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QBE Insurance hits four-year high of $14.51

Citi Research remains pessimistic on Bendigo and Adelaide Bank following the release of the regional lender’s interim profit result today, reaffirming its sell rating on the stock with a price target below its current level.

“A messy result, with poor fee and cost trends mitigated by a strong net interest margin (NIM) and record low bad debts,” Citi told clients.

“However, management has guided that the better than expected NIMs and bad and doubtful debts will reverse in the second half of FY20.”

On the BEN’s capital raising and dividend cut announced today, Citi believes the subsequent investment and cost reduction “lacks sufficient detail on potential benefits”. 

Citi has a price target on the company of $9.25. BEN last traded at $10.57 per share.

Goldman Sachs hasn’t been very impressed with the early results from the local reporting season.

“While it is still early in the earnings season, only 28 per cent of firms have beaten out earnings per share (EPS) estimates by more than 2 per cent, well down on the 39 per cent long-run average,” the investment bank told clients.

“More concerning, 46 per cent of firms have missed, a far weaker performance than the typical level of 30 per cent.”

Despite the underwhelming start, Goldman says investors are responding very positively to results with the average company outperforming the broader market by 1.5 per cent following its earnings result.

“Stocks that have beaten have outperformed the market by 4.4 per cent on average,” Goldman said.

“Those firms that have missed expectations are still performing roughly in line with the market on average.”

On the expected performance in the second half of FY20, it said companies are “generally giving cautious outlook commentary given the uncertainty around the potential impact of the coronavirus, but in most cases have not yet provided quantitative guidance on the likely impact”.

Prior to today’s results, 33 per cent of companies had released results accounting for 51 per cent of the market’s total capitalisation.

Mayne Pharma shares are down to 39.2¢ this morning, the lowest price June 2013. Shares in the generic medicine maker have fallen -52.4 per cent over the past 12 months from 82.5¢ in February 2019 down to the current price. 

Analysts have been cutting their ratings and targets with only one ‘buy’ rating on the stock, five ‘holds’ and one ‘sell’.  There has been very little news released by Mayne Pharma this year, apart from an ASX notice in early January that chief executive Scott Richards had forfeited 3.8 million shares that had been issued as part of an executive share loan scheme. 

Mayne’s half-year results are due on February 23. Analysts are expecting to see a 46 per cent decline in earnings before interest, tax, depreciation, and amortisation (EBITDA) from $81.2 million in the last six months of 2018 down to $43.8 million for the same period in 2019, according to data compiled by Bloomberg. 

JP Morgan has announced a substantial price target upgrade for Domino’s Pizza, driven by an expectation for stronger earnings from Japan along with higher margins in the company’s interim profit result scheduled for Wednesday.

The investment bank upped its price target for the fast food operator to $52, significantly higher than the $36 level seen previously. However, it retains an underweight rating given concerns about the company’s current valuation. DMP shares have risen 0.4 per cent to $58.42 today.

“We are confident that strong EBITDA growth can be achieved,” the investment bank told clients.

“However, valuation support is absent on a discounted cash flow basis, so the risk-reward remains unattractive in our view.”

If what Australians have been googling recently is any indication, the record-breaking recovery in the nation’s housing market may start to slow in the months ahead.

ANZ Bank’s Housing Search Index – a measure that uses a variety of housing-related search terms through Google to evaluate buying interest – suggests annual price growth in CoreLogic’s Home Value Index may top out around 10 per cent by the middle of this year.

CoreLogic reported that Australian home prices rose 5.1 per cent in the year to January in average weighted terms.

Portfolio manager at Tribeca Investment Partners, Jun Bei Liu, says trading is quiet this morning with an initial strength now fading away despite some decent results reported this morning. 

“Across the market, on of the main things out of this reporting season is that post-reporting the share price tends to move a far bit,” she said. 

“It is usually an indication of weak liquidity.” 

Ms Liu says Brambles’ results have ”comforted investors over where the growth is going to come from.” 

The problem today is shareholders want to hold onto their stock. So far today 1.5 million Brambles shares have changed hands, far below the average of 5.2 million. Brambles has 1.5 billion shares on issue, so the average volume represents a daily turnover of 0.3 per cent of shares on issue. Today’s volumes are running at less than 0.01 per cent of shares on issue. 

