Australian Stock Market Report – Telstra, Westpac, Sonic Healthcare shares & more

Australian Stock Market Report Telstra Westpac Sonic Healthcare shares more

Market Brief and Stock Tips - 14 December 2018

Highlights

Interest rates, confidence and finance scorecards – Telstra– prepares for 5G – Westpac – bonuses bite the dust – Commonwealth Bank – remediation costs keep on going on – Sonic Healthcare – growing the family tree.

Australian interest rates – where to from here?

The talk of the town is the decline in house prices, and the Australian banks’ are nervous about lending in the current environment to say the least. So are the banks adopting a new twist to the maxim “Safe as Houses?’ In response, RBA deputy governor Guy Debelle actually surprised us (me in particular) with comments about the possibility of a cut to the official interest rate.

The official interest rate has been unchanged since August 2016, at a record low of 1.5%- a far cry from 4.75% in late 2011. But how low can you go? – reminds me of that other maxim “you can’t push on a string”.

Australian Confidence indicators and Finance numbers

The National Australia Bank (NAB) Business Survey of November, indicated a slowdown in both business conditions and confidence. However, business conditions remain well above average, but business confidence has been a bit less robust. 

On the flipside however, the Westpac Consumer Confidence report showed a positive sentiment --- largely due to the market’s expectation of the official interest rate remaining largely unchanged for some time to come.    

Flicking the switch to overall lending figures, finance for home owner occupation has started to ease, but commercial finance commitments is increasing, supporting the view that business conditions remain healthy.

5G – is it a new dawn for Telstra?

TLS has invested $386 million to support its national 5G rollout (super-fast connection to the internet). This means that Telstra should continue its dominance in leading the 5G rollout. And its share price is slowly moving up---but the telco sector is still not my “flavour of the month.”

Westpac – the shareholders say no to fat-cats pay-cheques

At this week’s AGM, almost 64% of shareholders voted against WBC’s remuneration report.

In addition the tone of the AGM commentary was pretty downbeat. So as we all now know, the 2018 financial year was exceptionally difficult for the banking industry ---- hampered by various regulatory actions and the Royal Commission. But not only that, a slowdown in housing lending due to increased competition from other major bank peers, offshore banks and non-bank lenders are likely to be drags on the bank’s bottom-line. But one of the key focal points for 2019 is the reduction in costs (to above $400 million, one third higher than in 2018) and that’s positive.

Stop press

Commonwealth Bank – the bill keeps rising

Customer remediation and transaction costs of $355 million will be included as part of the half year results ending December 31. Positively however, the additional costs will be partially offset by a professional indemnity insurance payment of $135 million. In the grand scheme of things, the net result would equate to a 1 per cent cut in earnings which is largely immaterial.

Sonic Healthcare – going Christmas shopping

Sonic Healthcare is set to acquire US pathology services company, Aurora Diagnostics for US$540 million (funded by a A$600 million placement). The successful integration would add significant scale and increase the company’s US business and presence in the anatomical pathology area.

Stock tips Please contact Michael if you want details on 03 8633 9925

Companies across the broader market continue to chop and churn in a volatile fashion. But there is value in several companies including CSL,The A2 Milk Company, CBA and Woolworths.  

australian stock market weekly report 

Next week

In Australia:

Tuesday: RBA Monetary Policy Meeting Minutes

Thursday: Employment and Unemployment rate

In the U.S.A:

Usual range of data: Central bank funds rate and Press conference, Core Durable Goods orders and GDP. 

 

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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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