Market Update & Important Indicators
U.S. stocks fell Thursday, on course to snap a rally that had propelled major indexes to new highs. The Dow Jones Industrial Average climbed to records seven days in a row through Wednesday, leaving it up 6.7% for the year at the end of the session. But U.S. indexes retreated from those highs Thursday, dragged down by shares of materials and industrial companies. The Dow was down 78 points to 18,517 and the S&P 500 fell 40 basis points to 2,165. Big news on the US front was Joy Global rising 16% after Komatsu agreed to buy the company for US$2.9b. Joy is the largest independent manufacturer of underground mining equipment.
Australian stocks rose for a second day, led by health-care and financial stocks, amid growing expectations that central banks will soon roll out stimulus measures to boost economies. The S&P/ASX 200 ended up 23.7 points, or 0.4%, at 5512.4, after earlier breaking through the psychologically important 5,500 level as energy and industrial stocks also gained.
European stocks finished little-changed as investors shrugged after the European Central Bank kept interest rates unchanged as expected. Travel shares got hurt by warnings about the toll terrorist attacks are taking on the industry. The Stoxx Europe 600 inched lower by less than 0.1% to end at 340.6.
Hong Kong stocks pushed into bull market territory Thursday, in yet another sign of the building confidence among global investors that central banks will soon roll out stimulus measures. The Hang Seng Index finished up 0.5% at 22000.5, and has now risen in eight of the past nine trading sessions. Property and financial stocks have propelled the benchmark's recent gains, with those sectors up 2.7% and 1.1%, respectively, since the beginning of the week.
Gold rallied 1% to 1,331/oz and North American gold equities rallied hard. Based metals were mostly up with the exception of aluminium which fell 1.5% to 1,589/t. Copper was up 0.3% to 4,967/t and nickel rose 1.7% to 10,727/t. The AUD/USD is trading at 0.749.
In this Issue
Paladin Energy (PDN) | Monetising assets to repay debt | SPEC BUY
Market cap $368m | Current Price $0.21 | Target Price $0.26
Paladin Energy (PDN) announced an outcome to its ongoing strategic initiatives. The Company has signed non-binding term sheets to sell a further 24% of its flagship Langer Heinrich Mine (LHM: currently 25% PDN, 75% China National Nuclear Corp.) to an undisclosed party for US$175m. In addition, PDN has entered a binding agreement to sell up to 75% of the Manyingee development project for US$30m to MGT Resources. The initial US$185m raised from these two transactions, in addition to accumulated cash, should be sufficient to repurchase the outstanding US$212m convertible bonds (CBs) due April 2017. While this transaction removes near term balance sheet pressure, it does remove some of PDN’s leverage to a uranium price recovery.
TFS Corporation (TFC) | Note refinance | BUY
Market Cap $609m | Current Price $1.57 | Valuation $3.30
The issue of US$250m Notes maturing in 2023 at a coupon of 8.75% will allow TFC to redeem the 11.00% p.a. US$200m existing Notes, achieving the twin goals of extending the debt maturity profile and lowering its cost. It comes at a time when TFC is exhibiting strong operational momentum. There is continued interest in the investment product, harvest sizes are increasing, and the Company is deepening its end markets. Buying back grower interests in plantations gives TFC greater ownership and control over supply, and we expect improved cash flow from operations to be a feature of the FY17 numbers. Our valuation increases to $3.30 (prior $3.05) and we maintain a buy call.
Recent Contacts & Presentations
Department 13 (D13), Fortescue Metals (FMG), Paradigm Biopharma (PAR), Peel Mining (PEX), Ausgold Limited (AUC), Gascoyne Resources (GCY), Metro Mining (MMI), Pacific Energy (PEA), Novatti Group Ltd (NOV), 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), Sarasen Holdings (SAR), Botanics (BOT), Apollo Minerals (AON)