Brambles’ biggest shareholder is the Vanguard Group with 6.7 per cent of shares, followed by BlackRock with 6.2 per cent. 

Japan’s latest economic data has fallen short of economist expectations with quarterly gross domestic product (GDP) growth of -1.6 per cent compared a consensus expectation of -0.9 per cent. 

This takes the annualised GDP growth to -6.3 per cent, the lowest rate since 2014. Economists were expecting annual GDP to shrink by -3.7 per cent. 

The Japanese Yen has not moved in reaction. The Nikkei has opened 1.1 per cent lower. 

The decline reflects the introduction of a higher sales tax on October 1 which saw household consumption collapse 2.9 per cent during the quarter, an outcome that lopped of 1.6 percentage points from quarterly GDP.

Net exports added 0.5ppts to quarterly growth as imports fell sharply in response to household spending being brought forward by the sales tax increase. 

“The Q4 GDP data is consistent with our non-consensus view that Japan’s economy will shrink by 0.2 per cent this year,” said Marcel Thieliant, economist at Capital Economics.

“But with unemployment hovering close to a 27-year low, we don’t expect the Bank of Japan to provide more stimulus.”

Brambles shares have reacted favourably to the analyst call that took started at 10am and has only just wound up. 

The stock jumped up to $12.99 on the opening, then declined. Then during the call it jumped from $12.87 up to $13.20, sitting 5.6 per cent higher than Friday’s close. This is the biggest gain among the ASX 200 so far this morning. 

Meanwhile lotto re-seller Jumbo Interactive is down 5.3 per cent to $12.34, the biggest decline. 

Regis Resource shares have jumped out of the blocks on Monday after the release of its interim results. The gold producer reported record net profit after tax of $93.4 million for the half, up 17 per cent on the same period a year earlier.

Revenues rose 17 per cent to $371.4 million over the same period with 182,807 ounces of gold sold at an average price of $A2,063 per ounce. All in sustaining costs rose to $AUD1,226 per ounce during the half, up from $AUD954 in the same period of 2018-19.

The company left its 2019-20 production guidance unchanged at 340,000-370,000 ounces with all in sustaining costs expected to be at the upper end of guidance of $A1,125-$A1,195 per ounce.

RRL shares have risen 4.2 per cent to $4.47 following the profit update.

However, while the broader market likes the result, analysts at RBC Capital Markets remain unconvinced.

“This was a softer result than our estimates across the board,” it told clients.
“We remain Underperform on RRL and cite a preference for stocks we believe can demonstrate a material improvement in fundamentals to drive earnings and cash flow. To this end, we struggle to identify catalysts which could drive a more constructive view.”

The boss of Brambles says the company operated in an environment of increasing economic “uncertainty” in the first half, as the global logistics giant reported a 13 per cent fall in its interim statutory profit.

On a statutory basis the company’s first half profit dropped to $US277.9 million ($A413.8 million), but this was largely due to the sale of a plastics containers business in the previous financial year, which made no contribution to earnings in the first half of 2019-20.

On an underlying basis the company recorded an underlying profit from continuing operations of $US278.9 million, up four per cent on the prior corresponding period. Shares are trading about 2.2 per cent higher at $12.93 this morning. 

Chief executive Graham Chipchase said Brambles managed to deliver shareholders earnings and sales growth across all of its segments, despite first half challenges.

The company will pay a 30 per cent franked interim dividend of 13.38 cents (Australian) on April 9, down from 14.5 cents in the prior corresponding period.

“Despite a range of challenges, we delivered sales and earnings growth across all our segments and materially improved group cash flow generation in the first half,” Mr Chipchase said.

“Our operating environment in the first-half was characterised by increasing macroeconomic uncertainty and ongoing political instability, particularly evident in major European markets,” he said.

Brambles said labour and property inflation in the US continued to increase, but on the other side of the coin US transport and labour inflation continued to moderate.

“In this context, our first-half sales performance reflects the resilient nature of our business as we continue to expand with new and existing customers despite price realisation to recover higher costs in most markets,” Mr Chipchase said.

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