Good Evening,

Welcome to Equity Espresso. We’re here to catch you up on the day’s important stock market news in Australia and abroad. Here’s a sample of today’s top stories:

1. ✈️ Qantas Chairman Sets Departure Date

2. 🔋 Gina Rinehart adds to Liontown Stake

3. 🔍️ A Deep Dive on Aussie Tech

4. 🤑 Chinese Stimulus Incoming?

5. 🏦 Bank of QLD Drops

The Recap

ASX Continues Rebound On
Potential China Stimulus

Make that five in a row for the ASX200 index, finishing the day 47 points or 0.68% higher to 7,088.40 after another positive lead on Wall Street overnight and positive talk out of China.

Bloomberg reported that China is contemplating increasing its budget deficit for 2023. The new round of economic stimulus being floated aims to help the country achieve its official growth target. Policymakers are considering issuing at least 1 trillion yuan (US$137 billion) worth of additional sovereign debt to fund infrastructure projects, which may include water conservancy initiatives.

The Tech (+1.70%) sector was the biggest mover of the day, as Wisetech (+1.8%), Xero (+1.5%) and NextDC (+3.2%) all finished higher. Speaking of Tech, we look at some of the big movers of 2023 in the sector later in the newsletter.

Global bond yields continue to slide, with the Aussie 10-year at 4.43%.

Bank of Queensland reported a 70% drop in statutory full-year earnings today, sending the share price 7.4% lower. AGM season is well and truly underway, with CSL, CBA and IAG all hosting theirs today.

Outlook

Early signs indicate another positive night on Wall Street, with S&P 500 (+0.03%) and NASDAQ (+0.18%) futures trading higher. Some of the key events to keep an eye on this week include:

• Infosys. Qtr. Earnings (Thu)

• U.S. CPI Sep (Thu)

• U.S. Initial Jobless Claims (Thu)

• U.K GDP Aug (Thu)

• U.S. Banks Qtr. Earnings (Fri) - Black Rock, JP Morgan, Citi Group, Wells Fargo

Economic Data

• U.S. consumer inflation expectations for the year ahead increased to 3.7% in September 2023 from 3.6% in August, the highest in three months.

• The Reuters Tankan sentiment index for Japanese manufacturers in October 2023 remained unchanged at +4 from the previous month, as concerns over the global economy weigh on Japan's trade-dependent economy.

Wall Street

Wall Street indexes finished higher on Tuesday to make it three straight days of gains following the dovish comments from U.S. Federal Reserve officials, which pushed Treasury yields lower. The U.S.10-year Treasury yield came off its 16-year peak on Tuesday as trading resumed in the bond market, which had been closed for a holiday on Monday. The NASDAQ index saw a 0.58% increase, while the S&P 500 index marked a 0.52% rise at the end of the trading day.

Palantir Technologies stock gained more than 1% after the data analytics and software company won a $250 million contract with the U.S. Army, working to develop artificial intelligence and machine-learning capabilities through 2026.

Pepsi Co. rose nearly 2% after posting a third-quarter earnings which beat analysts estimates. The company reported an adjusted $2.25 per share on $23.45 billion in revenue, while analysts forecasted earnings of $2.15 per share and revenue of $23.39 billion.

German footwear company Birkenstock is expected to start trading on the U.S. stock exchange on Wednesday for $46 per share - valuing the company at $9.2 billion.

Sponsor

I’ve Showed You This Already!

We’ve all been there: You’re deep in your work, and the same colleague interrupts you with, “Sorry, can you show me how to do that thing again?”

So, how can you avoid these distractions?
You need a how-to guide that explains things visually - you need Guidde.

Guidde uses a GPT-powered extension that turns screen recordings into engaging video explainers up to 11x faster than making a video from scratch.

Using Guidde feels like AI magic:

• Record your screen, and Guidde automatically generates text for each step

• Instantly create a voiceover in almost any language or voice

The best part? It is totally FREE. No wonder Guidde was Product Hunt’s #1 product of the day with a 5-star rating on the Chrome Web Store

Quick Singles

🪃 Local News

• Get more than just a VPN. Shield your devices, guard your identity, and browse with peace of mind. Your online journey is now safer than ever with Surfshark One. Save 82% with the Equity Espresso subscriber deal!

