ASX 200 rises; Ansell, Judo, Reliance soar after results; Dexus, Yancoal tank; No rush on RBA rate cut

Inflation will be 'slow to decline': RBA minutes. Dexus sinks on FY25 distribution warning. Ansell's result better than expected. Judo tops expectations. Reliance results 'operationally strong'. Yancoal slumps on weak first-half. Baby Bunting, Monadelphous gain.

Local equity moves are being driven by economic commentary, more earnings updates. Picture: Gaye Gerard

Welcome to the Trading Day blog for Tuesday, August 20. The ASX 200 index closed 0.2 per cent higher at 7997.70 points. US indexes continued their winning streak overnight.

The Aussie dollar is trading around US67.30c at 5pm AEST after the release of the RBA's August meeting minutes.

Updates

4:57 pm August 20, 2024

ASX 200 gains eight days in a row

David Rogers

Australia's share market gained for an eighth-consecutive session amid renewed optimism about the outlook for the US economy and interest rates.

Global PMI data on Thursday and Friday's speech by Fed chair Powell's at the Jackson Hole central banker's symposium loom as the next tests of market sentiment.

The S&P/ASX 200 index closed up 0.2 per cent at 7997.7 points after hitting a three-week high of 8082.2 in early trade.

After plunging on US recession fear and yen carry trade unwinding at the start of August, the ASX has bounced 4.9 per cent versus 9.6 per cent for the S&P 500.

Gains narrowed intraday but the tech, utilities, materials, health care, financials and energy sectors closed up, with WiseTech up 2.5 per cent, Origin Energy up 1.7 per cent, BHP up 1.3 per cent, Ansell up 8.9 per cent and Suncorp up 3.1 per cent.

Banks were mixed with Westpac and NAB slipping and CBA and ANZ rising.

ARB, Ansell, Baby Bunting, Hub24 ,KMD, Ingenia, Reliance and Judo Capital rise at least 5 per cent after reporting while Dexus fell 8.9 per cent.

4:39 pm August 20, 2024

Synlait proposes huge equity raise

Joseph Carbone

Struggling dairy processor Synlait has agreed on a major recapitalisation plan, under which Chinese manufacturer Bright Dairy will become a majority shareholder, owning 65.3 per cent.

Under the proposal, Synlait will raise $NZ217.8m ($198m) in equity through shares issued to part owners Bright Dairy — which rescued Synlait with a $118m loan in July — and a2 Milk.

Bright Dairy will tip in $NZ185m at NZ60c per share, lifting its stake from its current 39.01 per cent.

a2 Milk will purchase $NZ32.8m in new shares to at NZ43c each, leaving its holding steady at 19.83 per cent.

The equity raise is set at a significant premium to Synlait’s recent trading prices.

Its Auckland-listed shares closed at NZ39.5c ahead of the announcement, which drove the ASX listed shares up 15 per cent to close at 42c.

Synlait and a2 Milk last week settled a matter of disputes, including exclusivity arrangements between the two processors.

4:02 pm August 20, 2024

AEC names new CEO

Colin Packham

The Australian Energy Council — the industry body representing the country's electricity and gas industry — names Louisa Kinnear as its new chief executive.

Ms Kinnear replaces Sarah McNamara who left in April to join Alinta Energy.

AEC chair Damien Nicks said the board was delighted to have someone of Ms Kinnear’s calibre.

"Louisa brings close to 20 years' experience working within the utility sector, including 12 years in energy. She has a deep understanding of the energy industry, having worked across multiple states and energy systems and leading the Northern Territory’s largest energy retailer.

"The board has no doubt that Louisa’s broad experience will benefit our members and will reinforce the AEC’s position as a strong advocate for the energy industry and its customers as the transition continues."

Ms Kinnear joins after four years as chief executive officer of Jacana Energy

3:48 pm August 20, 2024 Highlight

Woodside and Santos hit with downgrades

Perry Williams

Bernstein has downgraded Woodside Energy and Santos with the broker citing a wave of new LNG supply and a drop in Asian gas prices weighing on the two stocks.

The twin Australian producers have been downgraded to market perform from outperform.

While both have benefited from higher gas prices in the past three years, the market could be entering a period of lower gas prices while spending remains high which will lower near-term returns and earnings.

Compared with 2022-24, which only saw 30 million tonnes of LNG liquefaction capacity being added, an unprecedented 175 million tonnes of capacity should come to market between 2025-27, representing 40 per cent of current capacity, Bernstein estimates.

"Asia spot LNG will fall from low-teens currently towards single digits and possibly marginal cash cost of $5-6m British thermal units if the supply wave cannot be fully absorbed," the broker said.

"Both companies are expected to maintain higher levels of capex for growth over 2025/26 which would lead to lower free cash flow in the next two years."

Bernstein's 2025 earnings per share estimates for Woodside and Santos are 3 per cent and 12 per cent below consensus. Woodside's price target cut to $28 from $37, while Santos's price target takes a haircut to $7.70 from $8.20.

Santos reports results on August 21 with Woodside next week on August 27.

2:26 pm August 20, 2024

Banks cut deposit rates

Anthony Keane

Banks have started cutting their term deposit rates, signalling Reserve Bank of Australia rate cuts are on the way and prompting a fresh warning for savers to check their accounts.

See how the banks moved.

