ArgonautArgonautArgonautArgonaut
  • About Us
    • Business Model
    • Regulation
    • Community
    • Jason and the Argonauts
    • Disclaimer and Disclosure
    • COVID-19 Visitor Requirements
  • Corporate Finance
  • Stockbroking & Research
    • Stockbroking
    • Research
    • Best Execution Policy
    • Administration Forms
    • Open an Account
  • Special Situations
  • News
    • Latest News
    • Morning Notes
    • Latest Research
  • Contact
    • Careers
      • Advisers
      • Graduate Program
      • Internship Program

29/02/2016 Argonaut Morning Note

    Home Stockbroking & Research Morning Notes 29/02/2016 Argonaut Morning Note
    NextPrevious

    29/02/2016 Argonaut Morning Note

    By admin | Morning Notes | 0 comment | 28 February, 2016 | 0

    Overseas Market Report – U.S. Stocks End Mostly Lower

    U.S. stocks closed mostly lower after a choppy trading session on Friday.

    U.S. fourth-quarter GDP was unexpectedly revised upwards on Friday. The Commerce Department now thinks the economy grew at a 1% clip versus the 0.7% originally reported.

    Consumer spending rose by 0.5% in January from December levels, the biggest monthly gain since May. Incomes rose at the same clip in the month. Inflation, as measured by the PCE index, also ticked higher in the month. Overall prices were up 0.1% from the previous month and are now up 1.3% year over year. Excluding volatile food and energy prices, prices were up 1.7% year over year.

    Consumer sentiment moved slightly higher at the end of February, according to the University of Michigan survey. The reading of 91.7 was above the early February reading of 90.7 and analyst expectations, but was below the 92.0 level seen in January.

    At the closing bell, the Dow was down 0.3%, the S&P 500 was 0.2% lower, while the NASDAQ was up 0.2%.

    A number of factors distorted Kraft-Heinz's (KHC) reported fourth-quarter results (including the impact of a 53rd week, unfavourable foreign exchange, integration efforts, and heightened promotional activity a year ago), but after assessing the firm's underlying performance, Morningstar hasn't wavered from its stance that efforts to extract costs and reinvest in its brands to shore up its competitive position stands to drive profitable growth longer term. Fourth-quarter organic sales edged down 3%, as a nearly 4% reduction in volumes and unfavourable mix was only partially offset by 0.7% higher prices (which was constrained to the tune of 1.5% due to the pass-through of lower dairy, meat, and coffee costs). Shares rose 3.8% on the report.

    Although narrow-moat Gap's (GPS) fourth quarter was disappointing, partially owing to product issues and to the warm weather and weak apparel retail environment, management's update seemed to imply that some changes are finally bearing fruit. That said, Morningstar anticipates a few near-term headwinds that will somewhat mask progress in 2016 and provide clarity to the lower-than expected guidance of earnings per share of $2.20-$2.25. Shares were off 1.3% on the report.

    Although Weight Watchers' (WTW) shares are down sharply (nearly 30%) following its fourth-quarter update and initial 2016 outlook, Morningstar sees encouraging signs, including strong reception to Oprah Winfrey-led marketing efforts, "Beyond the Scale" platform enhancements, and increased levels of digital engagement. The market may have been looking for a more pronounced "Oprah effect" in 2016, likely explaining Friday's pullback. However, full-year 2016 guidance (calling for low-single-digit revenue growth, 100 basis points of gross margin expansion to just over 50%, flat marketing and general and administrative costs as a percentage of sales, and adjusted EPS between $0.70 and $1.00) is consistent with Morningstar's expectations for a more gradual recovery.

    For Australian ADRs listed on the NYSE, BHP Billiton fell $0.29 (-1.27%) to $22.54 ResMed gained 34 cents (0.59%) to $57.74, Telstra Corporation rose 4 cents (0.21%) to $18.81, Spark New Zealand slipped 1 cent (-0.09%) to $11.59 and Westpac declined $0.26 (-1.25%) to $20.50.

    At 8:00 AM (AEDT), the 10-year Treasury note yield was 1.76% and the 5-year yield was 1.24%.

    European markets finished higher on Friday.

    The French CAC 40, Germany's DAX and the FTSE 100 closed up 1.6%, 2.0% and 1.4%, respectively.

    Asian shares were also higher on the day.

    The Shanghai Composite rose 0.9%, while the Nikkei 225 was up 0.3% and the Hang Seng was 2.5% higher. India's Sensex closed up 0.8.

    Australian Market Report- Local Market Expected To Open Higher

    Ahead of the local open, SPI futures were 7 points higher at 4,860.

    Friday 26 February – close.   The Australian market tumbled shortly after open. However, local stocks bounced back along almost the same path of the early fall as a dramatic turnaround in Woolworths share price eased anxiety among local investors. At close, the ASX 200 index finished slightly lower, weighed down by losses from the big banks and resource stocks. There were mixed results from the sectors; health care gained most significantly while energy became the worst performer for this session. The Australian dollar depreciated against most major currencies.

    The All Ordinaries added 0.40 points to 4,945.10 while the S&P/ASX 200 lost 1.20 points to 4,880.00.

