US stocks tumbled on Tuesday as worries over global economic growth dented investor appetite for risk assets and Wall Street braced for June inflation data.
Ahead of tomorrow’s US June CPI report, analysts are suggesting a 9 per cent headline y/y inflation reading could eventuate.
Stocks fell in the final hour of trading after struggling to pick a direction throughout the day. The major indexes fluctuated between gains and losses, with the Dow up as much as 172 points and down more than 300 points at different stages.
Market participants are keeping a close eye on downside risk to earnings forecasts as companies grapple with rising interest rates and greater inflationary pressures, as Wall Street debates the likelihood of a recession.
The impact, however, won’t hit until companies post third-quarter earnings.
Across the sectors, all major sectors finished the day in the negative led by energy, which tumbled 2 per cent as oil prices declined on fears of a global slowdown. WTI settled down 7.9 per cent with oil moving back below $100/barrel.
Growth lagged value, with MSFT-US and AMZN-US amongst the poor perfomers. Energy, railway (downgrades), software were also areas of weakness. Airlines, media, homebuilders, food, cruiselines were some of the outperformers.
Some beaten-up tech bounced on Tuesday but gave up those gains later in the session. Salesforce and Microsoft each fell more than 4 per cent while Netflix and Alphabet shed more than 1 per cent. Amazon dropped more than 2 per cent.
Twitter shares, which have been volatile after Elon Musk terminated his deal to purchase the social media company, added 4.3 per cent.
Across global equity markets a potential recovery in Chinese stocks is stirring a debate among global investors that were previously burned by Beijing’s harsh regulatory crackdowns: Is it time to get bullish again on China?
Last month, more than $6 billion flowed into the 30 largest international mutual funds that focus on Chinese equities — the highest level since at least early 2021 — according to Morningstar, signalling fresh investor optimism about the battered asset class.
The MSCI China Index, which slid to a five-year low in March, has recovered some losses but was still down 14 per cent in the year to date as of Monday. The Nasdaq Golden Dragon China Index, which includes dozens of U.S.-listed Chinese companies’ ADRs , was down 16 per cent for the year.
A barrage of regulatory measures against internet-platform companies, economic weakness caused by Beijing’s unwavering zero-Covid policy, and heightened geopolitical tensions continue to be a drag on the market.
In currency news the dollar index, which measures the US currency’s performance against six other currencies, continues to hit new highs, bringing the Euro to parity with the US dollar and to its lowest level since 2002 as recession fears heighten in Europe.
The dollar index has been on fire this year, rising nearly 13 per cent. Several Wall Street strategists have warned that this strength in the US currency could spell trouble for corporate earnings ahead.
The surging USD is a symptom of global unease and will make life even more difficult for corporate America moving forward.
Bitcoin futures were off 5.1 per cent and back below the $20K level.
The SPI futures are pointing to a flat start.
Figures around the globe
US markets closed lower. The Dow Jones fell 0.6 per cent to 30,981, the S&P 500 lost 0.9 per cent to 3,819 and the Nasdaq dropped almost 1 per cent to 11,265.
Across the Atlantic, European markets closed higher. Paris added 0.8 per cent, Frankfurt gained 0.6 per cent and London’s FTSE closed 0.2 per cent higher.
Asian markets closed lower. Tokyo’s Nikkei fell 1.8 per cent, Hong Kong’s Hang Seng lost 1.3 per cent and China’s Shanghai Composite closed almost 1 per cent lower.
Yesterday, the Australian sharemarket closed 0.1 per cent higher at 6,606.
Dividends payable
There are a numer of companies set to pay eligible shareholders today:
Iron ore has fallen 7.2 per cent to US105.80 a ton.
Iron ore futures are pointing to a 1.1 per cent fall.
Gold lost $6.90 or 0.4 per cent to US$1,725 an ounce.
Silver was down $0.17 or 0.9 per cent to US$18.96 an ounce.
Copper was down $14.25 or 4.2 per cent to US$328.80 a pound.
Oil fell $8.25 or 7.9 per cent to US$95.84 a barrel.
