Investment Matters

Company news: June Quarter Updates

Australian Equities sub-portfolio

Cardno (very positive impact) looked to finish the week over 30% higher (as at 12pm). On Friday morning it announced that it expects operating profit (FY-20) to be 10% higher than it had previously guided (at the mid-point) and 10% higher than its earnings in the previous year. The announcement affirms our view that the company was well positioned to weather the COVID-19 downturn and is undervalued relative to its earnings.

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QBE (positive impact) has continued to see a strong growth in premiums over the first half of the year. It also announced a number of costs relating to COVID-19 which will impact its result for the half,, but remains in a strong capital position. We expect it to be a strong beneficiary from a rising interest rate environment.

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As we approach reporting season, a number of your resources companies released quarterly updates:

 

Lynas’ (positive impact) report for the June quarter was in line with our expectations, with performance supporting commentary by the company over the period. Operating performance aside, we see that the recent rise in geopolitical tension between the US and China (the worlds largest producer of rare earth metals) has strengthened the strategic value of its assets.

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Carbon Revolution (positive impact) share price ended the week over 10% higher. The company revealed it has signed an additional supply contract with an existing customer, with the company now supplying wheels for 11 vehicles. It also revealed that it is in the engineering validation stage with an Asian based vehicle manufacturer, which opens the door for additional contracts. Carbon Revolution invested heavily in industrializing its processes over the quarter and expects more modest investment spending moving forward, as it ramps up production and explores further commercial opportunities.

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BHP’s (neutral impact) quarterly report was in line with expectations, however iron ore production surprised to the upside. Responding to market conditions it has guided towards lower production of copper and oil in 2021. The holding remains a core diversified exposure to commodity prices, including a recovery in the price of oil.

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Newcrest Mining (positive impact) announced production levels that were marginally ahead of forecasts, with upgrades to resources at two of its smaller mines surprising to the upside. We see underappreciated optionality in these deposits, and it remains a key exposure to the price of gold.