Morning Notes

18/04/2017 Argonaut Morning Note

Market Update & Important Indicators

On Saturday, North Korea rolled a long-range ballistic missile, among other military equipment, through the streets of Pyongyang to commemorate the birth of the country's late founder, Kim Il Sung. The next day it unsuccessfully fired a ballistic missile, prompting a senior Trump administration official to warn that North Korea's provocative behaviour couldn't continue--a warning underlined Monday by Vice President Mike Pence, who is visiting the region.

Still, stock selling appeared to be moderating as tensions failed to escalate to a direct military confrontation; Korea's Kospi closed up 0.5%, recovering from recent declines.

In Tokyo, one source of the recent stock declines--the unwinding of bullish bets built following November's U.S. presidential election--is easing, said Soichiro Monji, general manager of economic research at Daiwa SB Investments. "The market will likely start to rebound" barring further escalation on the Korean Peninsula, he said.

For the rest of the week, investors will be watching U.S. trade relations with other Asian countries. Mr. Pence will be meeting his Japanese counterpart to discuss economic issues later this week.

In this Issue

GR Engineering (GNG) | Constructing a Strong FY18 | BUY
Market Cap $235m | Current Price $1.54 | Valuation $1.75

GNG continues to build its FY18 order book with the approval of the $17.5m Cosmic Boy Mill Recovery Enhancement Project for Western Areas Ltd (WSA.ASX). Based on our forecasts, GNG has now secured approximately $200m work for FY18, including a significant contribution from UPS. Consequently, given such a strong pipeline, we have increased our FY18 earnings forecasts, adjusted our valuation to $1.75 (prior $1.56), and upgraded our recommendation to buy.

Recent Contacts & Presentations

Metro Mining Ltd (MMI), Tox Free Solutions Ltd (TOX), St George Mining Ltd (SGQ), Venturex Resources Ltd (VXR), Creso Pharma Limited (CPH), Sino Gas & Energy Holdings Ltd (SEH), Orecorp Limited (ORR) Doray Minerals Limited (DRM), Capricorn Metals Ltd (CMM) Independence Group (IGO), Cardinal Resources Limited (CDV), Metal Bank Ltd (MBK), MOD Resources Ltd (MOD) Quintis Ltd (QIN), Regis Resources Ltd (RRL), Apollo Minerals Ltd (AON), Ironbark Zinc Ltd (IBG), Sovereign Metals Ltd (SVM), Pilbara Minerals Ltd (PLS), Laconia Resources Ltd (LCR), Hazer Group Ltd (HZR), Transerv Energy Ltd (TSV), Ausquest Ltd (AQD), Quintis Ltd (QIN), Paradigm Biopharma Ltd (PAR)

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