2:15 pm August 20, 2024 Highlight

Webjet split has big upside: analysts

Bridget Carter

Analysts have started crunching the numbers on the possible value of the $3.3bn online travel company Webjet following its demerger and they believe that the split could add up to $2bn to its overall value.

Webjet’s demerger is set to be approved at an extraordinary general meeting on September 17 before shares of the two entities are due to trade on September 23.

Analyst research published by Ord Minnett suggests that the business-to-business unit WebBeds, to be called Webjet Travel, would likely trade at a range of 15 to 25 times its earnings before interest, tax, depreciation and amortisation on a valuation basis including debt, otherwise known as its enterprise value.

At 2.15pm AEST, shares in Webjet are down 1 per cent to $8.40.

Full report in DataRoom.

1:08 pm August 20, 2024

Retail Food's push for new name after turnaround

Valerina Changarathil

Despite a challenging economy and "pessimism within the food and beverage sector", Retail Food Group swung to a profit as its brands remained resilient in the 12 months ended June 28.

The group delivered a profit of $5.8m, a turnaround from its $8.9m loss in FY23.

Australia’s largest multi-brand retail food franchise manager and owner of iconic brands including Gloria Jean’s, Donut King, Brumby’s Bakery, Crust Gourmet Pizza and Beefy’s Pie, reported a 10 per cent jump in revenue and other income to $131.9m.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) improved 15 per cent to $29.2m.
RFG chief executive Matt Marshall said the group had delivered on the first year of its growth strategy in a "tough macro environment". "We will continue to focus on the quality of execution in our core brands and unlocking profitable growth opportunities in the year ahead."

It hopes to do this under a new name, Savora Brands. Shareholder approval for the change will be sought at the annual general meeting later this year. FY25 has started well with network sales of $59.8m in the first six weeks, up 2.3 per cent on the same period of FY24. Shares in the small-cap stock are down to 7.2c.

12:56 pm August 20, 2024

ASX 200 remains up for eight days straight

David Rogers

Australia's stock market remained in positive territory and on track for an eighth-consecutive daily rise in line with the US market.

The S&P/ASX 200 is up 0.2 per cent at 7998 points in quiet trade after hitting an almost three-week high of 8025.2.

Gains have narrowed intraday but the utilities, materials, tech, health care and financials sectors remain positive, with Origin Energy up 1.4 per cent, BHP up 0.7 per cent, WiseTech up 1.3 per cent, CSL up 0.6 per cent and CBA up 0.6 per cent.

ARB, Ansell, Baby Bunting, Deterra, Hub24 , KMD, Ingenia, Reliance and Judo Capital rise at least 5 per cent after reporting while Dexus falls 6.6 per cent.

12:12 pm August 20, 2024

South32 project 'destroying capital': Canaccord

Cameron England

Canaccord Genuity says South32 shareholders should "expect the pain to continue" after initiating coverage of the stock with a deeply discounted price target.

The broker said it can’t see where earnings growth will come from following the sale of the company’s Illawarra metallurgical coal assets, with the exception of the restart of the company’s Australian manganese operations.

Canaccord says the company’s Taylor zinc project in the US, acquired for $US2.16bn in February, is a "cash drain" on the company.

"Although Taylor is low on the cost curve, we believe it is a capital destroying investment,’" Canaccord said, adding it had calculated a net present value for the operation of just $US725m.

"When assessing the company's performance in allocating capital, we estimate that slightly under US$6bn has been destroyed between the Taylor/Hermosa project and the Sierra Gorda acquisitions.

"We estimate that the Illawarra Metallurgical Coal disposal received a price slightly ahead of its value, but we expect this additional cash to be allocated to Hermosa which will continue the trend of value destruction, in our view.’"

Canaccord has a price target of $2.25 on the stock, compared with the current South32 share price of $3.04.

12:10 pm August 20, 2024

Dishonest BBY exec to undertake community service

Valerina Changarathil

A former strategy manager at collapsed stockbroker BBY will serve an 'intensive' correction order including over 100 hours of community services for her dishonest conduct.

Yat Nam (April) Yuen recieved an aggregate sentence of 2 years and 6 months imprisonment for her guilty pleas in February this year in relation to two offences – dating back to a decade ago – that involved breaches of the firm's obligations to holding client money on trust.

In June 2014, Ms Yuen instructed the transfer of $6.8m out of BBY’s futures client segregated account to fund a margin payment owed by BBY to ASX Clear. Again in March 2015, she caused the transfer of $1.6m out of BBY’s Saxo Buffer account and $350,000 out of the futures client segregated account to fund a corporate payment owed by BBY. The funds were not repaid and contributed to the client money shortfalls on BBY's liquidation. BBY was placed into voluntary administration in May 2015 and in liquidation in June that year.

Ms Yuen is also now automatically disqualified from managing corporations for five years and will be unable to be involved in the business of a market participant in connection with securities and futures markets.

In June last year, former BBY head of operations Fiona Bilton also received a 20-month imprisonment sentence, which was suspended for three years on the first charge, and also got a community correction order for three and a half years, including 380 hours of unpaid community work. She pleaded guilty in October 2022 to three charges of dishonestly obtaining a financial advantage.

In October last year, former BBY CEO Arunesh Narain Maharaj was charged with aiding and abetting fraud. His matter is listed for next year as financial regulator ASIC's investigation into BBY continues.