On the London Stock Exchange, Rio lost 0.7 per cent, BP fell almost 2 per cent and Shell closed 1.6 per cent lower
Currencies
One Australian dollar at 7:10 AM has strengthened compared to the US dollar yesterday, buying 67.58 US cents (Tue: 67.36 US cents), 56.88 Pence Sterling, 92.56 Yen and 67.36 Euro cents.
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Panasonic Energy (Panasonic) has converted a long-standing MOU into a contract for at least 10kt of high-performance synthetic graphite to be taken over 4 years (i.e. 2.5kt/year).
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ABx Group continues to add value to their Northern Tasmania Rare Earths Project with the announcement of highly encouraging drill results at their Wind Break Prospect. The Wind Break prospect lies 15-16km to the north east of the Mineral resource already discovered at Deep Leads, Rubble Mound & Leech Scrub (DLRM Prospect) and is further confirmation that the resource potential could be of considerable size. Mineralisation remains open in all directions.
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ABx Group have announced another significant increase to the Mineral Resource Estimate (MRE) at the Deep Leads Ionic Adsorption Clay (IAC) Rare Earths deposit in Northern Tasmania.
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Tamboran heads into 2024 with a number of exciting developments on the horizon. Production testing on Shenandoah South 1H (SS-1H) is due early in the new year and we expect to see positive results given the early data
from logging indicated high porosity and gas saturation relative to offset wells and DFIT analysis demonstrated pore pressure gradients of at least 0.54 psi/ft (in-line with the most productive regions of the Marcellus Shale
in the US). A successful flow test at SS-1H will allow Tamboran to sanction a 40 MMcf/d pilot project in the region, supporting the local NT gas grid.
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CTQ’s recent 1Q FY24 update confirmed operating cash flow of -$0.55m, a significant improvement on -$0.81m in the pcp. The company secured ~1,000 subscriber adds in the 1Q. Combined with a 1,500 unit TEQ-Secure order by ADT New Zealand, this will lift CTQ’s Sofihub subscriber base to >7,000.
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Empire Energy provides exposure to the development of the world class unconventional gas resource located in the Beetaloo Sub basin in Australia’s Northern Territory.
NXV Research Report
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NOVONIX (ASX:NVX) FLASH – The US Department of Energy has finalised a US$100m grant funding to NVX, which under the terms of the funding agreement must be matched by NVX. The funds will be used to expand production of synthetic graphite anode materials from the Riverside plant in Chattanooga Tennessee.
NVX Research Report
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NOVONIX (ASX:NVX) – Momentum has picked up in recent months, with two sizeable announcements last week and one significant news item regarding an announced AI and quantum partnership with Google spin-off, SandboxAQ. The Tennessee anode plant is now positioned well to receive a loan from the DOE, following operational success of the induction furnace technology. Further, Hatch gave a tick of approval to NVX’s unique, but still patent pending, “All-dry, Zero-waste” cathode manufacturing technology. Costs across its materials ecosystem are being reviewed due to lower prices and NVX is considering a feasibility study into its green cathode opportunity.
ABx Research Report
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ABx Group (ABX)Upgrades to Deep Leads IAC Rare Earths keep coming
Increases across the board for the Deep Leads Resource – Grade, tonnage & target area ABx Group have reported a 30% increase to their Mineral Resource Estimate (MRE) at the Deep Leads Ionic Adsorption Clay (IAC) Rare Earths deposit in Northern Tasmania. The increase to the MRE comes from 36 assayed step-out holes – representing a significant extension to the north for the existing Deep Leads prospect.
SYA has plans to build out two vertical integrated processing hubs in Québec Canada. The first hub comprises NAL, Authier and Tansim projects
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NOVONIX (ASX:NVX)
NVX has just formed an agreement with LG Energy Solutions (LGES), the world’s 3 rd largest battery maker, to develop a synthetic (artificial) graphite that matches their specific needs. Once the product is qualified by LGES, the expectation is that multi-phase offtakes will result. Earlier in March, NVX announced a 40%/60% JV with TAQAT Development Company to build a 30kt/year synthetic graphite anode plant in Saudi Arabia.
