| The Not So DAILY BULLETIN 19 September 2023 No.584 |
| Top Stories |
| Tuesday, 19 September 2023, the ASX 200 dropped 34 points to finish at 7197. After finishing last week on a high, the first two days have dropped 83 points. As noted in a paragraph below, we are in the worst month of the year, and this week has been some of the weakest days over the last 20 years. Markets are focussed on a raft of Central Bank meetings with the US Federal Reserve, the main one on Thursday. The expectation is for a HOLD, but the commentary about the outlook will guide market sentiment. Other banks meeting include the Bank of England (BOE), Swiss National Bank (SNB), Bank of Japan (BOJ), Sweden’s Riksbank (SEK) and Norway’s Norges Bank (NOR). Rate hikes expected from BoE, SEK and NOR. In particular, market watchers will be looking for signs that rates have finished increasing as this was the takeaway message from the European Central Bank (ECB) last Thursday, hence the rally on Friday. Another interesting piece below is the observation that under-investment in commodities might lead to a new commodities BULL market. El Nino has finally been called today, so the season is warming and changing. The ASX is still trading within the 7000 to 7500 trading range. Will it break out, or will the rollercoaster continue? WE ARE LESS CAUTIOUS AND EVEN A LITTLE MORE OPTIMISTIC. Selective about the areas we like. |
| September is the weakest month. Historically, September is not a great month for markets. The chart below from Bell Potter’s Coppo shows the average movement over 20 years for the US S&P 500. This week (4-5 days) has been statistically the weakest group of days for the year over the 20 years. Why is that? It is a combination of factors over time. Still, it is the period just after reporting season, and many stocks are trading without their dividend, but investors haven’t received their money. It’s also towards the end of the 3rd quarter of the year when some pension/mutual funds are tidying up their books. Also, there is a change of season, and then it is just September, which starts to build a reputation for weakness. The 2nd chart below shows the average return for the different months over the last 20 years. While the average is a nice 0.47% per month or 5.64% plus income, September is the worst by some distance. However, we could look at this another way. The time to buy is when the market is unloved and down, and as can be seen in the chart, the next three months have been solid as the Santa Claus rally gets going in late October and November. So our old mantra still applies (BUY THE DIP). |
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| Commodity underinvestment – a new bull market? Callum Thomas from Topdown Charts has provided an interesting observation regarding capital expenditure in commodities. The chart below shows a significant under-investment (compared to the long-term average) in new commodity supply since the commodity bear market of 2015-16. But another way of looking at it, is a decade-long bear market in commodities from the peak in 2011 to the trough in 2020. New supply has struggled in many sectors for various reasons, including regulatory changes and investor sentiment through climate change. The underlying demand for most commodities only continues to grow. At some point, the increased demand and limited supply due to low capital expenditure only has one implication. HIGHER PRICES. Thomas believes we may have seen commodities hit a price floor, and we may be building towards a new cyclical bull market in commodities as the highly forecast recession fails to materialise and demand increases. |
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| Smart Beta ETFs Number 2 – we like them! Smart Beta combines the best of active and passive investing: having the potential for better investment outcomes while being rules-based, transparent and cost-efficient. In our portfolio construction, we use several smart beta ETFs that have delivered results over the short, medium and long term. The second one in the series is the VanEck MSCI International Quality (QUAL) or (QHAL) – hedged version. This fund gives access to the world’s highest-quality companies based on key fundamentals (filters). (i) high return on equity (ROE), (ii) earnings (profit growth) stability and (iii) low financial leverage Morgan Stanley Capital Index (MSCI), the world’s largest index provider and the creator of the first international