Good Evening,

Welcome to Equity Espresso

We’re here to catch you up on all the day’s news both in Oz and abroad.

Here’s a sample of what you may have missed today:

1. ✈️ Qantas in Hot Water!

2. 🏰 Disney’s Profit Puzzle

3. 🏭 PMI Positive For China

4. 📩 Aussie Post's $200m Shocker

5. 💲 IGO’s Unexpected Announcement

The Recap

Earnings Season Concludes:
Qantas Steals the Spotlight

It was the definition of an up and down as the ASX200 dipped in and out of positive territory before ending the day up 7.6 pts. to 7,305.30. Eight of the 11 sectors finished the day higher, led by Telco (+0.98%) and Tech (+0.77%). There were more significant swings at the other end of the scale; Energy (-2.67%) and Staples (-1.44%) fell the most as Whitehaven Coal (-9.38%), Woodside Energy (-3.67%) and Woolworths (-2.03%) all traded ex-dividend today.

Harvey Norman, IGO, Pointsbet and Atlas Anteria were some of the companies who reported earnings today, officially bringing reporting season to a close.

Today's big story was that the Australian Competition & Consumer Commission (ACCC) will launch legal action against QANTAS, alleging it advertised tickets on more than 8,000 flights that it had already cancelled but not removed from sale. It’s alleged that Qantas kept selling tickets on its website for an average of more than two weeks between May and June 2022.

You can read more about this one in today’s deep dive later in the newsletter.

I guess this is another thing customers can add to the ever-growing list of grievances with the national carrier. Where does this rank among lost luggage, delayed flights, one-person call centres and those refunds that seem to get lost in transit?

ASX200 Stock Snapshot

Wall Street

U.S. markets gained for the fourth straight trading day as markets continue to price in peak rates amid a slew of weaker-than-expected economic data. The ADP non-farm employment data showed that private sectors only added 177,000 new jobs, the lowest since April. The second read of the U.S. Q2 GDP was revised to 2.1% from 2.4%, suggesting economic growth slowed.

Meanwhile, the market’s rebound has mainly come from growth stocks as the tech-heavy Nasdaq (+0.54%) outperformed the S&P500 (+0.38%). The US PCE, seen as the Fed’s favourite indication for inflation, will be on close watch tonight.

Technology was the top gainer in the S&P 500, with 9 out of 11 sectors finishing higher.

Salesforce's Q2 earnings beat expectations with earnings per share of US$2.12 and Revenue of US$8.60 billion, causing a 5.6% jump in after-hours trading.

Economic News

• Chinese manufacturing activity experienced a decline in August but at a slower rate than previously anticipated. The official manufacturing purchasing managers’ index (PMI) recorded a reading of 49.7 in August, exceeding expectations of 49.5 and last month's reading of 49.3.

• According to the government's second estimate of GDP for Q2, the U.S. economy grew slightly slower than expected. GDP increased at an annualised rate of 2.1% in the last quarter, lower than the 2.4% pace reported last month.

• The ADP National Employment Report released on Wednesday revealed that private payrolls increased by 177,000 jobs in August, following a rise of 371,000 in July.

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Quick Singles

🪃 Local News

• Airtasker reported an EBITDA loss of $8 million this past year - an improvement from the $17.1 million loss in FY22. Revenue grew by 40% in the last year, going on further to say it will be cash flow positive in FY24.

• Australia Post reported its first significant structural loss in more than 30 years, with a $200 million loss. Letter losses increased by over 50% to $384 million as costs to deliver community service obligations rose 27%, while letter volumes fell by 7.8%.

• Atlas Anteria lifted interim profits by 17% to $136.5 million - benefitting from higher inflation as fare charges on some toll roads were directly linked to consumer price indices. Traffic rose on all roads except the Chicago Skyway due to roadworks.

• Cromwell Property Group reported a statutory net loss of $443.8 million, thanks to a $491.6 million decline in property valuations.

• Gold miner Perseus reported a 70% profit uplift to $476.7 million, with 535,281 ounces of gold produced from its three mines across Chana and Core d’Ivoire. All-in-site costs were US$959 per ounce.

• Pointsbet reported a net loss of $276.3 million, which the company said was due to the cost of running the U.S. business, which is being sold to Fanatics.

