ASX falls 0.5pc; Woodside buys US LNG player; South32 to book $500m-plus impairment; NZ discount retailer The Warehouse could be on the block

The sharemarket has closed in the red for a third day, hurt by US losses and profit fears. Woodside snaps up Tellurian. NZ retail chain The Warehouse buyout potentially on horizon. Iress jumps on updated guidance. South32 smashed on $500m-plus impairment.

The local sharemarket came back late last week after a extended winning run. Picture: Jeremy Piper

Welcome to the Trading Day blog for Monday, July 22. The ASX 200 closed 0.5 per cent lower at 7,931.7 points on Monday.

The Aussie dollar has slipped, trading around US66.67c.

Updates

4:56 pm July 22, 2024

ASX 200 trims intraday fall as US risk eases

David Rogers

Australia's shares fell for a third consecutive day after US losses, downgrades on ANZ Bank and REITs including Goodman, a sharp fall in South32 on a writedown of its Worsley Alumina asset, and Woodside's purchase of Tellurian in the US.

The S&P/ASX 200 ended down 0.5 per cent at 7931.7 with 9 of 11 sectors down.

But the index bounced off a six-day low of 7902.4 as the risk appetite in global markets improved after Joe Biden stepped down and nominated Kamala Harris.

S&P 500 futures rose 0.3 per cent, the US dollar index fell slightly and the US bond yield curve "bull flattened" a touch in response to the news as it may lessen the chance of a so-called "red-wave" allowing major policy changes by Trump.

The energy, materials, property and communications sectors underperform.

South32 dives 13 per cent, Goodman falls 2 per cent, ANZ falls 0.7 per cent (but ends well above the day's low), and Woodside falls 2.1 per cent.

Iress leaps 9.3 per cent on stronger than expected earnings guidance.

2:14 pm July 22, 2024

AI PC's reinforce earnings upside for JB Hi-Fi: Citi

David Rogers

Citi's Adrian Lemme reiterates his Buy rating and $74 target on JB Hi-Fi as he says AI PCs are set to "reinforce FY25 earnings upside."

"The PC industry is set to see a rebound over the next two years as higher unit growth coincides with higher ASPs (application service providers) underpinned by the release of AI PCs," Mr Lemme says.

"JB Hi-Fi is the Australian computer market leader with about 15-20 per cent of its sales and therefore stands to be the biggest beneficiary.

He says consensus estimates do not appear to be factoring in much, if any, AI-driven benefits, with FY25 earnings consensus EBIT expected to be flat on FY24 versus his forecast of 7 per cent growth."

JBH last up 1 per cent at $65.78.

12:49 pm July 22, 2024

Coles closed gap to Woolworths: UBS survey

David Rogers

Coles closed the gap to Woolworths and had a similar April-June trading period according to the 36th Supermarket Supplier survey conducted by UBS.

Coles now leads in 15 of 26 sub-categories versus 14 in January.

Other findings were Aldi is best placed to win share and IGA most likely to lose share in the next six months, the growth outlook for the next 12 months slowed to 1.6 per cent from 1.8 per cent in January, and inflation expectations for the next 12 months lifted slightly to 2.3 per cent versus 1.7 per cent in January.

"The Australian Supermarkets revenue outlook is positive, albeit not as buoyant as in prior years, but gross margins are to expand at a lesser rate and CODB pressures which have been a headwind are to moderate in FY25," says UBS analyst Shuan Cousins.

"Company specific performance is becoming an increasing driver and favours COL and MTS, with WOW less well placed, having led the market over recent years.

"Regulatory pressures have weighed on P/E multiples since Dec-23, yet this uncertainty is expected to moderate as existing recommendations (including a mandatory code) likely to be implemented are as expected; and investigations are coming to an en end, with the last being the ACCC, although this is the most important."

12:42 pm July 22, 2024

Mighty Craft enters administration

Cameron England

Listed craft brewer and spirits manufacturer Mighty Craft has been placed in administration.

The company has been selling assets in a bid to pay down debt, however, on Monday said it had appointed Ankura as administrators of the company.

"The company has been undergoing a divestment and restructuring program to reduce the company’s debt," Mighty Craft told the ASX. "Fundamental to this program was a proposed merger between Better Beer Holdings and Mighty Craft, an arrangement which required the support of Mighty Craft’s senior lenders and the shareholders of Better Beer.

"A capital raise to support this process was also contemplated … it now appears unlikely that an agreement will be reached between Mighty Craft’s senior lenders, Better Beer and Mighty Craft that is acceptable to all parties.

"The directors therefore formed the opinion that the company should be placed into voluntary administration to evaluate options for the company to continue as a going concern, or if this is not possible, that an administration will result in a better return for the creditors and members of the company than would otherwise result from an immediate winding up of the company."

Mighty Craft shares last traded at 0.5c per share, valuing the company at $1.8m.

12:23 pm July 22, 2024 Highlight

ASX 200 down 0.8pc on US falls

David Rogers

Australia's share market continues to slip after Friday's falls on Wall Street.

An early "risk-on" move in global markets after Joe Biden dropped out of the president election mostly evaporated, giving minimal support for Australian shares.

