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ASX to open lower, Telstra (ASX:TLS) outperforms

Daily Market Update

ASX 200 (ASX:XJO) falls 0.5%, Telstra (ASX:TLS) outperforms, US market falls ASX to open lower

It was a mixed day for the ASX200 (ASX:XJO) taking a breather after what has been a hectic few days. 

Most sectors were down, with telecommunications and consumer discretionary the standouts, adding 1.9% and 1.0% on company specific news. 

  • Wesfarmers Ltd (ASX:WES) stock was a key contributor today, finishing 2.5% higher after providing a strong trading update. 

    Management announced that year to date sales to 31 October had been strong across most of their business lines, with online sales a standout, growing 166% in the period. 

    Looking at the individual business lines, Bunnings continues to lead the way, revenue growing 25.2% despite Victorian lockdowns, with just 3.8% of total sales online. 

    Officeworks continues to benefit from the WFH pivot, growing 23.4% with online sales represent nearly 40% of their total. 

    Kmart and Target struggled in the face of some supply issues, managing just 3.7% growth and a 2.2% contraction respectively. 

    By far the highlight was Catch Group, the $230 million acquisition in 2019, which recorded 114.4% sales growth, all of which was online, on the back of 2.7 million active customers. 

    This performance reiterates WES unrivalled ability to deploy capital in less traditional acquisitions.  

    Telstra (ASX:TLS) announces breakup plans, Seek (ASX:SEK) hits all-time high

    By far the news of the day was Telstra Corporation Ltd (ASX:TLS) which lead the market higher, adding 3.0%, after announcing a future shaping restructure. 

    CEO Andy Penn confirmed that the company would be split into three separate legal entities; InfraCo Fixed, InfraCo Towers and ServeCo

    The names are quite self-explanatory, Fixed holding the companies data centres, Towers the communication towers and ServeCo its mobile telephony and other services. 

    Penn suggested that this is one of the ‘most significant events in Telstra‘s history’, with the decision reinforced by the growing value of infrastructure assets around the globe. 

    According to the AFR, the communication towers are currently valued at $280 million but could be worth $4 billion, whilst the Fibre network alone is valued at least $20 billon. 

    The restructure will allow for the monetisation or sales of any of these assets, potentially releasing huge latent value for shareholders. 

    Most importantly, management reiterated recent guidance for 2021 but offered an insight into the post-NBN world, with EBITDA expected to return to growth by FY22. 

    Despite a tough few years for investors, TLS may finally be living up to expectations.

    Lack of stimulus amid rising cases slow rally, S&P500 down 1.5%, Tencent reports

    Lame duck President Donald Trump has all but given up on any hope of passing further fiscal stimulus for the battered US economy, sending the S&P500 down 1.5%. 

    The Nasdaq outperformed, down 0.7%, as investors once again turned back to the well-known technology names as US daily COVID cases hit another record above 150,000 yesterday; state-based lockdowns are now increasing likely. 

    In Europe, the UK economy grew 15.5% in the third quarter, nearly offsetting the 19.8% contraction in June. 

    Tencent Holdings (HKG:0700) provided a quarterly earnings update with the company overcoming US restrictions on its We Chat messaging app to deliver an 89% surge in quarterly profit. 

    The key driver was its world leading electronic gaming division, which saw sales increase 45% on 2019. 

    Monthly active users of its We Chat platform exceed 1.2 billion but the company is coming under increasing political pressure in both China and the US due to its monopolistic position.

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