Global markets drifted lower overnight on lower than usual volume with both the Chinese and US financial markets closed for holidays.
While US earnings season has come to an end, local earnings season gets in to full-swing across Australia & NZ this week, with major companies such as miner BHP Billiton likely to feature in news flow and drive investors sentiment. There were a number of profit announcements from companies yesterday which we touch on below. While it is very early days, so far it has been shaping up as a solid reporting season, with mining stocks being the standout sector in Australia.
Stock in Focus: Healthscope (HSO:AX)
Shares in private hospital company Healthscope (HSO) initially fell after its recent result announcement, but has now recovered the loss. HSO reported solid revenue growth although disappointed on the profit line with 2018 interim revenues up 4.9% from last year while operating earnings (EBITDA) were down -8.8% from last year to $193.5m.
Management said this result was expected, as indicated in the 2017 full-year result presentation. The company said that the profit decline was due to a few different reasons. The first reason was that there were softer private hospital market conditions with variability in patient case mix and a range of costs including wages which have risen faster than health fund price indexation. The next reason was that there were one-off planned brownfield expansion disruptions. The final reason was that the performances of Holmesglen Private and Frankston Private were disappointing. However, management are confident that the second half of the year will be positive for hospital operating earnings, with the full-year expected to be in line with 2017.
We have maintained a positive view on HSO’s outlook by focusing on the longer-term given the level of investment made by HSO into developing new private hospitals, especially given the aging population dynamic.
We currently have a BUY rating on HSO.
Members should look out for a full update on HSO to be released in tomorrow’s weekly report.
Australia & New Zealand Market Movers
The Australian share market rallied on Monday (ASX 200 index +0.64%) as the ASX started on the backfoot on Monday following a lacklustre session in the US on Friday but initial weakness soon gave way to gains as earnings took centre-stage. While it is early days, companies which reported so far have guided dividend per share estimates higher by 0.7% this reporting season and reported up to $820m in new buybacks. Earnings-related advancers included Beach Energy, which rallied 7.1% after posting a 5% gain in core net profit for the first half.
On the downside, Woodside Petroleum lost -6.8% as it started to trade for the first time after announcing its $2.5 billion capital raising last week. It garnered strong support from professional investors for the institutional part of the raising, it said on Monday. Funeral services company InvoCare saw its shares take a hit as investors seem to be focussed on the subdued shorter term outlook due to the closing of sites for refurbishment and increased depreciation and cost of debt.
The New Zealand market started the week off slightly lower (NZX 50 index -0.12%) in quiet trading ahead of a busy mid-week reporting period, led lower by Sky Network Television and Mercury, while Synlait Milk and a2 Milk rose.
In terms of stock news, Freightways was slightly lower as it reported a gain in first-half revenue although profit fell 8% to $31.4 million on the impact of a year-earlier one-time gain and a narrower earnings margin at its express package and business mail division. Shares of NZX dipped after it boosted annual profit 62%, cutting costs by trimming down its agri publishing unit and refocusing on its core markets business which relied on a glut of new debt listings to offset the lack of new equity initial public offerings and several de-listings in the year.
3 Things Markets Will be Watching this Week
1. Local AU/NZ companies continue to report profit figures as earnings season is likely to dominate news flow.
2. Minutes from the last meeting of the Reserve Bank of Australia are out Tuesday and Aussie wage price data is published Wednesday.
3. Minutes from the last US Federal Reserve meeting are released Thursday.
Have a Great Day,
Team