Market Update & Important Indicators
The U.S market was shut on Monday for the Memorial Day holiday. Reassurance from Federal Reserve Chairwoman Janet Yellen that U.S. interest rates are on track to rise which weighed on the Australian dollar Monday and helped lift the local equities market. Mining stocks responded positively to a weaker currency and a jump in the price of iron ore, Australia's biggest mineral export, while bank shares recovered from further weakness on Friday. The S&P/ASX 200 closed up 1% at 5721.5, partially retracing a 1.2% fall over past week.European stocks ended lower Monday, weighed down by concerns about the state of Greece's finances and political instability in Spain. Over the weekend Greece raised doubts that it would have the money it is due to repay to the International Monetary Fund next month. This news comes despite months of negotiations between Greece's leftist-led government and creditors, the European Union and the IMF. The benchmark Stoxx Europe 600 index closed 0.3% lower.
Chinese stocks rallied for a fifth straight day Monday to new seven-year highs, while the stronger dollar helped Japanese shares gain ground to extend its 15-year high. Shanghai's benchmark SSE Composite continued its recent surge, rising 3.4% to 4813.8. A wave of government-funded infrastructure projects to stabilize growth have helped spark recent buying interest. Shanghai shares added 8.1% last week. In Japan, stocks rose for the 11th time in the last 12 sessions, helped by a stronger dollar. The Nikkei Stock Average added 0.7% to end at 20413.8.
Brent crude turned around early losses, to trade around 1.2% higher on the day at $66.15/bbl at the European close, while gold was marginally higher at $1,206/oz. The LME metals market was closed on Monday.
In This Issue
Independence Group (IGO, HOLD) bid for Sirius Resources (SIR, HOLD)
Independence Group (IGO) has executed a binding deed to acquire Sirius Resources (SIR), whereby SIR shareholders will receive 0.66 IGO shares and $0.52 cash for every SIR share. In conjunction with the takeover, SIR will receive script in a new listed vehicle called S2 Resources containing Polar Bear and Scandinavian assets. Excluding S2, this transaction valued SIR at $4.38/sh based on IGO’s closing price prior to the announcement. At yesterday’s closing price the market values the IGO bid for SIR at $3.92. This valuation is highly accretive to SIR shareholders relative to last close ($3.24) and Argonaut’s valuation of $3.62. Argonaut considers the transaction to be dilutive for IGO on an EV/EBITDA basis (IGO 3.8x vs transaction value 5.4x) and on a NAV/sh basis (decreasing from $4.90 to $4.75). However, we regard the transaction to be positive for IGO in the long term, transforming earning / scale and enhancing investment appeal.
Recent Contacts & Presentations
Saracen (SAR), Kibaran (KNL), Sino Gas & Energy (SEH), Rewardle (RXH), Alexium (AJX), Ausdrill (ASL), Tox Free (TOX), OBJ Limited (OBJ), Cash Converters (CCV), Decmil (DCG), TFS Corporation (TFC), Mobile Embrace (MBE), Dacian (DCN), Saracen (SAR), Fertoz (FTZ), Atrum (ATU), Doray (DRM), Buru Energy (BRU), Carnarvon Energy (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), Pura Vida Energy NL (PVD), MZI Resources (MZI), High Peak Royalties (HPR), Spookfish (SFI)