Market Update & Important Indicators:
U.S. stocks fell intraday, giving up ground after gains in shares of technology companies helped lift the S&P 500, Nasdaq Composite and Russell 2000 to records a day earlier. Major indexes spent most of the day edging lower, then extended losses after a Bloomberg News report suggested President Trump was backing plans to move ahead with tariffs on $200 billion in Chinese imports as early as next week. The report took some shine off stocks, which had gotten a boost earlier in the week after The Dow Jones Industrial Average fell or 0.5%, to 25987, on course to post its first loss in five trading sessions. The S&P 500 lost 0.4% and the Nasdaq Composite declined 0.2%. U.S. corporate profits have boomed in the second quarter, something that has helped drive stocks to fresh highs this month. The US gold price decreased 0.6% to record 1,199.60 US$/oz.
European shares closed lower, with bank and commodity stocks among the biggest decliners of the day as scepticism grew about an olive branch recently offered by the European Union's top Brexit negotiator. Italian stocks also were among the day's biggest decliners amid continued concerns over the budget that the new government is to propose next month. The Stoxx Europe 600 Index fell 0.3% to 385.36. Despite the dip, the pan-European index remains up 0.5% in what would be its second straight weekly gain. For the month of August, it is down 1.6% and on track for its weakest monthly performance since March. Germany's DAX dropped 0.5% to 12,494.24. For the week, it is up 0.8% in its second straight weekly climb. For the month, however, it is down 2.4%. France's CAC 40 Index fell 0.4% to 5,478.06. For the week, it is up 0.8%, although it is looking at a 0.6% decline for August.
Stocks don't go straight up, as was evident after more than a week of steady gains in Asia Pacific markets. Korea's Kospi saw a nine-year best nine-day winning streak barely end as Down Under benchmarks narrowly missed closing bests. Equities in the region generally faded in the afternoon, but Japan's Nikkei was barely able to hang on with an eighth-straight rise. Though Chinese indexes fell more than 1% and Hong Kong ones were off 0.9%, the region saw muted moves throughout the day. A third exception was Singapore, whose benchmark was off 0.5% despite a 2.2% jump in heavyweight Singapore Telecom. China led declines in the Asian markets, with the Shanghai Composite down 1.1% and the Hang Seng down 0.9% while South Korea's Kospi edged down 0.1%
Australian stocks gave up modest gains in a last-hour slide as equities in Asia Pacific paused after broad gains of the past week-plus. The ASX recorded a 0.1% gain to 6,461 following Wednesday's latest 10 1/2-year closing high, ending a four-day winning streak. The health-care sector rebounded 0.8%, but financials pulled back 0.4% following their bounce in recent days, most recently fueled by Westpac's mortgage-rate increases. Also, engineering firm RCR sunk 44% in its return following a month-long trading halt amid a capital-raising efforts.
Base metal prices were mostly down on the London Metal Exchange. Lead fell 0.8% to 2,055/t, Zinc fell 1.6% to 2,475/t. Nickel decreased 1.6% to 13,200/t as the 3-month copper contract depreciated 0.2% to record 6,063/t. Aluminium declined 1.6% to 2,112/t.
In this issue:
Austal (ASB) | Australasia to drive FY19 | BUY
Market Cap $620m | Current Price $1.765 | Target Price $2.25
US shipbuilding margins have improved in each of the last 4 halves, and averaged 8.5% in FY18 (well ahead of ASB’s 6-8% target and FY17’s 6.8%). With 60% of group revenue from US ships, and another 15% (and growing) from Support work, we feel this helps underpin earnings. Meanwhile, investment in new designs and technology, and expanding capacity in Australasia, sets ASB up to take advantage of growing demand in the commercial ferry market. We expect a turnaround from FY18 losses in Australasia to help drive up EBIT by 15% in FY19. BUY maintained on a $2.25 blended valuation (prior $2.10).
Sandfire Resource (SFR) | FY18 Results | BUY
Market Cap $1,135m | Current Price $7.50 | Target Price $8.85
Sandfire Resource (SFR) reported FY18 financial results with record revenue of $607m and a substantial YoY increase in NPAT to $226m, versus FY17 revenue of $533m and NPAT of $114m (up 14% and 61% YoY respectively). This result was largely driven by a 25% increase in the average LME price from FY17 to FY18. Free cashflow was in-line YoY as a result of ~$34m increase in tax payments. SFR retains a strong balance sheet with $243m cash (no debt), before the post year-end pending $72.3m acquisition cost for Talisman Mining’s (TLM) 30% stake in the Springfield JV (Monty Deposit).
Recent Contacts & Presentations:
Austal Limited (ASB), 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)