The Recap

Good Evening,

Welcome to Equity Espresso's Daily Recap. It was another busy day on the market as September’s CPI beat expectations, raising the odds of another interest rate hike. We cover this and the companies who reported earnings updates today. Enjoy!

CPI Rises:
So Might Rates on Cup Day

Markets were tracking higher in the morning, but a stronger-than-expected quarterly CPI report pushed markets lower as reality set in that another rate rise by the RBA looks more likely by the day. The ASX200 index ended the day down 2.6 points or 0.04% to 6,854.30.

The September Quarterly CPI figure came in slightly higher than expected, with markets now seemingly pricing in at least one more rate rise before the end of the year. The most significant price increases from the previous quarter were Automotive fuel (+7.2%), Rent (+2.2%), New dwelling purchases by owner-occupiers (+1.3%) and Electricity (+4.2%). Economists from CBA, NAB and ANZ expect the RBA to raise rates at the next meeting on November 7.

From a sector standpoint, Materials (+1.62%) and Telco (+0.79%) finished higher. Iron Ore futures rose to US$119.00, with BHP (+2.6%), Fortescue Metals (+3.1%) and Rio Tinto (+2.3%) all rising. The interest rate sensitive REITS (-2.0%) sector was hit hardest today, with Goodman Group (-1.6%), Scentre Group (-2.8%) and Stockland (-0.8%) all finishing lower.

WTI crude oil futures remained steady at US$83 per barrel, while Gold prices are trading at US$1,972.40/oz.

A busy day of earnings reports both in Australia and overseas. We have two dedicated sections in today’s newsletter covering the companies that reported.

Economic Data

• Australia’s Headline CPI rose 1.2% in the September Quarter from June - beating consensus estimates of a 1.1% increase. Annually, this was a 5.4% rise, slightly ahead of forecasts of 5.3%.

• Core CPI (excl. volatile items) was 1.2% higher in the quarter, against a forecast of 1.1%. Annually, this was 5.2% vs. estimates of 5.0%.

• In her first full speech as RBA Governor last night, Michele Bullock warned that she would not hesitate to raise the cash rate further if there was a material upward revision to the outlook for inflation. The RBA board meets next on November 7.

• The U.K. unemployment rate for August remained steady at 4.3%, which was in line with expectations.

• The S&P Global Manufacturing PMI for the U.S. rose to 50 in October 2023 from 49.8 in September, beating forecasts of 49.5, preliminary estimates showed. It is the highest reading in six months,

Outlook

The S&P 500 (-0.20%) and NASDAQ (-0.39%) futures are trading lower this afternoon. U.S. New Home Sales and Building Permit data get reported overnight, while up further north, the Bank of Canada decides what to do with their interest rates, which are currently 5.00%

Quarterly earnings roll on, with Meta Platforms, Thermo Fisher, T-Mobile, IBM and Service Now some of the larger companies to report tonight.

Wall Street

U.S. markets finished in the green as earnings season switched into gear on Wednesday. Check out our dedicated earnings section to see how the companies who reported performed.
The S&P 500 (+0.73%) and the NASDAQ (+0.93%) finished higher. According to LSEG Group, of the 118 S&P 500 companies that have reported so far, 81% have beat analysts estimates.

Crypto-related stocks were some of the big movers on Tuesday. Coinbase (+6.3%), Microstrategy (+12.5%), Marathon Digital (+11.5%) and Riot Platforms (+10.3%) all rose as the price of Bitcoin shot up over 10% to trade at $34,070.00.

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Quick Singles

🪃 Local News

• Your data is always the centre of attention. Companies, hackers, bots, snooping ISPs, and even third-party trackers are all out to get it. How can you stay safe? Let Surfshark protect your data for you! You can get 82% off the deal as an Equity Espresso subscriber.

• A KPMG audit report showed that a $326 million investment in the remote Queensland Indigenous community of Mornington Island has brought no consistent improvement outcomes.