index, states, “Quality growth companies tend to have high return of equity (ROE), stable earnings that are uncorrelated with the broad business cycle and strong balance sheets with low financial leverage. Many active strategies emphasise Quality growth as an important factor in their security selection and portfolio construction.” The top holdings are Apple, Nvidia, Microsoft, Meta, Eli Lilly, Visa Alphabet (Google), Visa Novo Nordisk United Health Group and Mastercard. The stock selection process starts with the top 1500 stocks in the world by market value. This is the MSCI index. The algorithm then applies the three filters above to reduce the stocks in QUAL to 300. To illustrate QUAL – return on equity is 35.96% on Price/Earning ratio of 24.7, whereas the MSCI World index of 1500 has a ROE of 21.10% on a PE of 18.7. To compare, the ASX 200 ROE is 15.83%. These stocks are re-assessed every six months to ensure they continue delivering and providing solid returns. The table below shows the return over various time frames compared to the index. QUAL has beaten the index (MSCI) over every period apart from the 1-month result, and the returns are well above the ASX over the past five years. I have kept in the MVW from the last Not So. |
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| Orora (ORA) acquisition and capital raising Existing shareholders only Orora (ORA) has acquired global premium glass maker Saverglass (France) for $2.1bn. They make high-end wine and spirit bottles for brands including Glenfiddich, Don Julio, Jose Cuervo, Grey Goose and Hennessy. Existing shareholders can purchase one new share for every 2.55 existing shares for $2.70. The shares have started trading again and have fallen to near the issue price. Closed at $2.75. The offer opens 12/9 and closes 25/9. Paperwork should be received next week. We will provide more information when we receive it from the brokers. |
| Macquarie Bank Accounts Macquarie has advised they are making the following changes to the usage of their accounts. From January 2024 You won’t be able to: – order a cheque book for a new cash management account. From March 2024 You won’t be able to: – make a payment using our automated telephone banking service. From May 2024 You won’t be able to: – deposit or withdraw cash or cheques over the counter at Macquarie branches – order a cheque book on an existing account. Clients can continue to withdraw cash from their transaction account via ATMs across Australia and overseas without fees. However, cash deposits and branch withdrawals will no longer be available. From November 2024 You won’t be able to: – write cheques or request bank cheques – deposit or withdraw cash or cheques over the counter at NAB branches – make a super contribution or payment via cheque. Provincial Wealth summary In our reviews, we will be discussing with your usage of the account and whether these will have any impacts and if required, provide guidance on work around. |
| Financial Planning Snippets – Super Guarantee (SGC) for employees increases to 11% from 1/7/23 – Commonwealth Seniors Health Care card has seen the income limit increase to $144k(couple) $90k (single). If you are of Age Pension age and don’t have the card, please let us know. – Account Based Pension minimum pension payments will revert back to normal from July 2023 (from half normal, which were put in place due to COVID in 2020). |
| Other Stories – Spheria Emerging Companies (SEC) NTA $2.15 ($2.12) as at 15/9/23. Share Price $1.90 ($1.90). That’s a 11.6% (11.4%) discount. (brackets previous number). Gross yield 7.96% paid quarterly. – Japan’s stockmarket hit 30 year high yesterday. – NSW Govt budget. Hitting property investors. – BHP warns the Federal government’s new “same work, same pay” legislation could cost $1.3bn, which will mean less company profits, corporate taxes and impact dividends. |
| Broker Target Price changes – Ord Minnett Morgans Morgan Stanley Macquarie Bell Potter/Citigroup UBS Tracking changes for 2023 Upgrades 263 Downgrades 256 (we have noticed the overall trend is down but the CORE stocks are seeing upgrades. It probably reflects the quality stocks in our 30 CORE stocks). |
| Today’s ASX sector Movements Best – Energy +0.2% Worst – Materials -0.8% |
