ASX 200 (XJO) Tuesday – my thoughts on the JBH, KGN & LLC reports

The S&P/ASX 200 (ASX: XJO) is set to rise when the market opens on Tuesday according to the Sydney Futures Exchange. Here’s what’s in the news.

ASX 200 recap

The ASX 200 started the week on a negative footing, falling 0.8% as investors gained a better understanding of the health of corporate Australia.

The financial sector fell 1.7% after Bendigo and Adelaide Bank Ltd (ASX: BEN) deferred its dividend decision and reported an increase in bad debts. It was enough to send National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) down over 2.5%. The latter is due to report its dividend decision today and in my view, it’s not looking good.

Tech darling Altium Limited (ASX: ALU) finished 1.3% higher after posting a 10% increase in revenue, whilst my views on the other key reports are as follows:

Lendlease posts profit hit

The year from hell for Lendlease Group (ASX: LLC) was on show in its earnings result, posting an 88% fall in net profit to $96 million and a statutory or accounting loss of $310 million; shares were up 1.4%. The sale of the engineering division has been costly, $368 million this year, but the company reported a 48% increase in work in hand, to $113 billion, supporting a 33 cent per share dividend. It’s yet to be seen whether recent pricing and deliver issues pervade the broader business, nor the valuation impact on Lendlease’s diverse residential property portfolio.

Summary: No surprises but concerns abound on property valuations and settlement completions.  

JB Hi-Fi continues its resilience

JB Hi-Fi Limited (ASX: JBH) shares jumped nearly 5% yesterday after management delivered a slight beat on expectations, growing profit by 33% to $332.7 million, benefitting from the initial work-from-home transition. Sales growth of 11.6% to $7.9 billion was supported by 48% growth in its online platform, but this still represents just 7.5% of total sales, suggesting further upside is possible. Such was the strength that the dividend was increased by 33% to $1.89 per share, even as management refused to offer guidance for FY21.

Summary: Great result from a resilient company, but look out for foot traffic in the lead up to Christmas.

Is Kogan taking on too much?

If it wasn’t already obvious from recent all-time highs, Kogan.com Ltd (ASX: KGN) delivered a bumper year; sales were up 39% to $768.9 million and profit 56% to $26.8 million. The Kogan share price finished 6.1% lower despite boosting the dividend by 60% as management refused to offer guidance. Kogan now has 2.183 million active customers and offers a mixture of Kogan Exclusive Brands, third party and marketplace style drop shipping options.

Summary: Incredible result, but wary of over-diversification with recent expansion into superannuation and insurance.

S&P 500 still short of a record high, JD.com reports

The Australian market should open higher after the Nasdaq finished 1.0% higher and the S&P 500 0.3%, once again touching its all-time high but ultimately finishing just shy.

Tesla Inc. (NASDAQ: TSLA) was the highlight, adding 11.2% amid signs of heightened electric vehicle demand in China. The market was supported by another $101 billion in funding to Chinese commercial banks to offset a liquidity squeeze. The Chinese Amazon JD.com (HJKG:9618) reported sales growth of 34% in the June quarter in a boost for China-facing companies.

Today sees BHP Group Ltd (ASX: BHP), Cochlear Limited (ASX: COH) and Coles Group Ltd (ASX: COL) release their results, amongst others.

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

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