THE MARCUS TODAY MORNING MEETING – Monday 18th July

Anyone who has been in broking will tell you that the Morning Meeting is how all brokers start the day.  The format is to have a quick look at the overnight markets, consider what's coming up in the day ahead, hear from the analysts, share ideas and get set up for the day's stock market activity

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Transcript

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Marcus Today offers information that is only general in nature. It does not take into account your personal financial situation, needs or objectives. Nor does it take into account the financial needs of any specific person. You should consider your own personal financial situation and needs or seek financial advice before making any decisions based on this information. For more information please see our Financial Services Guide.

*PLEASE NOTE: Transcripts are autogenerated and may contain errors, especially Stock Codes and Names.

SPEAKERS

Henry Jennings, Tom Wegner, Chris Conway, Layton Membrey, Marcus Padley, Ben O'Leary

Ben O'Leary  

Good morning everyone, it is Monday the 18th of July morning, Henry Jennings, you're never not for us. What have you got?

Henry Jennings  

Good morning, Ben and welcome to another fun packed week in the Australian market. And we had a pretty good lead in today from US markets on Friday are some really good results from Citigroup. I must admit, it's unusual for a US Bank of the size of Citigroup to move 13% on only slightly above expectation results. So it just shows how much down and optimism there was in the marketplace for the US Bank. So it was impressive to see the US banks doing as well as they had in the likes of Goldman was up 4.4% Bank of America up 7%. And as a result of all this, the Dow Jones was up 658 points, which is a big night 2.15% Even commodities got a little bit of optimism a spring in their step. And we did see copper up point four of a percent oil doing well again, up 2.1%. So that was all good iron ore flatlining and some stability creeping in Italian futures as we speak at the moment in early Asian trade, because they did dip below 100 us a tonne on those futures exchanges on that last week session. So that is a bit of a concern. But generally, the positive lead was enough. And certainly we had spy up 57 points. And as Tom will tell you, we're not doing quite as well as at the moment. We're at 40 points and some big news in banking circles today, which we'll talk about as well.

Ben O'Leary  

Very nice. Thank you, Henry. Tom, could you fill us in on that big news, please?

Tom Wegner  

Thank you, Ben. Yes, well, as Henry said, we are up 40 points not quite what the futures had indicated but reversing more than half of last week's fall which is good to see energy and miners leaving the market higher healthcare and utilities in negative territory. But the big news story today is ANZ buying some corpse banking for $5 billion. They're going to raise $3.5 billion at 1890 cents. They also talked up intense price competition in the mortgage business and Suncorp is up 6% on the news they're wide haven't caught up 8%. They said they expect full year earnings to be $3 billion or reach $3 billion EML payments up 4%. They confirmed they were in talks with potential suitors but added discussions have now ended nuix and excel down 8%. They said they had expectations for earnings to more than half for the full year amid legal costs and boring sales Linus LIC up 3% They posted the second best quarter for sales revenue ever and Rio Tinto at 1.1% said they would push further into battery materials just signposting some of the main events this week we have the continuation of us results season resources sector quarterly reduction numbers. We've got bhp tomorrow, RBA minutes this week tomorrow as well. Some speeches from Philip Lowe and Deputy RBA governor Bullock UK inflation and an ECB meeting on Thursday colour the calendar that.

Ben O'Leary  

Very nice thank you Tom. Layton, what have you got from Brokers?

Layton Membrey  

Thank you, Ben. Just a couple of upgrades to go through this morning. But Ansel that's a n n upgraded to outperform at Macquarie the broker has noted that near term earnings could continue to be impacted with the unwinding of COVID demand that we saw in 2020 and 2021. That downgraded earnings forecast slightly for FY 22 In FY 23. But the target price actually jumped a little bit up to $27.85, which implies about a 16% upside and Sims that's SGM was upgraded to buy at Citi FY 22 And fy 23. Earnings forecasts have been lowered by the broker to account for lower Turkish scrap prices, which have now fallen 38% Since March and city believes are now getting into oversold territory market sees value and seems with the share price having recently fallen around 35%. And the company has a strong net cash position and a strong balance sheet. So the target price has dropped slightly down to $17. But that still implies a 23% upside. Thank you, Ben.

Ben O'Leary  

Thank you Layton. Couple of fresh ideas today. Quickly, Chris, you have one?

Chris Conway  

Yeah, I'm just taking a little bit next dc stock code NXT. The reason why I'm taking a look at it because it operates a little bit more like a utility company. It is a tech company. But it reminds me of the toll road operators that spend a lot of money building these roads and then collect fees for the next 50 years. So these guys obviously build data centres, and then they rent that data storage out to companies, governments institutions and collect fees for a long period of time. And this is a mega trend that's going on at the moment. There are all of those companies, governments institutions, like I said needing more and more data storage and willing to pay a good price for it. And whilst there will be some competition, someone else of course could build the data centres. The barriers to entry seem quite high and they do have a competitive advantage. So I'm just taking a look at it. It has bounced technically it's off the lows from On June I think it was around 980 has some momentum behind it now currently trading around 1150 I like it I've got a target up towards 13 bucks and there's some brokers out there with even more aggressive targets none of the Macquarie has a target at 3090 21% above the current Mark price.

