Stock Update

Reporting Season Stock Updates

13 Aug 2020
It’s a busy day with a number of strategy holdings announcing their FY20 full year results. I’ll provide a brief update on each of these below:

Momentum Strategy announcements

Evolution Mining (EVN) and Northern Star (NST)

While both reported their full year results, all gold producers provide quarterly updates on production, so these rarely provide positive/negative shocks, and the gold sector is trading higher today after a small bounce following a brutal couple of days. Gold prices remain, despite the weakness of late, at elevated levels and the environment remains supportive of higher gold prices. If there was anything to note in the updates provided by EVN and NST, it is the efforts to maximise production to take advantage of the positive gold price environment.

Xero Ltd (XRO)

XRO is holding its annual general meeting (AGM) today and has provided a good update on the state of its business during the pandemic. Impressively although not surprisingly, XRO has grown its subscriber base over 4% over the last four months which, including the increase in pricing throughout the year, and the continued trajectory of the business, should translate to another year of strong revenue growth.

XRO was originally sold off early in the pandemic on the fears of the failure of a large percentage of its client base, but not surprisingly accounting is a cost that businesses just can’t cut and XRO’s services are already very affordable and scalable. XRO’s future growth will come from its expansion in the US, so any future good news on that front will be key to further price gains.

Blue Chip Strategy announcements

Woodside Petroleum Ltd (WPL)

Like with the gold miners discussed above, its unusual we see big moves when the resource companies report as they provide regular updates. There were no big shocks today from WPL but its surreal to see the impact falling oil prices have had on the company. WPL remains the best-placed to withstand an extended period of low oil prices and even declared a dividend of US26c per share which will probably be the only dividend paid out of the sector.

WPL’s fortunes will rise and fall with the oil price and remains leveraged to a return to normal that would come with a successful vaccine, and as the safest name in the sector it is a stock we are very comfortable holding.

AGL Energy Ltd (AGL)

AGL has disappointed the market this morning with its results and guidance for FY21 which was lower than expected. AGL is facing a very difficult operating environment because of COVID-19 as lower energy demand hits the company. The bright spot in the announcement was the 51c final dividend (80% franked), but this was down from 64c in the previous corresponding period and using its guidance and payout ratio for FY21 points to a lower dividend again. Like WPL, AGL is leveraged to a return to normal and any success from a vaccine would be a shot in the arm for the company (excuse the pun).

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