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Morningstar runs the numbers

Lex Hall  |  17 Aug 2020Text size  Decrease  Increase  |  
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We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 14 August.

177 days

The amount of time it took the US benchmarket to regain its pre-covid record. The benchmark S&P 500 rose as high as 3387.24 on 14 August, just above its record high closing level of 3386.15 from 19 February. The record came just before investors sold shares in anticipation of what proved to be the biggest slump in the US economy since the Great Depression. The index’s intraday record high of 3393.52 was also set on 19 February. 

3.2 per cent

In the wake of coronavirus, most global economies continue to struggle, writes Morningstar’s Peter Warnes, but the Chinese economy has rebounded strongly, much to the chagrin of many, at least privately. “After recording a 6.8 per cent contraction in GDP in 1Q20, the economy grew by 3.2 per cent in 2Q20,” says Warnes, “China was the first major country to report a return to growth following the outbreak of the virus. For the six months to June (1H20), the economy contracted by 1.6 per cent from 1H19. Early signs indicate growth is continuing in 3Q20, with July trade data reflecting increased domestic and foreign demand.”

$3.80

Morningstar’s new fair value estimate for Telstra. The reception is fuzzy for Australia’s dominant telco, says Morningstar’s Brian Han, who has trimmed his fair value estimate for the first time in two years following the company’s 13 per cent per cent fall in profit. Since June 2018 Han has held a fair value estimate of $4.40 but despite what he sees as satisfactory earnings results, other factors have forced him to cut his estimate by 14 per cent to $3.80. “Management's near-term outlook is weak,” Han said in the wake of Thursday’s result, “with the midpoint of the fiscal 2021 total EBITDA guidance of $7.2 to $8 billion 11 per cent below our prior expectation.”

$58

Morningstar’s new fair value estimate for Magellan Financial Group. The global equity manager delivered a strong set of results amid challenging market conditions, lifting adjusted net profit after tax by 20 per cent to $438 million and growing average funds under management to $95.5 billion. Additional flows, supported by the Magellan High Conviction Trust raising and investment outperformance led to an increase in base management fees for the eleventh consecutive year, up 26 per cent to $587 million. Morningstar regional director Adam Fleck has increased his fair value estimate for Magellan to $58 per share from $52 after incorporating stronger future net flow growth.

11 per cent

The fall in profit announced by Commonwealth Bank. The short-term outlook may not be pretty, but the bank’s scale will help it endure higher loan losses while remaining competitive on price and service, says Morningstar senior analyst Nathan Zaia. Australia’s largest bank posted a drop in full-year profit and sharply cut its dividend as the coronavirus pandemic limited economic activity and forced it to make provisions for more loan defaults. The bank said cash profit for the 12 months to 30 June fell to $7.3 billion, down 11.3 per cent from a year ago. It also slashed its final dividend to 98 cents a share, the lowest payout since 2006. The wide-moat stock is still slightly overvalued according to Zaia’s fair value estimate, which remains at $71 a share.

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is senior editor for Morningstar Australia

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