• Airbnb cautioned that the proposed 7.5% tax by the Victorian government could decrease tourism to the state, as potential visitors may choose to spend their holidays elsewhere.

🌏 Around The Globe

• MGM Resorts International has revealed that the cyberattack it suffered in September has cost the company $100 million.

• Moet Hennessy Louis Vuitton (LVMH) reported a 9% rise in third-quarter revenue on Tuesday, marking slower growth as a strong wave of post-pandemic spending eases due to rising inflation and economic turbulence.

• Workers at Volvo Group-owned Mack Trucks went on strike on Monday after overwhelmingly rejecting a proposed five-year contract. Approximately 73% of the unit's 4,000 workers in Pennsylvania, Florida, and Maryland voted against the deal that included a 19% pay raise.

• John Riccitiello, CEO of gaming software company Unity, has announced his retirement following a recent controversial pricing change. James Whitehurst, who previously served as CEO of Red Hat, has been appointed Unity's interim CEO.

₿ Crypto Corner

• American supermarket chain Trader Joe's has filed a lawsuit in California to settle a trademark dispute with a cryptocurrency platform with a remarkably similar name. The supermarket chain took legal action against a decentralised exchange (DEX) called "Trader Joe" and its co-founder, Cheng Chieh Liu, accusing them of deliberately selecting a name closely resembling the supermarket's brand.

• Former Alameda Research co-CEO Caroline Ellison took the stand yesterday in the case against Sam Bankman-Fried (SBF). Ellison said that SBF directed her to commit crimes, portraying him as the brains behind the company operations, who knowingly transferred over $14 billion of FTX customer funds to the Alameda Research fund.

Enjoying The Recap?

Forward this email to a friend, family member, or work colleague who would benefit from getting caught up on the day’s news.
They can sign up with the link below. ⬇️ 

Markets

ASX200 Company Movers

Index & Commodity Prices

Sector

Bond Prices

ETF Watch

ASX News

🗞️ Company Announcements

Avjennings (AVJ) - announced a $30.4 million capital raise at $0.20 per share - half the price the company traded at yesterday of $0.40.

Bank of Queensland (BOQ) - fell after reporting a full-year profit of $124 million - down 70% compared with last year's profit, with the company expecting revenue and margin pressure to continue into FY24 from slower credit growth and competition.

Commonwealth Bank (CBA) - Chief Executive Matt Comyn said that he remains optimistic about the country’s economic outlook at the company AGM today. “The fundamentals of the Australian economy remain strong,” he said. “At the same time, we recognise that the impacts of higher inflation and higher rates are being felt unevenly across customers and the economy.”

CSL Ltd (CSL) - Provided an FY24 outlook at its AGM today, which was in line with previous guidance. At constant currency, the company expects revenue growth to be approximately 9 - 11% over FY23. NPATA is expected to be in the range of approximately $2.9 billion to $3.0 billion at constant currency - a growth of between 13 and 17%.

Ingenia Communities (INA) - provided a trading update today, reporting a 9% increase in forward bookings so far in FY24 as the outlook for the holiday business remains robust.

Insurance Australia Group (IAG) - confirmed it was on track to meet guidance targets for FY24 at its AGM today. The insurer expects to achieve “low double-digit” gross written premium growth during the upcoming financial year, with insurance margin guidance in the 13.5% - 15.5% range.

Liontown Resources (LTR) - Hancock Prospecting continues to add to its stake in the Lithium miner, buying a further 36.7m shares to take its holding to 18.36%.

Qantas (QAN) - Chairman Richard Goyder will leave the board next year along with two of his fellow directors, Maxine Brenner and Jacqueline Hey, who will depart next February. Goyder will stick around for another 12 months and leave the company at the 2024 AGM.

Telstra (TLS) announced it intends to acquire technology consultancy company Versent for $267.5 million to help scale its Telstra Purple tech services business. Versent reported $130m net revenue in FY23.

Deep Dive

A Look At Some of the
Best Performing Tech Stocks in 2023

The Information Technology sector has been the place to be on the ASX in 2023, with returns of over 22% so far this calendar year. This came after a sharp 36% drop in 2022, proving to be a volatile sector.

