ASX 200 (XJO) set to open lower – CBA & CIMIC share prices in focus

The S&P/ASX 200 (INDEXASX: XJO) is expected to take a backwards step when the market opens this morning. Here’s what ASX investors need to know.

ASX 200 recap – BNPL shares hit record highs, results in for CBA

The ASX 200 finished 0.5% higher, with every sector but consumer discretionary adding to returns. IT was once again the standout with both Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) hitting all-time highs as BNPL valuations took another leap forward. Whilst reported growth rates are exceptional, it is clear that competition is increasing and likely to impact on profitability going forward. Challenger Ltd (ASX: CGF) recouped a portion of Tuesday’s losses, finishing 4.7% higher.

Commonwealth Bank of Australia (ASX: CBA) led the earnings reports yesterday. With all eyes on the dividend, management delivered $1.50 per share. That represents a 53% increase on the small 2020 dividend, but 25% down on the previous year. Cash profit fell 10.8% to $3.88 billion with business lending beginning to accelerate, growing at three times the rest of the banking system. The company reported a 0.03% fall in its net interest or profit margin, to 2.01%, as low interest rates impact on profitability.

CommSec on the other hand was a highlight, benefitting from the Robinhood story, reporting 230,000 new accounts opened in 2020 and a doubling of trading volume to $110 billion. Doomsday loan default scenarios have been avoided, with just 25,000 home loans deferred as at 31 December down from 145,000 in June. CEO Matt Comyn flagged his intention to continue flexing CBA’s market share muscle, now 34%, in order to expand its services and extract further efficiencies. The CBA share price fell 1.5% despite the improved dividend.

Featured video: How to get an investing edge

More worries for CIMIC, Praemium’s record-breaking year continues

Construction and engineering firm CIMIC Group Ltd (ASX: CIM), previously Leighton Holdings, lost close to a third of its market cap yesterday, dropping 17.1% after closing out a difficult half. Management reported a 22.4% fall in revenue to $11.41 billion, with a lack of new contracts and stalling of a number of projects hurting the bottom line.

CIMIC’s 2019 figures were impacted by significant write-downs, but 2020 hasn’t been much better with underlying profit falling 25% to $600.5 million. Construction profits – the lowest-margin business – were down 34.6% to $307.6 million, Services profit fell 31.7% to $104.6 million and corporate costs netted a loss of $202.3 million. On the positive side, the company declared a 60 cent dividend, the first since October 2019.

Sticking with construction, Lendlease Group (ASX: LLC) CEO Steve McCann resigned, with head of Asia Tony Lombardo set to take over the position ahead of a very difficult period for the apartment and commercial builder. Both CIMIC and Lendlease appear to be facing major headwinds and uncertainty, particularly around office and apartment construction.

Elsewhere, Praemium Ltd’s (ASX: PPS) record-breaking year continued, with funds under administration 69% higher to $34.3 billion, now exceeding Hub24 Ltd (ASX: HUB) which administers around $31 billion. Scale has delivered profitability, albeit a small one, with net profit doubling to $3.0 million in the first half. Despite the result, Praemium shares edged lower yesterday to finish the day down 0.6%.

US markets mixed, Twitter stock rallies

US markets were mixed on Wednesday, with the Nasdaq breaking its winning streak, falling 0.3%, but the Dow Jones heading to another record high, adding 0.2% after a number of major industrial companies reported earnings.

Concerns that inflation was becoming an issue will abate for another few months, with US inflation just 0.3% in January suggesting the spending boom of 2020 has slowed.

Coca-Cola (NYSE: KO) outperformed expectations, growing earnings per share 6% despite a 5% fall in quarterly revenue to US$8.61 billion. Profit also fell 28% for the quarter to $US1.46 billion as slower sales impacted margins, with cost-cutting not sufficient to offset the falls.

Social media platform Twitter (NASDAQ: TWTR) rallied 13.2% despite struggling to benefit from the best digital ad market in recent memory. Sales did however rise 28% to US$1.29 billion ahead of expectations, contributing to net profit of US$222 million for the quarter.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just enter your email address below and we'll send you the report right away.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Disclosure: At the time of publishing, Drew owns shares in Zip Co.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Keep reading:

General Financial Advice warning
The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

© Rask Australia 2020

Join 20,000+ smart investors

Join the Rask Australia mailing and we’ll send you free investment reports, podcasts, expert insights, investing courses, ASX news and lots, lots more. All free. 

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian-owned.

feedback-icon

What can we do better?

Howdy, ASX investor.

I really care about your experience today.

Please, let me know if you have any suggestions we can use to improve our site and help others invest in ETFs. 

Cheers! 

Owen Rask