Latest / ausbiz a.m / 25.08.26 with David Walsh, Sarto Advisory
Transcript
- Andrew: And good morning. Welcome to your morning wrap from Ozbiz. It is Tuesday, August the twenty-fifth, and we're expecting a positive start on the local market, ⁓ up just around one-tenth of a percent. And in a moment, we'll preview the day ahead with David Walsh. First, though, a quick wrap-away global markets finished overnight. On Wall Street, we did see weakness in the tech sector, in particular, ⁓ semi-stocks. So the Nasdaq coming off around three quarters of a percent, the SP. Around a 30% lower. Small caps were also lower, while the DAD, their Dow, I should say, managed to add to some recent gains. In particular, NVIDIA was down almost 3%. It is set to release its quarterly results on Thursday morning our time. Treasury yields were slightly lower among the commodities. Brent, ⁓ that fell slightly to $92 a barrel. Copper futures are a little changed. Iron ore, that was up to $99 a ton. And gold. continues to rise, it up almost ⁓ one percent to a fresh three month high. And Bitcoin similarly, it's now up to close to seventy nine thousand US dollars. And the Aussie back to around seventy one and a half US cents. Well joining us to get across those market moves is David Walsh from Sato Advisory. David, good morning. David Walsh: Good morning, Andrew. How are you? Andrew: Very well, thanks for Tuesday. So, ⁓ what did you make of that ⁓ that session overnight? Just a bit of weakness there we're seeing in the tech sector. David Walsh: That is Yeah, exactly. I think there's a bit of prepositioning ⁓ ahead of the the NVIDIA result. ⁓ on Wednesday US time, we saw a a bit of divergence across the sectors, with the stronger sectors being the more defensive consumer staples, utilities. ⁓ whereas there was, you know, the tech sector was down about one point eight, specifically semiconductors. But as we've seen in the last couple of months, we expect a lot of volatility with these semiconductor stocks now. So that's ⁓ Not unexpected at this time. As you pointed out, the focus on the US Treasury yields, they were a bit ⁓ bit lower ⁓ overnight and the US dollar a bit stronger. There's still a lot of debate about what's going to happen there with the the buyers and the sellers. So we we're watching that quite closely. Andrew: ⁓ what what are you looking forward to with NVIDIA? I mean, always huge expectations built in and they always manage to deliver at least beat it. ⁓ always tends to be a pivotal point for markets, doesn't it? David Walsh: Yeah. Yeah, absolutely. And last quarter we we've got the first breakdown. They gave us the revenue by market platform where they split out their their revenue across the data centers. And they gave us the the the mix between the hyperscalers as well as other AI clouds, industrial and enterprise, as well as edge computing. So it'll be interesting to see the relative growth rates of those different ⁓ subsectors. NVIDIA guided for the second quarter revenue to be ninety-one billion plus or minus two percent. ⁓ and not in in that was not assuming any ⁓ data center compute revenue from China. ⁓ I would imagine that ⁓ the streets estimate is has drifted a bit higher. What the buy-side estimate is is always hard to tell, but ⁓ like you say, they've always managed to come in a little bit better than that and and give if give good give good guidance there. But you you know, there'll be a lot of positioning around by the hedge funds on this result. There'll be options trading, ⁓ but you know, there's nothing there's been nothing in the tea leaves that suggest that it will be disappointing, but it just depends on where expectations have drifted to under the surface. Andrew: Well speaking of expectations, let's ⁓ refocus on the local market, ⁓ David, obviously in the midst of reporting season. How how have you judged it? ⁓ given, you know, this is the last full week we're getting out of results and we'll we'll get to some of those in a moment of those reporting. David Walsh: Yeah. Yeah, it's it's interesting. Probably you can put the banks and ⁓ into one bucket there and while they were good results, not surprisingly we've had a bit of caution about the outlook around the housing market and what impact that will have going forward. So we've seen this month, you know, the banking sector has been relatively weak. And and the other large cap market dominator, the the resources have been strong in the outlook there, they've given you wouldn't say was overly bullish, but it's positive and so we've seen ⁓ a shift of flow of funds there, selling the banks, buying the resources. Healthcare has after, you know, a long time of dis been disappointing, hasn't ⁓ hasn't disappointed and so that's been a bit of a relief and we've seen a better is ⁓ better price performance from the likes of CSL, ⁓ ResMed and Cochlear. The consumer i you're really a mixed bag amongst the specialty retailers. Yeah, we had we've had good results. From ⁓ Supergroup, ⁓ Super Cheap Auto, as well as Rebel being very strong, whereas JV Hi Fi, Temple and Webster a bit disappointing. We saw ⁓ EVT ⁓ had really positive sales at their cinema groups yesterday, ⁓ and undertaking a a strong restructuring story there. So that had a really positive day yesterday. So it's been a real mixed bag and we've got a another, you know, an another big day of earnings today. Andrew: Well indeed, ⁓ let's get to that then. And speaking of retail, we've got coals reporting. ⁓ obviously the consumer staple. ⁓ cl there is a a very much a focus on how Australian households are navigating the current environment. Where do you think coals are placed at the David Walsh: Yeah. Yeah, it'd be interesting ⁓ to see how that consumer like the the core consumer staples are trending at the moment. ⁓ you know, we we always look at the comp sales growth, which for ⁓ Kohl's was around about three point six percent through the