ASX News LIVE | XJO Up; Origin Fallout; Star, Wisetech, Adairs Feature

Almond merchant Select Harvest [ASX:SHV] is down 9% after announcing a huge swing to a net loss.

Here are the numbers:

• Net profit after tax of $4.8 million in FY22 turned into a net loss of $114.8 million
• Despite the massive net loss, FY23 revenue was down 12.5% to $206 million
• Operating cashflow turned from a positive $26.8 million into an outflow of $8.2 million
• 2023’s almond down substantially from 2022’s 28,312 MT to 19,771 MT

So what happened?

Revenue fell, but not catastrophically. And the average almond price didn’t fall too much either YoY, from $6.80/kg to $6.42/kg.

Select Harvests blamed three factors:

• Lower crop volume due to adverse weather
• Write-down of 2022 crop inventory
• And a goodwill write-off

Since bad weather had such a large impact on results, I wondered if SHV’s profits — like the crop seasons — are cyclical.

But FY23’s net loss is an outlier.

It’s the first net loss in over a decade.

No wonder Brookfield and EIG sought to amend the takeover bid at the last minute. Its original bid was overwhelmingly rejected.

70% of Origin shareholders voted against a $9.43 a share takeover offer, before Brookfield and EIG lobbed a last-ditch bid on Thursday.

The saga rolls on.

In the latest What’s Not Priced In episode, Greg and I discuss:

• Updates from Accent Group, Lovisa, Kogan, Temple & Webster, and Nick Scali and what they reveal about consumer demand
• Origin Energy takeover chaos
• Nvidia’s massive forecast beat, albeit one largely priced in
• How the high cost of capital is forcing investors to get serious about valuations
• Why now is a good opportunity for investors who can ‘do their homework’
• ‘Investing is not about what you believe but what you believe that’s different to what the market believes’
• AI is not a substitute for great, creative investment research

– What updates from $LOV, $KGN, $TPW, $NCK & $AX1 reveal about consumer demand
– $ORG takeover chaos
– $NVDA huge quarter largely priced in
– High cost of capital forcing investors to get serious about valuations
– AI no substitute for good researchhttps://t.co/appzhBuv4I

— Fat Tail Daily (@FatTailDaily) November 24, 2023

COVID-19 did not lead to more breakups.

ABS labour force data shows couples are going strong. Couples with kids continue to fall as a percentage of the population, however.

Couples are not breaking up. But they’re not having kids either.

Seem to recall a bit of talk through covid of couples breaking up. ABS Labour Force data doesn't back that up. Existing trends continued. pic.twitter.com/xAvQOuv0j8

— Ben Phillips (@BenPhillips_ANU) November 24, 2023

More on the previous post about an uptick in dwelling density.

In June, former RBA governor Philip Lowe copped flak for comments before a parliamentary committee about people deciding to cohabitate to economise.

9News ran this headline at the time, ‘Struggling renters should get flatmates or move home, RBA boss says’.

But is that what he said?

Thankfully, the RBA links to transcripts of every parliamentary testimony given by senior officials. Here is the relevant exchange:

Philip Lowe: Some people are experiencing bigger increases in rents than that, so it is really hurting some people. The underlying issue here is supply and demand in the rental market. The vacancy rates in many cities are very low. I was in Perth earlier in the month and there it is almost impossible to find something. The rental vacancy rate is the lowest it has ever been. There are a few things that have contributed to that. During the pandemic, the average number of people living in each household declined. People wanted more space. They were working from home. Rents actually declined for a while. People said, ‘Rather than have a flatmate I will just have an office at home,’ so the average number of people living in each dwelling declined and that increased the demand as a result for the total number of dwellings. That has been going on. The other thing that is now happening is a big increase in population. The population is increasing by two per cent this year. Are there two per cent more houses? No. The rate of addition to the housing stock is very low. We have a lot of people coming into the country.

Philip Lowe: People want to live alone or move out of home and it doesn’t work. The way this ends up fixing itself, unfortunately, is through higher housing prices and higher rents. As rents go up, people decide not to move out of home or don’t have that home office; they might get a flatmate. The increase in supply can’t happen immediately, but the higher prices do lead people to economise on housing, don’t they? Kids don’t move out of home because the rent is too expensive or they decide to get a flatmate or a housemate. That is the price mechanism at work. We need more people on average to live in each dwelling, and prices do that.

Persons per dwellings (adults) looks to be increasing – roughly lowering demand for housing by about 100,000 dwellings since mid-2021. As suggested might be necessary by former RBA Governor Lowe. pic.twitter.com/HGYsJLjK59

— Ben Phillips (@BenPhillips_ANU) November 23, 2023

Greg Canavan offered another explanation to the Harvey Norman virtual queue.

‘It’s probably just s##t tech’.

Occam’s razor.

Kogan founder Ruslan Kogan is having trouble accessing Harvey Norman’s website.

So am I.

I just tried to go on Harvey Norman’s site and the same queue banner greeted me.

Rising rates are making us all patient penny pinchers.

Where do you even buy this tech? #BlackFriday2023 pic.twitter.com/G7kwpdYC9z

— Ruslan Kogan (@ruslankogan) November 23, 2023

Home furnishings business Adairs [ASX:ADH] is down 2% this morning after releasing a trading update accompanying its AGM.

In the first 21 weeks of FY24 (ending 19th November) group sales are down 9% on the same time last year.

Management said:

‘The impact of higher interest rates and cost of living pressures has seen a significant decline in traffic across each of our businesses of c.10% over the same period last year. Whilst sales in each business are below the same period last year, our focus on customer experience and conversion has ensured the sales decline is less than the traffic decline’.

How does that work? The impact of higher interest rates on home furnishings purchases.

In a neural macroeconomic environment, people replace linen, bedsheets, pillows, towels, etc once or twice a year. Now the same people are sticking with old linen or downgrading to K-Mart linen?

And not all households are affected by rising interest rates equally. Mortgage owners are hit hardest. Is that Adairs’ key demographic?

Good morning! Happy Friday. Kiryll here.

The ASX 200 is up about 0.30% currently in what shapes to be a cruisy day for Aussie markets. US stock markets were closed overnight for Thanksgiving.

But plenty of local firms are hosting AGMs today, and giving trading updates.

We’ll cover that and more in today’s blog.

By the way, our podcast, What’s Not Priced In, has a dedicated email address. You can send questions you’d like covered in future episodes to wnpi@fattail.com.au.