| Core Watchlist Index (changes since last Not So) The CORE Watchlist is a collection of 30 Australian shares, predominantly “Blue Chip”. We obtain research from up to 6 brokers on each share. Each broker provides a Target Price (value in 12 months) which then provides us with an average for each stock. We then compare that average to the current price as a percentage. IE Macquarie price $176.95 Av. Target Price $205.96= 85.9% (meaning 14.1% upside over next 12 months) + income 4.35% (including franking). To get the CORE Index we take the average across the 30 stocks. This provides us with a market average as there are up to 80 teams of analysts providing the research and target prices. The CORE Watchlist stocks represent more than 55% of the ASX 200 and so provide us with a good indicator of the market value. When it’s at 100% then the market is fully priced. We have seen that when the index is below 90%, then it’s good buying, but that doesn’t happen very often. Should you have any questions, please let me know. The Core index decreased from 91.73% to 90.85%. Overall Earnings Per Share (EPS) FY23 decreased from 2.93% to 2.90% (new low) FY24 increased from 6.61% to 6.7% Most expensive – CBA 112.1% Least expensive – Lend Lease 57.4% The CORE Watchlist has 7 (8) stocks trading above 100%; they are; BHP CBA JBH NAB RIO WDS WES, lowest number ever is 0, highest 9. While 9 (7) are trading below 85% (highest 18), while the lowest is 5. CSL LLC NEC NXT ORA RMD S32 SEK STO (Figures in brackets is last Not So). STOCKS TRADING BELOW ALL BROKER FORECASTS ARE AS FOLLOWS; (it has been a handy indicator in the past). 11 out of the 30 CORE stocks are trading below the lowest broker target price. Highest 24. Lowest for some time 5. ALL current price $41.04 Broker range $42.80 to $46.50 CSL current price $263.60 Broker range $325 to $340 LLC current price $7.31 Broker range $8.03 to $14.45 MQG current price $172.92 Broker range $175 to $209 ORA current price $2.75 Broker range $3.00 to $4.10 ORI current price $15.88 Broker range $16.50 to $20.30 RMD current price $22.72 Broker range $27.70 to $39 S32 current price $3.40 Broker range $3.60 to $5.15 SHL current price $30.45 Broker range $32 to $38 STO current price $7.85 Broker range $8.10 to $12.30 TLS current price $3.87 Broker range $4.20 to $4.75 Added Removed |
| Banking Index Like the CORE Watchlist index, the Banking index is the four major banks’ average target price based on research from up to 6 brokers. The percentage below 100% is the potential upside over the next 12 months (not including income). If at or over 100%, then this indicates the Banks are fully priced. The Banking index decreased from 103.2% to 102.3%. Still fully priced! Based on today’s bank prices, the table below shows the estimated dividends (c) and yield. The expectation is slightly increased dividend payments and still very attractive yields. PLUS FRANKING. FY 23 % FY 24 % FY 25 % ANZ 162.5 6.37% 163.0 6.39% 163.0 6.39% CBA 450.0 4.41% 457.7 4.48% 469.5 4.60% NAB 167.3 5.70% 167.5 5.70% 168.0 5.72% WBC 140.0 6.45% 141.0 6.50% 142.8 6.58% MQG 750.0 4.34% 677.0 3.92% 719.2 4.16% Dividend expectations have been cut for BHP and RIO. Yields are still expected to be very strong. The forecasts below are for the full year. I have added FY25. BHP and RIO results will see some changing forecasts with the likelihood of further reduction. FY23 cps % FY24 cps % FY25 cps % BHP 258.00 5.72% 226.33 5.02% 213.6 4.74% RIO 569.17 4.80% 651.00 5.49% 547.8 4.62% Plus franking. Please note RIO is Calendar Year (CY). Cents per share (CPS). |
| Other Indicators (changes since last Not So) – US VIX Index increased from 12.82 to 14. Bounced off 52 week low. Markets are pretty calm. – Iron Ore increased from $121.60 to $121.75. Highest level in months. ALL-TIME HIGH of $237.57. Av expected for 2023 is $113, while dropping to $94 for 2024. – Copper decreased from $3.84 to $3.77. – Gold increased from $1941 to $1952. Record high $2063. – AUD/USD decreased from 64.67c to 64.32c. Has the AUD bottomed, mid 63.5c? – USD/CNY increased from $7.27 to $7.30 Lowest $6.31 Highest in recent years $7.35. – Asian markets – DOWN – US 10 year Bonds increased from 4.29% to 4.32%, hit 4.35% (13 year high) Rate moving higher on the issuance of BONDS. US 30 year Bond increased from 4.38% to 4.40% The highest level was 4.47%. US Federal Reserve raised rates to 5.5% but maybe on hold in September. The US 2 year rate has increased from 5.02% to 5.06% (5.37%, highest since 2006). The gap between the 2 yr and 10 years an inverse -0.77%. It was -0.73% but still inverted, which historically has suggested a recession. Widest inverse gap is -1.3%. This is the most it has been inverted in 42 years. – German Bonds increased from 2.61% to 2.71%. 