🌏 Around The Globe

• Manufacturing giant 3M reached a historic $6 billion settlement to compensate around 240,000 U.S. veterans and service members who suffered hearing damage as a result of its faulty earplugs.

• For non-Prime members, Amazon is testing free shipping on basket sizes over $35.

• Snapchat is introducing a new AI-powered feature called Dreams. Users can upload selfies, select a theme, and receive eight generated photos for free.

• Apple has announced that it will hold its iPhone 15 release event on September 12. The event is expected to include the launch of the new iPhone 15 lineup and Apple Watches.

• China's major cities, including Guangzhou (the fifth largest city), are relaxing their mortgage requirements. Home buyers can now enjoy preferential loans for first-time purchases, irrespective of their credit history.

• Toyota is gradually resuming production at its Japanese factories following the breakdown of a computer system that processes orders for vehicle parts, which resulted in the closure of 14 assembly plants.

₿ Crypto Corner

• Tether, the issuer of tablecoin, has enlisted the services of Britannia Bank & Trust, a privately-held bank that operates in the Bahamas, for processing dollar transfers. Tether has not revealed the complete details of its banking partnerships, in how and where the $86 billion worth of assets are accessed and stored.

• The discount between the price of Grayscale's Bitcoin Trust (GBTC) and the value of Bitcoin hit its lowest level since December 2020, reaching 18.06% yesterday.

Markets

Index & Commodity Prices

Bond Prices

ASX By Sector

ETF Watch

Movers and Shakers

✅ Biggest Gainers

IGO Ltd (IGO) shareholders got a pleasant surprise, with the company announcing a Special Dividend of 16c per share to go with its Fully Franked Final Dividend of 44c per share.

IGO reported Revenue for the year of $1,024m, with a first-year contribution from its Nickel mining Forrentania operation totalling $275 million. Sales from its Nova nickel mine were 18% lower, primarily due to a fire to the power station in December 2022. The Greenbushes operation, in which IGO holds a 24.99% stake, recorded an almost 10-fold increase in Revenue and EBITDA with annual spodumene production of 1,491kt, exceeding guidance. IGOs Underlying Free Cash Flow rose 252% to $1,098 million.

The surprise Special Dividend came as the company announced a new capital management policy, with a new target returns range of 20 - 40% when underlying Free Cash Flow is below $1.0 billion. Payouts will be more than 40% when cash liquidity is over $1.0 billion.

IGO shares finished Thursday up 5.4% to $13.92

Harvey Norman (HVN) started the trading day slowly before ending 5.2% higher as it reported an expected double-digit profit and dividend slide, in line with its June guidance. NPBT was $776 million for the period, down 32%. Total Dividend was 25c per share, down from 37.5c in FY22.

The company reported $7.67 billion in Assets, anchored by its $4 billion in property portfolio - up 5.9% from FY22.

Total Revenue of $4.28 billion across all business segments fell by $230.46 million, or down 5.1%. Company-operated retail stores revenue fell due to macroeconomic headwinds, significant deterioration in business and consumer confidence in New Zealand, and trading contraction in Europe.

Harvey Norman said it is on track to deliver their Malaysian expansion plans as announced last year and is committed to strengthening their brand and global footprint.

🔻Biggest Fallers

Mayne Pharma Group shares fell by 22.7% today, as net losses expanded by 44% to $317.4m in FY23 despite a rise in reported Revenue of 17% to $183.6 million. The losses include $134.7 million in primarily intangible asset impairments. Revenue growth stemmed from the company’s branded products (BPD), which grew 484% to $61.9 million on the back of improved sales of women's health product NEXTSTELLIS.

Excluding impairments, the company's Underlying EBITDA showed a loss of $95.3 million, which increased from the $59.6 million loss in the previous fiscal year. Marketing and Distribution investments caused operating expenses to rise by 46%, reaching $142.4 million for the year. Net Operating cash outflows for the entire year were $42.7 million. Nonetheless, Mayne reported a positive operating cash flow of $14.1 million in 2HFY23, which is encouraging.

Chart of The Day

Disneys Share Price Plunge

The Disney share price is down almost 60% from its highs in March 2021. despite posting record revenues over the last couple of years after lockdowns and travel restrictions were lifted.

