Latest / ausbiz a.m / 11.08.26 with Jimmy Jang, GBA Capital
Transcript
- Andrew: Good morning and welcome to your morning wrap from AusBiz, setting you up for the day on the Australian share market. is Tuesday, August 11th, rates day. We will get that RBA decision later in the day. We're expecting a flat opening. The local market on the local market, the ASX futures down just three points. And in a moment, we'll preview the day ahead with Jimmy Jane. But first, a quick wrap of where global markets finished overnight. Oil prices settle about 5 % higher. after Iran and the United States traded demands for compensation, essentially dimming prospects for a deal to reopen the Strait of Hormuz. On Wall Street, the Nasdaq, S &P 500, and Dow all closed marginally lower, with declines in chipmakers to approve new year drag as investors also became less confident about the Middle East deal. Specifically, shares of Nvidia dropped around 3 % after it parted with six major financial institutions to launch compute finance platforms aimed at raising more than $500 billion in third party capital for AI infrastructure also weighing on the market shares of Intel which fell around 4 % after the chip makers said it was planning to raise $15 billion through a share sale. In the commodities complex as I mentioned oil is up gold also up around 1 % to around $4,390. Bitcoin has fallen back to $64,000. The Aussie dollar trading slightly weaker at 70.5 US cents. Let's get across those market moves now. Joining us, Jimmy Jang from GBA Capital. Jimmy, welcome. Jimmy: Good morning, Andrew. Andrew: So let's first start with what you saw on Wall Street. Look, I mean, we've had record after record more recently, maybe just a bit of a breather. How did you see it? Jimmy: Yeah, well, look, I think it was a bit of a flat day over in the US. So obviously S &P 500 did about 0.1 % after we saw that record high close on Friday last week. And Nasdaq fell around 0.4 % and Dow is about 0.25%. So it's a notably kind of quiet low conviction session after we saw that two kind of big. weeks of swingings in both directions. So it wasn't a bit of a risk off route from my gathering. It was more like a digestion around that near record high. So it was actually a pretty healthy session in my view. One of the kind of flagship stories that we saw in the Wall Street was obviously Nvidia that released a news this morning around. the fact that they are working with some of the biggest Wall Street, largest asset managers like Apollo, Blackstone, BlackRock, global infrastructure partners, Brookfield and Goldman Sachs and KKR. So on a $500 billion effort to finance their AI infrastructure build out. So this kind of follows that pattern where Nvidia guarantees the customers and the customer buys the chips and then the revenue lands back on Nvidia's income statement, which is that circular financing concern that investors having. kind of flagging all year. And as you know, Andrew, we saw the market cheering the AI's cat pack story for almost over a year. Now it's really starting to interrogate around how it's actually going to be funded. So even though we saw this such a big announcement coming out from the company, still kind of slipped around 3 % despite the headline size of the deal, which obviously tells you that the market is kind of sentiment sits on not just Nvidia, but ⁓ AI companies in general and chip makers. specifically how they're going to actually turn this into a profitable business now. So that's a very interesting to see. Andrew: Well, Jimmy, let's let's then focus on what's ahead locally. guess two big events, one going, been reporting season and also the rates decision. Let's begin with the RBA. How critical is that going forward? guess, particularly for investors and and and earnings growth. Jimmy: Absolutely. And look, before we go to RBA, probably also we can briefly touch on what the Fed has been doing. So the Fed in the US, they all obviously held the right ⁓ on the last session in July 29th. And we saw some kind of real split decision between the committee. So ⁓ there was at least three members dissented in favor of a 25 base point hike, which is very important to see. And we saw that weak July jobs report coming out as well. How it kind of lends in Australia, obviously RBA has been holding the rate for the last kind of six consecutive meetings now, ⁓ as universally expected. So it wasn't a surprise, but what we'll be really ⁓ potentially see is that mission bollocks ⁓ press are worth quoting on the air, which is the board judges on the current level of the cash rate appropriate. So rate must stay high for a long time, but obviously the need term cut doesn't align with the board's thinking. she mentioned in last meeting. So it's a hold as expected, ⁓ but it might be a hawkish leaning hold, Andrew, not a dovish one. And that's consistent with our calendar showing the business confidence printing at negative five yesterday, which is a softer domestic backdrop. ⁓ But whether it will be a very soft landing, I'm not sure. be in my sooner budget that given inflation is still above the target. We saw the oil price spiking again on yesterday's session. largely expect it to be a hole, but depending how hole-cashier will be, that will be the main focus. Andrew: Well, if it is that hawkish hold, what's the likely investor reaction? Jimmy: Look, it wouldn't be that big, you know, reaction because we actually got bigger things that we need to worry about in the macro level over in the US and Iran. So I think, you know, what the market is actually slowly picturing in is, you know, we saw the gold price obviously having a very strong three to four sessions now. That shows that the market is slowly, you know, reallocating a lot of their assets away from the US. So, you know, we saw a lot of the central banks, for example, has been accumulating gold rather than bonds in the US that obviously shows that the market is actually quite sick of what's happening in the Iran and US right now with the volatility that the oil price is also kind of pricing into the market as well. Plus that, you know, like we mentioned, the reason why the hawkish leaning hole is something we need to worry about is because the energy costs over, you know, due to the straight off, the moose constraint hasn't really factored into our inflation data yet. You know, it's only going to come out in the next two quarters. And that's what the marketing market is forecasting. So we might actually see a lot of these profit