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ASX 200 February Review, Market Movers and Sector Performance

ASX 200 February Review, Market Movers and Sector Performance
The ASX200 declined 2.5% in February to mark yet another month of declining equity prices
Mar 04, 2016 By Simon Herrmann Tags: ASX, cim, OFX, PRG, NCM, NST, Analysis, ASX Review

After shedding nearly 5.5% in January, the ASX200 declined 2.5% in February to mark yet another month of declining equity prices. However, volatility eased in the second half of the month and we note that a variety of stocks as well as sectors rebounded. Amongst the ASX200 market movers, roughly 50% of all stocks gained, while the remaining half experienced losses.

The focus of ASX investors shifted away from China towards the local half-year earnings reports. While results were mixed, most analysts agree that Australian companies performed “slightly better than feared”. Various large or mid cap companies announced robust results, such as QBE Insurance (ASX:QBE), SEEK Limited (ASX:SEK), Harvey Norman (ASX:HVN) or Carsales.com (ASX:CAR) to name a few.

In our mid-month report of the ‘best and worst performers on the ASX', we noted that all sectors apart from Utilities experienced losses year-to-date. Let’s take a closer a look at the developments witnessed during February.

Please note: All prices are as of 29/02/2016. No guarantee is made for the accuracy of this data.

ASX200 Sector Performance in February

Before we assess the individual sector performance, it is worth noting that Australia’s primary benchmark index S&P/ASX200 declined 2.5% or roughly 125 points for the month. The broader All Ordinaries, which includes the 500 largest companies on the ASX, lost 2.2%, slightly ahead of the ASX200. The Small Ordinaries gained 0.8%, as small and mid-capitalisation stocks have once again outperformed.

ASX200

-2.5%

All Ordinaries

-2.2%

Small Ordinaries

+0.8%

 

The table below contains 10 major industry groups of the ASX200 and their performance as a group in February.

Sector

Change in %

Materials

+8.2%

Industrials

+5.8%

Utilities

+0.6%

HC

-0.9%

Energy

-1.3%

Discretion

-2.3%

Telecommunication

-5.5%

IT

-5.7%

Staples

-5.7%

Financials

-6.2%

 

The materials sector was by far the strongest sector in February adding 8.2%, boosted by rising commodity prices, and especially, lifted by gold stocks. Gold futures gained for most of February as the price of a fine ounce of gold increased by roughly US$100.

Industrials gained 5.8%, closely followed by Utilities, which is traditionally said to be a ‘yield sector’. Financials was the worst performing sector shedding 6.2%, however Telecommunication, IT and Staples lost each more than 5% as well. These losses were largely attributed to falling blue-chip stocks with a strong weight on the sector, such as Telstra (Telecommunications), the ‘big four banks’ (Financials), Wesfarmers (Staples) or Computershare (Information Technology). Roughly 50% of all ASX200 stocks gained, while the remaining half decreased in value.

Best ASX200 Performers in February

The table below contains the ten best performing stocks on the ASX200 for the month of February. This table does not include any dividend payments and solely focuses on capital growth.

 

Ticker

Company

Change in %

MIN

Mineral Resources

+49.6%

BPT

Beach Energy

+43.2%

OZL

OZ Minerals

+35.2%

NST

Northern Star Resources

+32.7%

WHC

Whitehaven Coal

+30.1%

MSB

Mesoblast

+30.6%

NCM

Newcrest Mining

+30.6%

PRY

Primary Health

+29.7%

AWC

Alumina

+29.3%

CIM

CIMIC Group

+27.6%


As already noted in our last review, most of the best performing stocks belong to the resources or materials industry. In fact 7 of the best 10 performing stocks on the ASX200 have direct exposure to the mining industry. Some of these stocks have lost half of their value in the past 12 months, which makes it ‘easier’ for them to rebound. Rising commodity prices where the main contributor to the price surge, as investors revaluate the companies and their earnings potential accordingly.

Mineral Resources (ASX:MIN) was the best performing ASX 200 stock in February, adding nearly 50%. The company released better than expected results on 18 February as EBITDA was broadly in line with the previous corresponding period, while net profit after tax was slightly lower at $47.5million. Revenue declined 23% to $577million as a result of lower iron ore prices. Mineral Resources is an integrated supplier of goods and services to the resources sector and investors fear that a slowdown in mining investments will negatively affect the company’s services contracts.

OZ Minerals (ASX:OZL), Northern Star Resources (ASX:NST) and Newcrest Mining (ASX:NCM) were buoyed by rising gold prices as investors seek safety in gold stocks amid rising volatility in equity markets. However, the latest rally in gold stocks is attributed to a variety of factors which we have reviewed in detail here.

CIMIC Group (ASX:CIM) gained 27.6% in February, after posting a 20% rise in underlying earnings. Net profit was at the top end of CIMIC’s guidance range while Group net profit margins increased 130 basis points.

Worst ASX200 Performers in February

The table below contains the ten worst performing stocks on the ASX200 for the month of February. This table does not account for dividend payments.
 

Ticker

Company

Change in %

OFX

Ozforex Group

-39.9%

PRG

Programmed

-32.8%

ISD

Isentia Group

-25.5%

VRL

Village Roadshow

-24.6%

CVO

Cover-More Group

-24.5%

SHV

Select Harvests

-22.3%

BEN

Bendigo Bank

-21.6%

SUL

Super Retail Group

-21.3%

FXL

FlexioGroup

-21.1%

HGG

Henderson Group

-26.9%

 

Yet again there is no obvious correlation between the worst performers, apart from weak customer demand in the resources sector. While many companies have either direct or indirect exposure to the mining industry, investors reduce exposure from companies that were not able to meet their guidance.

Ozforex Group (ASX:OFX) was the worst performing stock of the ASX200 in February, falling 40% for the month. The company announced that it has terminated discussions with The Western Union Company which were previously announced in November 2015. Western Union did not submitted a binding proposal, which is why OFX terminated its discussions. Despite a 9% rise in income, Ozforex admitted that trading activity in the December quarter was below expectations as the company suffers from lower client acquisition levels whilst transitioning to a new website.

Programmed Maintenance Services (ASX:PRG) announced a sharp drop in demand for marine services due to the decline in oil and gas prices and expects to recognise a goodwill impairment charge of $75million in the second half of FY16. While demand for staffing and maintenance from non-resources sector customers’ remains solid, Programmed expects conditions in the mining sector to weaken further. PRG declined nearly 33% during February.

Our next monthly review will be released in April.

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Simon Herrmann Author: Simon Herrmann Mar 04, 2016

Simon is a financial analyst at independent research firm Wise-owl who wants to change the world by disrupting the cliché approach to investment decision making with convergent thinking. Wise-owl’s goal is plain and simple: Find the best opportunities for our members by following a proven methodology and to create long-term value through high-quality advice, innovation, technology and education. We combine industry experience and the agile mentality of a start-up. Wise-owl is the future of stock market investing.

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