So what’s the problem? Well, evidently, launching and running a streaming service is an expensive business. Costs related to the company’s Disney+ business have far outpaced the growth in Revenue. Disney+ launched in November 2019, with the Disney group amassing 219 million active subscribers across its Disney+, Hotstar, ESPN and Hulu platforms.

Disney’s Trailing Twelve Months (TTM) Net Income is the same now as it was in 2004 despite having tripled Revenue in that time.

Charlie Bielello posted this chart below on X, which illustrates this well.

Deep Dive

ACCC Takes on Qantas Over Deceptive Flight Cancellations

The Australian Competition and Consumer Commission (ACCC) has initiated legal proceedings against Qantas Airways, alleging misleading conduct.

The ACCC claims that Qantas continued to advertise and sell tickets for over 8,000 flights that had already been cancelled. These flights were scheduled between May and July 2022. Shockingly, Qantas allegedly kept these flights on sale for an average of more than two weeks post-cancellation, with some remaining available for up to 47 days.

Furthermore, the ACCC alleges that Qantas failed to notify existing ticket holders of the cancellations for an average of 18 days, leaving many in the lurch. In some instances, notifications were delayed for up to 48 days. This affected approximately 70% of the flights cancelled by Qantas in the mentioned period.

The ACCC's investigation revealed that Qantas cancelled nearly a quarter of its flights between May and July 2022. This equates to about 15,000 out of 66,000 scheduled domestic and international flights. The current proceedings pertain to over 10,000 of these cancelled flights.

The Maximum penalties for each breach of the Australian Consumer Law are the greater of:

• $10 million

• Three times the total benefits that have been obtained and are reasonably attributable or

• If the total value of the benefits cannot be determined, 10 per cent of the corporation's annual turnover.

To save you a Google search, Qantas reported $19.8 billion in total Revenue for the last financial year.

Daily Quiz

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A Little Extra

📉 Going Down?

Top 10 shorted stocks on the ASX - as of August 25

1. Flight Centre (FLT) - 10.36%

2. Syrah Resources (SYR) - 9.51%

3. Pilbara Resources (PLS) - 9.27%

4. Elders Limited (ELD) - 9.01%

5. Lake Resources (LKE) - 8.53%

6. JB Hi-Fi (JBH) - 8.38%

7. IDP Education (IEL) - 8.20%

8. Brainchip (BRN) - 7.84%

9. 29Metals (29M) - 7.46% 

10. Mesoblast (MSB) - 7.40%

📊Broker Ratings

What do the brokers have to say?

1. Brambles (BXB) - Downgraded to Neutral from Buy (Citi)

2. Dicker Data (DDR) - Upgraded to Buy from Neutral (UBS)

3. Flight Centre (FLT) - Upgraded to Outperform from (Macquarie)

4. Kelsian Group (KLS) - Downgraded to Hold from Buy (Ord Minnett)

5. Star Entertainment (SGR) - Upgraded to Add from Hold (Morgans)

💲Dividends

Companies trading ex-dividend today

1. Arn Media (A1N) $0.035

2. Ashley Services Group (ASH) $0.03

3. Carlton Investments (CIN) $0.6

4. Dalrymple Bay Infrastructure (DBI) $0.05

5. Eumundi Group (EBG) $0.035

6. Gryphon Capital Income Trust (GCI) $0.015

7. Integral Diagnostics (IDX) $0.035

8. Jumbo Interactive (JIN) $0.2

9. Metrics Income Opportunities Trust (MOT) $0.019

10. Metrics Master Income Trust (MXT) $0.017

11. Pengana International Equities (PIA) $0.014

12. Peoplein (PPE) $0.07

13. Platinum Asset Management (PTM) $0.07

14. Probiotec (PBP) $0.035

15. REA Group (REA) $0.83

16. Reckon (RKN) $0.025

17. SG Fleet Group (SGF) $0.073

18. Shape Australia Corporation (SHA) $0.065

19. Tabcorp Holdings (TAH) $0.01

20. Teaminvest Private Group (TIP) $0.003

21. Treasury Wine Estates (TWE) $0.17

22. Whitehaven Coal (WHC) $0.42

23. Woodside Energy Group (WDS) $1.25

24. Woolworths Group (WOW) $0.58

📅 Economic Calendar

Data to keep an eye on this week

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.