Market Update & Important Indicators
U.S. stocks rallied Thursday at the end of a tempestuous first half of the year. Stock markets extended gains after Bank of England Gov. Mark Carney predicted the central bank would need to cut its key interest rate over the summer. Investors have been expecting a policy response in the wake of the U.K.'s vote to leave the European Union, including further stimulus from the European Central Bank. Mr. Carney said an initial assessment of the economic impact from the referendum result would be made at the July meeting. Thursday's moves come after stocks in Europe and the U.S. posted their largest two-day gain since February on Tuesday and Wednesday, with two of the year's best days chipping away at two of the year's worst in the wake of the U.K. vote. The moves put the Dow industrials on track to rise 1.3% in the quarter and 2.8% for the year to date.
European stocks closed higher following a choppy session. The Stoxx Europe 600, which switched between gains and losses, closed up 1% at 329.88, with all sectors closing higher led by utilities and basic materials. European stocks on Wednesday surged 3.1%, marking a second straight day of sharp gains after a two-session rout in the wake of the U.K.'s vote to leave the European Union. Stocks had appeared to have found, at least, a short-term foundation for gains as the U.K. government had yet to formally start the negotiation process for the U.K.'s exit from the 28-member bloc, or Brexit.
Stock markets across Asia mostly finished higher Thursday on the back of gains in energy and mining shares, capping a volatile and eventful first half of the year. Japan's Nikkei Stock Average ended up 0.06% and South Korea's Kospi rose 0.7%. Hong Kong's Hang Seng Index closed up 1.8%, and China's Shanghai Composite Index ended down 0.1%. The month of June began with investors worried about a strengthening yen, which prompted multiple warnings by Japanese officials that they could intervene in markets. For the month of June, Japan's Nikkei was the region's worst-performing stock benchmark, down 9.6% for the month. In China, the Shanghai Composite booked a tiny gain of 0.45% for the month, a sign of its relative isolation from investors' worries about the preceding week's Brexit vote.
Australian shares jumped Thursday, joining a global relief-rally as fears ease over the fallout from Britain's vote to leave the European Union. Still, a second day's recovery for the local market wasn't enough to pull it out of the red for the month or the first half of the year, with June snapping a run higher over the previous three months. Capping a volatile few days, the S&P/ASX 200 finished 91 points, or 1.8%, higher at 5233.4. That left the index 2.7% lower for the month and down 1.2% at the mid-point of 2016. Thursday's gains were broad across all industry sectors, with solid performances by banks and resources stocks after crude-oil and metals prices pushed higher.
The London Metal Exchange's three-month copper contract was up 0.56% at $4,845 a ton at the PM kerb close, its highest price since May 3, after spending the day edging between gains and losses. Aluminium closed up 1% at $1,643 a ton, zinc was up 0.8% at $2,102 a ton, nickel was up 0.1% at $9,401 a ton, and lead was up 1% at $1,785 a ton.
In this Issue
MZI Resources (MZI) | Maiden L88 Shipment | BUY
Market cap $53m | Current Price $0.26 | Valuation $0.68
MZI Resources’ (MZI) first bulk shipment of L88 (88% TiO2 leucoxene) was shipped from the Port of Bunbury yesterday. The shipment, which consisted 8.3kt L88 and 7.0kt L70 (70% TiO2 leucoxene), will generate ~$9.8m revenue. Earlier in the week the Company also announced the restructure of its US$37.5m Senior Debt Facility with RMB. Repayments have been extended over an additional 27 months with lower upfront principle repayments and lower cash sweeping. These two events release pressure on MZI’s cash balance caused by lower contract sales with off-take partner Chemours (See Argonaut report: Sales contract reduced). Argonaut maintains a BUY recommendation with a revised target price of $0.68 (from $0.70).
Paragon Care (PGC) | FY16 earnings update | BUY
Market Cap $112m | Current Price $0.70 | Valuation $0.90
With guidance for full year NPAT of $6.4-6.7m, PGC will deliver 2H16 numbers ahead of our prior forecasts. Cash flow, the weak area in the 1H numbers, was much improved in the 2H based on a closing cash position of $17m. In our view management has done a commendable job delivering strong financials while integrating large acquisitions and moving premises. We like the business model and expect PGC to become a larger integrated supplier to the healthcare industry on the back of further organic and acquisitive growth. We maintain a buy call on a valuation of $0.90 (prior $0.85).
Recent Contacts & Presentations
Evolution Mining (EVN), LWP Technologies (LWP), Walkabout Resources (WKT), Minotaur Exploration (MEP), Peet Limited (PPC), Parmelia Resources (PML), Venturex (VXR), Dacian Gold (DCN), Cudeco (CDU), Resolute Mining (RSG), Echo Resources (EAR), Altech Chemicals (ATC), TFS Corporation Limited (TFC), Noxopharm (NOX), OBJ Limited (OBJ)
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