third quarter. So we'll be really looking to see how that's been maintained through the fourth quarter and what basket sizes and volume momentum are doing and just any insights they can give us around that. Coles, ⁓ as you recall, we were spending a lot of CapEx on their automated distribution centers and just sort of be interested to see how that's ⁓ trending and what impact that has on profit margins. ⁓ the liquor segment was a drag for them in the previous half, how they've been able to manage that as well as the The shrinkage and leakage controls that they've been putting in given that the tougher economy there'd been a a rising sort of drag from theft over the past sort of twelve months and what impact they'd been putting, what their their measures have been having there. So, you know, you're looking for a you're looking for a a a low single digits top line growth and and maybe the markets around about a a high single digit ad growth. So they're looking for some operating leverage there, a good dividend and you know a positive outlook so we'll see if they can if they can continue their their pretty good momentum at Coles. Andrew: ⁓ David, elsewhere ⁓ we've got both Woodside Energy and Viva reporting today. So we know what energy has done since the beginning of the the war in the Middle East. ⁓ I guess the question is, you know, where to from here. I mean, no one knows how that's going to pan out in the Middle East and and then potentially, you know, where oil prices can go from here. nonetheless, I mean, what sort of exposure do you think you want to to energy and and ⁓ David Walsh: Yeah. Yeah. Andrew: What do you make of Woodside? David Walsh: Yeah, it's a tricky one, isn't it? ⁓ we've seen overnight again ⁓ the US is talking about increasing economic sanctions on Iran. ⁓ oil prices were actually down a touch ⁓ in the overnight session. The the big question looking forward is what all countries will do about their energy security and sort of making sure they've got a more diversified energy supply chain. Yeah, this comes Woodside has obviously been a beneficiary of the the higher prices, you know, their LNG trains they're they're ex they're looking to expand both on the northwest shelf. We'll be watching for the update on the construction of the second Pluto and Scarborough. as you know, w there there are other projects that they're looking to do over in ⁓ in North America. It's a high quality company that pays, you know, a very strong dividend. We'll be looking just for some updates on their production guidance. I think the FY twenty six they were talking about a hundred and seventy four to hundred and eighty five million BOEs. ⁓ there was a bit of a hiccup there in the the last reporting season due to some ⁓ maintenance and cyclones, so that that should bounce back today. But really in the energy space, ⁓ We want to have exposure to those that have a growing production footprint. You know, obviously the the you know you want everything, you want a growing production footprint, a low cost of production and and great cash flow, but we ⁓ we're we're looking across We're looking across the globe for those that can fit that bill and that will attract the attention of these government strategies where they're looking for better energy security given the sort of risks that come with the Middle East now. Andrew: And David, ⁓ for something completely different, I I gather you've you actually like ⁓ propel funeral partners, that's reporting today. And well, I mean, unfortunately we know they're always in demand, but ⁓ I I haven't got across this recently. W what are you seeing in the stocks? David Walsh: Yeah. Yeah, it's interesting. You you'd think it's steady demand, but it's actually it's quite a down cycle in the ⁓ in the death ⁓ market in Australia. And it just we've spoken about this in the past. It's a small cap ASX listed company ⁓ which has been ⁓ rolling up ⁓ the independent funeral parlors around Australia, predominantly in regional ⁓ locations but increasingly in metro. ⁓ they, you know, it's a quite a not it's not a very concentrated industry, so they are growing their market share there. But what we have seen, you know, why why we're interested in it is that like this cycle has the top line has been quite weak as volume has been quite low. It should only be a one to two percent growth in volumes, a little bit of price there. There is competition around lower cost lower cost funeral services but when we look at the breakdown of the company they have a lot of ⁓ real estate on their balance sheet and when we we look at the sum of the parts and the value of the real estate that's carried at cost ⁓ you're getting the operating business at a very low price The market the the market has been disappointed ⁓ in the last few updates because they haven't had that beaten raise momentum that is the obsession these days. But it's a four and a half dividend, ⁓ four and a half percent dividend yield, strong management group that are aligned with a large shareholding there. ⁓ and you know we think they will continue to grow through acquisition. We're not sure when the the cyclical element of the business picks up, but if you look at the demographics there's a big bulk of the boomers that are ⁓ reaching that that age. So it's a really interesting small cap that's been Andrew: ⁓ well that that's something to look forward to, isn't it? Somewhat somewhat inevitable, but I didn't realise it was quite so cyclical. But ⁓ well there you go. ⁓ all right, well we'll get across that result as well. ⁓ well that was a a bit of a ⁓ mix of ⁓ stocks we got across. David, great ⁓ great to catch up. Thanks so much for joining us in Sarto Advisory. David Walsh: Yeah, I don't want it. It's a hard one. It's a hard one. Yeah. Thanks, Andrew. Have a great day. Andrew: And that is your Osbiz morning wrap. Hope you have a great day. I'm Andrew Gagan. Thanks for listening.