Overseas Market Report – U.S. Stocks Finish Slightly Lower
U.S. stocks ended Thursday's choppy session slightly lower as investors grappled with weaker-than-expected economic reports, mixed earnings results and deal news.
Gross domestic product grew at a 1.5% seasonally and inflation-adjusted annual rate in the third quarter, the Commerce Department said. This is in line with economists' forecasts and marks a slowdown in the rate of economic growth from both the second quarter and year-ago periods.Initial U.S. jobless claims rose by 1,000 to a seasonally adjusted 260,000 in the week ended 24 October, the Labour Department said. Despite the slight rise, the overall level remains historically low.
Pending U.S. home sales fell 2.3% in September, the second drop in a row, the National Association of Realtors reported.
At the close, the Dow was down 0.1%, the S&P 500 was flat and the NASDAQ was 0.4% lower.
For Australian ADRs listed on the NYSE, BHP Billiton slipped $1.41 (4.13%) to $32.72, ResMed lost 39 cents (0.68%) to $57.31, Telstra Corporation fell 40 cents (2.02%) to $19.42, Spark New Zealand was down 8 cents (0.73%) to $10.95 and Westpac declined 41 cents (1.79%) to $22.53.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 2.17% and the 5-year yield was 1.53%.
Shares of Allergan PLC (AGN) rose after the pharmaceuticals firm confirmed it was in preliminary talks to merge with Pfizer Inc. (PFE).
Shares of PayPal Holdings Inc. (PYPL) fell after the company's third-quarter earnings report revealed that it missed analyst expectations for revenue growth.
European markets were lower.
The FTSE 100 fell 0.7%, the French CAC 40 fell 0.1% and Germany's DAX was down 0.3%.
Asian shares were mixed.
The Shanghai Composite rose 0.4%, the Nikkei 225 rose 0.2% and the Hang Seng was down 0.6%. India's Sensex lost 0.8%.
Australian Market Report – Local Market Expected To Open Lower
Ahead of the local open, SPI futures were 14 points lower at 5,226.
Thursday 29 October – close. Local stocks opened higher this morning, following a positive lead from the US market overnight. However, the positivity was short-lived as a massive sell-off instigated by the index heavyweights WOW and NAB wiped out early gains. The downward trend continued during afternoon trade, to close far below the red line. Most sectors performed negatively, with the exception of utilities. The Australian dollar appreciated against most major currencies.
The All Ordinaries slumped 64.20 points to 5,310.20 while the S&P/ASX 200 dropped 68.30 points to 5,266.90.
In This Issue
AWE Limited (AWE) | BUY
AWE Limited (AWE) released its Q1 FY2016 results with total production of 1.38 mmboe, down 3% Q-Q (lower than our forecast of 1.45 mmboe), mainly due to slightly higher decline rate of the Tui Pateke-4H tie in well. Sales revenue was down from A$81m to A$59m due to only one lifting from the Tui oil project, however this was offset a little by slightly increased average oil prices (A$60.13/bbl v A$57.33bbl) up 5%. Cash reduced to $54m with debt drawn to $210m from AWE’s $400m facility.
During the Q AWE had positive news flow with BassGas production up 23% over Q4 with the Yolla-5 and Yolla-6 development wells brought into production, Sugarloaf 2P Reserves upgraded to 47.8 mmboe at 30 June 2015, and further drilling of the Austin Chalk (Sugarloaf 2P plus 2C now 65 mmboe net to AWE). Most importantly AWE saw significant flowrates and reserves increases from its Perth Basin assets with 2P Reserves and 2C Resources for Waitsia, Senecio, Synaphea and Irwin increasing to 721 Bcf (67 mmboe net).
Resolute (RSG) | HOLD
Resolute Mining (RSG) reported 80koz @ AISC A$1,176/oz, in-line with Argonaut’s expectation of 84koz @ AISC $1,193/oz. The strong FCF generated from the operations strengthened the balance sheet with cash and gold increasing to A$70m (was $54m) and debt reducing to A$109m (was A$118m). Near term, a major roaster shut down scheduled in the December Q is likely to impact on production. Longer term, Argonaut sees the potential of RSG becoming a low cost, long life, sizable gold producer with Syama being the cornerstone asset. The Company’s ongoing Feasibility Study on the Syama Underground operation, due CY16, could demonstrate lower cost and / or high grade. Argonaut increases its target price to A$0.40 (was A$0.38), reflecting the ongoing positive reconciliation at the A21 orebody. Given the strong share price performance, we downgrade the stock to a HOLD (was SPEC BUY).
Blackmores Limited (BKL) – Morning Star
Blackmores announced a strong first quarter performance with NPAT of $22.6m, up 161% on the pcp. The strong sales momentum across the Group continued with sales of $162.2m for the first quarter, up 65% on the pcp. The strong cash flows generated in the quarter have supported improved debt levels. This, combined with the benefit of a renegotiated loan facility has resulted in lower interest payments which further benefited the profit result. The Company and Bega Cheese are establishing an equal share partnership to develop and manufacture a range of nutritional foods, including high quality infant formula, through Bega's subsidiary Tatura. The Company announced the signing of a JV with Kalbe Farma. BKL soared $20.06 to $175.51.
Woolworths Limited (WOW) – Morning Star
Woolworths announced first quarter FY16 sales of $15.7bn. Sales increased by 0.8% on the previous year excluding Petrol and decreased by 2.5% including Petrol. Australian Food and Liquor sales for the quarter were $11.1bn, an increase of 0.4% on the previous year. Food & Liquor sales had declined by 0.9% for the first 8 weeks of FY16. The remainder of the quarter continued at a similar rate with comparable sales for the quarter declining by 1.0%. NZ Supermarkets sales for the quarter were NZ$1.6bn, an increase of 3.9% on the previous year. Comparable sales increased 2.5% for the quarter. General Merchandise sales were $974m, a decrease of 7.9%. Comparable sales declined by 8.1% for the quarter, an improvement on the first 8 weeks where comparable sales declined by 8.9%. WOW lost $2.67 to $24.70.
Recent Contacts & Presentations
Tox Free Solutions (TOX), AWE Limited (AWE), Ausdrill (ASL), GR Engineering (GNG), Medusa (MML), Resolute (RSG), Kingsgate (KCN), Troy (TRY), Northern Star (NST), Sandfire (SFR), Regis (RRL), Saracen (SAR), Sino Gas & Energy (SEH), Dacian (DCN), Buru Energy (BRU), Carnarvon Petroleum (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), FAR Limited (FAR), Central Petroleum (CTP), Senex Energy (SXY), Fortescue Metals (FMG)