The S&P/ASX 200 (INDEXASX: XJO) is set to rise when the market opens this morning. Challenger Ltd (ASX: CGF), Crown Resorts Ltd (ASX: CWN) and Macquarie Group Ltd (ASX: MQG) shares are making headlines.
ASX share market recap, Challenger share price whacked
The ASX 200 fell 0.9% on Tuesday as reality set after what had been an incredibly strong few weeks. Every sector finished lower, led by yield plays in property and utilities, down 2.1% and 1.4%, respectively.
All eyes will be on Crown once it recommences trading after the NSW Government Enquiry concluded the group was ‘not suitable’ for the Barangaroo casino license it was seeking.
The Challenger share price had rallied around 10% in the lead up to its half-year earnings report, but investors were disappointed by an unexpected reduction in the dividend, from 17.5 cents to 9.5 cents per share. The Challenger share price fell 14.8% on the news. This appears somewhat of an overreaction, as management delivered rather promising results across its funds management and annuity businesses. Specifically, Fidante Partners, which offers fixed income and similar actively managed funds, saw inflows triple during the half, with the broader group reporting another $6.4 billion in investment funds, up 32% on 2019 levels.
More importantly, Challenger’s core annuity business returned to strong growth, with Australian lifetime annuity sales increasing 11% and Japan remaining the highlighting, seeing 15% growth as investors seek consistent retirement income options. Management reiterated profit guidance despite a 14% fall in the first half, with large cash holdings in its investment portfolio a major drag on returns.
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Boral boosts profits, Macquarie shows resilience
Cement and building material supplier Boral Limited (ASX: BLD) also underperformed, falling 7.4% after management elected to hold off on the payment of an interim dividend. This offsets the 10% gain the shares have seen in the last week alone, but similar to Challenger, the larger story remains positive. Statutory profit increased 18% for the year to $161 million following a reversal of recent history.
In this case, the lack of restrictions in the US meant housing construction and building delivered earnings growth of 12%, whilst the stalling of major construction projects resulted in a 20% fall in Australian earnings to $128 million. Management has continued with a ‘slowly-slowly’ approach to the rationalisation of its non-core US businesses, offering little in the way of a progress update on the potential sale. On a positive note, the cost-cutting and renewed focus on efficiency delivered another $333 million in free cash flow, with a dividend unlikely to be far away.
Macquarie was by far the highlight, reporting third-quarter results and revealing profit for the 2021 financial year will be broadly in line with the previous year, despite the backdrop of COVID-19 slowing every aspect of their business; shares rallied 6.6% on the news. Looking more closely, Macquarie Asset Management saw assets fall just 1% to $550 billion, with performance fees offsetting weaker margins in the Banking and Financial Services (BFS) business. Approved loans increased 9%, supported by a 3% increase in deposits, whilst Macquarie Capital delivered 100 transactions in the quarter, totalling $58.4 billion in value, the float of Nuix Ltd (ASX: NXL) among them. All in all, this was a show of strength from a resilient company.
US markets finish flat, bonds in focus
US markets overcame an initial sell-off to finish flat across the board, the Nasdaq heading 0.1% higher and the Dow Jones 0.0%, despite the headwind of a spiking three-year bond yield.
Investors seem to be increasingly wary about the long-term impacts of the combined fiscal and monetary stimulus after the 30-year bond yield hit 2% overnight. Yet with signs of economic weakness, it seems unlikely any stimulus will be reduced for the time being, potentially supporting ever-higher valuations.
Technology and investment company Softbank (TYO: 9984) appears to have overcome a difficult 2020, during which the high profile failure of WeWork impacted profits and confidence, delivering a quarterly profit of US$11.6 billion on the back of US$16.8 billion in investment gains within its Vision Fund. The company is similar to a LIC, with many underlying investments spanning unlisted and listed markets including Door Dash (NASDAQ: DASH), Amazon.com (NASDAQ: AMZN) and Taiwan Semiconductor. Net sales in the quarter were US$14.3 billion, up 10.7% on 2019. Softbank shares finished the day 3.4% higher.
Back home on the ASX, expect reports from the likes of Commonwealth Bank of Australia (ASX: CBA) and Insurance Australia Group Ltd (ASX: IAG) today, while Telstra Corporation Ltd (ASX: TLS) and AMP Limited (ASX: AMP) are set to report tomorrow. Check out Rask Media’s ASX reporting season calendar for all the latest.
