Australian Stock Market Report – Sydney Airport, Kogan, ANZ shares & more

Australian Stock Market Report - Sydney Airport Kogan ANZ shares  

Market Commentary and Stock Tips - 22nd December 2017

Highlights

6000 points plus - and Index up 3% in December- not bad going at all! – to quote Bing Crosby “It’s beginning to look a lot like Christmas” –– Infrastructure king Cimic keeps winning contacts – Upstart online seller Kogan clicks more tickets – Sydney Airport, no xenophobia here!– Macquarie Group – it’s no Steven Smith or Bradman, but it’s still 100 not out.

“Scomo” aka the Treasurer smiles as the economy expands and deficit deflates

There were not too many surprises in what’s called the Mid-Year Economic Financial Outlook (MYEFO) released by Treasurer Morrison during the week.  The update shows that the economy is ticking over quite nicely and 3% growth is expected over the next few years.  For non-economists a 3% growth in the overall economy is a pretty good performance; the unemployment rate is expected to remain static at around about 5.25%; and inflation to be stubbornly low at below 2% per annum (I remember 15% per annum in the 1970’s – right now is nirvana!) 

Roads and Bridges… give me more say Cimic and Transurban

Victoria’s $9 billion splurge on infrastructure spending on a mammoth tunnel under the Yarra with associated toll roads, is like all Christmases have come at once for both Transurban and Australia’s infrastructure king Cimic (formally called Leightons).

But as the inimitable Tim Shaw used to say, there’s more! Other States and the Federal Government are also jumping on the infrastructure bandwagon. And that’s great. - And not before time. Try navigating Melbourne’s West Gate Bridge in peak hour! I might add that this infrastructure spending also is likely to gild the economic growth lily.      

Foreigners love us- just ask Sydney Airport

Passenger figures released by Sydney Airport show that international travelers are buzzing into Australia’s major airport like bees to the honey pot.  In fact the numbers show that international travelers coming to Sydney airport have increased by 7.1% over the year to November, while domestic passenger numbers are over 3.1%.  For those who are interested to know about where these foreigner travellers are coming from, the answer is: China; India; South Korea; United States; and Germany. Not a bad looking combo!  For the aeronautically savvy, the strong performance has been due to a combination of a 4.6% increase in capacity (i.e. more airlines flying to Sydney) and a 4% increase in load factors (i.e. passengers sitting seats). 

ANZ gets back to its knitting - and I like It, I like it (Gerry and the Pacemakers)

Hard to believe. ANZ have actually sold off 16 non-core businesses worth $billions over the last 2 years, including life insurance, and wealth management businesses. With these extra funds that have been garnered, ANZ are benefiting shareholders through a $1.5 billion on-market buy back of its shares. This occurs because existing shareholders get a greater return per share due to fewer overall shares on issue. 

Bottom line: Thankfully ANZ is now getting back to basics, which are banking, and its here in Australia.  Asian assets are now a thing of the past. 

Macquarie Group – no Steven Smith or Donald Bradman, but they’re 100 not out

Like the overall market, which has knocked on the door of 6,000 points more times than I like to remember, Macquarie Group likewise has been nervously knocking on the door of $100 a share for a few months, and it’s finally there!.  And with Macquarie’s interest in the United States, and with the stronger $US and a corresponding weaker $A, this should translate into higher Australian dollar profits for Macquarie.  Other Australian stocks to benefit from a weaker $A include: CSL; Cochlear; ResMed; Boral; Aristocrat; Treasury Wine; and James Hardie to name just a few who are likely to be beneficiaries of an American economy which appears to be coming up trumps---- particularly given the recent passing of major taxation bills.

Kogan: On the Up and Up ---and now Up Up and away

Kogan (the online retailer) which only listed on the share market in July last year has hit stratospheric highs as far as it share price is concerned from about $1.50 to recent price levels of around $5.80.  They seem to be very smart operators who are actually making a profit and pay a dividend.  They have also recently expanded into providing both health and pet insurance.  So far so good, but watch it! The most important benchmark of course is their next report, due in February next year.

Stop Press

Orica – explosive makers, has at last found the fuse (i.e. a satisfactory report)

Blue Scope Steel and Ansell – announce $millions benefit from U.S. tax cuts

Caltex – profit adjustment, but share price continues to rise

Conclusion

As I said on previous occasions I don’t foresee any major storm clouds on the horizon, as world economies are continuing on the upward trajectory.  Accordingly I believe that we are in for a pretty good performance next year. In deed we may well reach the highest level ever on our share market, and show an increase of around 12% to eclipse the 2007 high point of 6,851.1

Stock Tips- Reserved for Clients

australian stock market weekly report

Next Few Weeks

Not much in the way of economic data other than building approvals, retail trade;  housing finance and job vacancies in the 2nd and 3rd weeks of January.

In the U.S.  

There will be usual plethora of economic data.

 

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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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