Australian Stock Market Report – CSL, TPG, Metcash shares & more

Australian Stock Market Report CSL TPG Metcash shares more

Market Brief and Stock Tips - 7 December 2018

Highlights

Market volatility roils the market – CSL – keeps doing its research – TPG – broad-banding its offering – Metcash – cash drying up – Coles – facing chill winds of independence.

U.S. sharemarket – continues to get Trumped

Equity markets rallied strongly after the opening December bell, only to get ‘Trumped-on’ by the Donald’s recent comments regarding the trade tariffs with China. But while uncertainty lingers the market volatility continues.

Ultimately, at times like these, it is important to take a step back. In the grand scheme of things, we are of the view that this will all be resolved over the months ahead. Eventually, when we look back at this current milieu, it is the negative headlines rather than substantial issues - like impaired corporate profits or slow economic growth that has been the main culprit in driving the market down. So when the dust settles current share prices may look like a bargain hunter’s paradise.

Australian Economy – tracking nicely – GDP foot off the accelerator

The Reserve Bank Board decided to leave the cash rate unchanged at 1.5%, which has been the case since August 2016. Head-teller (Phillip Lowe) recited the strength of our Australian economy - GDP growth continues to tick north, along with employment - inflation contained around the 2 percent cent region and unemployment trickling southward. The only concerns were the low-growth in household income/consumption and debt levels remaining on the high side.  Overall the economy is in fine fettle, despite the usual prognostications of the perennial kill- joys.

CSL – no blood transfusion necessary

At the CSL Research and Development annual investor briefing, a host of projects are in progress. New product development activities focus on innovative new blood plasma therapies for life threatening diseases. In terms of existing products, continuous improvement remains the focal point, along with penetration into new markets. Overall, CSL is well placed to continue to grow its market share, particularly in the core immunoglobulins space. This latter area, is CSL's key market accounting for nearly half of the firm's revenue. CSL continues to look attractive, especially at its current low share price.

TPG – Directors pay ‘corralled” so it escapes shareholders wrath

At its 2018 Annual Meeting, TPM reiterated that their business is moving in the right direction. They have managed to deliver their 10th consecutive year of profit growth - which is something that the company is very proud of. Looking ahead, the planned merger with mobile giant Vodafone Australia will allow for a wider offering of telecommunication services to the broader community. This synergy would likely place TPG telecom one-step closer to the heels of Telstra. However, the telcos sector is not my “flavour of the month.”

Metcash – but not much jingle jangle of the cash going on here

The 2019 half year results presentation was rather underwhelming. Profit was marginally higher, but the challenging competitive outlook (Aldi, Costco and online) is becoming more of a concern. Moreover stiff competition within the supermarkets arena, and the slowing property market which affects Metcash’s hardware business, are headwinds for the company. 

Coles – on its own now  

Since its debut in late November, the share price of Coles group (code COL) has shed almost 7% (as measured from the $13.37 debut price to $12.62 today). In comparison to its sector peers, Woolworths and Wesfarmers, Coles appears to be the ‘ugly duckling’. Now for the contrarian investor its current share price may represent an opportunity.

Stop press

Resmed – breathing regularly

ResMed has agreed to acquire digital therapeutics company Propeller Health for $225 million. Propeller will continue to operate as a standalone within ResMed’s Respiratory Care portfolio. ResMed looks like a quality mid-cap stock.

Bluescope – but its share price is all Downscope

BlueScope has dedicated $250 million to repurchase shares over the next seven months. Upon completion, while this would strengthen the company’s cash position in preparation for future expansionary activities, risk remains for future growth in steel.  

Stock tips  For details please contact Michael on 03 8633 9925

australian stock market weekly report 

Next week

In Australia:

Tuesday: NAB Business confidence.

Wednesday: Westpac consumer sentiment

In the U.S.A:

Usual range of data: Producer Prices, Consumer Prices (inflation) and Retail sales.

 

Disclaimer: This publication has been prepared solely for the information of the particular person to whom it was supplied by Phillip Capital Limited (“PhillipCapital”) AFSL 246827.  This publication contains general financial product advice.  In preparing the advice, PhillipCapital has not taken into account the investment objectives, financial situation and particular needs of any particular person.  Before making an investment decision on the basis of this advice, you need to consider, with or without the assistance of an adviser, whether the advice in this publication is appropriate in light of your particular investment needs, objectives and financial situation.  PhillipCapital and its associates within the meaning of the Corporations Act may hold securities in the companies referred to in this publication.  PhillipCapital believes that the advice and information herein is accurate and reliable, but no warranties of accuracy, reliability or completeness are given (except insofar as liability under any statute cannot be excluded). No responsibility for any errors or omissions or any negligence is accepted by PhillipCapital or any of its directors, employees or agents. This publication must not to be distributed to retail investors outside of Australia.

 

About Michael Heffernan

+61 (3) 8633 9925 Email Profile

Michael Heffernan has over 30 years’ experience in the finance and securities industry and is currently a Senior Client Advisor and Economist with a leading Australian Sharebroker Phillip Capital after having been Chief Economist/Lawyer with the Australian Stock Exchange for 13 years, and an Economist with Commonwealth Department of Employment and Industrial Relations for 11 years.
Most recently Michael topped the poll of the Australian Newspaper's Criterion column of his expert tipsters for 2014 with an average increase of 26% over the year. Also Michael was named Stock Picker of the year 2013 and 2016 at the Australian Stockbrokers Foundation Annual Awards Charity Dinner.

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