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ASX 200 (XJO) to fall – my take on the SWM, ANN & QUB reports

The S&P/ASX 200 (ASX: XJO) is set to drop at the open this morning according to the Sydney Futures Exchange. Here’s what you need to know.

ASX share market recap

The ASX 200 finished 0.5% higher on Tuesday behind a strong rally in financials, up 2.5%, following positive comments on a potential COVID-19 treatment.

National Australia Bank Ltd (ASX: NAB) led the sustained rally, adding 4.2%, whilst Qantas Airways Limited (ASX: QAN) jumped 3.0% after announcing another 2,500 job cuts.

The administrators of Virgin Australia Holdings Ltd (ASX: VAH) confirmed that unsecured bondholders including many direct investors would stand to receive between 8 and 13 cents in the dollar return; shareholders, on the other hand, receive nothing.

Despite the continuing rally in the ASX 200, it remains 17% below its all-time and well behind the likes of the US. It was another busy day of reporting season on Tuesday, with our updates as follows:

Qube Holdings Ltd (ASX: QUB)

Qube shares fell 2.4% yesterday after the logistics company reported a 9% increase in revenue. Profits fell 15.4% to $104 million. Weakness was felt across the business as global trade was forced to slow, but particularly in container volumes and automotive shipments. Despite the disruptions, management was able to deliver earnings growth over the prior period. The dividend was cut from 2.9 cents to 2.3 cents per share which was in line with expectations.

Comment: Tough conditions, but market dominance supports the dividend and the growing demand for supply chain solutions.

Ansell Limited (ASX: ANN)

Ansell was perfectly positioned for the onset of COVID-19, delivering strong growth across the board. Revenue increased 7.7% to US$1.6 billion, pushing earnings 37.9% higher to US$219 million and profit along with it, adding 42.1% to US$158.7 million. The result was a substantially greater than expected dividend of 50 cents per share, 7% higher.

Comment: Strong (but expected) result, dividend a highlight.

Hub24 Ltd (ASX: HUB)

Hub24 shares fell 1.5% despite delivering record annual inflows of $4.9 billion. Revenue increased 37% to $74.3 million as group assets under management (AUM) reached $17.2 billion, a 34% uptick. The result was a 60% increase in profit to $24.7 million and importantly, margin expansion from 33.3% to 38.6% due to the benefits of scale. Management is now targeting total funds under management of $28 – $32 billion.

Comment: Solid result, albeit with AUM growth behind expectations.

Seven West Media Ltd (ASX: SWM)

Seven West Media shares tumbled more than 16% yesterday after the company reported a 14% fall in revenue to $1.2 billion and a $200 million loss. The result was due to an already weakening advertising market, with a 40% fall in the June quarter alone. On the positive side, management has used the pandemic to renegotiate the company’s expensive sports rights, saving $87 million on the AFL alone. The digital division was a highlight, reporting a 40% increase in revenue and 53% in consumption growth.

Comment: Reflects a sector in decline, future hangs on the ability to go digital.

Going global

Both the S&P 500 and Nasdaq reached new all-time highs for the second straight day, adding 0.4% and 0.8% respectively.

It was the ‘socially distanced’ companies like Gap Inc. (NYSE:GPS) and Starbucks Corp (NYSE:SBUX) leading the market higher as vaccine hopes grew and ahead of a speech by the Federal Reserve that is expected to make no changes to current accommodative monetary policy.

Facebook Inc. (NASDAQ: FB) announced a series of platform changes that pivot into e-commerce, it finished 3.5% higher.

As flagged in this column previously, Alibaba’s (NYSE: BABA) financial services group, Ant Financial, filed for what could be one of the world’s biggest IPO in both Hong Kong and Shanghai. The company has over 1 billion users, processed $17 trillion in transactions and is expected to attract a $225 billion valuation.

Back home on the ASX, expect reports from the likes of Jumbo Interactive Ltd (ASX: JIN), Lovisa Holdings Ltd(ASX: LOV) and Australian Ethical Investment Limited (ASX: AEF).

This article was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. 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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