Viewpoint: Bearish
Ventia Services Group Limited is an essential infrastructure services provider in Australia and New Zealand. Its segments include defence and social infrastructure, infrastructure services, telecommunications and transport. The defence and social infrastructure segment provides maintenance and support services to customers operating across defence, social infrastructure and others. This segment also provides property and consulting services. The infrastructure services segment supports the ongoing operation and maintenance of infrastructure. This segment also provides environmental remediation and rehabilitation services. The telecommunications segment provides end-to-end service capabilities that span design, supply, minor construction, installation, commissioning and maintenance of telecommunications networks and infrastructure. The transport segment provides maintenance, project delivery and technology solutions to owners and operators of road, motorway, tunnel and rail networks.
DOW -23.74%: a brutal reaction to a poor 1H result for the facilities contractor as contract losses and a restructure weighed on the outlook. Profit fell 20% to $68m while a $12m post-tax hit will be taken in the 2H following a revenue recognition error on an ongoing contract.
DMP -23.81%: Whacked today and rightly so after a result that was a big miss to consensus while market positioning had clearly become more positive on the stock with the share price up ~50% from its recent lows. Fund manager’s drank the DMP cool-aid with gusto as Mr Meji said that while things were tough, they were turning around – which now seems a stretch, in the short term at least.
Platform & data provider IRE rallied +5.8% yesterday but the stock remains close to its multi-year lows. IRE has enjoyed a dominant position in the markets in which they operate however competition is increasing for both customers and also for staff, IRESS is a platform we use every day, and MM still feels it’s ripe for disruption.
SGR -20.8%: Not a lot to like about today’s update from the casino operator with trading being hit by operating restrictions and competition from Crown.
NCK -13.04%: the furniture retailer announced 1H results today with a strong 6-months unable to offset lacklustre commentary. Revenue jumped 57% to $284m, helped by improving delivery times and a full contribution from Plush which was acquired in 2021.
The Yen initially tumbled after the BOJ stuck to its ultra-easy money policy yesterday afternoon but the seed appears to have been sown plus falling US bond yields are weighing on the Greenback offsetting strength in the Yen. Following the sharp decline in the cross rate a period of consolidation in early 2023 is our preferred scenario.
Fashion jeweller/retailer LOV delivered an excellent result back in August with revenue coming in at $459m, up 59% on FY22 while its high gross margins climbed to 78.9%. However, the stocks more than doubled through 2022 and we believe it’s fully priced around $22.50 trading on 31.5x earning for FY’23.
US bond yields did edge higher overnight but it’s hardly noticeable in terms of the last few months’ price action. At MM we don’t believe the recent weakness in stocks can be put at the door of bond yields, it’s more a case of stocks having rallied too hard too fast and the Fed’s clear message that it’s keen to contain any optimistic exuberance towards risk assets.