🌏 Around The Globe

• Japanese semiconductor equipment company Kokusai Electric Corp. rose after its initial public offering debut, the country’s highest since 2018. Shares opened at ¥2,116, marking a 15% increase from the IPO price of ¥1,840.

• Eli Lilly is planning a clinical trial of its diabetes drug Mounjaro in patients six years and older who have obesity. The company is already conducting a trial of the drug in children as young as ten with type 2 diabetes, according to a U.S. government registry.

• Tinder has added a matchmaking feature that gives users’ friends and family members autonomy to hand-pick who they should date.

• Nvidia has reportedly started designing Arm-based CPUs for Windows PCs. The chips could be available as soon as 2025.

• The International Energy Agency says that world fossil fuel demand will peak by 2030 as more electric cars hit the road and countries move towards cleaner energy.

• Hong Kong is reversing the emergency increase in stamp duty on stock trades as officials aim to revive the city's position as a hub for finance and IPOs.

• TikTok is reportedly testing 15-minute video upload limits. The current maximum video length on the platform is 10 minutes.

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Markets

ASX200 Company Movers

Index & Commodity Prices

Sector

Bond Prices

ETF Watch

ASX News

🗞️ Company Announcements

• Ampol (AMP) reported a sharp lift in earnings for Q3, with refining margins rising to US$19.69 per barrel - up from US$15.46 a year ago. Operating profit rose by 65% to $438.2 million as total fuel sales volume increased by 26%.

• Aussie Broadband (ABB) and Symbio (SYM) have agreed to a 7-day due diligence extension to October 31 related to ABBs’ $3.15 per share takeover offer of Symbio.

• Beach Energy (BPT) reported a 12% decline in revenue to $397 million on lower production and gas prices. Average gas prices were down 6% to $8.89/Gigajoule (GJ). Production from its Otway Basin was down 10% QoQ.

• Corporate Travel Management (CTD) announced an on-market share buyback of $100 million commencing November 15.

• Dexus (DXS) Chief Executive Darren Steinberg will step down from his role in 2024 after 11 years.

• Kogan (KGN) shares rose after reporting QoQ gross sales growth for the first time since Q1 FY22, rising by 2.2% to $189.2 million. Sales were, however, down 6.5% to $189.2 million. Despite the drop, adjusted EBIT improved from a $4.1 million loss in FY23 to $4.0 million in FY24.

• Mineral Resources (MIN) production volumes rose by 14% from the last quarter to 66Mt, with Iron Ore production increasing by 8%. The company’s Mt. Marion Lithium mine production increased 31% QoQ. as the company opened up more areas to access fresh ore at the site. The miner also reaffirmed its FY24 volume guidance.

• Magellan Financial (MFG) chief executive David George is stepping down from his role, whilst board director Andrew Formica will assume the role of executive chairman as the fund manager searches for a replacement.

• Pointsbet (PBH) said it still expects total operating cash flow to be positive for FY24 despite cash outflows in Q1 of $10.4 million. Turnover from sports betting was down 3% to $611.0 million. However, the total net win was 18% higher than the pcp., rising to $58.2 million.

• Super Retail Group (SUL) said sales for the first 16 weeks of FY24 are up 4% from the prior year, while like-for-like sales were 2% higher. The Super Cheap Auto (+4%) and BCF (+3%) brands have seen the largest sales increase to date. Supercheap Auto’s performance has been driven by ongoing strength in the auto maintenance category, whilst BCF’s rise was attributed to increased demand in boating, fishing and water sports.

• Woolworths (WOW) says that food inflation costs had eased during the September quarter, with prices for fruit, vegetables and meats reducing. The supermarket giant reported a 5.3% increase in group sales to $17.2bn.

 📱 Post of The Day

International News

📰 Global Earnings

Reported During Trading Hours

• Spotify (SPOT) shares rose 10.4% after the company posted a surprise Q3 profit, its first quarterly profit in over a year. The company cited cost-cutting measures, including lower marketing spend and layoffs, and increased subscription costs for the profit of €65 million.

