Market Update & Important Indicators
The Dow industrials turned little changed amid mixed corporate earnings from UnitedHealth Group Inc. and International Business Machines Corp. Earlier, stocks gained after reports suggested the European Central Bank was set to deliver a bond-buying program that matched investors' expectations. The Dow advanced 39 points, or 0.2%, to 17,554 and the S&P 500 rose 10 points, or 0.5%, to 2,032.European stocks paused after four consecutive sessions of gains, ahead of a key European Central Bank meeting Thursday at which market participants broadly expect the bank to announce a lofty bolstering of its asset-purchase program to stimulate lacklustre growth in the region. Having hit a seven-year high the previous session, the Stoxx Europe 600 fluctuated between slim losses and marginal gains early afternoon, as investors tweaked their positions ahead of the ECB interest-rate decision and subsequent news conference. London's FTSE 100 was around 0.7% early afternoon, while Germany's DAX and France's CAC edged 0.4% and 0.3% lower respectively.
Stocks in Asia climbed with Europe nearing a decision on whether to launch a stimulus program and rising oil prices lifted Australia. The S&P/ASX 200 was up 1.3% at 5374.10 and Hong Kong's Hang Seng Index was up 1.1% to 24209.99. In Shanghai, stocks were up 1.5%, extending a rebound Tuesday after the market's 7.7% plunge Monday. In Japan, the Nikkei Stock Average was off by 0.5%, ahead of a policy decision from the Bank of Japan. Analysts say however that there is little chance the central bank will make another change to its bond-buying program, having increased its size only three months ago.
Base metals on the LME were mostly higher. Zinc rose 1.9%, nickel increased 1.7% and aluminium advanced 1.5%. Gold slid 0.1% to US$1,293.0/oz and WTI crude stepped up 1.9% to US$47.28/bbl. The AUD is buying US$0.809.
Thought for the Day
DTI Group Limited (ASX:DTI, market cap $26.2m)
Niche business: DTI Group is a specialist provider of surveillance systems and fleet management solutions for the global mobile security market. Founded in 1995, DTI is strongly positioned within the Australian mass-transit market. In 2006 their presence extended internationally throughout Europe, North America, the Middle East and South America.
Integrated surveillance solutions: DTI’s generates revenue by; (1) surveillance solutions; hardware systems video, audio, GPS tracking and data collection systems and communications. (2) Management services to varying enterprises within the mobile security market. This includes video management, vehicle data analysis, IT infrastructure, technical support and maintenance to mass-transit, private enterprise and government sectors.
Surveillance integral to infrastructure: To ensure continued economic growth, investment in high-speed rail and other methods of transport are integral to cost-effective and efficient services. Surveillance and screening equipment, infrastructure security, and control systems are all integral to infrastructure management and maintenance. The surveillance and screening sub-market is the dominant sub-market due to cost effectiveness, holding 63% in 2013 according to Visiongain (see Figure 2 and 3 below). DTI provide superior solutions covering the surveillance and screening market spectrum.
Crime and terrorism a key driver: Growth in worldwide transport infrastructure investment particularly in developing economies and the continued risk of crime and terrorism strengthen the importance of wide-scale security in the transit security market. Other drivers to the mobile security market include:
• Liability issues for operators
• Damage and vandalism
• Customer service
• Passenger information
• Transit-only lane enforcement
Continued organic and acquisitive growth: DTI currently hold a strong track record in operating revenue growth since inception; $0.98 million in 2004 to $20.8 million in FY14. Revenue from international projects exceed domestic revenue according to company statements, reflecting a key growth strategy held by DTI; to further penetrate international markets. Last December, 30 additional video surveillance systems were ordered for Łódź, as well as 16 for Gdańsk. Further penetration into Poland, and the Eurozone will deliver considerable value for DTI in terms of organic growth. Further, we expect DTI to pursue acquisitive growth opportuities following its recent ASX listing in November 2014.
In This Issue
Western Areas (WSA)
Western Areas (WSA) released December Q results with 6.4kt Ni in concentrate at A$3.10/lb (payable est.) vs September Q of 6.5kt at A$3.52/lb and Argonaut forecast of 6.6kt at US$3.53/lb. The Company improved its net cash position to $50.3m (unconsolidated), up from $42m in the preceding Q.
Saracen (SAR)
Saracen (SAR) delivered record production of 42.9koz @ AISC A$1,191/oz, significantly higher than Argonaut forecast of 37koz @ AISC A$1,212/oz, driven by higher grades at Red October (RO) and Whirling Dervish (WD). The current production trajectory suggests SAR will beat its FY15 guidance of 145-155koz @ AISC A$1,150/oz with 79.4koz delivered in H1 FY15. Costs are likely to fall further with the full benefit of grade increase and the retirement of a fleet / digger expected in the March Q. Cash increased to A$37.2m (was A$36.3m at 30th September) and debt remained unchanged at A$12m. With the Karari exploration decline commenced and ongoing exploration drilling at Red October (RO), SAR is expected to continue deliver steady news flow on the exploration front and prove up higher margin ounces. Specifically, the upcoming program at Karari could prove up a long life, underground operation. The stock offers expanding margins, exposure to a weakened AUD, a sizable inventory of 6.9Moz Resource and tangible exploration upside.
Recent Contacts & Presentations
Northern Star (NST), Doray Minerals (DRM), Troy Resources (TRY), Gold Road Resources (GOR), Saracen Mineral Holdings Limited (SAR), Beadell Resources Limited (BDR), Resolute Mining Limited (RSG), RTG Mining (RTG), Alexium International Group Limited (AJX), Pacific Energy Limited (PEA), Otto Energy Limited (OEL), Peninsula Energy Limited (PEN), Sandfire Resources NL (SFR), Atrum Coal (ATU), Empired (EPD), DTI Group (DTI)
Please read Argonaut's Important Disclaimers & disclosures
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