Market Update & Important Indicators:
U.S. stocks ended the month higher, boosted by strong corporate earnings. The S&P 500 now sits about half a percentage point from all-time highs. With nearly 60% of the companies in the S&P 500 having reported, first-quarter earnings are on track to rise 12.5% from the year prior, according to FactSet. That's above the first-quarter earnings growth of 9.1% that analysts estimated as of March 31. On Friday, shares of Chevron and Exxon Mobil climbed after the companies posted encouraging results. The S&P 500 ended the week up 1.5%, putting its April gains at 0.9%. The index slipped 4.57 points, or 0.2%, to 2384.20 Friday. The Dow Jones Industrial Average edged down 40.82 points, or 0.2%, to 20940.51 Friday. Friday's declines followed data showing the U.S. economy stumbled in the first quarter. The U.S. gold price bucked the trend Friday, rising 0.3% to 1,267.70 US$/oz. Gross domestic product rose 0.7% at a seasonally adjusted annual rate, the Commerce Department said, falling short of the 1% growth expected by economists surveyed by The Wall Street Journal. There were other positive signals in the data. U.S. wages and benefits rose at the fastest pace since 2007 during the first quarter, signalling a tightening labour market. The Fed's preferred inflation gauge also rose at a rate of 2.4% in the first quarter, its biggest jump since spring 2011.
European stocks posted mild losses Friday, with investors pushing up both the euro and the pound against the dollar following top-tier economic data for the Eurozone and the U.K. The Stoxx Europe 600 index fell 0.2% to close at 387.09, logging a second straight day in negative territory. The benchmark on Thursday broke a six-session win streak after the European Central Bank offered no surprises at its policy meeting, while a drop for Deutsche Bank also weighed. Most European stock markets are closed for trade on Monday for May Day and the U.K.'s early May bank holiday. Only the Danish market is open for trade, according to index provider Stoxx.
In Asia, Japan's Nikkei 225 index closed down 0.29%. Hong Kong's Hang Seng Index fell 0.44%. China's Shenzhen A-share index bucked the trend, rising 0.36%. South Korea's Kospi closed 0.18% lower after President Donald Trump said he wanted to renegotiate a trade deal with the country, in an interview with Reuters. Mr. Trump also said a major conflict over North Korea's nuclear ambition is possible.
Australian shares eked out a sixth straight session of gains Friday, for the strongest weekly advance in a month. Losses in energy and materials stocks were largely offset by strength in industrial, healthcare and information technology companies. Corporate earnings season in the U.S. also has lifted investor sentiment in recent days, although strong results from technology stocks overnight had a limited impact on Australian shares Friday given limited size of the sector in the local market, said Ric Spooner, chief market analyst at CMC Markets. Reclaiming early losses, the S&P/ASX 200 ended with a rise of 2.6 points at 5924.1, a fresh two-week high that pushes the index nearer the 6000 mark that was last breached at the closing bell in December 2007.
The London Metal Exchange's three-month copper contract closed up 0.76% at $5,736/t. The other base metals finished mainly higher on Friday. Tin prices rose 0.4% at 19,990/t, zinc prices rose 1.1% at 2,619/t, lead prices jumped 3.0% at 2,284/t whilst nickel prices rose 1.2% at 9,404/t. Aluminium prices bucked the trend falling 0.6% at 1,903/t.
In this Issue:
Threat Protect (TPS) | Revenue improves, cash position weakens | SPEC BUY
Market Cap $22m | Current Price $0.028 | Valuation $0.030
Improved Monitoring revenue in the March quarter positively impacted segment GP margins, highlighting the benefits to be gained from increased utilisation of the largely fixed cost base infrastructure. This was not reflected in operating cash flow however, with acquisition-related effects partly responsible for a $0.6m outflow and the closing cash balance of $0.5m. This position is expected to improve in the current quarter, and our speculative buy call is based on the expectation operating leverage benefits will increasingly be reflected in earnings and cash flow over time.
Hazer Group (HZR) | March quarterly update | SPEC BUY
Market Cap $44.8m | Current Price $0.585
The commitment of Mineral Resources Ltd to HZR provides strong external validation of HZR’s potential value from a well-known and innovative operator in the materials processing space. The funding also, crucially, provides HZR with full funding through the pilot plant scale up process and into commercialisation of the technology. We maintain our positive view of the large potential value in the HZR’s hydrogen and graphite production technology. Spec buy call maintained.
MZI Resources (MZI) | Operations strong, balance sheet concerns | HOLD
Market Cap $218m | Current Price $0.25 | Target Price $0.42
MZI released March Q results with record heavy mineral concentrate (HMC) processed at the Picton mineral separation plant (MSP). This resulted in the highest mineral sands production to date of 20.9kt, up 33% Q-on-Q and in line with Argonaut’s forecast of $21m. The Company generated positive operation cashflow of $2.8m and finished the quarter with $6.2m cash (down from $13.1m at 31 December and broadly in line with our forecast of $7.0m). We believe there will be another sharp increase in production in the June Q, resulting from increased throughput from the new mining field unit (MFU) and debottlenecking of the wet concentrator plant (WCP) from the recently installed additional spirals. While we forecast a transition to free cashflow in the current Q, MZI is burdened with ~US$24m (~A$32m) debt repayments this calendar year.
OBJ Limited (OBJ) | March quarterly update | SPEC BUY
Market Cap $110m | Current Price $0.062
Whilst the disappointing cash receipt for the March quarter may provide the catalyst for near-term share price decline, the long-term value in OBJ’s technology remains significant. We are provided some comfort, with some more clarity around OBJ’s licensing terms with P&G, that the cash receipts we expected this quarter have just been delayed to subsequent quarters. Spec buy call maintained.
Botanix (BOT) | March quarterly update | SPEC BUY
Market Cap $25.8m | Current Price $0.051
BOT has maintained a rapid development timeline and, with data from Phase 1a trials expected in the current quarter, news flow in the near-term is expected to drive share price accretion. The expansion of the Company’s product pipeline to include products that do not require FDA approval provides potential opportunities for near-term revenues and adds to the value of BOT. The potential prize is large, and management has demonstrated continued prudency in advancing pipeline products, underpinning our spec buy call.
Recent Contacts & Presentations:
Metro Mining Ltd (MMI), Tox Free Solutions Ltd (TOX), St George Mining Ltd (SGQ), Venturex Resources Ltd (VXR), Creso Pharma Limited (CPH), Sino Gas & Energy Holdings Ltd (SEH), Orecorp Limited (ORR) Doray Minerals Limited (DRM), Capricorn Metals Ltd (CMM) Independence Group (IGO), Cardinal Resources Limited (CDV), Metal Bank Ltd (MBK), MOD Resources Ltd (MOD) Quintis Ltd (QIN), Regis Resources Ltd (RRL), Apollo Minerals Ltd (AON), Ironbark Zinc Ltd (IBG), Sovereign Metals Ltd (SVM), Pilbara Minerals Ltd (PLS), Laconia Resources Ltd (LCR), Hazer Group Ltd (HZR), Transerv Energy Ltd (TSV), Ausquest Ltd (AQD), Quintis Ltd (QIN), Paradigm Biopharma Ltd (PAR), Pharmaust Ltd (PAA)
Please read Argonaut's Important Disclaimers & disclosures