ABx Research Report Popup
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We initiate coverage on ABx Group with a valuation of $0.33 per share.ABx Group is currently progressing three businesses, including discovering and developing an ionic adsorption clay rare earth project in northern Tasmania, establishing a plant to produce hydrogen fluoride and aluminium fluoride from recycled industrial waste to replace imports (ALCORE), and mining and enhancing bauxite resources for the cement, aluminium and fertiliser industries.
EMH Research Report
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European Metals Holdings (EMH.ASX) – The large Cinovec Project (EMH 49%), is strategically located in the heart of the growing European EV ecosystem in the northwest of the Czech Republic. Cinovec is a large historic lithium resource, with a clean pathway to underground development, resulting in minimal surface impact or disturbance. EMH’s 51% JV partner is the national utility CEZ a subsidiary of CEZ Group, which is owned 70% by the Czech Government. The Czech auto industry is important as it makes up ~10% of local GDP. Hence a local gigafactory, in addition to three in southern Germany, would accelerate the transition to EV’s and with broader EU support underwrite Cinovec’s development.
Careteq Research Report
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CTQ has developed a leading proprietary assistive living technology platform
(Sofihub) with a portfolio of best-in-class solutions for the global aged care,
home care, disability care and personal security sectors. Key products
include falls detection, vital signs monitoring and medication management.
The health-tech industry enjoys significant tailwinds for assistive living
products, driven by the ageing population, rising costs and labour shortages,
technology innovation and recommendations from the Royal Commission into
Aged Care. The market is very fragmented, with no competitor offering CTQ’s
broad suite of products.
CTQ’s income stream is non-discretionary and largely funded by federal and
state governments and insurers. There is a growing recurring revenue
component built on SaaS-based subscriptions to its platform.
The company has built a significant new contract pipeline in recent quarters
and is targeting c.15,000 subscribers on its platform by Dec 2023, which
represents sufficient scale to reach profitability. Cash on hand of $3.6m (2Q
FY23) is likely sufficient to fund operations until breakeven is reached.
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Sayona Mining
Sayona Mining (ASX.SYA) – Production has commenced, on time and within budget, at the North American Lithium (NAL) Project (SYA 75%) in Québec and is presently ramping towards a steady state concentrate production of 226kt/year. This is a significant achievement for the NAL JV and for Canada, as it re-joins the global Lithium Producers Club. In short, NAL is Canada’s only producing lithium project and supports its aim to be the world’s 3rd largest supplier of EV raw materials by 2027. Canada also aims to lift EV sales from ~5% of new car sales in 2021 to 20% in 2026 before expanding to 60% by 2030 and 100% by 2035. Importantly, the Government supports the development of a vertically integrated EV ecosystem, as it seeks to return to its glory days as the world’s #5 in auto manufacturing. Financial support for SYA’s expansion is expected via Government grants, guarantees and loans.
TerraCom Research
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TerraCom
The record high coal prices seen in 2022, combined with continual operating improvements at their Blair Athol mine in Australia, has enabled TerraCom (ASX:TER) to resume dividend payments to shareholders in the first half of FY2023 and will continue to allow it to pay healthy dividends in the future.
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Strong FY23 Interim result
SGI recently reported its 1H FY23 results, delivering a record profit and building on the steady improvement of recent years. The strong result was driven by organic growth, recent acquisitions and associated scale benefits, combined with positive supply and demand dynamics.
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Secures binding contract with Tier-1 OEM
US based anode active project gathers momentum
Magnis Energy Technologies (MNS.ASX) – MNS is planning an anode active facility in the US and recently announced a binding, yet conditional, contract for the supply of anode active with Tesla. The contract is for a minimum 17.5kt/year with an option to purchase another 17.5t/year. Conditions precedent carry a tight development timeframe, with first production scheduled for February 2025. Site selection is underway and co-locating with an OEM on a brownfields site makes sense. Long lead items have been ordered and detailed engineering and design is expected to commence soon.
December Quarterly Report: Q2 FY2023
Looking past the rain – there’s a rainbow.
TerraCom released their operating results for the December quarter FY2023 with operating metrics being in line with our forecasts.
Unseasonal rains in both Australia and South Africa contributed to operational and logistical issues across all mines, however guidance for annual production at Blair Athol is unaffected and highlights the quality of TerraCom’s skills in operational management.
