Market Update & Important Indicators
The US was closed for President’s Day and focus last night was on Greece. Talks among euro-zone finance ministers over a new financing arrangement for Greece broke down abruptly Monday, demonstrating a wide gulf between Athens and its official creditors and triggering a period of high uncertainty about Greece's future inside the currency bloc.
As a result European stocks slipped off seven-year highs Monday. The Stoxx Europe 600 closed 0.1% lower, having ended Friday at its highest level since late 2007 on upbeat eurozone growth data for the fourth quarter of last year. Greek stocks fell 3.8% on Monday, reversing a large chunk of Friday's 5.6% gain. Germany's DAX 30, which ended Friday at an all-time high, fell 0.4% while France's CAC 40 was down 0.2%.
Stocks in Japan jumped to fresh seven-year high Monday with the country pulling out of a recession in the final months of 2014, but conflicting stories out of Greece and Ukraine capped gains in Asia. The Nikkei Stock Average rose 91 points, or 0.5%, to 18,005, above the 18,000 threshold for the first time since July 2007, after data showed Japan's economy grew at an annualized pace of 2.2% in the three months through December. The result was significantly weaker than the 3.6% expansion forecast by economists surveyed by The Wall Street Journal. But, stronger exports in the latest quarter aided growth, amid robust demand from the U.S. and a weaker yen and provided the latest sign that the economy was recovering from a slump following a sales tax increase in April.
Elsewhere, shares in the Asia region were mixed with Hong Kong, Shanghai, Australia and India rising slightly but Singapore and Indonesia were down.
Copper futures nudged slightly higher on the London Metal Exchange on Monday, but trading was slow with U.S. markets closed for the Presidents Day holiday and the Chinese Lunar New Year holiday looming. Aside from copper, most other base metals closed lower overnight.
WTI and Brent both rose, with the latter at $61.59/bbl. Gold gained 0.5% to $1,228/oz, and iron ore had another positive day, with 62% Fines climbing 3.3% to $65.28/t.
Thought for the day
WA Industrials | Themes and opportunities
Key Themes
Key Themes … Implications …. Examples of those impacted
Resource construction bubble has burst ….. squeezing resource construction companies NWH, SXE, DCG, MND….. and the WA resources job boom is over ….. bringing wages back to normal levels helping competitiveness in time….. impacting employment and confidence reducing demand for housing & hurting developers PPC, CWP, FRI However city construction/ infrastructure busy helping builders and subcontractors GCS, BYL A$ doing its "commodity currency" job ….. offsetting declining commodity prices and helping A$ miners….. but with corporate activity limited ….. engineers and drillers are still scrapping for work CGH, GNG, SWK, BLY, IMD….. the focus is still firmly on costs hurting companies servicing producing mines ASL, MLD, ANG No resource exposure & US$ sales a key plus leading to upside potential for some companies AJX, ASB, OBJ and TFC
In This Issue
Paladin Energy (PDN)
Paladin Energy (PDN) announced the completion and pricing of a US$100m convertible bond (CB) raising, with key terms including; March 2020 expiry, 7% pa coupon and an initial conversion price of US$0.356/sh with a conversion premium of 25% above the share price at the time of pricing. Proceeds of the 2020 CBs, along with A$205m equity capital raised in 2014, will be used to retire the US$300m November 2015 CBs. The US$100m ensures positive cash balance to April 2017, when the US$274m CBs are due.
Imdex
IMD’s 1H15 result was fairly close to our expectations for both revenue and earnings. The balance sheet position is comfortable, with ND/E reduced to 16% post the $17m inflow from the sale of SEH shares. While the Oil and Gas division is battling sector headwinds, the Minerals division is showing modest improvement. We pare back our 2H15 numbers but make little change to FY16 and beyond.
AWE Limited (AWE) |
AWE Limited (AWE) is an oil and gas company underpinned by strong production with Australian, New Zealand, Asian and North American exposure. 2015 is a catalyst rich year with exploration results from the Q2 2015 Senecio-3 flow testing of the Waitsia discovery, completion of BassGas drilling in Q2 2015, the Pateke-4H tie-in Q3 2015 and the potential mid-2016 Ande Ande Lumut (AAL) Final Investment Decision (FID).
Due to recent success in the Perth Basin and a strong market for domestic gas, AWE (WA’s largest onshore gas producer) prioritised exploration efforts in this basin. With an extensive drilling program set to kick off we view this will be a key catalyst for the stock, and if successful, will double AWE’s gas production from 2016.
Recent Contacts & Presentations
Energia Minerals (EMX), OBJ Limited (OBJ), Gage Roads (GRB), Rewardle (RXH), Doray (DRM), Alexium (AJX), Orbital (OEC), IMF Bentham (IMF), Metals X (MLX), Pura Vida (PVD), Image Resources (IMA), Tangiers (TPT), ABM Resources (ABU), Centaurus (CTM)
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