ASX 200 (XJO) morning report – CBA, TCL & SEK shares in focus

The S&P/ASX 200 (ASX: XJO) is set to rise at the open on Thursday, following a strong lead from global markets overnight. Here’s what’s making headlines.

ASX 200 recap

The ASX 200 jumped out of the blocks on Wednesday after the Commonwealth Bank of Australia Ltd (ASX: CBA) released its full-year results (more below). CBA was up over 2% at the open but finished down 0.5% for the day.

Ultimately, the market finished 0.1% lower. Analysts clearly saw something positive in the result, sending National Australia Bank Ltd (ASX: NAB) up 2.2%.

Gold bullion drew the morning headlines, with reports the precious metal had fallen the most in seven years; on closer inspection, the 5.7% fall looks to be some profit-taking. It was an important day for the ASX, with a number of major companies reporting, starting with CBA.

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CBA cuts dividend by 60% as profit falls 11%

The bank’s profit fell 11.3% to $7.3 billion, pushed lower by $1.2 billion in impairments for unpaid loans. CBA’s final dividend was reduced by 60% on 2019, but paid at the maximum 49.95% of profit threshold announced by APRA; an annual income of just 4%. $15 billion in new deposits means the bank’s loans are 74% funded from customer deposits, the lowest cost source of capital.

Summary: Solid but not great result.

SEEK delivers a weak result

SEEK Limited (ASX: SEK) delivered a weak, albeit not unexpected, result with profit falling 51% to $90.3 million. Management was forced to mark venture capital investment in Brazil and Asia down by $198 million due to accounting principles.

The Chinese Zhaopin and Online Education businesses, revenue up 12% and 7% for the financial year, were the highlights. SEEK’s dividend was cancelled to avoid a capital raising and maintain all-important growth investment.

Summary: Difficult decisions but a long-term opportunity.

Transurban swings to a loss

Transurban Group (ASX: TCL) posted a net loss of $111 million as average daily passenger numbers fell 8.6% due to the stay-at-home measures. Victoria’s CityLink has been hardest hit, falling 48% in the financial year and 60% following the Stage 4 restrictions. The final distribution was cut by close to 50% and remains aligned with free cash flow to avoid a repeat of the GFC cash crunch.

Summary: More pain to come, as debt piles up.

Going global

The S&P 500 fell just short of its mid-February record close, rallying another 1.4% on the back of technology and energy stocks continuing their recent bounce. Apple Inc. (NASDAQ: AAPL) led the way, adding 3.3% but it was not alone with all but one of the market’s eleven sectors heading higher.

The Euro Stoxx also continued its four-day rally, adding 0.9%, ensuring the ASX will open stronger this morning. Gold bullion also recovered ground lost from yesterday falls.

Chinese tech leader Tencent (HKG: 0700) released its quarterly report, boosting revenue by 29%, the fastest growth in two years. The company’s online gaming division, which owns Fortnite creator Epic Games, grew even quicker at 40%, due to the global lockdown measures. Management also sought to reduce concerns about the threat to its WeChat platform suggesting any bands by President Trump would only relate to US operations.

Back home on the ASX, today is set to be a busy day with Telstra Corporation Ltd (ASX: TLS), AMP Limited (ASX: AMP) and Treasury Wine Estates (ASX: TWE) some of the many companies expected to release their reports.

This article was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. He may maintain positions in the securities mentioned. To get in contact with Drew, click here to visit the Wattle Partners website.

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Drew Meredith is the author of this post. He may maintain positions in the securities mentioned.

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