Market Update & Important Indicators:
U.S. stocks stabilized intraday, suggesting investors are coming to terms with central banks' plans to gradually leave behind a decade of unprecedented monetary stimulus. The Dow Jones Industrial Average waffled between small gains and losses and was recently off 0.1%, at 25,175. The S&P 500 rose 0.2%, and the technology-heavy Nasdaq Composite gained 0.8%. All three indexes slumped in the previous session. After the Federal Reserve signalled Wednesday that U.S. interest rates will likely go up four times in 2018 – instead of three, as had been widely believed – the European Central Bank said it would end its bond-buying program in December. But the central bank reassured markets by pledging that rates in the Eurozone wouldn't start to rise at least until summer of next year. The US gold price gained 0.2% to record 1301.90/t.
Stocks across Europe surged by the most in more than two months as the euro got walloped following the European Central Bank's policy decision to wrap up crisis-era bond purchases by the end of 2018 and keep interest rates low for at least another year. The Stoxx Europe 600 Index rose by 1.2% to 393.04, marking its best day, on a percentage basis, since April 5 and hitting its highest close since May 22, according to WSJ Market Data Group. On Wednesday, the pan-European benchmark rose 0.2%. Germany's DAX 30 index also flipped higher, to up 1.7% to 13,107.10, also finishing around a three week high, while France's CAC 40 index climbing up 1.4% to close at 5,528.46. Spain's IBEX 35 advanced 0.6% at 9,957.70, and Italy's FTSE MIB index picked up 1.2% to 22,486.32.
It wasn't a pretty day for Asian stocks, with things not starting well and things generally worsening from there as late-day selloff in the U.S. after the Fed's releases put a cloud over equities trading across the Pacific. Korea's Kospi, after a Wednesday holiday, saw the biggest drop at 1.9%, though that was fuelled by a pullback in white-hot construction stocks. Taiwan's benchmark fell 1.4% and markets in Southeast Asia and Hong Kong are down about 1% ahead of the end of trading in those locales while Japan logged such a drop.
Pacific saw, but it still dropped for a third day in four. A recovery by resources stocks and a rebound in Telstra helped counter further losses by the major banks, leaving the S&P/ASX 200 down 0.1% at 6016.6. The financial sector now has fallen 11% this year and is at 19-month lows as concerns continue to build about revenue headwinds and the potential fallout from the ongoing probe into industry misconduct. Elsewhere, APA retreated 3.9% after Wednesday's surge, further widening the share-price gap to the takeover offer pitched by CK Infrastructure and siblings Wednesday amid worries the group won't be able to clear regulatory hurdles.
Base metal prices were mainly down overnight on the London Metal Exchange. The 3-month copper contract decreased 1.1% to 7,173/t whilst tin recorded 20,957/t. The price of aluminium fell 0.8% to 2,262/t and nickel decreased 2.2% to 15,211/t. Zinc also declined by 1.1% to 3,221/t.
In this issue:
Gage Roads (GRB) | Acquisition of Matsos | BUY
Market Cap $106m | Current Price $0.105 | Valuation / Target Price $0.100 / $0.117
The “Return to Craft” strategy has been well executed. The Matsos acquisition accelerates this process by adding well-known brands to a stable of strongly growing Gage products. The purchase price, at ~7x incremental EBITDA is attractive, and although largely funded by up to $12m in new equity at $0.085, we see EPS accretion close to 30% in FY19. Our blended valuation climbs to $0.100 (prior $0.090), however with strong momentum we introduce a target price of $0.117 (blended valuation 1-year out). Although the price is up nearly 25% on the placement and SPP price, there is still upside. BUY maintained.
Recent Contacts & Presentations
Marindi Metals (MZN), MOD Resources (MOD), Santos (STO), Adriatic Metals (ADT) Bio–Gene Technology (BGT), Walkabout Resources (WKT), Triton Minerals (TON), Calima Energy (CE1), Peel Mining (PEX), Catalyst Metals (CYL), Vault Intelligence (VLT), Doray Minerals (DRM), Nzuri Coppoer (NZC), Bowen Coking Coal (BCB), Phosphagenics Limited (POH) Great Boulder Resources (GBR), Orthocell (OCC), Northern Minerals (NTU), ABM Resources Ltd (ABU), Vital Metals Ltd (VML), Todd River Resources Ltd (TRT), Pacific Energy Ltd (PEA), Carnarvon Petroleum Ltd (CVN), Australian Mines Ltd (AUZ), Australian Finance Group (AFG), Paladin Energy Ltd (PDN), Cooper Energy Ltd (COE), Medibio Ltd (MEB), Botanix Pharmaceuticals Ltd (BOT), Salt Lake Potash Ltd (SO4), Golden Mile Resources Ltd (G88), NTM Gold Ltd (NTM), Ausmex Mining Group Ltd (AMG), Matrix C&E Ltd (MCE), Austal Ltd (ASB), Decmil Group Ltd (DCG), Ventnor Resources Ltd, Ausdrill Ltd (ASL), Alice Queen Ltd (AQX), PNX Metals Ltd (PNX), Alliance Resources Ltd (AGS), Myanmar Metals Ltd (MYL), Primary Gold Ltd (PGO), Sino Gas & Energy Holdings Ltd (SEH)
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