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Morning Bell 24 August

Jessica Amir
August 24, 2020

The Aussie futures are eyeing a fall of 0.2% at the open, despite U.S. stocks on Friday scaling to another fresh record high, with the S&P500 up 0.3% and the Nasdaq up 0.4%.

Trump announced he’s considering fast tracking AstraZeneca’s vaccine before the election, while he also authorised plasma treatment in COVID-19 patients. On the economic side, green shoots continued to sprout as the U.S. service sector grew at its quickest pace in 17-months.

What to watch today:

  • Afterpay (ASX:APT) reported that it’s expanding into Europe.
  • Companies reporting this week: Fortescue Metals Group (ASX:FMG), Nearmap (ASX:NEA), nib (ASX:NHF), St Barbara (ASX:SBM), Super Retail Group (ASX:SUL) and Chorus (ASX:CNU).

Local trading ideas:

  • Inghams (ASX:ING) buy rating and price target was upgraded by Bell Potter to $4.10, implying 21% share price growth from Friday’s close. Profit was in line with forecasts and no guidance was given.
  • MyState (ASX:MYS) was reiterated as a Bell Potter buy while dropping its price target 9% to $4.10, mainly as a result of not paying a final dividend which drops its payout ratio. What’s important is it didn’t cancel the dividend due to performance but to conserve capital. Bell Potter expects 11% share price growth from Friday’s close.
  • Car cooling system company, PWR Holdings (ASX:PWH), had its buy rating and price target upgraded by Bell Potter, giving it a price target of $5.25 after it delivered much stronger results than forecasted last week. Although it didn’t given guidance, PWR is expecting a strong rebound in FY21.
Read Transcript

Good morning, thanks for your company this Monday the 24th of August.

I’m Jessica Amir a market analyst with Bell Direct.

Well a massive week is on the cards for equity markets with investors absorbing quite a lot of reporting season results.

Including from Fortescue Metals (ASX:FMG), which has just handed down a record report card, really telling of how the iron ore market is performing given the commodity is at a year high, we’ll touch on their results in just a sec.

This week we’ll also hear from Blackmores (ASX:BKL), Seven Group Holdings (ASX:SVW), IGA owner Metcash (ASX:MTS), Woolworths (ASX:WOW) and then of course later in the week, Afterpay (ASX:APT) as well.

Now if we just turn to the U.S., how they wrapped up their session.

On Friday, we saw stocks scale to another fresh record high.

The S&P500 put on 0.3% while the NASDAQ was up the most 0.4%.

Over the week, the NASDAQ also shone the brightest up 2.6%, really thanks to Apple shares rising 8%, a big part of that rally came from, 1 –  Trump announcing that he’s considering fast tracking AstraZeneca’s vaccine before the election, while he also authorized a blood plasma treatment in COVID-19 patients. 2 – On the economic side, green shoots continue to sprout, the U.S. services sector grew at its quickest pace in 17 months and manufacturing also reported the biggest rise since January 2019.

Now the stock futures are indicating a positive open this evening in the U.S., we’ve also seen the Gold price scale down to a one-week low with investors favoring riskier assets.

This is why the Gold price lost about $6, it’s now US$1,941 an ounce.

While the oil price met a similar fate, falling by about 1% to US$42.60 with the uptick in COVID-19 cases causing demand concerns for the oil commodity as well as brent.

Now what to watch today, well the futures are suggesting an 11 point fall, that’s 0.2%.

Afterpay, in terms of company news, has just reported that it’s expanding into Europe.

Staying on the company news side of things, AMP (ASX:AMP) has announced its Chairman David Murray has resigned amid feedback from major shareholders, Debra Hazelton has just been appointed his replacement.

In addition to that board reshuffle, we just saw Boe Pahari step down from the CEO of AMP capital as well, all at the backlash of shareholders.

There’s also no economic news out today, the focus of course on reporting season results including Fortescue Metals, which just reported net profit after tax (NPAT) rose to another record, an increase of about 50% compared to the same time last year and FMG, Australia’s biggest iron ore major, one of the world’s majors as well, they also increased their dividend.

Nearmap (ASX:NEA), nib (ASX:NHF), St Barbara (ASX:SBM), Super Retail Group (ASX:SUL) and Chorus (ASX:CNU) also report results today or have reported.

Austal (ASX:ASB), the ship builder, ASB they just reported an exceptional report card.

Profit growth of 45% with revenue charging up 13% on the back of continuing to win Government contracts from the U.S. Navy.

In terms of trading ideas, Inghams (ASX:ING), their buy rating and price target was upgraded by Bell Potter to $4.10 and that implies 21% share price growth from Friday’s close.

What’s important to note though is profit was in line with forecasts.

No guidance was given however, given its defensive nature as it’s a poultry business, a material recovery in earnings is expected in the second half of the financial year.

Secondly, MyState (ASX:MYS) reiterated as a Bell Potter buy, while Bell Potter dropped its price target 9% to $4.10, mainly as a result of MYS not declaring a final dividend, in fact scrapping their final dividend, that drops the company’s payout ratio.

What is important though, it didn’t cancel its dividend due to performance but really to conserve capital.

This is why Bell Potter expects MYS’ share price to grow 11% from Friday’s close.

And lastly, car cooling system company PWR Holdings (ASX:PWH) had their buy rating and price target upgraded by Bell Potter, giving it a price target of $5.25.

After it delivered a bumper profit result much stronger than analysts expected, due to tighter cost of control.

Although it didn’t give guidance, PWR is expecting stronger rebounds in sales in FY21.

I’m Jessica Amir with Bell Direct. Happy trading, stay safe.

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