Morning Bell 21 October

Jessica Amir
October 21, 2020

The ASX futures are suggesting the market will lift 0.2%  – with the focus on Daniel Andrews opening Victoria’s boarders. This comes after seven of Australia’s largest companies, including BHP, Wesfarmers, CBA and CSL called on the government to open the boarders, saying ‘the current situation is not sustainable’.

Hopes are high for a new U.S. fiscal rescue package to be reached, with  House of Representatives Speaker Nancy Pelosi just hours away from handing a deal to the Trump Administration, to hopefully be passed before the election. The benchmark S&P500 ended 0.5% higher, the Dow lifted 0.4% and the Nasdaq rose 0.3%. As for commodities: Oil gained 1.7% to US$41.51 and Gold maintained its foothold around US$1,909.

What to watch today:

  1. More quarterly results are out today, including for: Lynas Corporation (ASX:LYC), Megaport (ASX:MP1), Sandfire Resources (ASX:SFR), Syrah Resources (ASX:SYR), Atlas Arteria Group (ASX:ALX), and Coronado Global Resources (ASX:CRN).
  2. AGMs today: AGL Energy (ASX:AGL), MyState (ASX:MYS), Orora (ASX:ORA), Service Stream (ASX:SSM) and Temple & Webster (ASX:TPW).
  3. Ex-dividends: Acrow Formwork & Construction Service (ASX:ACF), Australia & International Holdings Limited (ASX:AID) and Sandon Capital Investments (ASX:SNC).
  4. Preliminary retail data is out today. Not likely to move the needle though.

Trading ideas:

  • Bell Potter upgraded costume jewellery business Lovisa (ASX:LOV) as a Buy, increasing its price target to $10.00 , implying 15% upside. LOV held its AGM yesterday, noting same store sales are almost back in the black, while Metro Melbourne stores are set to open on 1 November.
  • Zip (ASX:Z1P) was reiterated as a UBS Sell, with a $5.50 price target, after Zip launched ‘Tap and Zip’ allowing people to shop anywhere that accepts Zip.
  • Bell Potter downgraded Pacific Smiles (ASX:PSQ) from a Buy to a Hold, but increased its target to $2.05. However Morgan Stanley maintained Pacific Smiles as a Buy with a $2.40 target as the group is expecting fee growth of 20%.
  • Uniti Group (ASX:UWL), Structural Monitoring Systems (ASX:SMN) and West African Resources (ASX:WAF) are all showing bullish charting signals – according to Trading Central.

 

Read Transcript

Good morning, thanks for your company this Wednesday the 21st of October, I’m Jessica Amir, a market analyst with Bell Direct.

Well hopes are high for a new U.S. fiscal stimulus package to be reached with *House of Representatives* speaker Nancy Pelosi just hours away from handing a deal to the Trump administration to hopefully be passed before the election on Sunday.

We know Pelosi told Trump’s administration that she would come up with a deal in 48 hours so that’s what investors have been waiting for and why U.S. investors have been quietly cautious nevertheless we did see stocks attempt to rebound from prior session.

Economic recovery companies rose the most like Cimarex Energy up about 7%, casino giant Wynn Resorts gained about 4% after hiring a former Clinton and Obama advisor to their board and Travelers rose about 6% on stronger than expected profit numbers.

All in all the benchmarks S&P500 ended up about 0.5%, the Dow lifted 0.4% and the Nasdaq was up 0.3%.

As for commodities the oil price lifted 1.7% which is welcome news for our energy companies today as the oil price is currently at US$41.51 a barrel and gold has maintained its foothold around the US$1,909 mark.

As for local trade today the ASX futures are suggesting the market will lift 0.2%, the focus to be on Daniel Andrews opening Victoria’s boarders after seven of Australia’s largest companies including BHP (ASX:BHP), Wesfarmers (ASX:WES), CBA (ASX:CBA) and CSL(ASX:CSL) all have called on the government there to open boarders saying the current situation is not sustainable.

What else to watch well more quarterly results out today including for Lynas Corporation (ASX:LYC), Megaport (ASX:MP1), Sandfire Resources (ASX:SFR), Syrah Resources (ASX:SYR) also look out for Atlas Arteria Group (ASX:ALX) and Coronado Global Resources (ASX:CRN). And AGM season continues with AGL Energy (ASX:AGL), MyState (ASX:MYS), Orica (ASX:ORA), Service Stream (ASX:SSM), and Temple & Webster (ASX:TPW) all holding AGM’s today.

Ex-dividends there’s a few, Acrow Formwork & Construction Service (ASX:ACF), Australia & International Holdings Limited (ASX:AID) & Sandon Capital Investments (ASX:SNC) all go ex-div. As for economic news well not much out but we will get a preliminary read on retail trade today that’s not likely to move markets.

So as for trading ideas that could be worth a look, Bell Potter upgraded the costume jewellery business Lovisa (ASX:LOV) as a buy increasing its target to $10 and that implies 15% upside. LOV did have their AGM yesterday and they noted that same store sales rather are almost back in the black while metro Melbourne stores are set to open soon the first of November.

Now Bell Potter is expecting more stores to open in FY22 and also likes that Lovisa has got a strong balance sheet.

What do I mean by that a good cash balance and undrawn debt facilities. And Zip (ASX:Z1P) was reiterated as a UBS sell with a $5.50 target after Zip launched that ‘Tap and Zip’ platform allowing people to shop anywhere that accepts Visa.

Now UBS argues that while the product is a lower cost to the merchant which is good Zip is better placed by having less reliance on merchant fees and more reliance on charging consumers for their payment choices.

Now this means Zip could be in a better place when the RBA reviews the buy now pay later sector so keep an eye on that however nevertheless UBA maintains Zip as a sell because they’re forecasting lower earnings this and next year, Bell Potter has downgraded Pacific Smiles (ASX:PSQ) from a buy to a hold but increased their target for PSQ to $2.05 however at the same time Morgan Stanley maintained the same company PSQ as a buy with a $2.40 target as the group is expecting fee growth of 20%.

Lastly keep an eye on three stocks Uniti Group (ASX:UWL). Structural Monitoring Systems (ASX:SMN)  and West African Resources (ASX:WAF) all showing bullish charting signals according to Trading Central.

I’m Jessica Amir with Bell Direct, stay safe happy trading.

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