ASX Stock Market in the Aftermath of RBA Holding Interest Rates Steady

Team Veye | 19-Jun-2024

Reserve Bank's decision to keep its cash rate unchanged was given immediate thumbs up by the Australian Stock Market on Tuesday by rising 1% quickly.

RBA leaving the interest rates on hold at 12 year high for seventh straight month was seen as a perfect balancing act between controlling the inflation and keeping economic growth on its path.

However, the RBA board discussing a possible rate hike and then deciding against it have set the alarm bells ringing.

Utilities, financials and healthcare recorded the strongest performances. Consumer cyclicals and the real estate sector, which is highly rate sensitive, also faced the impact.

The Two Stocks that have a Potential to Perform in the current scenario are

Scentre Group (ASX: SCG)

Scentre Group (ASX: SCG) reported that during the three months ended 31 March 2024, Scentre’s business partners achieved $6.5 billion in sales, marking a 2.4% increase compared to the same period in 2023. On a rolling 12-month basis to 31 March 2024, sales reached $28.5 billion, which is $1.0 billion more than the corresponding period in 2023.

Cash collections for the first four months totalled $902 million, an increase of $38 million compared to the same period in 2023. As of 30 April 2024, portfolio occupancy was 99.2%.

In FY23, which ended on 31 December 2023, the company successfully opened the final stage of its $355 million investment in Westfield Knox (SCG share: $178 million), with visitation 14% higher than the comparable period in 2019. Additionally, Scentre Group completed 3,273 leasing deals, including the introduction of 307 new brands to its portfolio. Customer advocacy increased to 46, up 6 points from December 2022.

The company reported customer visitation to its Westfield destinations reached 175 million in the first 18 weeks up to 5 May 2024, an increase of 2.8 million compared to the same period in 2023.

As of January 2024, Scentre Group stands firmly positioned with substantial liquidity totalling $3.5 billion, meticulously allocated to cover all debt maturities through 2025. This robust liquidity not only fortifies the Group's financial stability but also empowers it to pursue strategic initiatives without immediate cash flow constraints.

Moreover, Scentre Group has proactively bolstered its interest rate hedging strategy, achieving a notable 92% hedged position at an average rate of 2.65%. Looking ahead to December 2024, the Group plans to maintain an 80% hedged position at an average rate of 2.84%. These meticulous hedging efforts are designed to shield the Group from potential interest rate volatility, ensuring predictable interest expenses and reinforcing financial predictability.

Super Retail Group Limited (ASX: SUL)

Super Retail Group Limited (ASX: SUL) released its trading updates covering the initial 43 weeks of FY24. Throughout this reporting period, Group sales for March and April exhibited a modest increase of approximately 1% compared to the prior corresponding period (PCP).

The company's advancing market position and diversified range of operations, coupled with an unwavering commitment to enhancing customer service and experience, are poised to be further bolstered by its forthcoming expansion endeavors. 

This strategic expansion is anticipated to not only sustain the company's growth trajectory but also accelerate it. This optimistic outlook is underpinned by the remarkable financial performance witnessed in recent years, exemplified by the notable growth in revenue and earnings. 

From $2.7 billion in 2019, revenue surged to $3.8 billion by 2023, while earnings climbed from $139 million to $263 million during the same period. Such robust financial growth, expected to gain momentum, is poised to deliver substantial shareholder value and returns. 

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