26 August 2024 | Weekly Snapshot

Did you know?

The below table shows that, on average, 62% of Chinese household assets are comprised of property. This is very similar to Australian households, which on average hold 56% of household assets in property. This helps highlight the level of sensitivity that households have to movements in property prices and the overall value of their balance sheets.

Market Movements

The ASX extended gains by +0.66% this week, following the strong performance the week before. Wisetech Global was one of the best performing companies, up +28.15% after saying its forecast EBITDA will accelerate between 33 and 41 per cent, or $660 million to $700 million. Inghams Group was among the worst performers, down -21.77% after announcing Woolworths will reallocate some chicken volume (on a regional basis) away from Inghams to improve supplier diversification

Over the week, financials edged lower, underperforming the ASX 200 +0.66% amid a busy reporting season. The August RBA minutes showed that the board had considered tightening monetary policy this month if members judged there was a material increase in the risk that inflation will not return to target by late 2025. However, futures are pricing in a rate cut by year-end after governor Bullock earlier this month warned a rate cut was unlikely in the next six months

The S&P500 was up 1.45% this week, after being up +2.67% the week before. Target Corp was among the best performers, up 10.04% after the retailer reported comparable sales and adjusted EPS for the second quarter that topped analysts expectations. The large pharmacy group, Walgreens Boots Alliance Inc., was down -5.68% related to a class action lawsuit against the company relating to positive statements made by Walgreens’ for its expected revenue for FY2024.

The week’s in-line initial jobless claims number got some attention given labor-market concerns, though continuing claims hit their highest level since November 2021. Preliminary US services PMI unexpectedly increased while manufacturing remained languid. A notable economic bright spot was a big 10.6% m/m increase in July new-home sales (also seeing June’s level revised upward).

Portfolio Movements

Westpac proves Q3 update – Notes improving economic outlook

• Westpac provided a Q3 update with unaudited net profit for the three months through June of $1.8 billion, up 6% compared to the quarterly average of its first half. Excluding the impact of notable items, unaudited net profit increased by 2% to $1.8 billion.
• Westpac’s Q3 net interest margin was 1.92%, up 3 basis points on the quarterly average of the first half. Expenses increased by 2% due to higher investment spend along with ongoing inflationary pressures particularly in technology services.
• “Our consistent focus on customer service has contributed to another solid quarter. We grew the business and maintained a strong financial position,” said Chief Executive Peter King. Adding “Impairment charges to average loans of 4 basis points were down from 9 basis points, reflecting an improvement in the economic outlook,”.

Sonic Healthcare reports FY results – Should steady the ship

• Sonic Healthcare, a global leader in laboratory medicine / pathology, radiology and primary care medical services, reported its FY results that should help steady the ship after what has been a rough few years.
• Annual profit was down 25% but this was no worse than expected with adjusted EBITDA of $1.60B in line with the downgraded guidance announced in May. Although net income attributable of $511.1 million looks to be a beat on the $479.9 million expected and revenue of $8.97 billion up 9.8% also looks slightly ahead of the $8.86 billion expected. The final dividend was raised to 63 cents, from 62 cents last year.
• Sonic Healthcare has maintained FY25 EBITDA guidance of $1.70-1.75 billion also in line with the $1.72 billion estimate.

Dexus reports full year results – Updates capital allocation framework

• Dexus, a leading office and industrial REIT Dexus reported full year results with an adjusted funds from operation/share (FFO) of $0.48, a slight miss on the $0.49 expected. Full year FFO of $0.65 was in line, and FY revenue of $902 million rose 6% and is ahead of the $874 million expected.
• Statutory NPAT of a $1.58B FY loss vs the $752.7M loss last year is a result of the external review announced in June. Dexus said its offices were 94.8% occupied at the end of June, well above the mid 80% occupancy for the broader office sector. The industrial portfolio occupancy is 96.8%, with company gearing at 32% on a look through basis, the bottom end of its target range of 30-40%.
• From FY25 the distribution policy has been updated to pay out 80-100% of adjusted FFO for a FY distribution of circa 37 cents which is below current expectations, noting attractive opportunities in the industrial, infrastructure and alternative investment sectors.

The Week Ahead

• Monday: US Durable Goods Orders will be released, with consensus expecting an increase of 4.2%, following last months contraction of -6.7%
• Wednesday: Australian CPI YoY is expected to come in at 3.4%, compared to the prior reading of 3.8%. NVDA’s earnings release, due out post-close on Wednesday 28-Aug, with consensus expecting US$0.646 per share
• Thursday: US Initial Jobless claims are released, with consensus expecting 235k, compared with the prior reading of 232k. US 2Q GPD is expected to print a number of 2.8%, compared to the prior reading of 2.8%. US Pending Home Sales, consensus is expecting 0.4% increase in July, compared to the prior reading of 4.8% in June.
• Friday: Australian Retail Sales (MOM) are expected to show a 0.3% increased, compared to the prior reading of 0.5%. US Personal Income (July) expected to rise 0.5% compared to the prior 0.3% and Personal Consumption expected to rise 0.2% compared with the prior of 0.2%.