failed to capitalise on strong Wall St leads today as all but the S&P/ASX Utilities Sector (XUJ) (+0.34%) traded in the red.

That gain was mainly to do with a 1.5% jump in Origin (ASX: ORG) as major shareholder AustralianSuper rejected an offer to join the takeover bid for the company from Brookfield-EIG. "…the offer remains substantially below our estimate of Origin’s long-term value" according to Aus-Super.

In the banks, a rebound in National Australia Bank (ASX: NAB) +1.5% following last week's release of its FY23 results helped offset a 3% drop in ANZ Group (ASX: ANZ) as the latter reacted negatively to its results release today.

The major iron ore miners were mixed with BHP +0.3% roughly up as much as RIO -0.2% and FMG -0.3% were down. Iron ore futures in Singapore crept 0.7% higher to US$127.65/ tonne.

The rest of mining was pretty dismal as base-and-precious metals prices fell in Friday's trade. South32 (ASX: S32) -2.9%, Nickel Industries (ASX: NIC) -2.5%, Lynas Rare Earths (ASX: LYC) -2.4%, Ramelius Resources (ASX: RMS) -2.8%, and Perseus Mining (ASX: PRU) -2.6 each struggled.

Energy was once again the worst performing sector as losses in the price of crude oil mounted. Karoon Energy (ASX: KAR) -2.5%, Santos (ASX: STO) -1.7%, and Woodside Energy (ASX: WDS) -0.7% were notable losers in the energy sector.

Economy

No new major data releases at the time of publishing.

Also a quiet night coming up in the States as markets brace for the all-important CPI data due early Wednesday morning AEDT. Locally, watch out for Westpac Consumer Sentiment and NAB Business Confidence data due at 10.30am and 11.30am AEDT tomorrow respectively.

Latest news

ANZ Group (ASX: ANZ)

The company reported FY23 results today - you can read about them here.

Boral (ASX: BLD)

The company today upgraded its FY24 guidance by as much as 10%. EBIT is now expected to be in the range of $300-$330 million compared to the previously stated $270-$300 million range. The revision was a result of a better than expected performance in the first quarter of FY24, as Boral continued to enjoy favourable price traction against improved cost management.

Boral CEO, Vik Bansal, said the result reflected "greater discipline" in pricing and costs. Importantly, despite the strong pricing performance, volumes year to date remained "relatively steady". Looking forward, Bansal noted that he expected this to "continue through the remainder of FY24".

Elders (ASX: ELD)

The company reported its FY23 results today. Underlying NPAT was $103.7 million, down 32%, and was shy of FactSet consensus of 11 major brokers of $105.3 million. Revenue of $3.32 billion beat estimates of $3.27 billion, however. Underlying EBIT was in the middle of the company's guidance range.

Lower margins were reported across the Retail Products, Agency Services, Real Estate, and Feed and Processing Services segments. Only Financial Services improved on a stronger insurance business.

Looking forward, there were few positives, with the company noting "We expect some of the market headwinds experienced in FY23 to continue into FY24". Elders expects lower crop production due to El Niño, as well as "challenging conditions" in Real Estate.

However, "some margin recovery" in their Rural Products segment was forecast as input prices, such as fertilisers and crop protection had returned to "more sustainable levels". Elders reiterated its forecast of 5-10% EBIT and earnings per share growth through the cycles, but did not provide specific guidance for FY24.

It's hard to say what the market loved so much in this result. Elders CEO Mark Allison did remark he thought the result was "actually quite resilient", but that there was "significant room for growth in the business".

In mulling the substantial underperformance of Elders' share price over the past 12-months, he offered investors perhaps were overly pessimistic about the company's prospects. Certainly, this pessimism had caused Elders shares to be extremely popular with short sellers.

Today's move probably reflects a result which didn't surprise to the downside of lowered expectations, and which most likely caught the short sellers off guard. If you're short, and you don't want to be, you have to buy. And buy they did today!

