Morning Notes

09/01/2018 Argonaut Morning Note

Market Update & Important Indicators
U.S. stocks edged higher Monday following a run of records in the first week of trading. Stocks began the year on an upbeat note, buoyed by investors' optimism over the global economy and bets that central banks are unlikely to pressure markets by raising interest rates too quickly. Many believe the gains will continue in 2018, although some analysts have warned that valuations have made U.S. stocks look pricey relative to their international counterparts. The Dow Jones Industrial Average rose less than 0.1%. The S&P 500 gained 0.1% and the Nasdaq Composite rose 0.3%. Corporate news drove much of the moves in individual stocks Monday. Shares of Crocs, which raised its guidance for fourth-quarter revenue, added 11%. Meanwhile, GoPro shares slid 11% after the company said its fourth-quarter revenue would come in below what it had previously expected, in part due to product price cuts. The U.S. gold price traded higher overnight, gaining 0.1% to close at 1,319.70 US$/oz.

European stocks on Monday closed at a 2 1/2-year high partially buoyed by gains in German shares despite downbeat data from Europe's largest economy. The Stoxx Europe 600 index tacked on 0.3% to end at 398.41, scoring its best close since July 2015, according to FactSet data. The gauge on Friday finished at its highest since August 2015, leading to last week's rise of 2.1%. Germany's DAX 30 index rose 0.4% to finish at 13,367.78, holding near a two-month high. France's CAC 40 picked up 0.3% to close at 5,487.42, also at its highest since early November. The U.K.'s FTSE 100 index, meanwhile, fell 0.4% to close at 7,696.51 after Friday's record finish.

In the Asia-Pacific region, last week's rally continued across most equity markets Monday. China's Shenzhen A-Share index rose by 0.2%, as did Hong Kong's Hang Seng Index. Taiwan's Taiex closed at a fresh 28-year high, up 0.3%. Japanese markets were closed.

Early enthusiasm for Australian shares cooled by midday, but the benchmark S&P/ASX 200 index still managed to notch a fresh 10-year closing high. It rose 0.1% at 6130.4 after getting to 6143 within the first hour of trading. Materials were weaker, with BHP down 0.1% despite Macquarie now favoring the stock over Rio Tinto on the potential for a capital-returns surprise next month. The country's big banks continued their rebound, however, with CBA climbing 0.6%. The index has risen for 4-straight days, and 10 of the past 13.

The London Metal Exchange’s 3-month copper contract traded higher overnight, rising 0.1% to finish at $7,125/t. The other base metals finished mixed. Aluminium prices lost 1.3% to close at 2,159/t, whilst Lead prices bounced 2.6% to close at 2,612/t. Zinc prices gained 0.7% to close at 3,405/t, whilst Nickel prices traded flat at 12,487/t. Tin prices also traded flat for the day, closing at 20,020/t.

In this issue
Global Construction (GCS) | Review | BUY
Market Cap $189m | Current Price $0.895 | Valuation $1.05

It has been a strong first half of FY18 for GCS, both strategically and in terms of share price gains. The sale of the equipment hire division in December last year was a prudent move by management to divest an underperforming business and reduce GCS’s overall capital intensity. As a result, among other catalysts, the share price has gained over 50% since the start of FY18. A strong balance sheet, reduced capital intensity and potential significant growth in the rectification of combustible cladding underpin our buy recommendation on a revised valuation of $1.05 (previously $0.90).

Recent Contacts & Presentations
Greenland Energy Ltd (GGG), Walkabout Resources Ltd (WKT), Marindi Metals Ltd (MZN), Volt Power Group Ltd (VPR), PharmAust Ltd (PAA), Alice Queen Ltd (AQX), Jervois Mining Ltd (JRV), St George Mining Ltd (SGQ), Overland Resources Ltd (OVR), Metro Mining Ltd (MMI), Botanix Pharmaceuticals Ltd (BOT), Xanadu Mines Ltd (XAM), Orthocell Ltd (OCC), Whitebark Energy Ltd (WBE), Atrum Coal Ltd (ATU), Minotaur Exploration Ltd (MEP), Panoramic Resources Ltd (PAN), Sino Gas & Energy Holdings Ltd (SEH), Great Boulder Resources Ltd (GBR), Metallum Ltd (MNE), Gold Road Resources Ltd (GOR), Apollo Consolidated Ltd (AOP), De Grey Mining Ltd (DEG), Triton Minerals Ltd (TON), Evolution Mining Ltd (EVN), Silver Mines Ltd (SVL), NTM Gold Ltd (NTM)

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Argonaut Morning Note