The S&P/ASX 200 index is down 0.8 per cent at 7908.3 after dipping to a six-day low of 7902.4. Chart support around 7900 should be strong but volatility in global markets is increasing amid heightened focus on US election risks.

All sectors except consumer staples are down with energy, materials and property underperforming.

Woodside falls 2.8 per cent as it buys Tellurian for $US900m cash and oil retreats.

South32 dives 13 per cent on a massive writedown of Worsley Alumina.

Fortescue falls 1.5 per cent as iron ore prices hit four-week lows.

ANZ falls 1.4 per cent as JP Morgan downgrades.

Goodman Group dives 2.4 per cent as Macquarie downgrades.

Iress jumps 11 per cent on strong earnings guidance.

Endeavor gains 1.6 per cent and Treasury Wine adds 1 per cent.

11:11 am July 22, 2024

Insignia up 5.5pc on cost-driven upgrade

David Rogers

Insignia shares jump over 5 per cent on a cost-driven profit upgrade although Citi keeps its Sell rating, noting there were "plenty of 'one-off costs'."

"Despite FY24 being the first result for new CEO, Scott Hartley, a time when new company management are traditionally conservative, perhaps with one eye on the environment Insignia now guides to FY24 UNPAT well above our current forecasts and consensus," says Citi analyst Nigel Pittaway.

He says revised FY24 NPAT guidance of $212m-$218m is a 9 per cent beat of consensus, but $135m after tax is added to the remediation provision while there is also a further $11m associated with an enforceable undertaking with APRA.

"Surprisingly, flows were positive for the quarter pre-pension payments despite apparent advisor dissatisfaction," Mr Pittaway says.

IFL last up 4.4 per cent at $2.49.

10:42 am July 22, 2024

ASX 200 down 0.8pc despite US futures rise

David Rogers

Australia's share market falls for a third consecutive day on US market weakness.

The S&P/ASX 200 falls 0.8 per cent to a six-day low of 7906.6 in early trading.

The fall is in line with Friday's overnight futures losses.

It ignores solid gains in US stock index futures early Monday amid an improved risk appetite in global markets after President Biden stepped aside and nominated Kamala Harris, removing the uncertainty about Biden that peaked last week.

Energy is the weakest sector after Brent crude oil fell 2.9 per cent on Friday.

Woodside falls 1.9 per cent after buying Tellurian and Driftwood LNG for $900m cash, while Santos is down 1.1 per cent.

Financials and materials are the biggest drags.

ANZ leads a 0.9-1.4 per cent fall in the major banks.

South32 dives 10pc after a writedown on Worsley Alumina.

10:31 am July 22, 2024

South32 dives 12pc to 3-month low

David Rogers

South32 shares dives 12 per cent to a three-month low of $3.01 after its production report flagged a $554m impairment for Worsley Alumina due to the WA EPA’s recommended conditions and associated challenging operating conditions.

Worsley Alumina plans to lodge an appeal in relation to the Western Australian Environment Production Authority assessment report, which creates "significant operating challenges" and impacts its long-term viability.

Citi says the production report was "generally lower than we expected" and market focus is on the Worsley issues given its position as a flagship asset.

On the charts, the December low at $3.00 and March low at $2.75 are important.

S32 last down 10 per cent at $3.08.

10:16 am July 22, 2024

Insignia Financial reveals poor advice provisions blowout

David Ross

Insignia Financial has notched up a $188m blowout in provisions for poor financial advice, as it paid a $10.7m fine to the prudential regulator, as the listed advice company told investors it was seeing a return to positive net inflows for its wealth platforms.

In a fourth quarter update the ASX-listed wealth manager told investors it was focusing on profitable growth, noting it expected its underlying full year results, set to be published on August 22, would show "upgraded guidance supported by higher average FUMA and benefits of cost optimisation program"

Chief executive Scott Hartley said the company had also separated its Rhumbus Advisory business, retaining a 37 per cent equity stake. However, he warned Insignia Financial had added $188m to existing provisions to address a blowout in remediation costs for legacy quality of advice and product compliance issues.

“We acknowledge the impact these historic remediation programs have had on shareholders; however, it is important that clients are fully remediated,” he said. “Importantly, we expect this is our final provision increase related to the legacy advice remediation program which is now substantially complete, and that funding the advice and product remediation increases announced today will not require a capital raise from shareholders.”

Insignia said it expected to reveal to investors an upgraded 2024 net revenue margin, noting margin guidance provided in February was on track to achieve the upper end of the $60-70m range, plus a further $20-25m reduction in net operating costs compared to last year. The company said underlying profits after tax were expected to be in the range of $212m to $218m.

10:15 am July 22, 2024 Highlight

Iress jumps 6pc on earnings guidance

David Rogers

Iress shares jump 6 per cent to an 11-month high of $9.55 on earnings guidance.

Guidance for 1H Adjusted EBITDA to rise 50pc on-year to $65-$67m was about 9-12 per cent above consensus according to Wilsons.

The chart shows a turnaround is well underway.

Last week's break above the March peak at $9.06 puts the share price in a significant uptrend, with $9.00 potentially now offering support for a test of $11.00.

IRE last up 3.2 per cent at $9.30.