    In This Issue

    Argonaut Research | Gascoyne (GCY) | SPEC BUY
    Gascoyne Resources (GCY) is rapidly developing its Dalgaranga Project (80% interest), located in Western Australia. A Pre-Feasibility Study (PFS) is expected in the March Q, which could demonstrate a high margin project producing ~100koz pa for ~6 years. Dalgaranga consists of two open pit deposits with outstanding metallurgical properties (see below), benefitting both opex and capex. Whilst being smaller in scale when compared to peer developers including Dacian (DCN) and Gold Road (GOR), Argonaut is attracted to GCY’s technical simplicity, lower funding requirement, and management ownership (~20%). Argonaut assigns a SPECULATIVE BUY recommendation and a A$0.48 target price.

    Argonaut Research | Ausdrill (ASL) |BUY
    There were some promising signs in ASL’s 1H16 result.  Revenue appears to be stabilising in core businesses, margins are climbing on improvement initiatives, and action is being taken on underperforming, non-core activities.  With NTA of $1.79, attractive multiples even on near term earnings, and considerable leverage to an improving environment in the longer term, we believe ASL offers deep value.  We maintain a buy call on a long term view and an unchanged blended valuation of $0.85. 

    Argonaut Research | TFS Corporation (TFC) |BUY
    TFC has strong momentum.  The 1H16 results were good, and broadening of end markets (through forward heartwood sales) and positive commentary around investor demand, plantation yields and harvests, and ongoing potential in pharma provide good reasons to remain encouraged by the outlook.  Operating cash flow should be positive for the full year, and boosted in FY17 as harvests ramp up, putting TFC in a good position to further increase plantation ownership.  We retain our buy call on a $2.85 valuation.

    Argonaut Research | OZ Minerals (OZL) | HOLD
    OZ Minerals (OZL) released results of the study for the Carrapateena development options and, as expected, has made a decision to progress the high grade, lower production option. This option entails mining and processing 2.8Mtpa to produce 40kt copper and 38koz gold in concentrate at C1 costs of US$0.70/lb (LOM average) with development capex of $770m. A PFS is expected mid-2016 and, if positive, development on the decline will commence in H2 2016. Argonaut estimate project NPV10 at $324m. The Company also announced an on market share buy-back of up to $60m.

    Wesfarmers (WES)
    Wesfarmers announced that shareholders of Home Retail Group PLC approved the sale of the Homebase business to the Company at a GM held on 25 February 2016. This follows approval in early February 2016 from Home Retail Group's banking syndicate. Both approvals were required under the agreement entered into by the Company to acquire Homebase from Home Retail Group for GBP340m, announced on 18 January 2016. Following the approval of Home Retail Group's shareholders, the transaction is expected to complete over the next few days. WES fell 5 cents to $40.33.

    Woolworths (WOW)
    Woolworths announced that Brad Banducci has been appointed as CEO and MD, effective immediately. Mr Banducci is currently MD of Woolworths Food Group and will continue to act in that role pending a new appointment. Brad joined the Company in 2011 after the acquisition of the Cellarmasters Group, a wine direct retail and production company. Brad has a Master of Business Administration from the Australian Graduate School of Management and received Bachelor of Law and Bachelor of Commerce degrees from the University of KwaZulu-Natal. Gordon Cairns also announced that former Company CEO Grant O'Brien would leave the business on 26 February 2016. Mr O'Brien will cease to be an employee on 1 August 2016 but will no longer exercise the responsibilities and powers of the CEO position with effect from 26 February 2016. WOW lifted 45 cents to $22.34

    Recent Contacts & Presentations

    Troy Resources (TRY), Northern Star Resources (NST), Regis Resources (RRL), Medusa Mining (MML), Doray Minerals (DRM), Beadell Resources (BDR), Red 5 (RED), Kingsgate Consolidated (KCN), OBJ (OBJ), Sino Gas & Energy Holdings (SEH), TFS Corporation (TFC), Paragon Care (PGC), Austal (ASB),  Orbital Corporation (OEC),Energia Minerals (EMX), Berkeley Energia (BKY) , Finders Resources (FND), 4DS Memory Ltd (4DS) , Bionomics Ltd (BNO)

     

    Please read Argonaut's Important Disclaimers & disclosures

    Log in to the client area below to download the full Morning Note PDF

    Argonaut Morning Note

    No tags.

    NextPrevious
    • About Us
      • Business Model
      • Regulation
      • Community
      • Jason and the Argonauts
      • Disclaimer and Disclosure
      • COVID-19 Visitor Requirements
    • Corporate Finance
    • Stockbroking & Research
      • Stockbroking
      • Research
      • Best Execution Policy
      • Administration Forms
      • Open an Account
    • Special Situations
    • News
      • Latest News
      • Morning Notes
      • Latest Research
    • Contact
      • Careers
        • Advisers
        • Graduate Program
        • Internship Program
    Argonaut

    Argonaut | The Natural Choice in Resources.
    © 2022 Argonaut.

    Corporate Finance
    Stockbroking & Research
    Contact Us

    Argonaut | Perth

    Level 30, Allendale Square, 77 St Georges Terrace Perth, WA, 6000 Australia

    clientservices@argonaut.com

    ABN 72 108 330 650

    Argonaut | Login

    Client Area Help
    Register for Access to Client Area
    Privacy Policy
    Financial Services Guide 
    Website Disclaimer

    Copyright 2022 | Website ⚡ by Start Digital