TPG Telecom (ASX: TPG)

Despite media reports as recently as Friday the deal was still on, the company announced today it would cease discussions with Vocus about selling some of its Enterprise, Government and Wholesale assets and associated fixed infrastructure assets, including Vision Network.

According to the TPG, the deal was too complex and both parties couldn't "reach alignment".

Interesting news and movers

Trading higher

• +70.6% 4DMedical (4DX) - US CMS assign reimbursement benefit for XV LVAS

• +18.3% Elders (ELD) - Earnings

• +10.1% ARN Media (A1N) - SWM acquires 14.9 holding of ARN Media (A1N) at $1.10

• +9.5% Imugene (IMU) - Continuation rally post 6 Nov update "positive signals" from co's Phase 1 VAXINIA Study

• +7.5% Grange Resources (GRR) - Rising iron ore prices

• +7% Southern Cross Media (SXL) - SWM acquires 14.9 holding of ARN Media (A1N) at $1.10

• +5.1% Boral (BLD) - Guidance

• +3% PYC Therapeutics (PYC) - PYC-003 demonstrated efficacy in human models

Trading lower

• -15.6% Invictus Energy (IVZ) - To continue sampling operations at Cabora Bassa

• -12.5% APM Human Services International (APM) - Bell Potter downgrade

• -11.7% TPG Telecom (TPG) - Ceases discussions with Vocus

• -3% ANZ Group (ANZ) - Earnings

Broker notes

Alpha HPA (A4N)

• Bell Potter, 10 Nov: Buy; $1.68 target (lowered from $1.54)

  • Reviews co’s recent $40 million equity raise with Australian Super and Orica as corner-stone investors, as well as the company's outlining of initial earnings estimates. Increases price target from $1.54 to reflect increased value proposition of Alpha Sapphire subsidiary and capital raise.

APM Human Services (APM)

• Bell Potter, 10 Nov: Hold; $1.76 target (lowered from $1.90)

  • Reviews co’s AGM statement. FY24 EPS forecasts cut due to “lower revenue and profitability”. Share price likely to remain under pressure until “clearer path to improvement”.

Carnaby Resources (CNB)

• Macquarie, 10 Nov: Outperform, $1.10 target (lowered from $1.70)

  • Substantial EPS reductions due to data from Q1 report, especially Maiden Resource at Greater Duchess, updated production profile. Expects two capital raisings required to fund exploration, Greater Duchess construction. Still, latest news is major "de-risking event".

Data#3 (DTL)

• Goldman Sachs, 11 Nov: Downgraded to Neutral from Buy; $7.65 target (lowered from $7.95)

  • Reviews co’s AGM commentary and various valuation metrics. Cites lower margin expansion forecast and relatively “full” valuation with respect to peers. DTL trading on 26 times FY24 earnings versus broker’s numbers suggesting 19 times peers.

NIB Holdings (NHF)

• Goldman Sachs, 11 Nov: Buy; $8.40 target (lowered from $8.75)

  • Reviews co’s Q1 update. Notes policy growth progressing better than expected, but New Zealand disappointed. Loss of Qantas partnership will negatively impact Travel business. Lowers earnings forecasts.

• Citi, 10 Nov: Upgraded to Buy from Neutral; $8.35 target (lowered from $8.55)

  • Review's co's Q1 update. Notes in strong position to weather inflation storm, contract renegotiations with hospitals. Travel weaker, but upcoming Woolworths partnership should "offset". Higher premium rate hike of 4-5% likely on the way.

• Morgans, 13 Nov: Upgraded from Hold to Add; $8.38 target (lowered from $8.77)

REA Group (REA)

• Barrenjoey, 13 Nov: Upgraded to neutral from underweight; $155 target

• Macquarie, 10 Nov: Neutral, $155 target

  • Reviews co's Q1 update. Notes was a "solid" result in line with expectations.

• Goldman Sachs, 10 Nov: Buy; $179 (raised from $175)

  • Reviews co's Q1 update. Notes strong residential business is well placed on improving listing volumes. Commercial outlook is "improving".

Scans