2.94% highest since 2008 as the ECB increased rates last week. – Japanese Bonds increased from 0.712% to 0.72.1% highest in 10 years. – Aussie Bonds 10 year Bonds increased from 4.11% to 4.18%. Recent high 4.32% – Other Aussie Bonds 1 year 4.10% 2 year 3.92% 4 year 3.91% 5 year 3.94% 15 year Bonds 4.42%. Rates flattening. Given the cash rate is 4.10%, there is not a lot of suggestion that rates are falling over the next couple of years. – Oil prices increased from $90.84 to $92.86. Will the rally in oil put pressure on inflation again? – Tungsten – China remained at $305 to $315mtu. |
| Contact details PO BOX 149 Deniliquin NSW 2710 125 End St Deniliquin NSW 2710 Ph. 03 58950100 Fax 03 58950101 Mobile 0412113524 scottm@provincialwealth.com.au kevinh@provincialwealth.com.au chrisp@provincialwealth.com.au maddyl@provincialwealth.com.au |
| The Not So DAILY BULLETIN 28 August 2023 No.578 Top Stories Monday, 28 August 2023, the ASX 200 gained 45 points or 0.6% to finish at 7160. Over that period, the ASX 200 has increased 12 points and is at the lower end of the trading range of 7000 to 7500. This financial year (nearly two months), we have traded between 7004 and 7456 is down -0.6%. Over 2023, we have traded between 6899 and 7558 as the market seems to need help to digest the impacts of higher inflation and interest rates and is only up 1.72% for the year to date. August has been weaker by 3% after a good July. We are seeing companies trade without dividends, which usually sees the market lower (generally also in September). Reporting season has nearly finished in Australia, and it’s been OK. There are not too many disasters, but some concerns about interest rates and inflation (especially wages) remain. See below. The US Federal Reserve Jackson Hole meeting suggested interest rates may have further to rise IF inflation doesn’t continue to fall and emphasised that rates would remain elevated for longer. (This has been Provincial Wealth’s view as well). Economic data continues to be mixed with global PMI (purchasing manager indexes) showing slowing economies, but retail sales in Australia were up 0.5% in July (maybe FIFA World Cup). We are still waiting for a meaningful stimulus from China, which is causing domestic weakness, especially in commodities. Today, China announced a reduction in the stamp duty on share trade. This boosted Chinese markets, up 1.5% and should hold the AUD, Copper and iron ore. It probably accounted for some of the gains in our biggest stocks today, with BHP up 1.2%, CBA up 1.2%, CSL up 1.7%, NAB 1.3% and WES 2.1%. Watching this week for; Wednesday Aust monthly inflation figures Friday US payroll figures WE ARE LESS CAUTIOUS AND EVEN A LITTLE MORE OPTIMISTIC. But what will be the catalyst to take markets higher and out of the trading range? Australia Profit Season Part 1 This is the last week of profit results for most of the ASX. I’ve tried to summarise Macquarie’s view from the table below. It shows the ASX results and whether their research was beaten (dark blue) by the profit results, inline (light blue) or missed expectations (orange). For the Jun 2023 period (Jun half), it shows 31% of companies beat their expectations by more than 5%. 42% were in line with expectations, and 27% missed expectations by more than 5%. So overall, they are happy that the beats are more than the misses. However, the profit outlook in the next six months (December half), FY24 and FY25 are causing a little concern as the analysts are revising their forecasts lower, with only 10% in Dec half beating expectations while 45% were misses. While FY24 and FY25 weren’t as bad, they still had misses exceeding beats. Some of the downgrades have come from company guidance, and even in the CORE watchlist of 30 stocks, we have seen profit expectation of FY24 number reduce by 2% in the last two weeks. Macquarie says this is due to companies being a little conservative as the full effect of interest rates and wages is yet to play out.  