Last year’s sell-off came as interest rates started to rise, affecting the valuation of many Technology companies. In particular, unprofitable companies or those with negative cash flow felt the brunt of the sell-off.

After a tumultuous 2022, the release of Chat GPT was the genesis of an A.I. boom, lifting the U.S. tech sector. The NASDAQ is up 36% so far this year, led by Nvidia (+216%), Meta (+155.2%), and Tesla (+140.2%).

We look at some of the biggest companies in the ASX Information Technology sector, which is worth noting, excludes some other ‘tech-like’ companies like REA Group, Seek and Carsales.

1. Wisetech (WTC) - The largest company in the sector by market cap, Wistech provides software solutions to the logistics industry. Wisetech shares are up over 30% this year, with an average return of 31% p.a. over the past five years. Revenue (+269%) and profit (+420%) have experienced significant growth in that time; however, a portion of that has come from several acquisitions. Wisetechs’ share price ran hard into its earnings report in August, reaching $87.00. It has since fallen to around $64.00 as its valuation appeared stretched compared to analysts’ growth expectations. Despite the fall, Wistech’s 5-year price has returned 31% p.a over the last five years.

2. Xero (XRO) - It has been an up-and-down couple of years for Xero, which saw a hard sell-off in 2022, from highs of $154.00 to as low as $68.00 as unprofitable stocks with sky-high valuations saw big sell-offs. Xero has been able to turn the tide, as it’s focused on cost-cutting measures to improve cash flow and increase operating margins. The New Zealand-founded accounting software provider reported a full-year Free Cash Flow of NZ$102 million, up from NZ$2 million a year earlier. Xeros share price is up 70% this year to trade at around $113.00, growing revenue by an average of 27% p.a. over the last five years.

3. Altium (ALU) - One of the big winners of the recent reporting season. Altium saw its share price rise to all-time highs of $45.36 but has recently pegged back to $42.00, still up 25% this year. Altium develops software for designing electronic products, including printed circuit boards. Altium was the subject of a takeover offer from U.S. company Autodesk for $38.50 per share, which Altium rejected in June 2021. The decision looked to have been a bad one during parts of 2022 when the company traded as low as $26.00 per share. Altium’s financial growth has been slightly more modest than Wisetech and Xero, with revenue and net profit growth of 13.3% and 12.1%, respectively.

If you’re interested in the sector, Betashares has a weighted Australian Technology ETF created in March 2020 under the ticker code ‘ATEC’. As of October 10, the ETF holds 39 companies, with 57% of the holdings in six: Carsales, Computershare, Xero, WiseTech, REA Group and Seek.
The ETF price is up 27% this year and 38% since inception, with a Management Fee of 0.48% p.a.

Below are the top eight companies in the Technology sector by Market Cap - their estimated growth prospects in the next financial year and how their valuations stack up based on their current value.

Daily Quiz

Test Your Knowledge

Yesterday’s Daily Quiz Question. Which of these companies provides software services to hotel businesses?

Answer: Siteminder. A tricky one, with only 28% of you getting that correct. Ardent Leisure was the most popular answer, which actually operates the Dreamworld and Whitewater World theme parks. Siteminder provides hotels a platform to connect online travel agencies (e.g. Booking.com) with the hotel’s property management system. Siteminder reported over 39,000 customer properties as of the end of June across 150 countries.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of October 5

📊 Broker Ratings

What do the brokers have to say?

1. Domino's Pizza (DMP) - Upgraded to Buy from Neutral (Citi). The Target price is $58.60.

2. Regis Healthcare (REG) - Upgraded to Accumulate from Hold (Ord Minnett). The target price is $2.80.

👨‍💼 Director Transactions

What are the insiders doing? (On-market trade only)

💲Dividends

Companies trading ex-dividend today

1. Future Generation Australia (FGX)

2. Duxton Water (D20)

3. Wam Global (WGB)

4. Gowing Bros (GOW)

📅 Economic Calendar

Data to keep an eye on this week

DISCLAIMER: None of the information provided in this newsletter should be constituted as financial advice. This newsletter is strictly for educational purposes only. It should not be taken as investment advice or a solicitation to buy or sell assets or make financial decisions. Please do your research.