Market Update & Important Indicators:
U.S. stocks rose broadly Tuesday. U.S. stocks have notched record highs this summer without substantial improvement in earnings growth, largely on expectations that interest rates will remain lower for longer. Investors are waiting for further clues on that in a speech to be given by Federal Reserve Chairwoman Janet Yellen on Friday at a conference in Jackson Hole, Wyo. Her comments could provide fresh direction on the timing of the next rate rise and steer the dollar, which has fallen against major currencies this month. Mark Watkins, regional investment manager at U.S. Bank Wealth Management, said he expects little change to come from those meetings. He has been cautiously buying stocks in companies that specialize in home improvement and consumer services.
European stocks finished higher Tuesday, with strong Eurozone economic indicators and advances in the mining and financial sectors pushing the market to a second day of gains. The Stoxx Europe 600 picked up 0.9% to close at 343.60, marking its biggest percentage gain since Aug. 5.
Shares in Asia were mixed Tuesday, as oil prices fell and the U.S. dollar weakened ahead of a key meeting of U.S. Federal Reserve officials and other central bankers later this week. The Nikkei Stock Average closed down 0.6%. Hong Kong's Hang Seng Index was down 0.1%, while the Shanghai Composite Index closed 0.2% higher. In oil-reliant Malaysia, the FTSE Bursa Malaysia Index was down 0.5%. Crude oil prices slipped Monday on scepticism that the Organization of the Petroleum Exporting Countries would reach a deal to cut production, sending commodity stocks in Japan sharply lower.
Australian shares closed higher Tuesday, buoyed by the major banks and as investors continued to focus on corporate earnings. In its strongest rise in two weeks, the S&P/ASX 200 ended the session 38.7 points, or 0.7%, higher at 5553.8. The four largest banks collectively added about 14 points to the index as every sector other than the energy space rose. The basket of energy stocks fell 0.6%, tracking a decline in crude-oil prices as hopes for a freeze in production by the Organization of the Petroleum Exporting Countries faded after reports that Iraq is preparing to ramp up output and Nigeria could soon follow. Earnings season will continue Wednesday, with a raft of companies including Wesfarmers, WorleyParsons, Qantas Airways and Alumina scheduled to report.
Copper prices slumped to a two-month low as growing stockpiles in London warehouses and continued production underscored a supply glut. The London Metal Exchange's three-month copper contract settled down 0.8% at $4,710/t. Other base metals rose on Tuesday, with aluminium closing up 0.1% to $1,657/t, zinc closing up 1% at $2,305/t, tin closing up 0.8% at $18,728/t, lead closing up 0.4% at $1,850/t, and nickel closing flat at $10,214/t.
In this Issue:
Tox Free Solutions (TOX) | WA wasting away | HOLD
Market Cap $358m | Current Price $2.49 | Valuation $2.65
A weaker than expected 2H performance detracted from FY16’s numbers, and the muted guidance for FY17 is uninspiring. Commentary clearly demonstrate the negative impact from reduced volumes and pricing pressure on the west coast. While the rapid expansion onto the east coast has been a sound strategy to offset the WA drag, it has not prevented us from cutting our forecasts. TOX is trading on ~14x our revised FY17F earnings, which we believe is fair in an uncertain environment. With a $2.65 valuation we downgrade to hold (prior buy) pending margin clarity in coming periods.
Troy Resources (TRY) | Guidance Update | BUY
Market cap $172m | Current Price $0.48 | Valuation $0.54
Troy Resources (TRY) has released updated production guidance factoring in operational delays. Whilst processing and weather conditions are improving, TRY has revised its FY17 production guidance to 85-95koz at an all-in sustaining cost of US$750-850/oz (25% downgrade against our forecast). At the same time management are focussing on resources expansion in brownfields development and optimising performance of the processing plant as weather conditions improve at Karouni. The outlook for 2HCY remains optimistic, but further operational issues cannot be ruled out. Management are clearly taking a much needed conservative stance.
Recent Contacts & Presentations:
Rio Tinto (RIO), Silver Lake Resources (SLR), Lynas Corporation (LYC), Evolution Mining (EVN), Regis Resources (RRL), Xanadu Mines (XAM), Mincor Resources NL (MCR), Carbine Resources Ltd (CRB), Antipa Minerals (AZY), Energia Minerals Ltd (EMX), Pantoro Limited (PNR), Boss Resources Ltd (BOE), Metro Mining Ltd (MMI), Metal Bank Ltd (MBK), Actinogen Medical (ACW), St. George Mining Ltd (SGQ), Resapp Health Ltd (RAP), Orecorp Limited (ORR), Dimerix Limited (DXB), Genesis Minerals Ltd (GMD), Dakota Minerals Ltd (DKO), Breaker Resources NL (BRB), Bard1 Life Sciences Ltd (BD1), Alto Metals Ltd (AME), Birimian Limited (BGS), Antipa Minerals Ltd (AZY), Vault Intelligence Ltd (VLT)