The Match Out: Market drifts, Drinking tops gambling as times get tougher, Not a Crypto ad to be seen this Super Bowl!

James Gerrish

Market Matters

A quiet session to kick off the trading week with the Super Bowl taking centre stage as the Kansas City Chiefs knocked off the Philadelphia Eagles 38-35, in a very close contest. Last year the game was rebranded by some as the ‘Crypto Bowl’ given the extent of ads put out by high flying Crypto exchanges, but this year they were nowhere to be seen, understandable given Bitcoin was nearer US$50,000 this time last year versus $US21,847 this afternoon.

  • The ASX 200 finished down -15pts/ -0.21% at 7417
  • The Energy sector was best on ground (+1.78%) while Staples (+0.27%) & Communications (+0.12%) were also strong.
  • Consumer Discretionary (-1.40%) and IT (-0.58%) the weakest links.
  • Lend Lease (ASX: LLC) -6.14% lower on a weak outlook, the developer flagging inflation, interest rates and other market risks as a hindrance to recovery.
  • IAG +4.46% gained after offering more detail around guidance issued amid last week’s downgrade.
  • JB Hi-Fi (ASX: JBH) -5.08% produced a good 1H23 result, and January was okay however they are seeing things come off the boil, particularly within Good Guys – remember, stock markets price the future which looks tougher for retail.
  • Aurizon (ASX: AZJ) -6.5% missed on 1H23 earnings and downgraded FY23 guidance.
  • Fletcher Building (ASX: FBU) -6.26% seems to always disappoint at earnings time, and today was no different with adverse weather to blame this time around.
  • Star Entertainment (ASX: SGR) -20.8% is struggling with regulation & competition, FY23 earnings are now likely to be 22% below consensus.
  • Endeavour Group (ASX: EDV) +4.11% was a rare bright spot showing its defensive qualities – people still drink in tough times – more so than gamble it seems- with January trading remaining strong.
  • Audinate (ASX: AD8) +10.04% rallied on a better 1H23 result, a beat right across the board really – The only stock we own that reported today.
  • Johns Lyng Group (ASX: JLG) +3.23% edged higher on a broker upgrade from Citi – it’s been a tough 12 months for the builder down ~30%.
  • Iron Ore was ~0.50% higher in Asia today, hovering around $US126
  • Coal prices bounced, the March contract +7% to $US206 – Coal stocks edged higher with Whitehaven Coal (WHC) +XX and New Hope Corp (ASX: NHC) +XXX
  • Gold was down ~0.40% trading at ~US$1858 at our close.
  • Asian stocks were mostly lower, Hong Kong down -0.60%, Japan -1% while China was up +0.52%
  • US Futures are all down, around -0.40%

ASX 200 Chart

JB Hi-Fi (ASX: JBH) $44.25

JBH -5.08%: traded lower following 1H23 results that were largely pre-guided to, with commentary around January trading the main focus. To that end they said while the group is pleased with January trading result, with sales continuing to be well above pre-Covid January 2020, we have seen sales growth start to moderate from the elevated levels seen in 1H. This is what the market has latched on to and is another data point signalling a slowdown in consumption. Metrics for 1H23 were strong, earnings +15% YoY and an interim dividend of $1.970 vs. $1.630 this time last year, however, the stock market is forward-looking and the outlook is for weaker growth, lower margins and a tougher environment ahead – we don’t see any reason to own this right now.

Audinate (ASX: AD8) $7.89

AD8 +10.04%: a record half for the audio-visual hardware and software company, further boosted by favourable FX. Revenue of $US20.6m and EBITDA at $US 4.3m were new highs for Audinate and were in line with the most bullish analyst expectations. The only black mark on the result was a bigger contribution from Video which saw margins fall. The backlog of orders provides a solid line of sight for further growth in the second half, while the software contribution is tracking ahead of expectations. Overall a strong start to the year which de-risks Audinate's growth outlook.

Star Entertainment (ASX: SGR) $1.485

SGR -20.8%: Not a lot to like about today’s update from the casino operator with trading being hit by operating restrictions and competition from Crown. They now expect EBITDA for the half to be $195-$205m versus consensus of $221m with Sydney the drag, while FY23 guidance of $330-$360m is a 22% downgrade to consensus of $446m. They didn’t provide guidance for FY24, however, the market was looking for EBITDA of $430m – now very unlikely. They did announce $40m in cost savings, a slight positive, but really, a poor update with shares now trading at $1.50, down from a pre-covid high of $6.50.  

Insurance Australia Group (ASX: IAG) $4.92

IAG +4.46%: The insurer had downgraded guidance only a week ago so today’s 1H23 result was largely a known known, however more detail around guidance, and how they’ll achieve margins of 10% in FY23 was the key for the stock, and they delivered on that. Price rises will be pushed through given higher claims inflation however if we see a moderation here, which seems very likely over time, then there will be a margin benefit to IAG and that 10% guidance may prove conservative.

Lendlease (ASX: LLC) $7.79

LLC -6.14%: the builder struggled today on a soft start to the year, missing expectations by ~10%. They produced NPAT of $105m, however operating earnings were negative as a result of a $200m provision on UK buildings acquired in 2005. The company secured a further $2.3b in work in the half, slightly down on last year, but expects to start on $6b in the 2H to help boost their FY result. They reiterated guidance, though the group expects to come in at the lower end of ROIC on investment and development, and the low end of the EBITDA margin range for construction. Overall a soft result and tepid guidance, the company continues to face headwinds.

Broker Moves

  • Platinum Asset Cut to Underweight at Morgan Stanley; PT A$1.85
  • Deterra Cut to Equal-Weight at Morgan Stanley; PT A$5.10
  • Johns Lyng Rated New Buy at Citi; PT A$8.77

Major Movers Today

Have a great night

The Market Matters Team

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James Gerrish
Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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