ASX 200 (XJO) morning report – my 3 takeaways from the week

The S&P/ASX 200 (ASX: XJO) is set to edge lower when the market opens this morning according to the Sydney Futures Exchange. Here’s what you need to know as we head into another big week of ASX reporting season.

ASX market recap

The ASX 200 finished 0.2% lower for the week, down just 0.1% on Friday, despite a strong US lead. Suncorp Group Ltd (ASX: SUN) was the highlight, beating expectations despite reporting a 33% fall in profit and finishing up 11% for the day.

Over the week, it was the IT sector, behind WiseTech Global Ltd (ASX: WTC) up 40%, and healthcare behind CSL Limited (ASX: CSL) that supported the market despite the hit of Victoria’s lockdowns becoming more clear.

Australian retail sales grew 3.3% in July from June, with household goods up 30% as consumers divert their $100 billion travel spend to improving their homes. This came as Scentre Group (ASX: SCG) locked out Mosaic Brands from some 129 stores.

5 ASX reports on Friday

Suncorp Group – Stunned the market in a positive way, adding 11.1% after retaining its dividend, but cutting by 50% to 10 cents per share. Underlying profit weakened less than expected, falling 33% to $749 million as both banking and insurance were hit by impairments and claims. Net interest margin of 1.94% was strong.

Comment: Looking solid despite higher funding costs.

BWX Ltd (ASX: BWX) – Finished 3.8% higher after reporting a 26% increase in sales and a 59% improvement in profit to $15.2 million following a difficult few years. The Sukin brand demands 55% of sales with 4,000 new stores in the US, Asia, Europe and even Target.

Comment: Strong result with 10% sales growth forecast in FY21.

Redbubble Ltd (ASX: RBL) – Reversed recent gains falling 2.3% despite announcing 132% year-on-year sales growth in July and 36% increase in revenue to $349 million. Strong growth in Australia, 24%, UK, 33%, and the EU 30%, with 30% growth in first purchases on the platform. Strong free cash flow of $38 million and 6.8 million unique customers, a global platform.

Comment: Great result, a global Kogan.com Ltd (ASX: KGN).

Inghams Group Ltd (ASX: ING) – Poultry producer rallied 3.0% as volumes increased 4.3%, benefitting from huge demand as the population was forced to stay at home. Previously flagged issues relating to their processed alternatives meant a 28% cut to the dividend after profit fell 62% to $40 million.

Comment: Quality defensive business with cost base now rest.

MyState Ltd (ASX: MYS) – Finished 3.9% higher despite cancelling their dividend and closing six branches. Profit fell 3% to $30 million, however home loans growing 70% faster than the market. Wealth management lost AUM of $100 million.

Comment: Tough business but ramping up loan issuance.

For a run-down of four key reports from the week, including Pro Medicus Limited (ASX: PME), JB Hi-Fi Limited (ASX: JBH) and Kogan.com Ltd (ASX: KGN), check out the second instalment of our ASX results recap:

My three takeaways from the week

The S&P 500 delivered a fourth straight weekly rally, finishing 0.7% and adding 0.3% on Friday as Apple (NASDAQ: AAPL) finished 5% higher. The US election campaign is beginning in earnest with the backdrop of an improving economy, manufacturing PMI increasing to 53.6, despite another spike in coronavirus cases.

With a lot of action this week, my three takeaways were:

1. It’s time for a new set of blue chips – Reporting season has exposed the structurally challenged nature of many Australian businesses, there is a new group of mid-caps, enabled by technology, ready to take over.
2. Look past the headlines – One-off or significant events, underlying vs. statutory profit. It’s never been more important to review every earnings report with a fine-toothed comb.
3. Vaccine may be hopeful – It was a week of hope according to our politicians, yet 25% of the country remains under strict lockdown with little economic support. Whilst we are all hoping for a vaccine, I’m not confident enough to bet on it yet.