Profit Season Part 2 UBS has also summaries their view of the profit season. Company profit results through August saw earnings (profits) beats outnumber misses by a ratio of 5:3, which illustrates the underlying strength the domestic economy. Amongst sectors, Materials (ex-mining) and Communication Services saw the strongest beat rate, while the Consumer Staples & Information Technology saw the biggest skew towards earnings misses. Soft guidance from companies, saw analysts revise down FY24 earnings at a ratio of 2 downgrades for each upgrade Persistent and broad-based domestic cost pressures. The most prevalent headache for companies this profits season has been on cost management. Across sectors, management teams are pointing to the cost growth they are seeing from labour, rent, energy, transport and technology spend. The broad-based stickiness in cost inflation that we saw in company results, maps with recent business survey data, and suggests that input costs pressures will likely remain elevated. Profit margins are still holding up. The cost pressures that companies continue to face are still being largely passed onto customers, which is allowing companies to defend their profit margins. As was the case in the February results period, Telcos and Insurers were again able to push through price increases to their customers without damaging sales. This outcome again illustrates how ultra tight labour markets have diluted the impact of the interest rate hikes we have seen over the last 12 months. In the 3/8/23 Not So, we noted UBS wanted to know the answer to 4 key questions for the reporting season. This is what they found. 1. Is the consumer crunch now happening? August results showed that recent activity levels from the consumer have not proved as bad as feared. That said, stocks where a consumer or economic slowdown was noted include: Adairs, Amcor, Centuria, Dominos Pizza, G8 Education, HomeCo Daily Needs, JB Hi-Fi, Pinnacle Investment, Region Group, Super Retail, Seven West Media, Telstra, Vicinity Centres and Woolworths. 2. Are labour costs beginning to break out? Versus what has been seen in most other advanced economies, wage inflation in Australia over the past 12 months has proved relatively contained. But recent data points show wage restraint may now be starting to wane, with various labour cost surveys having surged since the minimum wage decision on 2 June. Stocks where labour costs (or shortages) are proving a headwind to profitability included: Boral, Coles, G8 Education, JB Hi-Fi, Netwealth, Sims, Sonic Healthcare, Super Retail, Seven West Media, Telstra and Woolworths. 3. Can profit margins be maintained? The fact that most Australian companies have had little trouble passing on high input costs over the past year has actually not surprised us, and reflected an end customer that has been able (although reluctant) to digest higher prices. Results through August show this dynamic is mostly continuing. Stocks where profit margin compression was observed included: ASX, Bapcor, Bendigo Bank, Carsales, Commonwealth Bank, Corporate Travel, GPT Group, Insignia Financial, JB Hi-Fi, Mirvac Group, National Australia Bank, Pinnacle Investment, Resmed, Steadfast, Sims, Stockland and Seven West Media. 4. Are interest expenses manageable? Stocks that showed an uncomfortable growth in interest expenses included: Autosports Group, Aurizon, Bapcor, Carsales, Charter Hall Long Wale REIT, Endeavour Group, IVE Group, Mirvac, Sims, Seven West Media and Vicinity. Jackson Hole The global Central Bankers met at the annual Jackson Hole, Wyoming meeting last week. This annual meeting provides an opportunity for global Central Bankers to discuss the global outlook and policy setting. A speech from US Federal Reserve chair Powell usually dominates it. Betashares chief economist David Bassenese made the following comments. Powell’s speech suggested that while the US Federal Reserve retains a tightening bias (more rate rises), it’s in no hurry to raise rates again. Instead, it’s prepared to “proceed carefully” and assess incoming inflation and activity data for the time being. This likely rules out a September rate rise, though keeps in play a potential hike at the next meeting in November – if either inflation surprises on the upside and/or there are further signs of a rebound in economic activity, especially consumer spending. Thankfully, markets took Powell’s speech well, and there was little volatility, which hasn’t been the case in the past. China lack of growth and lack of stimulus Over recent weeks, the economic news hasn’t been great coming out of China. The economic re-opening miracle hasn’t happened, and the property sector has seen a slowdown with increasing stories of Chinese property developers in trouble. GDP is still likely to grow at 3-4% without stimulus and probably 5% with, but this is lower than we have seen in