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ASX 200 set to fall – BHP, WPL & MFG shares in focus

It was another rough day for the S&P/ASX 200 (ASX: XJO) with the selling pressure continuing to grow as ASX reporting season picks up steam.

The financial sector was the biggest contributor to the market 0.9% fall, dragged down 1.7% by Magellan Financial Group Ltd (ASX: MFG) and Commonwealth Bank of Australia (ASX: CBA) which is nearing a technical 10% correction.

Materials were also weaker ahead of BHP Group Ltd’s (ASX: BHP) massive announcement with healthcare a rare winner, up 0.4%.

BHP merges with Woodside

Whilst technically occurring after-market, BHP’s deal to merge its oil and gas division with Woodside Petroleum Limited (ASX: WPL) will garner all the headlines today.

Under the deal, BHP’s oil and gas assets, valued at US$14 billion, will be transferred into a new entity, 48% owned by BHP shareholders, with all debt remaining in BHP.

The combined entity will move Woodside from being an also-ran to a top 10 energy producer. But most importantly, it allows BHP to improve its environmental credentials and double down on the future, which it sees in potash.

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Magellan’s surprise

Magellan was the worst performer on Tuesday, dropping a surprising 10.2% after delivering its financial year results. The selloff was a surprise as there was little new information in the update, with performance fees down 40% to just $30 million the likely trigger.

Yet the group’s core strategies have been underperforming for 12 months so this wasn’t anything the market didn’t already know. The group reported an 8% increase in management fees to $631 million, with profit down 33% but a $1.14 per share final dividend announced.

Assets under management remain easily above $100 billion and management confirmed that the investment in Barrenjoey was performing better than expected. An expected result but unexpected reaction.

Westpac costs increase

Westpac Banking Corp (ASX: WBC) will be forced to shut more branches and stand down staff as it seeks to cut $8 billion in costs, but management has flagged the potential capital returns.

It is rare to see a company seeking to save money whilst paying it out to shareholders. Westpac handed in its third-quarter report on Tuesday, with shares finishing 1.3% lower.

Santos cash flow positive

Santos Ltd (ASX: STO) delivered its HY21 results, reporting a 22% increase in revenue to US$2.04 billion, leading to a US$354 million profit and a 5.5 cent per share dividend.

The company has finally recovered from its highly indebted position but the merger with Oil Search Ltd (ASX: OSH) stands out as both a major risk and opportunity given the difficult backdrop for the energy sector; I side with the former.

Breville under the pump

Finally, the risk of not living up to expectations was on show on Tuesday with appliance retailer Breville Group Ltd (ASX: BRG) falling 9.0% despite delivering a record $1 billion in sales.

The group decided to cut its dividend significantly, announcing a 13.5 cent fully franked final dividend, taking FY21 total dividends to 26.5 cents. This is a 35% reduction on FY20.

ASX 200 today

Looking ahead, the ASX 200 is expected to open lower on Wednesday, following a negative lead from US markets overnight.

Today is set to be the busiest day yet of reporting season, with the likes of CSL Limited (ASX: CSL), ANZ Banking Group (ASX: ANZ) and Coles Group Ltd (ASX: COL) handing in their results. For all the latest, check out Rask Media’s ASX reporting season calendar.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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Wattle Partners is a financial advice firm, servicing clients around Australia, specialising in retirement planning (pre and post retirement). 

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