Last week was a volatile one for ASX shares as the growing coronavirus threat sent investors fleeing for safe havens. The S&P/ASX 200 Index (INDEXASX: XJO) lost 3.5% and has fallen more than 15% since hitting a record high on 20 February, with the market now sitting at its lowest level since early last year.
Central banks tried to stem the flow with stimulus measures. The RBA cut the cash rate to 0.5%, a record low, in an attempt to cushion the blow from the spread of coronavirus. Nonetheless, uncertainty around the length and depth of the epidemic means volatility is likely to remain on the menu.
ASX travel shares and those exposed to interest rates were hit hard last week. So, let’s take a look at the 5 biggest ASX share price fallers last week.
Corporate Travel Management Ltd (ASX: CTD)
Corporate Travel was last week’s biggest faller shedding 21.2% of its share price to finish the week at $10.80. The coronavirus outbreak has hit the company hard with shares halving in value since their January highs.
Corporate Travel was hit with a report from hedge fund VGI Partners last week which queried its accounts, alleging the company was covering up underlying weakness that predates the coronavirus outbreak. The hedge fund questioned how Corporate Travel reported a decline in volume-based incentives when its actual turnover from transactions increased over the same period.
VGI also queried Corporate Travel’s level of debt, estimating it averaged $30.5 million, well in excess of Corporate Travel’s reported closing balance of $21.6 million in debt. Corporate Travel rejected VGI’s assertions, saying its characterisation of large intra-period loan balances was incorrect and that VGI had ignored a movement from volume-based to transactional revenue.
What is clear is that Corporate Travel is suffering from the impacts of coronavirus on its business, having recently downgraded its full-year guidance. Full-year earnings before interest, tax, depreciation and amortisation (EBITDA) is now forecast to be between $125 million and $150 million. This would represent a flat result on FY19 at the upper end, or a 16.5% reduction at the lower end of the range.
Corporate Travel reports that in its Asian region, approximately one third of transactions relate to flights into and out of China. In February, post-Chinese New Year activity was down 50%, largely driven by border closures and travel bans. The company has advised that significant cost management measures are underway to mitigate lower client activity.
HUB24 Ltd (ASX: HUB)
Shares in HUB24 fell 20.5% last week to close the week at $7.99. HUB24 provides an investment and superannuation platform, and like other ASX companies exposed to interest rates, was sold off following the RBA’s rate cut.
HUB24 was travelling well prior to the rate cut, having reported a record first half, but investors have been wary of the company as expectations of a rate cut amplified. The company earns interest on cash balances held via its platform that are yet to be invested, so the drop in rates will be detrimental to its earnings.
Nonetheless, HUB24 reported a 58% increase in Funds Under Administration in the first half, which reached $15.8 billion, and have since increased to $17.4 billion as of February 21. HUB24 reported record net inflows for the first half, which were up 18% to $2.5 billion.
Flight Centre Travel Group Ltd (ASX: FLT)
Flight Centre shares ended the week 18.8% lower at $26.50, meaning shareholders have seen a 40% fall in the share price since the start of the year. The Flight Centre share price has been a victim of the spread of coronavirus, with the company downgrading its full-year guidance in late February.
Flight Centre lowered its FY20 profit before tax forecast to $240 million – $300 million from $310 million – $350 million. In early February, Flight Centre reported China and Singapore businesses had been significantly impacted by China travel shutdowns. These businesses together generated around 2.5% of Group total transaction value in the first half.
Flight Centre also reported its business elsewhere had been significantly impacted as companies amend travel policies to prevent employees travelling to China and elsewhere. Leisure travel has also been impacted as customers reconsider short term travel plans.
Although it is difficult to predict the impact of the virus, Flight Centre expects it will lead to subdued activities through the rest of the financial year. Based on its experience during the SARS outbreak, Flight Centre expects a strong rebound in travel after the crisis subsides.
Virgin Money UK PLC (ASX: VUK)
Virgin Money shares dropped 16.4% last week to finish the week at $2.50. There was no news out of the lender last week, however, the share price fall echoed that of its UK-listed shares which fell 12% last week.
The lender was also likely sold off due to the RBA’s latest interest rate cut. As rates fall, margins on lending products can become compressed, leading to lower earnings for those in the lending business.
In its first-quarter 2020 trading update, Virgin reported performance was on track despite the difficult market. Customer deposits grew by 1.6% and business lending grew by 2.5%. While the mortgage book saw a 0.8% reduction, personal lending grew 3.7% primarily due to high-quality credit card growth.
Pendal Group Ltd (ASX: PDL)
Pendal Group shares dropped 16.1% last week to close on Friday at $6.21. The investment manager was sold off alongside its contemporaries following the RBA’s latest rate cut.
It was a bad week for listed fund and investment managers in general with Perpetual Limited (ASX: PPT) losing over 13% during the week, albeit trading ex-dividend, while Janus Henderson Group (ASX: JHG) lost nearly 8%.
Pendal had Funds Under Management (FUM) of $101.4 billion according to its last update, recording an increase of 1% in the December quarter. The major contributor to Pendal’s increased FUM was higher markets with the MSCI All Countries World Index increasing 7.4% over the period in local currency terms.
Net outflows for the quarter totalled $1.3 billion, an improvement on the previous two quarters. The annualised effect of the quarterly net outflows on Pendal’s fee income will be a reduction of $8.9 million. Pendal’s half-year ends on 31 March so investors will need to wait until late April for results.
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Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Flight Centre Travel Group Limited. The Motley Fool Australia has recommended Hub24 Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.