Market Update & Important Indicators
Stocks slipped Wednesday, on track to close out what traders have described as an eerily calm August with a monthly loss. A tumble in the price of oil dragged the broader market lower after data released Wednesday showed U.S. stockpiles of crude oil increased to another record high. The S&P 500 declined 0.6% to 2,168 and the Dow Jones fell 0.53% to 18,395.Asian shares were broadly down except in Japan, where a weaker yen against the dollar pushed stocks higher. The Nikkei Stock Average rose 1% Wednesday, Korea's Kospi was down 0.3%. The gains in Japanese equities came even as the latest data showed that the nation's industrial output remained unchanged in July missing the 0.8% increase economists expected following a 2.3% rise in June. Elsewhere in Asia, the Shanghai Composite Index reversed earlier losses to close up 0.4%, while Hong Kong's Hang Seng Index slid 0.2%.
Sharp falls by mining and energy shares after a retreat in commodities prices brought Australia's equities market to a more than six-week low on Wednesday. The U.S. dollar climbed overnight on rising expectations the Federal Reserve was positioning to raise interest rates. The dollar's gains in turn weighed on a range of commodity prices, including copper and gold which both fell to new two-month lows on Tuesday. The S&P/ASX 200 finished down 45.3 points, or 0.8%, at 5433.0, its lowest close since July 15. The index has fallen 1.5% so far this week, after a similar drop on Monday.
Oil suffered high losses with WTI falling 3.6% to US$44.70/bbl. Metals were mixed overnight with copper gaining 0.2% to US$4,603/t, while nickel dropped 0.5% to US$9,725/t. Gold was down 0.4% to US$1,312/oz and the AUD/USD is trading at 0.752.
In this Issue
Independence Group (IGO) | FY16 Financials | HOLD
Market Cap $2,153m | Current price $3.67 | Valuation $3.75
Independence Group (IGO) reported a net loss of $58.8m, higher than Argonaut’s forecast of $50.4m. The key drivers for the switch to a loss from a $76.8m profit in FY15 were $65m acquisition costs for Sirius Resources, lower base metal commodity prices and a $35m impairment on exploration assets. Revenue was down 16% year-on-year driven by lower production and lower prices including -34% nickel, -18% copper and -9% zinc (partially offset by an 8% rise in gold). FY15 to FY16 NAPT and EBITDA variances are charted below. IGO has strengthened its balance sheet post-FY16 with a $280m equity raising. Argonauts estimates the pro-forma cash balance at ~$315m. Outstanding debt at June 30 was $271m, with minimal additional draw down expected to complete Nova development.
Vault Intelligence (VLT) | Right space, bright prospects | SPEC BUY
Market Cap $22m | Current Price $0.039 | Valuation $0.055
VLT’s FY16 sales revenue of $2.7m was as expected, and post the capital raising the Company ended the financial year in a comfortable net cash position of $3.2m (gross cash $4.2m, borrowings $1.0m). During the year VLT added 38 new customers and now has exposure to more than 370 corporate clients and 600,000 end-users across 22 industries. With an attractive product suite that includes a recently launched mobile platform, and the cash resources to pursue growth opportunities, we believe the Company is well set for FY17. We believe VLT is in the right space, with a good product, cash on hand, and the backing of a quality, growing team.
CTI Logistics (CLX) | Feeling for WA’s pulse | HOLD
Market Cap $59m | Current Price $0.84 | Valuation $1.20
WA’s slowing economy continues to impact CLX’s results, and underlying 2H16 PBT of $0.7m was the weakest 6 monthly performance in years. The responses from CLX have resulted in a strengthened balance sheet from property sales and annualised cost savings of ~$2.5m. We expect CLX is past the earnings low point, but believe it too soon to invest despite the stock trading well below longer term value. Earnings risk and dividend uncertainty will remain the focus in the near term. We maintain a hold call.
Recent Contacts & Presentations
Hammer Metals Ltd (HMX), Helix Resources Ltd (HLX), Saracen Mineral Holdings Ltd (SAR), Merdeka Copper Gold (MDKA: IJ), Monument Mining (MMY.V: TSX), Apollo Consolidated (AOP), Botanix Pharmaceuticals (BOT), Sino Gas & Energy (SEH), 4DS Memory Ltd (4DS), Troy Resources (TRY), Gold Road Resources (GOR), Bionomics Ltd (BNO), Orthocell Ltd (OCC), Walkabout Resources Ltd (WKT), Migme Ltd (MIG), Syntonic Ltd (SYT), Berkeley Energia (BKY), Hazer Group Ltd (HZR)