Market Update & Important Indicators:
The S&P 500 edged slightly higher intraday, as the broad measure of U.S. stocks stood on the verge of cementing its bull run from the depths of the financial crisis as the longest ever. The S&P rose 0.1% in midday trading after bouncing around the flatline earlier in the day. At the close of the day's session, the S&P will have extended its bull run from March 9, 2009 to 3,453 days, surpassing the previous record set between 1990 and 2000. Despite the historic milestone, trading was tepid. The index struggled to move meaningfully higher as investors tried to gauge the fallout of two criminal convictions against people who were closely tied to President Trump, former personal attorney Michael Cohen and former campaign manager Paul Manafort. While the convictions shouldn't substantially alter the stock market landscape, money managers and analysts said the developments raise the likelihood of further turbulence ahead for Mr. Trump heading into the midterm elections, and that uncertainty would likely weigh on the minds of investors. The Dow Jones Industrial Average fell 89 points, or 0.3%, to 25734, while the Nasdaq Composite rose 0.4%. The U.S. gold price was relatively unchanged overnight, shedding 0.02% at 1195.30 US$/oz.
European shares dropped after a mixed session in Asia amid uncertainty caused by U.S. political turmoil. The Stoxx Europe 600 fell 0.04%, or 0.17 points to 383.98 as the euro gained 0.15% against the dollar to $1.1589.
Hong Kong stocks continued to rebound even as mainland equities pulled back some. The market logged a fourth-day of gains like a number of others in the region, with the Hang Seng rising 0.6% to 27927.58 and the China Enterprises Index climbing 1%. Tencent was the biggest help, rising 2.5%, while Pin An Insurance jumped 3.5% following late Tuesday's second-quarter report. Combined, they made up 60% of the Hang Seng's gain.
Following their worst day in five months, Australian stocks lagged again, with financials and materials falling a further 1%. The ASX 200 finished down 0.3% at 6266. BHP Billiton shed 1.4% in continued post-fiscal-year selling, while CBA dropped 1.5%. Likely not helping sentiment was the Senate's voting down Prime Minister Malcolm Turnbull's proposed corporate tax cut. One bright spot was telecoms. That lightly weighted sector surged 7.5%, the most since January 2008, on consolidation prospects involving TPG. It popped 20% to log its best day since 2009 and hit near-2-year highs.
Base metal prices were mixed overnight on the London Metal Exchange. Lead gained 0.4% to 1,992/t, whilst zinc rose 1.8% to 2,470/t. Aluminium also had a positive night, rising 0.5% to 2,041/t, whilst tin was the biggest gainer, jumping 2.0% to 19,430/t. Falling overnight was the nickel price which shed 0.2% to 13,443/t. The 3-month copper contract depreciated 0.7% to finish at 5,980/t.
In this issue:
GR Engineering (GNG) | FY18 results | BUY
Market Cap $207m | Current Price $1.35 | Valuation $1.55
Revenue of $284m and underlying EBITDA of $24.1m were in line with our expectations. Timing of contracts and an increase in working capital negatively impacted cash flow in 2H18, although we expect this to improve through FY19. It will be influenced by the timing of two key projects (Thunderbird and Karlawinda), as will our FY19 revenue forecast (expected to be 2H weighted). Our $1.55 valuation (prior $1.60) is based on a longer-term view, a solid track record, and an expectation cash will climb from here. BUY.
Saracen Mineral Holdings (SAR) | FY18 Results | HOLD
Market Cap $1,575m | Current Price $1.92 | Target Price $1.85
Saracen Mineral Holdings (SAR) reported FY18 financials with strong results across the board. Revenue of $511m, EBITDA of $199m and NPAT of $76m were up 21%, 75% and 166% respectively. This was largely in-line with Argonaut’s forecasts listed in Table 1 below. Underlying NPAT was $76m after deferred exploration costs (-$1.4m), a profit on the King of the Hills asset (+$10.6m) and an impairment on asset sales ($-0.9m) SAR retains a strong balance sheet with $118m cash and liquid assets and $150m undrawn debt. Higher production, lower operating costs and only a marginal drop in the realised gold price led to margin expansion with free cashflow increasing from $8m in FY17 to $66m in FY18.
Western Areas (WSA) | FY18 Results – Busy year in FY19 | BUY
Market Cap $763m | Current Price $2.79 | Target Price $3.40
Western Areas (WSA) released FY18 financial results with revenue of $248m, EBITDA of $84m and underlying NPAT of $12m, versus Argonaut’s forecasts of $237m, $92m and $12.2m respectively. NPAT decreased $7.5m or 39% Y-on-Y, however underlying NPAT rose $23.4m after removing asset sales realised in FY17 (Bluejay Plc and Kidman Resource to the sum of $30.8m). Revenue, which increased 16% Y-on-Y, benefited from A$1.48/lb higher realised nickel prices, partly offset by an 11% decrease in sales volumes. WSA retains a strong balance sheet $152m cash and no debt.
Recent Contacts & Presentations:
Gold Road Resources (GOR), Encounter Resources Ltd. (ENR), OZ Minerals Limited (OZL), Melbana Energy (MAY), Botanix Pharmaceuticals Ltd (BOT), Novo Litio (NLI), 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)
Please read Argonaut's Important Disclaimers & disclosures
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