taking domestically back into, say, more conservative approach like gold, for example, or physical gold as well. So that's something that we're seeing domestically within my clients as well. Andrew: Yeah. All right. Well, I know you like gold. We'll get to that in just a moment. First though, just turning to reporting season. Today we do have Life360, Coronada Global, SGH. Let's ⁓ talk about Life360. I know you're happy to take a closer look at that given it is the tech stock. ⁓ What are your thoughts then on what's next for the tech company? Jimmy: and Yeah. Yeah, look, Life360, you know, as a company, deliver very strong growth quarter. And, know, it's driven by the subscription and advertising. And then the first quarter advertising was already close to 20 million US dollars, which is a record of 330 % year-end growth. So the guidance that, you know, we should be, it's always coming out today. And the guidance that we're looking at in terms of revenue, the guidance was about 650 to 685 million. Subscription revenue is about 470 to 475. So we'll be very interested to see how these guidance either can be bid or not. And also we've got the adjusted EB DAB 130 to 140. Now, what's really important in my view, and it's kind of seeing how the reporting season is playing out in the US, a lot of these tech companies or software companies, the main focus that the market really kind of highlighted over the last year was growth. How quickly can these companies grow? Now, as I kind of briefly touched on earlier in the session, what the market's really focusing on now is how profitable can you guys be and what are the margins? Can your margins get thinner due to what's happening in the world right now? That's been a key focus and we saw that quite regularly in the reporting season in the US as well. I think Life360 in our case, I don't think it will be much different. Obviously strong growth is very important, but whether the adjusted EBITDA will be still within the guidance or the growth is gonna be within the level. I think that will be the key focus that the market might watch out for today. So definitely should be on the watchlist for a lot of people and then a lot of people hold onto this stock as well. Andrew: Just briefly, obviously, we had Westpac out yesterday. The banks are hurting in regards to a pullback in mortgage growth. Certainly, applications are way down. We've got the other big three ⁓ still due to report. Jimmy, what's your view there? And I guess, I mean, we could tie this back to the RBA, couldn't we, given where interest rates have gone, but also, obviously, given those budgetary changes we've seen in regards to tax. Jimmy: Yeah, let's kind of touch on Westpac, Andrew. I think it's a good kind of stock to talk about in the broad financial sector. So very weak result. their cash earning was largely broadly in line and core earnings was largely in line as well. the main negatives that I think the market really focused on was the mortgage application falling nearly 20%. And that's largely expected, obviously, because of what's happening in the real estate market right now. I think the auction clearance rate is dropping like a feather, especially in the Eastern suburb like Sydney and Melbourne. And the application declined further to about 26,000 a month from the May 15 to July 31st versus 29,000 during the third quarter. So that's obviously a big drop. And the housing credit growth expected to fall about 6.8 % from financial year 26 to about 4.7 % financial year 27. So that's been a big. driver of the market pullback as well from the expectation. yeah, however, what we're interesting to see is that the business lending is actually currently growing faster than housing. So you'll be interested to see how the bank position themselves in business lending business as well. And we also saw in the report that the investor interest only loans are increasing, which is kind of suggesting that the customers may be extending their loan duration rather than a new loan. ⁓ Obviously managing repayments, in this high yielding environment is quite aggressive. it's kind of showing that a lot of people refinancing the loan is not actually a good thing from the bank's perspective because it means that currently struggling to pay their down debt at the moment. that's probably one of the biggest issues housing at the moment, Andrew. I think that's where the market's seeing it at moment. Andrew: Jimmy, I know you also got to focus on resources in particular. mentioned gold, you like that. Maybe you can mention a couple of stocks, gather that tin is also on your list. Jimmy: You Yeah, look, I don't think it's that difficult to find very cheap gold stocks right now just because it's been quite beaten down due to the gold price dropping nearly 25 % from the high. So guys like your normal guys, producers like North and South, it's a very great pick. I actually suggest people to go into the blue chip names now because it's already getting a very high risk to reward ratio just because how quickly they drop. The North and South is probably a big good pick for me right now. No need to take a further risk than what's already out there at the moment. But TIN is probably a very interesting commodity that may not be in front of a lot of people right now because TIN is obviously one of the main commodity for semiconductors as well as data centers in general. So Sky Metals SKY.ASX is the ticket card is probably one of my key focus. They just had a Taliburg PFS matters released yesterday, which shows ⁓ very, very strong return. So their project MPV is roughly effectively looking about 10 to 12 times their current equity value and their market cap is only about 25 to 30 million market cap at the moment. that sort of announcement that we saw yesterday is obviously materially changing the valuation framework for a lot of junior mining company. So for those people that's looking for a bit more higher geared exposure to gold price, I JuniExpore is like Sky, not Gold Prize, sorry, Tim Price, think Sky Metals will be a very good pick because their average 160 million average EBITDA is also very meaningful in the report we saw yesterday. So definitely a good one to put on the watch list today. Andrew: Well, Jimmy, great to get across the opportunities you're seeing on the local market at the moment. Thanks for joining us from GBA Capital. And that is your AusBiz Morning Wrap. Hope you have a great day. I'm Andrew Gagin. Thanks for listening. Jimmy: Thanks, Andrew.