Morning Notes

21/04/2017 Argonaut Morning Note

Market Update & Important Indicators:

U.S. stock indexes climbed intraday, led by gains in shares of financial and industrial companies. The Dow Jones Industrial Average rose 165 points, or 0.8%, to 20570 intraday. The S&P 500 was up 0.7%, and the Nasdaq Composite rose 0.9%. Also rising was the U.S. gold price overnight, which jumped 0.1% to 1,281.70 US$/oz. A stabilisation in oil prices and a stream of better-than-expected earnings reports helped lift major indexes. Signs of corporate and economic health should buoy stocks, analysts say, even as investors weigh doubts over the Trump administration's ability to push through policy changes like tax reform and fiscal stimulus. Still, some say the stock market has already largely priced in expectations of firming economic data and improving earnings.

U.K. stocks ended a wobbly session slightly higher after a mixed bag of corporate results, including well-received earnings from consumer giant Unilever. The FTSE 100 index rose 0.1% to close at 7,118.54, bouncing back from the lowest close since Feb. 1 that it logged on Wednesday. Stocks have been sliding in recent days, with the fall continuing after U.K. Prime Minister Theresa May called a snap general election for June 8. The FTSE on Wednesday erased its yearly gain, dropping 0.5% after falling for four straight sessions. In Paris, the CAC 40 rose 1.5% to 5,077.91, the strongest percentage rise since March 1, FactSet data showed. French equities outperformed the broader European market, with the Stoxx Europe 600 notching a 0.2% advance to end at 378.06, after slipping between small gains and losses. The pan-European index was held back by declines in the oil and gas and utility sectors, but the industrial, financial and technology groups printed gains.

Stocks in Asia end broadly higher on bargain hunting following recent volatility. The Hang Seng Index added 1%. The Shanghai Composite ended flat, with an ambitious goal by the local exchange operator on IPOs this year spooking investors. The Nikkei Stock Average also ended flat, as a stronger yen late in the session offset gains made after data showed exports in the country rose 12% on year, beating expectations. Indonesian shares ended a tad lower as local investors took profit, even as foreigners still poured money to the local bourse. The JSX index dropped 0.2% to 5595.31, with 219 decliners and 122 gainers. Thailand's SET index ended flat at 1566.28 points in mixed trade, with some banking and infrastructure related stocks supporting the index.

Banks helped drive a broad recovery in Australian shares, pulling the market back from a three-week low. Snapping a run lower over the last three sessions, the S&P/ASX 200 ended up 17.4 points, or 0.3%, at 5821.4. The four largest banks, among the largest stocks in the ASX 200, collectively added almost 10 points to the index as the lenders recovered from falls in recent days amid heightened geopolitical concerns that weighed on the broader market. Still, mining and energy companies continued to weaken after oil fell to its lowest in almost three weeks overnight and following steady declines in iron ore the past week, and in the wake of quarterly trading updates from several resources companies.

The London Metal Exchange's three-month copper contract closed up 1.21% at $5,623/t. All other base metals finished higher on Thursday. Aluminium prices rose 2.3% at 1,932/t, nickel prices rose 1.6% at 9,435/t, lead prices rose 0.1% to 2,157/t, tin prices rose 0.5% at 19,894/t and zinc prices rose 3.5% at 2,618/t.

In this Issue:

Quintis (QIN) | Pruning plantations | HOLD
Market Cap $449m | Current Price $1.15 | Target Price $1.50

Only time will prove whether QIN and McKinsey are right about end markets. Naysayers’ strong assertions on the other hand need only stoke fear to see predictions fulfilled. Regardless of who’s right or wrong, ructions caused will impact the business. Accordingly, we assume downgrades in the near term and are more conservative longer term. This reduces our valuation, although at $2.09 (prior $3.30) it still reflects our long-term belief in significant value. We expect this to be largely ignored though while near-term risks are elevated. As a result we downgrade to hold with a $1.50 target price.

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), Pharmaust Ltd (PAA)

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