Overseas Market Report – U.S. Stocks Make Small Gains
U.S. stocks finished Monday's range-bound session marginally higher, as steep losses in energy stocks, following a drop in oil prices, weighed on the main indexes.
China said its economy grew 6.9% in the third quarter, below the government's 7% target but above the 6.8% growth expected by economists. Other data released showed slowdowns in investment and industrial production, stoking ongoing questions about the accuracy of the overall growth numbers.
At the close the Dow was up 0.1%, the S&P 500 remained flat while the NASDAQ was 0.4% higher.
For Australian ADRs listed on the NYSE, BHP Billiton slipped 85 cents (2.37%) to $35.21, ResMed gained $1.39 (2.46%) to $57.89, Telstra Corporation lost 62 cents (3.13%) to $19.19, Spark New Zealand slipped 8 cents (0.74%) to $10.73 and Westpac lifted 82 cents (3.73%) to $22.78.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 2.02% and the 5-year yield was 1.34%.
Morgan Stanley (MS) reported disappointing quarterly results. Excluding certain charges, the firm said it earned 42 cents a share in the quarter compared to the 62 cents a share expected by analysts. A big drop in bond trading revenues was a big driver of the earnings miss, but other parts of the business were soft as well.
Shares of Weight Watchers (WTW) soared after it was announced that Oprah Winfrey was buying a 10% stake in the firm for $43.2 million and that she would be joining the board of directors.
European markets finished mixed.
The FTSE 100 fell 0.4%, while the French CAC 40 was flat and Germany's DAX was up 0.6%.
Asian shares were also mixed.
The Shanghai Composite and Nikkei 225 were off 0.1% and 0.9% respectively, while the Hang Seng was flat. India's Sensex rose 0.6%.
Australian Market Report – Local Market Expected To Open Flat
Ahead of the local open, SPI futures were unchanged at 5,237.
Monday 19 October – close. Local markets opened lower today on the back of gains on Wall Street overnight but quickly rose with Westpac leading the way. However, the positivity was short-lived as stock fell below the flat-line shortly after 11 am, weighed down by miners and Telstra in a choppy afternoon session that ended slightly higher. There were mixed results from the sectors; energy gained most significantly whilst materials were the biggest laggard. The Australian dollar gained against most major currencies.
The All Ordinaries rose 0.90 points to 5,304.60 while the S&P/ASX 200 rose 1.50 points to 5,269.70.
Arrium Limited (ARI)
Arrium provided quarterly production report for the period ended 30 September 2015. Hematite ore mined for export in the Middleback Ranges was 2,648k (wmt) for the quarter, up 13% on the prior quarter, reflecting the business' focus on its lower cost Middleback Ranges operation. Shipments for the quarter were 2,194k (dmt), down 20% on the prior quarter primarily due to the mothballing of the Southern Iron operation. Total ore sales for the quarter were 2.09mt, with sales planned to ramp up over the balance of the year to total 9mt-10mt for FY16. The Platts 62% fines index price averaged US$55/dmt CFR for the quarter, a US$3/dmt decrease compared to the prior quarter. Significant progress has been made on resetting the cost base to achieve its targeted average cash breakeven price for FY16 of US$47/dmt. ARI added 0.02 cents to $0.12.
Crown Resorts Limited (CWN)
Crown Resorts and its JV partner, Schiavello Group, announced that award winning British architects, Wilkinson Eyre had won the contest to design the proposed new Queensbridge Hotel Tower and precinct to be located in Melbourne's Southbank area. The Company and Schiavello conducted a global design competition which resulted in five architecture firms being shortlisted – Wilkinson Eyre, Bates Smart, Hassell, Foster + Partners and Jean Nouvel. This luxury hotel addition coupled with the recently announced expansion of the Melbourne Convention and Exhibition Centre will reinforce the Southbank precinct's position as Vic's leading tourism, meetings, exhibitions and event destination. CWN lost 12 cents to $11.84.
In This Issue – Argonaut Research
CTI Logistics (CLX) | BUY
The flagged sale and leaseback of a $26m property has reduced gearing to comfortable levels. In essence it has provided the funding for the recent $27m acquisition of east-coast based GMK, which is expected to generate around 3x more in earnings than it will cost CLX in additional rent. CLX is building a platform for long term growth and we maintain our buy call on a $2.00 valuation (prior $1.85).
Paringa Resources (PNL) | SPEC BUY
Paringa Resources (PNL) has executed a cornerstone sales agreement with Louisville Gas and Electric Company (LG&E) and Kentucky Utilities Company (KU), two of the largest consumers of thermal coal in the Ohio River market. The contract covers the first five years production at the Buck Creek No.1 from 2018 to 2022 at fixed price escalating from US$44.50t to US$48.20/t for a total value of US$220m. This price range is largely in line with Argonaut’s forecast of US$46.00/t escalating to US$48.00/t and ratifies demand for the Company’s product. While the price was negotiated at a market low and is likely to factor in “new supplier” discount, it still provides a strong margin against the forecast all-in cost of US$30.19/t and should underpin a project finance contract.
Recent Contacts & Presentations
Lucapa Diamond (LOM), Southern Cross Electrical (SXE), AWE Limited (AWE), Ausdrill (ASL), Austal (ASB), Medusa (MML), Resolute (RSG), Kingsgate (KCN), Troy (TRY), Northern Star (NST), Sandfire (SFR), Regis (RRL), Saracen (SAR), Sino Gas & Energy (SEH), Dacian (DCN), Buru Energy (BRU), Carnarvon Petroleum (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), FAR Limited (FAR), Central Petroleum (CTP), Senex Energy (SXY), Reward Minerals (RWD), Wildhorse Energy (WHE), Agrimin (AMN)