Ben O'Leary  

Great stuff. Thank you Chris and I've got a quick look at IGO stock code IGO which has been a little bit of broker interest recently but nothing major to report there. Just a little look at some interesting news Henry we've got a Henry's Take?

Henry Jennings  

Just in my taken the drilling of stock is a small cap company $250 million market cap paying plus 9% Fully Frank yield which is good. A recent trading update as well which is good is a stock called IV group IV group stock code IG l a mate of mine who I used to work with many years ago at Macquarie who was the insurance analyst and then became the head of IR at QB E is helping these guys IV group with a little bit of investor awareness so he asked me to have a look at it have had a look at it and it doesn't look too bad. Not exactly stunning growth but there are certainly potential there as it gets its act into gear. It has a digital business called lassoo which makes digital catalogues it also prints a paper catalogues and you thought the paper catalogues were dead but I have to say looking in my letterbox they're not dead they are alive and well and flourishing so these guys are one of the big daddies in the print space and although we will always tell them we're gonna have paperless offices and paper was going to be dinosaur kind of material here we are and I know that we get through lots of paper as do most people so interesting little stock, good yield and pretty good balance sheet potential buybacks, low p are good management, it has got liquidity issues and it does obviously suffer from that whole dinosaur industry kind of thought around paper printing but they're coping quite well with the supply chain issues and building up inventory to take advantage of the situation. And just as an aside, interestingly, this morning Woolworths bought a thing called shopper Media Group which is a digital company they do catalogues and digital marketing. So they bought that for 150 million, the market cap of I ve group which has been going since 1921. So 101 years is $250 million. So a little bit of perspective on that one.

Ben O'Leary  

 Very interesting thak you Henry. Lastly today Tom got a buy hold sell it in the newsletter.

Tom Wegner  

I do and it's one of our favourite retailers. JB Hi Fi code J B H results on August 15. The stock is down 17% Since the start of the year, beaten down by expectations for higher interest rates. And of course, the soaring cost of living affecting the price no guidance for the full year which is expected to highlight margin compression, higher labour costs, supply chain disruptions and higher inventory levels. But what is important to remember is that we're probably in the worst part of the economic cycle for JB Hi Fi it's trading at a big discount to its historical PE it has a history of returning shareholders and reporting strongly. It also has a history of acquiring businesses and extracting value from them. Most recently, the one was the good guys in 2016. Given the strong level of negative sentiment is already priced in and accounting for slower revenue and earnings growth. The asymmetry of risk is debatably sitting to the upside so JB Hi Fi one to look at heading into results. It is starting to look a bit nicer technically, it's also got a gross yield of almost 7% as well. So not a bad stock.

Ben O'Leary  

Very nice right up there. Thank you, Tom. Our question today in light of cam Smith winning the open at St. Andrews and a handy 2.1 million pound prize that goes along with it is what a sporting event would you like to go to that you haven't Tom?

Tom Wegner  

I don't think you would go past a World Cup final. I think that would be phenomenal. And being in the country that wins the World Cup as well would just be amazing. I remember I think was France one in 2018 and seeing the Sean's elisee with all the people on it for days looked amazing.

Ben O'Leary  

I'm going to assume you're talking about soccer. 

Tom Wegner  

Yeah, World Cup soccer. Yeah.

Ben O'Leary  

Very good. Layton?

Layton Membrey  

There's a lot of sporting events and I want to go to but the first one on my list because it's probably the most achievable would be an AFL Grand Final I think haven't been to one yet. 

Ben O'Leary  

Very nice. Chris?

Chris Conway  

I'll give you three. Game seven of an NBA Finals. A Super Bowl, but number one would be Celtic vs. Rangers, I would love to go it's see that.

Ben O'Leary  

That's interesting. Henry?

Henry Jennings  

As far as I'm concerned, my number one would go and see the Summer Olympics in Paris in 2024, which isn't that far away. And it's eminently doable. I was at the Sydney Olympics in 2000 for two weeks and had one of the best times ever was fantastic. We had tickets to every track and field event we went to see the swimming the rowing equestrian and I think it would be fantastic to go in Paris in 2024 in July so that is on my bucket list and I think it's quite doable.

Ben O'Leary  

Sounds sounds pretty good. You might say Tom there has been an Olympics fan as well. My one, I'll be like Chris my top two would be the Super Bowl and the masters at Augusta very cool experience and have the $1.50 pimento cheese sandwich because the price is still in 1960 So pretty cool. Thanks guys.

Marcus Padley  

I was playing golf at the weekend with one of my friends who has been listening to our morning meeting podcasts for free for the past year and he was looking a bit sad and the reason he was looking a bit sad is because from the first of August the Marcus today morning meeting podcast is going dark. We are putting it behind the paywall. It'll be for members only anyone who wants to continue listening to the Marcus day morning meeting podcast should do themselves a favour and do us a favour and subscribe and just a tickle you along if you send an email to info at Marcus today.com.au and be very nice to will Chi Chi and charisma. They may just give you a bit of a promo code give it a go.