Morning Notes

09/08/2018 Argonaut Morning Note

Market Update & Important Indicators

U.S. stocks waffled between small gains and losses intraday as shares of utilities and energy companies slumped and the S&P 500 hovered just below its all-time high. The broad stock-market index rose less than 0.1% after closing at its second-highest level ever Tuesday. The S&P 500 is about 0.5% away from its January high. The Dow Jones dropped, or 0.2%, to 25584, while the Nasdaq Composite rose 0.1%. Investors continue to parse corporate-earnings results, with the bulk of companies done reporting numbers for the most recent quarter. U.S. economic data has pointed to a strong economy, and investors have remained hesitantly optimistic as companies this year have reported positive earnings growth, pushing the S&P 500 up 3.6% in the past month. Shares of energy companies were the worst performers in the S&P 500, with the sector losing 0.9% as oil prices tumbled. U.S. crude for September delivery settled down 3.2% at $66.94 a barrel after data showed total U.S. stockpiles of oil and fuel hit a seven-month high, suggesting supply was outpacing demand. Declines in the utilities and consumer-staples sectors also dragged on the broad index, while the financials, tech and health-care sectors edged higher. The US gold price gained 0.2% to record 1213.50 US$/oz.

The Stoxx Europe 600 dropped 0.2% as geopolitical tension continues to weigh on stocks across the region. The pan-European index fell 0.8 points to 389.7, with Germany's DAX down 0.1% and France's CAC-40 off 0.4%. "Markets had a muted reaction to China's announcement that it plans to impose tariffs on $16 billion worth of U.S. goods, starting on Aug. 23," said David Madden at CMC Markets. "The token retaliation from Beijing keeps the trade spat alive." Danish drug company H. Lundbeck fell 14% after first-half results.

In Asia, Japan's Nikkei edged lower 0.1% while Hong Kong's Hang Seng was up 0.4%. The Shanghai Composite Index fell 1.3% and the Shenzhen A Share index dropped 1.9% as the Trump administration completed plans Tuesday to impose tariffs on an additional $16 billion of Chinese imports. The penalties, which were widely expected and would take effect Aug. 23, brings the total amount of Chinese goods covered by tariffs to $50 billion. China announced plans to retaliate with duties on an equivalent amount of U.S. goods. Meanwhile, surging imports helped narrow China's trade surplus in July to $28.05 billion, below the $39.10 billion expected by economists polled by The Wall Street Journal.

Several well-received earnings reports helped drive Australia's stock market as equities faded some in Asia Pacific this afternoon. Reversing most of yesterday's drop, the ASX all Ords gained 0.2% to 6355. Financials and materials led, with CBA rallying 2.6% following its fiscal-year beat. Meanwhile, also beaten-down AMP rebounded 3.9% and Tabcorp jumped 7.6%. Still, there was weakness in utilities, industrials and health care. Tomorrow's earnings calendar includes AGL Energy and Suncorp.

Base metal prices were mostly up on the London Metal Exchange. Nickel recorded a 1.5% gain to 13,968/t whilst tin fell 0.9% to 19,461/t. The 3-month copper contract rose to 6,144/t, Zinc appreciated 0.4% to close at 2,654/t. Aluminium recorded a 3.5% increase to 2,084/t.

In this issue

Threat Protect (TPS) | Ramps up run rate into FY19 | SPEC BUY

Market Cap (post CN conv.) $31m | Current Price $0.200 | Valuation $0.225

The ramp up in the revenue run rate to $4.5m in 4Q18 augurs well for the coming year, helping validate the Company’s FY19 guidance for >$17m revenue and $3.8-4.0m normalised EBITDA. This is in line with our prior expectations, and our forecasts are little changed. Further, the capital structure will be simplified in the future once the Con Notes are converted, and existing debt is consolidated under a new $15m Macquarie facility. The ability to leverage existing infrastructure is a positive, and we maintain a SPECULATIVE BUY call on a $0.225 blended valuation (unchanged on prior).

Recent Contacts & Presentations

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), Peel Mining (PEX), Catalyst Metals (CYL), Vault Intelligence (VLT), Doray Minerals (DRM), Nzuri Coppoer (NZC), Bowen Coking Coal (BCB), Phosphagenics Limited (POH) Great Boulder Resources (GBR), Orthocell (OCC), Northern Minerals (NTU), ABM Resources Ltd (ABU), Vital Metals Ltd (VML), Todd River Resources Ltd (TRT), Pacific Energy Ltd (PEA), Carnarvon Petroleum Ltd (CVN), Australian Mines Ltd (AUZ), Australian Finance Group (AFG), Paladin Energy Ltd (PDN), Cooper Energy Ltd (COE), Medibio Ltd (MEB), Botanix Pharmaceuticals Ltd (BOT), Salt Lake Potash Ltd (SO4)

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