The Match Out: Market takes a breather, Newcrest bid, Nick Scali tanks and flags a tough January

James Gerrish

Market Matters

Some fireworks to kick off the trading week with a bid for Newcrest (ASX: NCM) by larger global competitor Newmont (NEM US) while 1H23 reporting season is getting underway.

  • The ASX 200 finished down -19pts/ -0.25% at 7536
  • The Energy sector was best on ground (+0.92%) while Utilities (+0.51%) & Materials (+0.32%) outperformed.
  • Real-Estate (-1.95%) and Healthcare (-0.82%) gave back some recent gains.
  • Newcrest (ASX: NCM) +9.27% confirmed a takeover approach from US-listed Newmont (NEM US) - price reaction was underwhelming.
  • ARB -0.24%: Provided a positive trading update today ahead of their 1H23 results due out on Feb 21.
  • Nick Scali (ASX: NCK) -13.04%: 1H23 was solid however they flagged weak trends in January.
  • Magellan (ASX: MFG) unchanged: Had another $500m in outflows in January, with total FUM sitting at $46.2bn.
  • Beach Energy (ASX: BPT) +3.7% rallied on a rare positive update – we’re not fans of BPT.
  • Coal Stocks were better today, Whitehaven (ASX: WHC) +2.92% and New Hope (ASX: NHC) +2.59% - a fairly deep pullback from the sector as complacent longs get tested.
  • Reporting tomorrow: Centuria Capital (ASX: CNI) | Cettire (ASX: CTT) | Macquarie Group (ASX: MQG) | Transurban (ASX: TCL)
  • Iron Ore lower in Asia on higher stockpiles – Futures down ~3% in Singapore.
  • Gold was up ~US$10 in Asian trade after getting hit on Friday thanks to a resurgent $US – sitting at $US1876at our close.
  • Asian stocks were mixed Hong Kong down -2.50%, Japan +0.70% while China was off -1.01%.
  • US Futures are lower, around -0.40%

ASX 200 Chart

Newcrest Mining (ASX: NCM) $24.53

NCM +9.27%: This morning, NCM confirmed an approach by US-based Newmont Corp (NEM US) at 0.38 NEM shares for each NCM share held, making the bid worth ~$27.40 for NCM based on Newmont's close of $US49.85 and the AUD ~US69.11c, we have 5% of our Flagship Growth Portfolio in NCM. The logic and synergies for this deal make perfect sense as does the timing with NCM searching for a new CEO and the relative weakness of the share price:

  • Newcrest (ASX: NCM) is trading over 40% below its 2020 high while at the same time, the $A has depreciated more than 35% over the last decade. In other words for a buyer in $US, NCM is looking very attractive, especially if like ourselves they believe both the gold price and $A will be higher in the coming years. In terms of pricing, we think the current ~22% premium undercooks NCM, and we would expect more from a scrip deal like this.

The other important point to think about is that other quality local miners might already be under the microscope from offshore players with the $A trading around 69c – remember a few weeks ago we pointed out that every morning when the local currency dipped offshore buying seemed to hit the ASX around lunchtime, a recent characteristic which has helped the markets outperformance in 2023.

Nick Scali (ASX: NCK ) $10.80

NCK -13.04%: the furniture retailer announced 1H results today with a strong 6-months unable to offset lacklustre commentary. Revenue jumped 57% to $284m, helped by improving delivery times and a full contribution from Plush which was acquired in 2021. EBIT was up 66% to $91m with the margin improving 150bps, and net profit was up 70% to $60.6m. The Plush integration seems to have been successful with $20m of annualized synergies now realized and integration of the Nick Scali sales model and point of sale operations improving conversion rates in the business. Much of the market’s issue was with comments around the 2nd half of the year with the company failing to provide FY guidance while saying January sales were down 12% on last year despite being “better than expected.” If the expectation is for sales to fall 12% in the back half of the year, Nick Scali will fall well short of current consensus which is for revenue of $493m and net profit of $95m.

ARB Corp (ASX: ARB ) $33.32

ARB -0.24%: Provided a positive trading update today ahead of their 1H23 results due out on Feb 21. While Sales revenue of $340.9m was down 5% on pcp, it is ahead of the $330.5m expected while the second part of the period (2Q) showed growth – so the worm is turning here. They also talked to inflationary pressures easing calling out freight & steel prices that are returning to more historical levels, clearly a positive for ARB but also interesting from a wider perspective. So, revenue is now growing and cost pressures are subsiding which will lead to improved margins. This was a good update from ARB after a tough period.

Broker Moves

  • Insurance Australia Cut to Hold at Morgans Financial Limited
  • Ridley Rated New Buy at CLSA; PT A$2.40
  • PEXA Group Rated New Add at Morgans Financial Limited
  • Insurance Australia Cut to Neutral at JPMorgan; PT A$5
  • Janus Henderson GDRs Cut to Hold at Bell Potter; PT A$43.81

Major Movers Today

Have a great night

The Market Matters Team

Livewire gives readers access to information and educational content provided by financial services professionals and companies ("Livewire Contributors"). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.

1 topic

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...

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Please sign in to comment on this wire.

trending on livewire
Get the best of Livewire by signing up to our popular daily newsletter