We continue to like the stable operating metrics around the company’s Australian operations and see potential for the South African operations to benefit from increased management focus given the rationalisation of operations following the closure of the Ubuntu mine.
Corporate Connects overall financials remain unchanged as does our target price of $1.35 share. We maintain our forecast for a fully franked quarterly dividend of 7.5c/share to be paid in the March and June quarters of FY2023.
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High performance synthetic anode & cathode materials Building a US based materials supply chain
NOVONIX (ASX:NVX) – is scaling a synthetic anode materials plant in the US and piloting nickel rich cathode material in Canada. Why? China is dominant and growing – 100% of global natural anode and 68% of synthetic anode is refined in China. In short, China controls the global midstream battery chain by controlling 60% of chemical refining, 87% of anode manufacturing, 61% of cathode manufacturing and 73% of battery manufacturing. It is global battery supply and price domination at scale.
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Tamboran Resources – the major player in the Beetaloo Basin
We initiate coverage on Tamboran Resources with a 12-month target price of $1.10 – representing 520% upside from the current share price. The company provides investors with a pure exposure to the development of the world class unconventional gas resource located in the Beetaloo Sub basin in Australia’s Northern Territory. The drilling of 2 wells before the end of 2022, Amungee 2H and 3H, will provide significant visibility on the commerciality of the proposed EP 98 Pilot Development – both wells are fully funded with the company having a current cash balance of ~A$130million.
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Phosphate and Rare Earths – it’s time to duel!
RareX Limited is an Australian Rare Earths company that has set its sights on becoming one of the largest light rare earth elements (LREEs) producers in Australia. The company’s flagship project is the Cummins Range deposit, a carbonatite deposit with a current 18.1Mt resource at 1.15% TREO (0.5% cut-off grade) that has significant potential for expansion.
Recent exploration results have confirmed high-grade extensions at depth and along strike with an additional 30,000m drilling program commencing in the second quarter of FY2022. The companies scoping study suggests upside from phosphate and economic viability over the Life of Mine (LOM).
We initiate on RareX Ltd with a A$0.12 price target – risked at 25%
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Antisense Therapeutics (ANP) Taking a Quick Approach to Long COVID
This report looks at the results of a collaborative study Antisense undertook which looked at the largest protein expression database in Long COVID-19 patients who experienced neurologic symptoms well after the primary or acute SARS-CoV-2 infection was considered over (Groups 1 & 2, with 48 subjects Group 2 comprising a single patient from a different clinical site). The symptoms and others experienced by such patients result in a highly significant amount of illness, possibly more than all primary SARS-CoV-2 infections i.e COVID-19.
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Paxalisib Misses AGILE Hurdle, but Very Significant Value Remains
Investors Over-React, Smart Ones Will Profit
Kazia Therapeutics (KZA) announced yesterday morning that paxalisib did not meet the threshold to move into stage 2 of the GBM AGILE clinical trial (NCT03970447). The study was an adaptive trial designed to assess the potential of new therapeutics to treat the highly aggressive brain cancer glioblastoma (GBM) in a cost-effective manner. Demonstrating efficacy in GBM is an extremely high hurdle as shown by the fact that there is only one approved drug for the disease, temozolomide, and it is only effective in 1/3 of patients.
Given the high nature of the hurdle, in our original initiating coverage report on KZA, we only gave paxalisib a small chance of returning a positive result from the overall study. That is the nature of drug development with one group estimating only 6% to 7% of new chemical entities that commence clinical trials reach launch (Dowden & Munro (2019) Nat Rev Drug Discov). The small percentage that do make it to launch, however, more than make up for the cash spent on those that don’t.
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4Q reveals more focus on profit and cash flow
• LBY’s 4Q FY22 quarterly activities update showed continued solid growth in top line metrics, albeit slowing, with GMV of NZ$203m (+26% on pcp) and income of NZ$12.1m (+23% on pcp).
• Net Transaction Margin (NTM) disappointed at -0.5%, due to further increase in credit losses from 4.0% to 4.9% of GMV. However, new fraud and credit risk management tools have seen losses recover materially with NTM back to 1.2% in March and LBY is confident of further recovery in coming months.
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Signs MOU with Ford Company – Kachi is now sold out!
