Investment Matters

What matters this week: month-end. Markets up.

This week marks the end of the month (obviously).  But an eventful, and in many ways surprising month, on the markets.

The Australian market (All Ordinaries Accumulation Index) finished up 2.5% for November.  After the market drifted along at the start of the month, Trump's election unexpectedly brought an air of optimism and buoyancy.  Will it last?

It was a fairly quiet week in relation to general company news.  Metcash (IGA supplier, along with liquor and hardware retailing) released its half year results for the period ending 31-Oct-16.  It wasn't pretty, driven by the supermarkets division - earnings fell 8% vs pcp.  Entry of Aldi into WA and SA, price discounting by Woolworths, and being challenged both operationally (highest cost offering in an increasingly competitive environment) and structurally (low margins and quite high gearing ex intangibles) makes the future challenging.

Medibank Private's investor day highlighted the challenges it is also facing.  It is losing market share (-2.5% net loss in policyholders in FY-16, and losses continuing), and has considerably higher ombudsman complaints than its market share; issues it hopes to turn around within 3 years.  Revenue growth is also under pressure.

Ardent Leisure plans to reopen Whitewater World and Dreamworld on 10-Dec-16 (the latter progressively), in time for school holidays.  The company detailed the financial impact to date, with ongoing impact depending on the drop-off in future attendances.

For more positive news, CSL held a R&D investor day. It highlighted its continued commitment to R&D spending in fours areas (immunoglobulins, haemophilia, speciality products and vaccines) - actually stepping up in FY-16,  Most of the spending is on new product development.   Management highlighted the extensive R&D portfolio it has, and the expected progress in the coming 12 months.  Investing for the future.

And the global test house ALS released its first half results.  The results were on the lower side of guidance (but still within guidance), with the recovery in minerals testing volumes perhaps a little slower than hoped, and oil and gas testing remaining challenged.  But overall not a bad result, and the company's continued repositioning of the business (more exposure to less cyclic areas such as life sciences, food test etc) is going well.