• Coca-Cola (KO) rose 2.9% after beating analysts’ expectations in Q3, with adjusted EPS of $0.74 on revenue of $11.91 billion. Analysts’ estimate EPS were $0.69 on $11.44 billion in revenue. The company also raised its full-year earnings growth outlook to 7% to 8%, up from 5% to 6%.

• General Electric (GE) popped 6.5% after beating analysts’ expectations on both EPS and revenue for Q3. General Electric also raised its full-year guidance, noting increased demand within its aerospace business.

• Texas Instruments (TXN) reported a revenue increase of 13% to $56.5 billion in Q3 - beating analysts' estimates of $54.52 billion.

Reported After Hours

• Microsoft (MFST) was among the big winners overnight, jumping more than 3% in after-hours trading after releasing first-quarter results that topped analysts’ estimates. Microsoft posted EPS of $2.99 on $56.52 billion in revenue. Meanwhile, analysts forecasted EPS of $2.65 on $54.50 billion in revenue. Microsoft’s profit jumped due to slower operating expense growth and better-than-expected revenue from its Azure cloud segment.

• Alphabet (GOOGL) fell 6% after-hours despite beating analysts’ estimates on both top and bottom lines in Q3. Revenue growth reaccelerated to 11% from the previous quarter. Revenue from Google Cloud came in at $8.41 billion, well below consensus estimates of $8.64 billion, which was the likely driver of the lower share price.

• Visa’s (V) share price fell flat after posting an earnings and revenue beat in its Q4 report. The company raised its dividend by approximately 16% and authorised a $25 billion share buyback.

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Analyst Report

Freelancer Limited

Code: FLN | Market Cap: $105.5m | Current Price: $0.24
Price Target: $ Sector: Industrials
Broker: Edison

Freelancer Limited operates a freelancing and crowdsourcing marketplace in Australia. The company operates in two segments: Online Marketplace and Online Payment Services. (Escrow.com)

Freelancer provided a Q3 business update yesterday; despite reporting a 3% drop in Gross Merchandise value (GMV) to $222.3 million, the company achieved a positive operating cash flow for the quarter of $23.5 million.

Broker Highlights:

• Despite the fall in GMV, the broker believes revenue likely grew, given the marketplace’s higher average take rate of GMV vs. Escrow.com. However, this was not provided by the company.

• Freelancer achieved a key target by delivering positive operating EBITDA in each division, driving a positive operating cash flow of $1 million in the quarter.

• Marketplace GMV growth was driven by a 1.6 million user increase and a 1.9% lift in average project size.

Recommendation

The broker believes Freelancer’s share price does not reflect its long-term potential, with multiple levers driving value. The company trades at an 81% discount to peers on EV/sales across FY1e and FY2e, narrowing to 44% compared to Upwork and Fiverr. Showing further growth potential in either division could be a catalyst.

Reply to us at [email protected] if you want access to the full report.

Daily Quiz

❓️ Test Your Knowledge

Yesterday’s Daily Quiz Question. Which ASX company has Randi Zuckerberg, sister of Meta's Mark Zuckerberg, as a Non-Executive Director?

Answer: Life360. Randi joined the board of Life360 back in January 2021. She is the founder and CEO of Zuckerberg Media, a boutique marketing firm and production company,

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of October 19

📊 Broker Ratings

What do the brokers have to say?'

1. McMillan Shakespeare (MMS) - Upgrade to Buy from Neutral (Citi)

2. Smartgroup Corp (SIQ) - Upgrade to Buy from Neutral (Citi)

👨‍💼 Director Transactions

What are the insiders doing? (On-market trade only)

💲Dividends

Companies trading ex-dividend today

1. GQG Partners (GQG) - $0.0259

2. Lion Selection Group (LSX) - $0.015

DISCLAIMER: None of the information provided in this newsletter should be constituted as financial advice. This newsletter is strictly for educational purposes only. It should not be taken as investment advice or a solicitation to buy or sell assets or make financial decisions. Please do your research.