Market Update & Important Indicators:
U.S. stocks closed out August with monthly gains, holding their ground even as jitters around trade negotiations drove investors out of major indexes elsewhere around the world. Investors ended the month much as they began it: weighing questions around the future of U.S. trade policy. Stocks slipped after a report Thursday suggested President Trump was planning to move ahead with tariffs on Chinese imports. Separate reports that the U.S. and Canada were unable to reach a trade deal Friday kept major indexes under pressure, although the S&P 500 erased its losses late in the session after officials said they would resume talks next week. Even as the week's developments added to investors' uneasiness around trade, major indexes held onto their gains for both the week and the month. The S&P 500, Nasdaq Composite, Russell 2000 and Dow Jones Transportation Average all rose to fresh highs in August. For the month, the Dow industrials rose 2.2%, the S&P 500 notched a 3% gain and the Nasdaq rose 5.7%-its best showing for August in 18 years. Much of the advance was driven by large technology stocks, which rallied in August and extended their gains for the year. Investors were also reassured by upbeat economic data, which showed the U.S. economy grew faster than initially expected in the second quarter and after-tax corporate profits rising at the fastest pace in six years. The Dow Jones Industrial Average fell 22.10 points, or 0.1%, to 25964.82. The S&P 500 added 0.39 point, or less than 0.1%, to 2901.52 and the Nasdaq Composite edged up 21.17 points, or 0.3%, to 8109.54. The US gold price added 0.1% to record 1,200.80 US$/oz.
The Stoxx Europe 600 index closed down 0.8% at 382.27 on renewed concerns over trade tensions, with engineering and mining stocks broadly lower. Germany's DAX and the U.K.'s FTSE 100 fell just over 1%, France's CAC 40 ended 1.3% lower, Italy's FTSE MIB down 1.1% and Spain's Ibex 35 down 0.7%.
The Shanghai Composite fell 0.5%, ending the month 5.3% lower despite slightly better-than-expected factory data. Hong Kong's Hang Seng was down 1% Friday and 2.4% for the month. Worries about U.S.-China trade tensions and the broader health of the Chinese economy have sent Chinese stocks sharply lower this month. Japan's Nikkei was flat Friday and up 1.4% for August despite a somewhat stronger local currency, which tends to pressure shares of multinationals.
Australian stocks slid to session lows at the close as equities in Asia Pacific are ending this week–and August–on a soft note after steady gains for much of the back half of this month. The ASX 200 fell 0.5% to 6319.5, cutting this week's gain to 1.2% and August's uptick to 0.6%. It's the fifth-straight monthly gain for the index, the longest streak since 2012. The materials sector slid 1.3% following the overnight slide in metals prices. But health care climbed 0.4%, hitting fresh record highs.
Base metal prices were mostly down on the London Metal Exchange. Tin fell 1.1% to 19,053/t, as the 3-month copper contract lost 1.6% to 5,968/t. Aluminium and zinc both lost 0.5% to 2,102/t and 2,462/t, respectively. Nickel was the biggest mover as it declined 3.7% to close at 12,708/t.
In this issue:
CTI Logistics (CLX) | FY18 Results | BUY
Market Cap $81m | Current Price $1.05 | Valuation $1.35
The acquisition of Jayde helped CLX deliver underlying growth at both revenue ($183m, up 19%) and EBITDA ($16.2m, up 7%) lines. Margins were weaker than expected though (largely reflecting the slow pace of WA recovery), and this is captured in our now more conservative forecasts. Positively, CLX exhibits greater geographic diversity, while consolidation in WA positions the Company to benefit from an eventual turnaround here. Our blended valuation has dropped to $1.35 (prior $1.50), impacted negatively by earnings adjustments, but positively by lower valuation risking. Despite a pullback in forecasts, CLX is still trading on undemanding multiples and we maintain our BUY call
Northern Star Resources (NST) – Market Cap $4.2bn HOLD TP $6.77ps
Northern Star Resources (NST) has announced the acquisition of the Pogo Gold Mine in Alaska from Sumitomo Metals Mining Co., Ltd (Sumitomo) for US$260m (A$347m). Pogo has a non-JORC Resource of 4.1Moz @ 12.2g/t Au and a Reserve of 760koz at 11.9g/t Au. The acquisition will be funded 50/50 from existing cash and via a fully underwritten A$175m placement to institutional investors at an issue price of A$6.70ps. Pogo is forecast to produce 250-260koz Au in FY19 at an all-in sustaining cost (AISC) of A$1,175/oz). Pogo is a quality acquisition and we see value upside in not only mine life extension, but the application of NST’s rigorous cost template and aggressive investment in exploration. Importantly, NST is maintaining a significant cash balance post-deal suggesting further M&A could be in the pipeline short term. HOLD maintained and target price of $6.77ps
Sandfire Resource (SFR) | FY18 Results | BUY
Market Cap $1,135m | Current Price $7.50 | Target Price $8.85
Sandfire Resource (SFR) reported FY18 financial results with record revenue of $607m and a substantial YoY increase in NPAT to $226m, versus FY17 revenue of $533m and NPAT of $114m (up 14% and 61% YoY respectively). This result was largely driven by a 25% increase in the average LME price from FY17 to FY18. Free cashflow was in-line YoY as a result of ~$34m increase in tax payments. SFR retains a strong balance sheet with $243m cash (no debt), before the post year-end pending $72.3m acquisition cost for Talisman Mining’s (TLM) 30% stake in the Springfield JV (Monty Deposit).
Recent Contacts & Presentations:
Aspire Mining (AKM), Austal Limited (ASB), Macmahon Holdings Limited (MAH), Nickle Mines Limited (NIC), Carnarvon Petroleum Limited (CVN), Prodigy Gold (PRX), Ausdrill Ltd (ASL), Bionomics Ltd (BNO), Gold Road Resources (GOR), Encounter Resources Ltd. (ENR), OZ Minerals Limited (OZL), Melbana Energy (MAY), Botanix Pharmaceuticals Ltd (BOT), Novo Litio (NLI), Classic Minerals (CLZ), OZ Minerals (OZL), Saturn Metals (STN), Antipa Minerals (AZY), SRG Ltd (SRG) Bowen Coking Coal (BCB), Birimian (BGS), Breaker Resources (BRB), Galena Mining (G1A), Valmec (VMX),Bryah Resources (BYH), Calima Energy (CE1) Genesis Minerals (GMD), Agrimin (AMN), Magnetic Resources (MAU), Core Exploration (CXO), Marindi Metals (MZN), MOD Resources (MOD), Santos (STO), Adriatic Metals (ADT) Bio–Gene Technology (BGT), Walkabout Resources (WKT), Triton Minerals (TON), Calima Energy (CE1)