the past 20 years (shown in the graph below). While we’ve heard slow-down and property collapse stories before, they are usually followed by a strong economic stimulus package from the Chinese Government which has continued to see the Chinese economy be the world’s growth engine for the last 30-plus years. AMP’s Shane Oliver has written a piece about the Chinese slowdown, structural challenges and implications for Australia In summary, he says – China’s economy is slowing not helped by a property collapse and longer-term structural constraints around poor demographics and threats to productivity growth. – China needs to save less and spend more, and this requires significant fiscal stimulus. So far policy stimulus has been tepid, but a more forceful response is likely. While China has a high level of debt, it also has a high level of savings, and most of the debt is funded domestically. This means the debt problems are very different to the previous debt crisis. – Chinese shares are cheap trading on a PE of 7.7 and are likely to bounce, should a stimulus package be announced, but short-term risks are high. – The risks around China’s outlook mean Australia can’t rely on the China/commodity boom indefinitely. Australia still exports 30% to China (was 42% before trade dispute). A sharp downturn to the China (worse case) would be a double whammy as Australia also deals with higher interest rates. This highlights the need to do more to boost our longer-term growth potential.  Core Watchlist profit season During the last profit season, 24 of the 30 CORE watchlist stocks increased their dividend. It will be interesting to see whether this can be maintained. So far, 13 have increased, 4 stayed level and 6 decreased out of 23 ( 6 have profit announcements in November). Below are CORE watchlist stock and when they are reporting. Not all companies report as at end of June. For example, ANZ MQG NAB and WBC report end of Sept. Jul 26 – RIO – profit was $US 51bn down 43% while dividend was also down. This was expected as coming from high levels. Aug 4 – Resmed (RMD) – profit up 8% and quarterly dividend up 9%. But didn’t appease investors, have sold off the stock. Looking like a buying opportunity as now the cheapest stock in the CORE WATCHLIST. Aug 9 – CBA – profit up 5%. Record dividend. Increased on market buyback by $1bn. Brokers raised dividend expectations. Aug 14 – JB Hi Fi (JBH) – profit $524m. Dividend down but from high level. Lend Lease (LLC) – statutory loss but an operating profit of $257m. 7% lower property valuations. The pipeline of work $126bn. Dividend slightly higher. Aug 15 – CSL full year profit $2.61bn up 10%. Dividend Full year $A3.59 which is also higher. Seek.com (SEK) full year profit $202m down 16% Dividend 23c for half year, which is higher than one year ago. Aug 16 – Transurban (TCL) traffic up 20% Distribution for FY 24 up 6.8% Computershare (CPU) profit $258m Dividend 40c up 33% Aug 17 – Amcor (AMC) full year profit $1,048m with dividend slightly higher. Goodman (GMG) profit $1,783m up 17% Forecast to grow 9% in FY24. Dividend the same. Reinvesting in growth Orora (ORA) profit $203m up 8.5% Dividend 9c up 5.9%. Consistent performance. Sonic Health (SHL) profit $685m down 53% due to drop in COVID testing. Up 19% compared to pre-pandemic. Dividend increased 3% to 62c. Telstra (TLS) Full year Profit $2.1bn up 13%. Dividend 8.5c remaining the same. Not spinning out the infrastructure assets into separate company. Aug 22 – BHP profit was $US12.9bn a drop of 58% from record profit last year. The dividend of US80c or $1.25 was 55% lower than the record last year. Yield is still 5.9% plus franking. Coles (COL) full year net profit of $1.042bn. 30c dividend was the same as last year. Woodside (WDS) profit $1.896bn. up 4%. Dividend US 80c is down 26% from record last year but still equivalent to 6.9%. Aug 23 – STO Profit of $790m down 37%. Dividend 8.7c which is up 14% from last year. WOW profit of $1.618bn for full year which is up 4.6%. The dividend was 58c which is 9% on the same time last year. Aug 24 – Nine Entertainment (NEC) $262m down 25%. Dividend 5c down 21% South 32 (S32) core profit $916m. Dividend 5c, well down on last year due to fall in commodity prices. Aug 25 – Wesfarmers (WES) profit $2.4bn up 4.8%. Dividend $1.03 up 6.1%. Aug 29 – NextDC (NXT) reported a EBITDA of $193m up 15% on last year. No dividend (reinvesting profits for future growth in data centres). Aug 30 – BXB NAB Capital Notes (Hybrid) NAB is raising approximately $1bn via a capital note (debt). This is similar to the CBA and ANZ raising over the last few months. The details are; The code will be NABPJ and likely to have a yield of 6.90%-7.10%, which is a floating rate. The capital price is $100 per security. The first income payment date is 17/12/2023, and the first optional call date is 17/9/2030, with a mandatory conversion or maturity date of 17/6/2033. While they have a 10-year maturity date, they can be traded on the market anytime. At the beginning of 2023, we only expected ANZ to issue a new note as they had one maturing. Based on CBA and NAB issues, new hybrids. Westpac is likely to be considered a note as well. Financial Planning Snippets – Super Guarantee (SGC) for employees increases to 11% from 1/7/23 – Commonwealth Seniors Health Care card has seen the income limit increase to $144k(couple) $90k (single). If you are of Age Pension age and don’t have the card, please let us know. – Account Based Pension minimum pension payments will revert back to normal from July 2023 (from half normal, which were put in place due to COVID in 2020). Other Stories – Australian retail sales up 0.5%. – Spheria Emerging Companies (SEC) NTA $2.19 as at 24/8/23. Share Price $1.88 – Orora (ORA) in trading halt. Expecting to purchase a French bottle maker and a $1bn cap raise. Broker Target Price changes – Ord Minnett Coles (COL) increased from $14 (lowest broker) to $14.50 (still lowest broker) Goodman Group (GMG) increased from $18.60 (lowest broker) to $19.40 (still lowest broker) Woolworths (WOW) increased from $27 (lowest broker) to $27.50 (still lowest broker) Morgans COL decreased from $19.85 to $16.90 GMG increased from $24 to $24.50 Santos (STO) decreased from $8.45 (lowest broker) to $8.10 (still lowest broker) Westpac (WBC) decreased from $24.22 to $23.02 Wesfarmers (WES) decreased from $55.50 (equal highest broker) to $55.15 Woodside (WDS) decreased from $38.60 to $38.50 WOW increased from $38.30 to $41.30 Morgan Stanley ANZ increased from $25.20 to $26.20 South 32 (S32) increased from $3.90 to $4.15 WBC decreased from $21 (lowest broker) to $20.60 (still lowest broker) Woodside (WDS) increased from $40 (highest broker) to $41 (still highest broker) WOW increased from $30.50 to $33 Macquarie COL decreased from $20 to $18.50 Nine Entertainment (NEC) decreased from $2.14 (lowest broker) to $1.96 (still lowest broker) STO increased from $9.45 to $9.90 S32 decreased from $4.40 to $3.60 (lowest broker) WBC decreased from $21.50 to $21 WES increased from $52 to $54 WDS decreased from $35 to $34 Bell Potter/Citigroup BHP decreased from 445 to $44 COL decreased from $20.20 to $18.30 STO increased from $8.50 to $9 S32 decreased from $4.05 (lowest broker) to $3.80 (still lowest broker) WES increased from $40 (lowest broker) to $44 UBS Amcor (AMC) decreased from $16.30 to $15.50 BHP decreased from $37 (lowest broker) to $36 (still lowest broker) NAB increased from 425 to $26 NEC decreased from $2.50 to $2.28 Orora (ORA) increased from $3.50 to $3.75 S32 decreased from $4.60 to $4.30 Telstra (TLS) decreased from $4.75 (equal highest broker) to $4.65 WES increased from $55.50 (equal highest broker) to $57 (highest broker) Tracking changes for 2023 Upgrades 248 Downgrades 248 (we have noticed the overall trend is down but the CORE stocks are seeing upgrades. It probably reflects the quality stocks in our 30 CORE stocks). Today’s ASX sector Movements Best – Healthcare +1.5% Worst – IT -0.7% Core Watchlist Index (changes since last Not So) The CORE Watchlist is a collection of 30 Australian shares, predominantly “Blue Chip”. We obtain research from up to 6 brokers on each share. Each broker provides a Target Price (value in 12 months) which then provides us with an average for each stock. We then compare that average to the current price as a percentage. IE Macquarie price $176.95 Av. Target Price $205.96= 85.9% (meaning 14.1% upside over next 12 months) + income 4.35% (including franking). To get the CORE Index we take the average across the 30 stocks. This provides us with a market average as there are up to 80 teams of analysts providing the research and target prices. The CORE Watchlist stocks represent more than 55% of the ASX 200 and so provide us with a good indicator of the market value. When it’s at 100% then the market is fully priced. We have seen that when the index is below 90%, then it’s good buying, but that doesn’t happen very often. Should you have any questions, please let me know. The Core index decreased from 92.64% to 92.49%. Overall Earnings Per Share (EPS) FY23 increased from 3.11% to 3.16% FY24 decreased from 7.35% to 6.56% (this has dropped 2% in 2 weeks) Most expensive – CBA 110.6% Least expensive – Resmed (RMD) 68.6%. The CORE Watchlist has 6 (6) stocks trading above 100%; they are; CBA JBH NAB WDS WES WOW, lowest number ever is 0, highest 9. While 7 (6) are trading below 85% (highest 18) this is the lowest for a while. CSL LLC NEC ORI RMD S32 STO (Figures in brackets is last Not So). STOCKS TRADING BELOW ALL BROKER FORECASTS ARE AS FOLLOWS; (it has been a handy indicator in the past). 