The Match Out: Stocks edge higher ahead of Federal Budget, Ampol hurt by Jet Fuel

James Gerrish

Market Matters

It was a choppy session for the ASX today, up around 50pts early before tapering off around midday ahead of the Federal Budget tonight – a quick run-through of key budget themes below…

  • The ASX 200 finished up +20pts/ +0.28% at 6798
  • The Property sector was best on ground (+1.67%) while Communications (+1.58%) & Consumer Discretionary (+1.28%) were also strong.
  • Energy (-1.58%) and Materials (-1.19%) are the weakest links.
  • Chinese stocks in Hong Kong rebounded from a 7% sell-off yesterday to be up more than 2%. The Hang Seng Tech Index jumped as much as 6.1% implying some recovery in the US-listed names tonight.
  • Ampol ASX: ALD -12.56% hit on a weak trading update, buying jet fuel high and selling it low the issue.
  • Reliance Worldwide ASX: RWC -13.37% also hit on a weaker quarterly and rhetoric for tougher times ahead.
  • Wisr (WZR) +23.08% a stock we owned many moons ago released a better Q1 update today. It’s now capped at around $70 million trading at 6.4 cents – coming off a very low base.
  • Oz Minerals ASX: OZL-4.3% lower on yesterday’s weak quarterly and today CLSA downgraded to reduce.
  • Seek ASX: SEK +2.28% traded higher on a broker upgrade – we agree and have recently bought the online recruiter.
  • Research Lead Shawn Hickman was on Ausbiz this morning talking big picture, plus a few stocks that have recently had weak updates – Click here to watch
  • The Federal Budget is out tonight with key sectors in focus….
  • Infrastructure: $6bn for road and rail work is being reported: Key stocks to watch: Boral ASX: BLD, Adbri ASX: ABC, Lendlease ASX: LLC, Bluescope Steel ASX: BSL.
  • Resources: $50.5 million over four years to establish a critical minerals research and development hub. $1 billion will be allocated to support value-adding resources projects and $50 million will go to grants for early- and mid-stage critical minerals projects. Key stocks to watch: Pilbara ASX: PLS, Iluka Resources ASX: ILU, Allkem ASX: ALK.
  • Housing: There may be some supply-side policies on real estate given the tight rental market. Key stocks to watch: Property-listing firms REA Group ASX: REA and Domain Holdings ASX: DHG.
  • Children and families: A range of family-focused measures such as additional childcare funding will be featured. The government said it will increase paid parental leave to 26 weeks from 18 weeks. Key stocks to watch: Childcare provider G8 Education ASX: GEM and educational services firm 3P Learning ASX: 3PL.
  • Telecom: The government will expand full-fiber access to 1.5 million premises by 2025 with a $2.4 billion equity investment in the National Broadband Network over four years. Key stocks to watch: Telstra ASX: TLS, TPG Telecom ASX: TPG and Aussie Broadband ASX: ABB.
  • Iron Ore was around 1.5% lower in Asia
  • Gold was flat, trading around US$1648
  • US Futures are flat as a tack.

ASX 200 chart

Reliance Worldwide (RWC) $3.11

RWC -13.37%: Hit hard today after reporting weaker than expected quarterly sales while they talked to tougher and unpredictable conditions ongoing. The plumbing supply business that generates nearly 70% of its revenue from the US saw volumes decline in all regions except Australia. While sales were up +23% YoY and there were no changes to the key assumptions for FY23 outlined in the full-year earnings announcement in (other than interest expense & depreciation), it was more the downbeat rhetoric that seemed the issue. That’s somewhat surprising given the stock is down 50% year to date given these concerns. While the market has been shunning weak outlooks, and the momentum in RWC is clearly on the downside, this is a stock that will do particularly well when the worm turns.

Ampol (ALD) $27.35

ALD –12.56%: Hit hard following a disappointing trading update today which showed they were caught out by holding Jet Fuel purchased at higher levels before selling for a loss, partially offset by strong results in Refining, Convenience Retail and Z Energy. They did talk about continued volatility in conditions but went on to say that they were still on track to deliver record Full Year earnings. Stocks that provide negative updates have been hit, and have stayed hit for a while, with ALD closing on the session lows today.

Broker moves

  • Sims Cut to Underperform at Macquarie; PT A$10.80
  • Carnarvon Energy Ltd Cut to Neutral at Macquarie
  • Coles Group Raised to Neutral at JPMorgan; PT A$16
  • OZ Minerals Cut to Reduce at CLSA; PT A$27
  • Treasury Wine Raised to Buy at Goldman; PT A$14.70
  • South32 Cut to Neutral at JPMorgan; PT A$4.10
  • Seek Raised to Positive at Evans & Partners Pty Ltd; PT A$26.54

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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