The S&P/ASX 200 Index (ASX: XJO) is tipped to edge higher when the market opens this morning despite weak trading in the US overnight. Here’s what’s making headlines.
$2bn for Sydney Airport, James Hardie wins market share
Sydney Airport Holdings Ltd (ASX: SYD) finally capitulated, going cap in hand to investors seeking $2 billion to ‘strengthen its balance sheet’ as the impacts of the pandemic look like extending beyond 2021. No dividend will be paid in 2020. The offer is at a discount of just 13% ($4.56 per share) and I wouldn’t be surprised if retail investors stay away as they did with Qantas Airways Limited (ASX: QAN) last month. I think SYD is one to avoid, particularly given the IATA has predicted it won’t be until 2024 that travel returns to normal.
James Hardie Industries plc (ASX: JHX) led the market higher, adding 6.8% despite announcing an 89% fall in quarterly profit to a paltry US$9.4 million. Investors were surprised by JHX’s market share gains as the company managed to avoid shutdowns in the US; management guided towards a strong recovery with a $330 – 390 million profit for 2021.
Mesoblast tanks, Challenger facing an existential crisis
Stem-cell research company Mesoblast Limited (ASX: MSB), who has an application in to the US FDA for a potential COVID-19 treatment (not vaccine), tanked 30.1% on Tuesday, as briefing notes for its upcoming review did not reflect positively on its hopes for approval this week.
Annuity seller Challenger Ltd (ASX: CGF) also disappointed investors, falling 7.6% after writing down its Life annuity business by $750 million; a combination of weaker investment returns and higher capital requirements due to lower interest rates are hitting the company’s bottom line. Net profit was down 13% to $344 million but fell to a statutory loss of $416 million after the write-down. Life and annuity sales in Japan were a particular highlight, the unit growing 13%, as was specialist fixed income and credit manager Fidante Partners, which saw $3.8 billion in net inflows.
In an income starved world, Computershare Ltd (ASX: CPU) managed to maintain its dividend despite announcing a 2.3% fall in revenue and 3.7% fall in earnings.
Overseas markets split
US markets fell into the close, with the S&P 500 off 0.7% after nearing all-time highs during the session. As earnings season nears its close, investors are turning back to economic results, with the comments suggesting more stimulus is a long way off hitting confidence.
President Trump continued his one-man re-election campaign, flagging a potential reduction in capital gains tax by introducing an Australian-like inflation adjustment.
The news was positive in Europe with markets cheering a jump in Chinese automobile sales, +16.4% in July, supporting BMW (ETR: BMW) which headed 5.8% higher. Vladimir Putin approved the first COVID-19 vaccine in the world, Russia’s own, after testing on just 76 people; only time will tell if it is the cure the market is seeking.
On a lighter note, readers of my Unconventional Wisdom newsletter may remember that Tom King of Nanuk Asset Management, a sustainable technology-focused global equity fund, highlighted the potential benefits of feeding seaweed to cows in order to reduce emissions; well Graincorp Ltd (ASX: GNC) and Twiggy Forrest just signed a deal with the CSIRO to commercialise the product.