The ASX ended the week just scraping by into the green as the reporting season neared its end amidst continuing damage from the delta variant.
The ASX200, ASX300, and Ordinaries ended the week up 0.3%, 0.34%, and 0.4% respectively.
As Australian markets closed Friday, all eyes were on the Jackson Hole Symposium in progress in the US.
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ASX Stocks Last Week
Woolworth’s Group (ASX: WOW), Australia’s largest retailer announced its FY21 results on Friday.
The market had high expectations following stellar earnings from arch-rival Coles Group (ASX: COL).
Woolworths reported total revenues of A$67.2 billion (up 5.7% YoY), operating earnings of A$3.66 billion (up 13.7% YoY), and a net profit of A$19.72 billion (up 22.7% YoY).
However, the stock ended the week down 3.26% after the rapidly spreading delta variant cast a pall on the retail sector.
Wesfarmers (ASX: WES), also a major retailer and one of Australia’s biggest conglomerates, declared strong results and a generous dividend. The company reported revenues of A$33.9 billion (up 10% YoY), mainly driven by sales at Bunnings due to growing demand for hardware owing to the property boom.
It reported an NPAT of $2.42 billion (up 16.2% YoY) and declared a dividend per share of A$0.9.
However, the stock took a beating and ended the week down 5.84% after the company stated that the worsening COVID scenario may hurt its performance over the next few months.
Clinuvel Pharmaceutical (ASX: CUV) was one of the week’s biggest winners after it reported record results. The company announced revenues of A$48.7 million and a net profit of A$25.7 million, both figures being all-time highs.
The company, profitable for the fifth year running, enjoyed strong demand for its product and a successful rollout in the US. Clinuvel ended the week up 26.34%.
Atlas Arteria (ASX: ALX) was one of the week’s best performers after it released its interim FY22 results. The company, which is one of Australia’s largest toll road operators, showed off a strong recovery as traffic volumes increased and swung back into profitability.
The company reported an NPAT of A$71 million, compared to a loss of A$123 million last year. The stock closed up 7.45%.
The week was important in terms of travel outlook because major companies from the sector such as Qantas, Air New Zealand, and Flight Center came out with earnings reports.
Sector behemoth Qantas Airways (ASX: QAN) wowed the market with its numbers and closed the week a solid 21% higher. The company reported revenues of A$5.8 billion, down 58% YoY, and a full-year loss of A$1.83 billion.
Though it still estimates that the pandemic would cost A$20B in lost revenue by the end of 2021, a travel recovery between the first and delta waves has nevertheless helped the company reduce its net debt from $6.4 billion to $5.9 billion.
The company’s reduction in cash-burn and leaner operations have primed it to benefit from operating leverage whenever the recovery kicks in, which is probably what investors are bullish about.
Air New Zealand (ASX: AIZ) too reported a lower cash-burn and a full-year net loss of A$440 million. AIZ ended the week up 4.7%.
Flight Center (ASX: FLT), one of Australia’s largest travel portals and one of the biggest accommodation aggregators in the world, won investor support as it reported its highest monthly revenue in June since the onset of COVID. The company met its full-year guidance by reporting a net loss of A$507 million. Flight Center ended the week up 23%.
Real estate was bid up this week as investors flocked towards defensive stocks in light of the uncertainty around the impact of the delta variant and as a play on the booming conditions in the sector.
Vicinity Centers (ASX: VCX), one of Australia’s largest retail REITs, ended the week up 8.23%.
Scentre Group (ASX: SCG), another major retail real estate company, enjoyed investor support and ended up 10.45% for the week.
Private Healthcare operator Ramsay Health Care (ASX: RHC) declared its full-year financials and slightly missed guidance. However, the market was bullish as the company reported a respectable net profit of A$449 million and announced a final dividend of A$1.03 per share, bringing the total annual dividend to pre-COVID levels. Ramsay ended the week 1.9% in the green.
Another big winner was Ardent Leisure (ASX: ALG), a global theme park operator, which closed a mammoth 49% higher for the week. The company reported very strong recoveries on business across the US and a net-loss reduction of 36%. EBITDA for the year was up 167%.
Tech and AI company Appen (ASX: APX) had a horrible week after reporting disappointing full-year results. The company reported a 55% decline in net profits and a 2% decline in revenues. The stock closed the week 15.69% lower.
The A2 Milk Company (ASX:A2M), which was once the best performing stock on the planet, had an abysmal week after its earnings disappointed investors. Its crucial daigou sales channel to China has all but dried up; the company announced 30% lower revenues and a 77.6% decline in EBITDA, as well as proposed a re-evaluation of its business model. A2M ended the week down by a hefty 10.6%.
Beauty giant BWX (ASX:BWX) the week higher by nearly 4% after it announced the A$90 million acquisition of peer Go-To, a company established by BWX founder Zoe Foster Blake. Following the deal, which values Go-To at A$177 million, BWX will own 50.1% of the company.
