Market Update & Important Indicators:
Gains in technology shares lifted U.S. stocks intraday, putting major indexes on track for a fourth straight session of gains as investors monitored the latest trade developments. The S&P 500 added 0.6%, while the tech-heavy Nasdaq Composite climbed 0.8%. Both indexes were on pace for all-time highs. The Dow Jones Industrial Average erased early losses and was recently up 0.2%. The S&P 500 information technology sector rose for the ninth time in the past 10 sessions, adding 0.9%. Optimism about trade has buoyed stocks recently, as the U.S. struck a deal with Mexico this week and has charted a path to resolve its tariff fight with China. Worries that protectionist policies would weaken the global economy have hurt markets throughout the year, but some analysts view the most recent developments as a sign that the Trump administration wants to avoid growth-hindering policies. Investors were looking ahead to Thursday inflation data for the latest reading on consumer prices, as some remain concerned that gradually accelerating inflation and rising interest rates could threaten corporate profits. The US gold price gained 0.5% to record 1206.30 US$/oz.
European stocks closed higher, with the Stoxx Europe 600 index up 0.3% at 386.58, though U.K. stocks fell due to gains in the pound. Shares in Italian sports-car maker Ferrari jumped 4.2% after HSBC upgraded the stock to buy. Spanish fashion retailer Inditex is among the biggest fallers, losing 5.7% after Morgan Stanley downgraded the stock to underweight, while Danish brewer Royal Unibrew loses 5.3% following results. Germany's DAX index ended up 0.3%, France's CAC 40 up 0.3%, while Italian stocks recovered after recent falls, with the FTSE MIB ending up 0.7%. Spain's Ibex 35 finished down 0.4%. The U.K.'s FTSE 100 underperformed, closing down 0.7% as the pound rose to a three-week high against the dollar after comments from EU negotiator Michel Barnier revived investor hopes of a Brexit deal.
Japan's Nikkei ticked 0.2% higher while China's Shanghai Composite Index fell 0.3%. Hong Kong's Hang Seng gained 0.2%. The drop in Shanghai came despite resilient earnings reports in recent days from three of China's four largest banks. The lenders' performances were against the backdrop of Beijing's attempts to reduce the build-up of leverage and broader market fears of a trade-related economic slowdown. The Chinese yuan was down 0.3% against the U.S. dollar.
A last-hour push to session highs was enough for Australia's stock benchmark to log= another 10 1/2-year closing high. In rising for a fourth day, the S&P/ASX 200 also finished at session highs, climbing 0.7% to 6457. The heavily weighted Financials, which pressured the market most of last week, continued their rebound in climbing 1.8% today and nearly erasing this month's drop. But the hot health-care space fell 0.2%. It's surged 51% the past year. Energy dropped the same today. Individually, grocer Metcash jumped 10% after its chief executive said at today's annual meeting that improved sales trends have persisted. Building-products firm Boral rose the same following its fiscal-year report.
Base metal prices were mostly down on the London Metal Exchange. Lead gained 0.3% to 2,072/t, Zinc fell 1.2% to 2,514/t. Nickel decreased 1.3% to 13,415/t as the 3-month copper contract fell 1.0% to 6,073/t. Aluminium appreciated 1.7% to 2,147/t.
In this issue:
Austin Engineering (ANG) | Strategy delivering | BUY
Market Cap $130m | Current Price $0.225 | Valuation $0.27
Underlying FY18 EBITDA of $23.2m was toward the top end of the guidance range. However, key for us is ongoing strategy execution. Business rationalisation sees ANG’s FY19 EBITDA guidance of $25-28m up at least 30% on the underlying performance of continuing operations in FY18 (on our numbers). The anticipated sale of non-core crane assets in Chile reduces depreciation and interest charges, with the resultant uplift in our forecasts reflected in a higher blended valuation of $0.27 (prior $0.25) The industry backdrop is supportive in the medium-term and we upgrade to BUY (prior HOLD).
Independence Group (IGO) | FY18 results – FY18 increasing cashflow | HOLD
Market Cap $2,544 | Current Price $4.39 | Target Price $4.20
Independence Group (IGO) released FY18 full year results with record sales revenue of $778m, record underlying EBITDA of $339m and NPAT of $53, up 85%, 125% and 210% respectively. Revenue was in line with Argonaut’s forecast, however EBITDA and NPAT were higher primarily driven by a lower than predicted D&A charges and the sale of a gold royalty. The YoY increase in was primarily driven by the Nova hitting commercial production. Nova contributed $349m to revenue and $46m to NPAT. Higher ounces (up 8%) and a 5% increase in the gold price raised Tropicana’s NPAT contribution by $28m YoY. Long and Jaguar contributed $31m lower EBITDA in FY18, with the former now placed on care and maintenance and the latter divested to Copperhem in May 2018. Net debt decreased from $168m at the start of FY18 to $4m at financial year end ($139m cash and $143m debt). IGO declared a fully franked 2¢/sh dividend. HOLD recommendation maintained.
SCEE (SXE) | Transformed | BUY
Market Cap $175m | Current Price $0.755 | Valuation $0.85
SXE has transformed itself in recent years, substantially reducing exposure to resources, increasing its scale and diversity, and improving its earnings visibility. This was reflected in a strong FY18 outturn, which delivered $348m revenue and $19.0m normalised EBITDA. With $300m locked away for FY19 and a healthy tender book and pipeline, SXE’s target of >$400 revenue in FY19 is achievable. Medium-term growth potential and a less risky business model is reflected in our upgraded valuation of $0.85 (prior $0.80) and a BUY call (prior HOLD).
Recent Contacts & Presentations:
Macmahon Holdings Limited (MAH), Nickle Mines Limited (NIC), Carnarvon Petroleum Limited (CVN), Prodigy Gold (PRX), Ausdrill Ltd (ASL), Bionomics Ltd (BNO), Gold Road Resources (GOR), Encounter Resources Ltd. (ENR), OZ Minerals Limited (OZL), Melbana Energy (MAY), Botanix Pharmaceuticals Ltd (BOT), Novo Litio (NLI), Classic Minerals (CLZ), OZ Minerals (OZL), Saturn Metals (STN), Antipa Minerals (AZY), SRG Ltd (SRG) Bowen Coking Coal (BCB), Birimian (BGS), Breaker Resources (BRB), Galena Mining (G1A), Valmec (VMX),Bryah Resources (BYH), Calima Energy (CE1) Genesis Minerals (GMD), Agrimin (AMN), Magnetic Resources (MAU), Core Exploration (CXO), Marindi Metals (MZN), MOD Resources (MOD), Santos (STO), Adriatic Metals (ADT) Bio–Gene Technology (BGT), Walkabout Resources (WKT), Triton Minerals (TON), Calima Energy (CE1)