9 out of the 30 CORE stocks are trading below the lowest broker target price. Highest 24. Lowest for some time 5. ALL current price $40.52 Broker range $42.80 to $46.50 CSL current price $267.95 Broker range $325 to $340 LLC current price $7.57 Broker range $8.03 to $9.75 ORA current price $3.52 Broker range $3.75 to $4.10 ORI current price $15.03 Broker range $16.50 to $20.30 RMD current price $25.30 Broker range $31.40 to $39 S32 current price $3.43 Broker range $3.60 to $5.15 STO current price $7.63 Broker range $8.10 to $12.30 TLS current price $4.01 Broker range $4.20 to $4.75 Added ORA Removed NEC SHL Banking Index Like the CORE Watchlist index, the Banking index is the four major banks’ average target price based on research from up to 6 brokers. The percentage below 100% is the potential upside over the next 12 months (not including income). If at or over 100%, then this indicates the Banks are fully priced. The Banking index increased from 98.9% to 99.7%. Nearly fully priced. Based on today’s bank prices, the table below shows the estimated dividends (c) and yield. The expectation is slightly increased dividend payments and still very attractive yields. PLUS FRANKING. FY 23 % FY 24 % FY 25 % ANZ 162.5 6.61% 163.0 6.63% 163.0 6.63% CBA 450.0 4.47% 457.7 4.54% 469.5 4.66% NAB 167.3 5.92% 167.5 5.93% 168.0 5.94% WBC 140.0 6.55% 141.0 6.59% 142.8 6.68% MQG 750.0 4.35% 677.0 3.93% 719.2 4.17% Dividend expectations have been cut for BHP and RIO. Yields are still expected to be very strong. The forecasts below are for the full year. I have added FY25. BHP and RIO results will see some changing forecasts with the likelihood of further reduction. FY23 cps % FY24 cps % FY25 cps % BHP 258.00 5.92% 226.33 5.20% 213.6 4.90% RIO 569.17 5.24% 651.00 5.99% 547.8 5.04% Plus franking. Please note RIO is Calendar Year (CY). Cents per share (CPS). Other Indicators (changes since last Not So) – US VIX Index decreased from 17.89 to 15.68. Jackson Hole meeting settled the cattle (market) – Iron Ore increased from $105.25 to $111.75. ALL-TIME HIGH of $237.57. Av expected for 2023 is $113, while dropping to $94 for 2024. – Copper increased from $3.69 to $3.76. – Gold increased from $1922 to $1945. Record high $2063. – AUD/USD increased from 64.10c to 64.30c. Is this the bottom? – USD/CNY decreased from $7.30 to $7.28 Lowest $6.31 Highest in recent years $7.35. – Asian markets – UP on Chinese small stimulus. – US 10 year Bonds increased from 4.20% to 4.22%, hit 4.29% last night (13 year high) Rate moving higher on issuance of BONDS. US 30 year Bond decreased from 4.34% to 4.27% The highest level was 4.34%. US Federal Reserve raised rates to 5.5% but maybe on hold in September. The US 2 year rate has increased from 4.90% to 5.08% (5.37%, highest since 2006). The gap between the 2 yr and 10 years an inverse -0.86%. It was -0.68% but still inverted, which historically has suggested a recession. Widest inverse gap is -1.3%. This is the most it has been inverted in 42 years. – German Bonds decreased from 2.60% to 2.56%. 2.94% highest since 2008 as the ECB increased rates last week. – Japanese Bonds increased from 0.63% to 0.663% 0.663% highest in many years. – Aussie Bonds 10 year Bonds decreased from 4.24% to 4.16%. Recent high 4.28% – Other Aussie Bonds 1 year 4.09% 2 year 3.92% 4 year 3.89% 5 year 3.93% 15 year Bonds 4.40%. Rates moving lowers as market thinks RBA on HOLD are . – Oil prices decreased from $80.66 to $79.99. – Tungsten – China remained at $305 to $315mtu. Contact details PO BOX 149 Deniliquin NSW 2710 125 End St Deniliquin NSW 2710 Ph. 03 58950100 Fax 03 58950101 Mobile 0412113524 scottm@provincialwealth.com.au kevinh@provincialwealth.com.au chrisp@provincialwealth.com.au maddyl@provincialwealth.com.au |
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