NZ
Rakon has warned of up to a +$10M impact on its EBITDA guidance of +$26-34M due to a slower than anticipated rollout of 5G across its telecoms customers. Lowering our expectations here and reiterating buy at 85c or better — we think this is a fairly material headwind. The company is hosting a conference call later today to discuss the revision — at the low end $16M of EBITDA values the company at roughly 11x EV/EBITDA. For a while looked like momentum was on our side with this stock — now this is uncertain and we are reassessing what its value looks like in the short term. Still value to be had at 85c and under.
Vulcan Steel has downgraded its NPAT guidance from $95-109M to $86-89M, incl. costs of Ullrich Aluminum integration. Note volume (excluding Ullrich) down 13% YoY – softening construction/tradie appetites? No view but an interesting macro-read for housing etc.
Speaking of housing sales, noting further weakness – down 4.1% vs May. Sure and steady decline. Retail spending largely flat thanks to a boost from consumers hitting the petrol pump before the excise duty increased.
US
JPMorgan reported a strong earnings beat – profits up 67% YoY. Net interest income sat at $21.9B (up ~44%). The big contributor here was the bank’s purchase of First Republic for a steal earlier in the year. EPS sat at $4.37 per share (vs. analyst estimates of $4.00) while the bank put aside $2.9B for credit losses. We continue to be buy rated on JPM. Sony, which has been the biggest opposition to Microsoft’s mammoth takeover of Activision-Blizzard, signed a deal with the company which locks in sharing of the hit Call of Duty franchise to both Sony’s playstation platform and Microsoft’s Xbox platform. It’s a stunning about-face in a series of turnarounds, which culminated last week with the FTC’s legal case against the merger essentially being rejected. We think this is a pretty big “positive” for the merger and think it is likely to go through. Target price $95 per share.
Australia
Resmed is scheduled to release its fourth quarter 2023 results on August 4th at 6:30 am AEST. We anticipate a significant boost in device sales as RMD continues to gain market share.
We expect top-line growth will be complemented by an improvement in gross margin percentage due to factors such as decreasing freight and component costs, as well as enhanced manufacturing efficiencies. No view. More pain in the unlisted property space — Charter Hall’s unlisted $2.45bn Charter Hall Direct PFA Fund, which had received redemption requests equal to 15% of its equity, paid just 25% of what was requested in Feb and will pay another instalment “shortly” and the balance over the rest of this year as it sells assets. Prefer retirement operators as exposure to property…Oceania, Summerset, in that order of preference.
| Chart – the widening gap between Goldman and Morgan Stanley |
| Goldman Sachs earnings due this week – we’re still sell rated on the company — CEO Solomon’s lead has created little value over the last five years — a consumer banking blunder and missed wealth mgmt opportunities. Expecting another earnings miss — we found the chart below from the always excellent Semafor to be quite good. GS are still the best dealmakers in town but we’d only look at upgrading the stock when and if it trades below book value. |
| Week Ahead Monday US: Empire Manufacturing; China: Q2 GDP, IP, Retail Sales, Fixed Assets; Australia: Whitehaven Coal Q Production. Tuesday US: Retail Sales, NAHB Housing Market Index, IP; Australia: RBA Minutes, Blackmores Scheme Meeting, Rio Tinto Q Production. Wednesday US: Housing Starts, Building Permits; Eurozone: CPI; Australia: Q Production: BHP, Woodside, Northern Star, Beach Energy; NZ: CPI. Thursday US: Initial Jobless Claims, Existing Home Sales, Philadelphia Fed Outlook; Australia: Employment, NAB Business Confidence, Q Production: Santos, BHP, Evolution Mining. Friday Eurozone: Consumer Confidence; Japan: National CPI; Australia: Atlas Arteria Q3 Revenue & Traffic Update; NZ: Arvida Annual Meeting |