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Weekly Wrap 21 August

Jessica Amir
August 21, 2020

The Aussie share market has slipped 0.1% this week (Mon-Thur), its first fall in three weeks as investors sift through 30 company reports – the busiest reporting season week so far.

In this week’s wrap, Jessica covers:

  • (0:24) Seven companies that beat market expectations
  • (0:36) WiseTech Global (ASX:WTC) sky rockets 38% after reporting
  • (1:13) 16 companies that reported in-line
  • (1:36) Seven that missed market expectations
  • (1:57) Three emerging themes worth thinking about
  • (3:25) What to consider if you want to generate above average returns
  • (3:54) Over to the U.S.: Apple becomes a US$2 trillion company
  • (4:46) What to expect from Fortescue Metals (ASX:FMG), Woolworths (ASX:WOW) & Afterpay (ASX:APT) next week
Read Transcript

Thanks for tuning into the weekly wrap this Friday the 21st of August.

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

The Aussie share market hit a two-month high this week but lost momentum slipping 0.1% to Thursday, marking the first fall in three weeks.

Investors had a lot to think about with 30 companies reporting, the busiest week so far this reporting season.

Of the companies that reported, seven beat market expectations, they included WiseTech Global (ASX:WTC), Corporate Travel (ASX:CTD), Bapcor (ASX:BAP), Mount Gibson Iron (ASX:MGX), NRW Holdings (ASX:NWH), Pact Group (ASX:PGH) Redcape Hotel (ASX:RDC).

Of those, WiseTech Global, the technology logistics company, reported the most notable result that sent its shares up 38%, making it the top performing ASX company this week.

Its FY20 results were stronger than expected, driven by lower costs which helped its profits soar 200%.

WiseTech also guided a stronger FY21 with logistics chains expected to recover well.

Amid the bright outlook, Credit Suisse, Macquarie and Bell Potter all upgraded WTC with $28 the most popular price target.

16 companies this week delivered results in line with what analysts were thinking, known as consensus, they included The a2 Milk Company (ASX:A2M), Brambles (ASX:BXB), Carsales.com (ASX:CAR), Crown Resorts (ASX:CWN), CSL (ASX:CSL), Data#3 (ASX:DTL), Estia Health (ASX:EHE), Fletcher Building (ASX:FBU), Mineral Resources (ASX:MIN), Moelis Australia (ASX:MOE), Nearmap (ASX:NEA), Oz Minerals (ASX:OZL), Saracen Mineral (ASX:SAR), Silver Lake Resources (ASX:SLR), SmartGroup (ASX:SIQ), The Reject Shop (ASX:TRS) and Vocus Group (ASX:VOC).

While on the other side, seven companies missed expectations they included APN Industria Reit (ASX:ADI), Dexus Property (ASX:DXS), Vicinity Centres (ASX:VCX), Webjet (ASX:WEB), Domino’s Pizza (ASX:DMP), Northern Star (ASX:NST) and Invocare (ASX:IVC).

Now of those Vicinity Centres and Webjet both fell over 8% this week forcing them to take a seat at the ASX200 worst performing table.

But if we just think about the themes that emerged this week, given that we’re all spending a lot of our time at home, commercial rent collectors landlords like Vicinity Centres and Dexus under-delivered, missing forecasts and also not guiding what FY21 holds, given lower occupancy rates and rents particularly in Melbourne.

Secondly, we’ve seen death rates decline according to the ABS.

Ironically, death rates are below their five year average.

Now this is why funeral businesses like Invocare (ASX:IVC) reported a notable miss on market expectations.

Invocare’s fundamentals do remain strong, but given more people are indoors and extremely health-conscious, there’s a lot less funerals.

This is why IVC didn’t provide guidance for what to expect in FY21.

On the positive side, with us spending more time around our humble abodes and more likely *NOT* to catch public transport.

Now this is by car part and servicing business Bapcor (ASX:BAP) shone, with sales revving up in May and June and carrying into July.

Bapcor also reiterated its five-year growth targets, with sales surging.

Other key winners this week were those companies benefiting from the China recovery.

The uptick in mining activity and the iron ore price trading at year highs with NRW Holdings (ASX:NRW) and Mount Gibson Iron (ASX:MGX) both packing a punch, expecting growth to continue this financial year.

But what about the big picture?

Well if you tallied up the 69 companies that have reported so far, the majority 46% have been in line with market expectations, well 35% have pleasantly surprised and 19% have delivered sour grapes.

This explains why the market has not shot the lights out this week and why you might need to focus on picking the right stocks in the right industries.

If you want to generate above average returns.

Whereas if you think about the U.S., 82% of the S&P500 companies have reported so far, mostly beating expectations even though earnings are down 33% year on year.

This has helped the S&P500 hit a brand new record all-time high this week, erasing all of the COVID-19 losses.

A big part of the U.S. market though are tech stocks, which are continuing to benefit from the shift to working at home.

The tech heavy NASDAQ flexed its muscle again, knocking the top off its previous record all-time highs and this was helped by Apple, one of the biggest companies in the world, becoming a US$2 trillion company this week, the first time that a U.S. company has reached this milestone.

To put that into perspective, Apple is now worth more than the largest 500 stocks that make up the Aussie stock market.

Now moving to what to watch next week, well Fortescue Metals (ASX:FMG) reports on Monday the 24th, with consensus expecting US$4.71 billion in profit.

FMG is a UBS buy with a $17.50 target.

Secondly, City Chic (ASX:CCX) reports Tuesday, this has been outperforming the market due to the shift to shopping online and the boom in U.S..

It’s also building scale and its balance sheet is strengthening profit of $16.2 million is expected.

CCX is a Bell Potter and a Goldman Sachs buy, with Goldmans targeting $4.15.

Thirdly, Propel Funeral Partners (ASX:PFP) reports Tuesday, the market’s looking for NPAT (net profit after tax) of $12.6 million.

It’s a Bell Potter buy with a $3.65 target.

Lovisa Holdings (ASX:LOV) reports Wednesday, the market’s expecting NPAT of $21.8 million, it’s also a Bell Potter buy with a $7.50 target.

Woolworths (ASX:WOW), the supermarket giant reports on Thursday.

Net profit after tax of $1.67 *billion* is expected, that’s less than last year.

It’s a Citi hold with a $41.50 target.

Afterpay reports on Thursday with earnings (EBITDA) or $43 million expected.

It’s a Bell Potter buy with a $92.50 target and Morgans is giving it a $100 – $101 target.

On behalf of everyone here at Bell Direct, have a happy and safe weekend.

I’m Jessica Amir, we’ll see you next week.

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