MARCUS MIDDAY - Wednesday, 27 August

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The ASX 200 is up 12 points or 0.1% at midday. Tentatively following the US higher. Higher than expected CPI having little impact. Another volatile results day. Companies all but giving up on managing expectations. Losers include WOW, WTC, EBO, DMP, FLT and ARN. Winners include KAR, WOR, TAH, NEC, LOV and SIG. Resources on top despite BHP and RIO both falling in the US. No change to iron ore in Singapore. The two giants are up 1% while FMG is off 1% on broker downgrades. Lithium, copper and gold all in demand. Uranium up for a third day save for BOE. Utilities next best despite MEZ flat on results.

Discretionary stocks, Health Care and Financials all with modest gains. Big four banks up between 0.1% and 0.5%. MQG flat. Insurers doing well. REITs, Telecom, Tech in the red. XRO, TNE and NXT treading water but WTC down 10%, off lows. Staples gone from best performer by a country mile yesterday to worst. COL up another 3% on positive broker commentary but WOW being dumped 13% on sales miss and big one-off costs. Asian markets flat. Nasdaq futures up a touch.

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Upgrades and target price increases for COL today. Share price up another 2.5%, backing up yesterday’s big 8.5% gain.

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STORIES

• Australia’s monthly CPI print has come in ahead of expectations. Rising from 1.9% to 2.8% vs 2.3% expected. Highest level in over a year.
• Woolworths Group (WOW -13.2%) – Full year results. Numbers before significant items slightly below expectations. One-off costs amounting to $569m. Opening update: Down 12%. Results roulette continues.
• Flight Centre (FLT -3.8%) – Poor numbers. Underlying earnings 2% below expectations. Profit down 10% YoY due to a weak Q4. Share price down 36% in the last year. 
• Wisetech (WTC -10.4%) - Revenue increased 14%. Profit up 17%. Both below expectations. Dividend up at least. See Henry's Take for more.
• Lovisa Holdings (LOV +14.8%) – Revenue up 14% to $798m. Profit up 4.8%. The Jeweler up nearly 100% YTD.

ANNOUNCEMENTS

• Nine Entertainment (NEC +6.3%) – Up 6% this morning as full year profit of $166m beats the consensus by 14%. Driven by a strong H2. Still down 12% vs last year. Total TV revenue growth of 3%, boosted by Olympics coverage. Revenue up 10% with total number of paying subscribers up 6% to ~2.5m.
• Droneshield (DRO -1.1%) – Volatile ride continues. Opened up 7% on half year results, before dropping 13%. Huge growth to justify its share price more than tripling this year. Revenue up 210% to $72.3m. Swing in profit to positive, -$4.8m to $2.1m. “Outlook for counterdrone sales continues to be strong, with negligible market saturation and rapidly growing customer demand globally”. Isn’t that expensive on a forward PE of 63x vs some other high growth names.
• Karoon (KAR +6.1%) – Up 8% this morning despite half year underlying profit dropping 61% to $45m. Production up 4%, sales revenue down 25% vs the oil price down 8% in the same period (average realised prices were down 14%). Dividend cut in half to 2.4c.
• Neuren Pharmaceuticals (NEU +5.4%) – Half year profit up 88% to $15m. “Substantial potential for future growth in the US with two-thirds of the 5,500 to 5,800 diagnosed Rett patients yet to try DAYBUE. Outside the US, Acadia continues to build its European commercial team in anticipation of approval of the marketing application.” Guidance reaffirmed.
• Tabcorp Holdings (TAH +23.2%) – Up 16% on full year results. Underlying revenue in line. Underlying earnings a strong beat thanks to Wagering and Media segment $329m vs $307m expected. Profit 26% ahead of the consensus and up 77% YoY. Cost savings helped. OpEx reduced by $39m vs previously guided $30m.
• Worley Limited (WOR +9.4%) – A rare results winner today. Up 6% on the open as EBITA misses but profit beats. Up 14% YoY to $475m vs $461m expected thanks to winning high-quality work and disciplined execution. Margins up from 7.9% to 9.2%. Forecast in FY26 to hold near that level while higher growth in revenue vs FY25 is targeted.
• EBOS Group (EBO -11.8%) – The marketing group down 14% after reporting profit of $257.5m. A 6% miss and down 15% vs last year. Another $7bn company failing to manage expectations.
• Dominos (DMP -18.4%) – Full year profit of $116.9m only 1% off the consensus yet the share price is being dumped 20%. Same store sales flat YoY. Australia strong. NZ weak. EU mixed. “Operational Reset: Supporting Growth through Efficiency and Capital Discipline The Company is progressing a Group-wide cost efficiency program”. Similar to CSL – whenever you hear ‘reset’ or ‘restructure’, sell!
• Sigma Healthcare (SIG +5.5%) – Full year revenue up 82% to $6bn. Normalised profit up 40% to $579m. 11% sales growth. Chemist Warehouse the standout performer with sales up 14%. “The merger with Chemist Warehouse has delivered a stronger, more integrated healthcare business, with greater scale, capability, and market reach”. Bulk of synergies expected to take place in FY27. Strong start to FY26 with sales growth above 10%. CFO stepping down.

BROKER MOVES

• Fortescue Metals (FMG -1.1%) - Downgraded to trim from hold at Morgans. Target increased however to $16.60 from $16.50. Downgraded to sell from hold at Bell Potter. Target cut to $17.05 from $17.40. Downgraded to neutral from overweight at JPMorgan. Target remains $20.
• Kelsian Group (KLS +6.1%) - Upgraded to positive from neutral at E&P. Target increased to $5.35 from $4.55.
• Reece (REH +0.4%) - Upgraded to equal-weight from underweight at Morgan Stanley. Target decreased however to $12 from $17.
• SKS Technologies Group (SKS +2.8%) - Downgraded to accumulate from buy at Morgans. Target increased however to $3.15 from $2.75.
• Helloworld Travel (HLO +4.3%) - Upgraded to buy from hold at Morgans. Target increased to $2.32 from $1.76.
• Coles Group (COL +3%) - Upgraded to buy from hold at Bell Potter. Target increased to $24.30 from $22.10.  
• Nanosonics (NAN -4.8%) - Downgraded to underperform from sector perform at RBC Capital Markets. Target cut to $4 from $4.50.
• Codan (CDA -1.8%) - Downgraded to neutral from buy at UBS. Target increased however to $29.60 from $18.50.  

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