Global markets were mixed overnight as volatility remains depressed. In the US, both the S&P 500 Index and Dow Jones Industrial Average remained in record territory, as strength in technology shares helped balance out weakness in energy.
As we discussed yesterday, investors remain focussed on quarterly profit reports especially as the market has been counting on earnings to support the relatively high valuations for equities. During “earnings season” the market focus usually shifts away from economic issues and back to company profits, with earnings announcements being made across the US, Australia and NZ.
Stock in Focus: Crown Resorts (CWN.AX)
Crown has announced its 2017 full year results, which reflected difficult trading conditions. Total normalised revenue across Crown’s Australian resorts declined by 12.7%. This decline was due primarily to the reduction in VIP program play revenue in Australia, which was down 48.9% on the prior comparable period. The VIP business has been a concern since several Crown employees were detained in China last year.
Crown also announced another $375 million buyback to supplement about $1.1 billion of capital management. Crown has engaged in share buybacks and special dividends following the sale of its Macau venture (Melco Resorts), although the bulk of this has now been distributed.
We see Crown as a beneficiary of our tourism boom investment thematic over the medium term, particularly with increased tourism from Asia.
We are currently BUY rated on Crown. Members should look out for a full update on CWN to be released in tomorrow’s weekly report.
Australia & New Zealand Market Movers
The Australian share market made gains on Monday (ASX 200 index +0.93%) after the embattled Commonwealth Bank regained some lost ground, prices for iron ore and oil lifted, and after positive global leads. Mantra Group jumped +5% after the hotels group announced a $52.5m acquisition of the Art Series Hotel chain.
The New Zealand market started the week higher (NZX 50 index +0.33%) with more volume through politically-driven sectors as the September election draws closer. A2 Milk Co surged to another record high, while Xero gave back some gains. The New Zealand dollar fell to a three-week low as traders took yesterday's weaker inflation reading from the Reserve Bank's survey of expectations as evidence the bank will lag behind its global peers in hiking interest rates, reducing the kiwi's appeal.
3 Things Markets Will be Watching this Week
1. It’s all about corporate profits as Earnings season continues across the US and Australia.
2. Local earnings season kicks off in New Zealand.
3. The Reserve Bank of New Zealand releases an interest rate decision Thursday, with it being Governor Graeme Wheeler's last monetary statement.
Have a Great Day,