ASX Stocks This Week
Annual earnings reports
Iron ore major Fortescue Metals (ASX: FMG) is scheduled to report results on Monday. Investors are expecting bumper earnings and a large dividend, in line with chief rivals BHP (ASX:BHP) and Rio Tinto (ASX:RIO). However, the recent reversal in iron ore prices might dampen sentiment.
Aristocrat Leisure (ASX: ALL), one of the biggest gambling machine manufacturers in the world, is due to report results on Tuesday. The market expects it to better its 1H results as the leisure sector recovers outside Australia and digital gaming revenues grow.
Harvey Norman Holdings (ASX:HVN), of Australia’s largest home item retailers, is due to report FY21 results on Tuesday. The home item retail sector has been doing very well as people are spending more time at home amidst a booming property market. Investors expect stellar performance from the company on the back of record 1H results.
Australian gambling and entertainment major, Crown Resorts (ASX:CWN), will report results on Monday. The company has been having a very tough time lately due to lockdowns and gambling license concerns. Australia’s worsening COVID scenario has muddied the prospects of the stock.
Infrastructure company Infratil (ASX:IFT), which invests in assets including airports, retailers, telecommunications, and utilities, is expected to announce FY21 results on Tuesday. The company owns assets across New Zealand, Australia, and the US. Investors are bullish because they expect strong results from recoveries in the US and New Zealand.
Webjet (ASX:WEB), one of Australia and New Zealand’s biggest travel aggregators, is scheduled to report earnings on Tuesday. The company has had a stellar week after the Australian government announced that interstate travel might be permitted by Christmas. While the stock has been hurt by COVID, the downside may have been priced in and investors are now looking forward to recovery.
ASX Listings
Ballymore Resources (ASX:BMR) is set to debut on the markets on Thursday. The company is Queensland-headquartered and is engaged in the exploration and development of precious commodities such as gold, silver, and copper.
The company plans to raise A$11M from investors to accelerate its projects at Dittmer and Ravenswood along with conducting feasibility studies/geological surveys for its Torpy site. Shares are priced at A$0.2.
Water supplier Rubicon Resources (ASX:RWL) is set to make its public debut on Wednesday. The company plans to raise A$40 million at A$1 per share to bring its low water irrigation system to market.
TEK-Ocean Group (ASX:T3K) is an ocean energy industry services company. The company provides services such as consulting, project management, logistics, etc. to companies with offshore energy assets. The company aims to raise a minimum of A$5M and a maximum of A$8M from the markets at A$0.5.
Economic News and Market Outlook
As mentioned, the Australian markets closed on Friday with all eyes on the Jackson Hole Symposium.
At the meeting, Federal Reserve chair Jerome Powell said that while the Fed may decide to taper its $120 billion a month asset purchases later in the year, it does not intend to follow that up with a rate hike.
Powell stated that the US economy had made substantial progress towards recovery so far this year and if it continues to heal broadly as planned, the Fed will seriously consider tapering asset purchases.
He also warned that while employment growth has been respectable so far, the US is still not clear of the rapidly spreading delta variant.
Major Wall Street indices closed at records after investors viewed Powell’s comments on tapering as somewhat dovish.
Over the week, the Australian Bureau of Statistics reported its retail sales figures, which were of some concern to investors.
Retail sales declined 2.7% in July, following a 1.7% reduction in June. The biggest drop was seen in personal items (nearly 16%) and entertainment/dining (about 12%). Moving forward, this could spell trouble for businesses in these sectors.
Meanwhile, Australia’s Q2 GDP numbers, due out Wednesday, will show some impact from the latest outbreak of the pandemic which began in late June. The consensus is for 0.5% QoQ growth, but some analysts fear a contraction.
Things on the COVID front are worsening for Australia as NSW reported the highest daily new count of the year of 1126 cases. This was followed by 64 cases in Victoria and 26 in Canberra. This all but ensures that the current quarter will show a national contraction in growth.
On Friday, the Commonwealth Bank of Australia (ASX CBA) cut its estimate for GDP contraction for the quarter from 2.75% to 4.5%. As things stand, Australia is teetering on the brink of another recession, defined as two successive quarters of contraction.
US non-farm payroll data will be out next Friday and will be closely watched for pointers to Fed policy.
Forex Outlook
The Australian dollar grew stronger over the week in the wake of steadying iron ore prices due to the re-opening of ports in China.
Also, the US dollar index was weak after the Jackson Hole symposium, at which Powell did not adopt a very hawkish stance.
However, with a technical recession looming large in Australia, and the US economy recovering faster than Australia, pressure on the AUD is likely to re-emerge, particularly when it becomes clear that the RBA would have to continue to keep monetary policy easy.
Moreover, as clouds gather around a Chinese slowdown, the outlook for a commodity currency such as the AUD could weaken further.
New Zealand extended its pandemic restrictions while Auckland continues under lockdown. Technically, the AUD/NZD continues to rule weak, and New Zealand policymakers tend to make hawkish noises.
Besides, last week New Zealand retail sales rose a buoyant 3.3% in the June 2021 quarter, following a 2.8% rise in the March 2021 quarter.
In terms of economic data, Australia now appears to be the poor cousin.
