Jan Rally, Local Earnings Ahead | Healthscope

4 February 2019

Global markets were mostly in positive territory on Friday. Wall Street ended mixed as optimism from a surge in January US job growth was offset by a weaker-than-expected outlook from Amazon that battered retail stocks.

January has been a strong month for stock markets, with the US market rebounding nearly +8% (measured by the S&P 500 index) as shown below. The ASX and NZX have also followed global sentiment higher.

The local Aussie & Kiwi markets experienced relatively quiet trading last week as investors wait for company earnings season to kick off in February. Company earnings announcements begin in Australia including Commonwealth Bank of Australia and Insurance Australia Group, which are due to report this week.

       

Stock in Focus: Healthscope (HSO:ASX)

HSO shares jumped +3.8% on Friday after its board recommended a takeover bid worth $2.50 a share including its 3.5¢ dividend. 

The private hospital operator revealed that it has entered into an implementation deed with Brookfield Business Partners, under which Brookfield will acquire Healthscope for $2.50 per share. The Healthscope board has unanimously recommended the Brookfield transaction.
 
Healthscope also said that in the first half of its 2019 financial year the company achieved revenue of $1,224.6 million and operating earning of $198.1 million. This was a 3% and 7.7% increase, respectively, on the prior corresponding period. The core Hospitals segment was the key driver of growth, while HSO found earnings growth harder to come by in New Zealand.

The numbers were encouraging and we have held a positive view on HSO for some time now. However, these number may be largely irrelevant if the company is acquired, with the Brookfield transaction subject to limited conditions.
 
Members should look out for a full update on Healthscope to be released in our weekly report.

 
Australia & New Zealand Market Movers

The Australian share market was little changed (ASX 200 index -0.03%) although Friday's moves saw continued strength for miners, with the sector extending weekly gains. Banks were softer ahead of next week's final banking royal commission report. In stock news, software as a service business WiseTech Global continued its expansionary strategy buying Norwegian business Systema AS for less than $6 million. The software group did not provide a trading update.
 

The New Zealand market was in slight positive territory on Friday (NZX 50 index +0.15%) as Air New Zealand shares fell to a 3-month low following the release of a negative broker report. In economic news, the ANZ-Roy Morgan consumer confidence survey showed people's optimism was above long-run average – they were feeling better about the state of their finances and willing to make big-ticket purchases. Retailer Kathmandu Holdings was one of the biggest gainers on Friday.

 

3 Things Markets Will be Watching this Week

  1. US corporate earnings season continues this week.
  2. Local earnings season also kicks off in Australia this week, with CBA among the heavyweights to release profit figures.
  3. The Reserve Bank of Australia makes an interest rate decision on Tuesday.

 

Have a Great Day,
 

Team

January has been a strong month for stock markets, with the US market rebounding nearly +8%

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