Lake Resources (LKE. ASX) – LKE has signed two non-binding MOU’s in the space of 10 days. Ford Company (Ford) has signed an MOU for ~25,000t/year and last week Hanwa, a Japanese commodity trader signed a MOU for up to 25,000t/year. Subject to execution, this is an amazing feat as Ford and Hanwa are prepared to enter into longer-term strategic partnerships with LKE. Commercial negotiations are still ongoing but are expected, especially if Ford & Hanwa inject new equity into LKE, to further de-risk the project financing & thus ensure LKE and Kachi are fully funded.
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Strategic Vanadium-battery growth with Titanium & Iron earnings resiliency
TNG Ltd is an ASX-listed technology owner and developer of the world-class Mount Peake near-surface vanadiferous titanomagnetite deposit. To unlock value, TNG will concentrate ore from its central Northern Territory mine for processing through its patented TIVAN® process produce three premium quality revenue streams: hi-purity vanadium pentoxide (V2O5) for steel alloys and Vanadium Redox Flow batteries, a quality titanium pigment for paints and a premium steel input with >64%Fe iron ore fines.
Promising exploration and development update while SOP prices continue to rise
Two recent gravity surveys have considerably exceeded expectations and revealed potential for extensions to the existing MRE at Lake Throssell, plus a material growth opportunity at Lake Yeo. This reinforces the potential for a multi-decade, Tier-1 SOP production hub based around Lake Throssell.
TMG is currently completing work towards the PFS due early 2023, including drilling to start in Q3 2022, evaporation trials and permitting activities. Results from these programs will support the PFS and any future resource upgrade.
Benchmark SOP prices have risen to ~US$940/t due to recent geopolitical developments. The Oct 2021 Scoping Study assumed a SOP price of US$550/t and contained a sensitivity analysis showing every 10% increase in price drives a +$144m increase in the project NPV of $364m. The c.70% increase above the Scoping Study thus implies a project NPV of ~$1.4bn.
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Increasing our Target
Despite the lower realised oil and gas price, which fell by 5.4% and 19.7% respectively in August, Calima managed to show improvement in its key business metrics.
We expect higher production in November due to the contribution by the new Thorsby wells which will be drilled in August/September which will see Calima meet its 2021 production guidance of 4,500 boe/d.
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Emerging Financial Wealth Advisory Group
WT Financial Group Limited (WTL) is a growing diversified financial services company, founded in 2010 and listed on the Australian Stock Exchange (ASX) in 2015. Its advice and product offerings are delivered primarily through a group of independent financial advisers operating as authorised representatives of WTL under its Wealth Today Pty Ltd (Wealth Today) and Sentry Group Pty Ltd (Sentry Group) dealer group operations. It has around 275 advisers across more than 200 financial advice practices Australia-wide. It also operates a direct-to-consumer operation under its Spring Financial Group brand.
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Immutep Taking the Fight to Cancer
In May 2021, Corporate Connect analyst Marc Sinatra published a comprehensive research report on ASX-listed biotech Immutep Ltd (ASX: IMM). So impressed was he with IMM that Corporate Connect felt it imperative that a follow-up report be released placing a valuation on the company, because the market was not seeing the vast potential of eftilagimod alpha (efti).
This follow-up report has been released today. Using comparables, after adding cash back to their EV estimate and dividing by the total number of issued shares, Corporate Connect now places the fair value of an Immutep share at $A2.20.
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Market leading lifelong learning platform technology company in Australia and SE Asia
PayGroup (PYG) delivers multi-country BPO services and cloud SaaS HCM solutions, assisting companies to manage employees in multiple, complex jurisdictions. The company has many growth opportunities, including new clients, new jurisdictions, new products, partner expansion, and new revenue sources. PYG’s scalable business model allows operating leverage and with savings from in-housing third party technology, support margin expansion.
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Market leading lifelong learning platform technology company in Australia and SE Asia
OpenLearning (OLL) is a higher education technology company that operates a scalable online learning platform through a software-as-a-service (SaaS) business model and provides a global marketplace of high quality courses for learners of all levels. Its primary customers are education providers based in Australia and South-East Asia (primarily Malaysia). OLL started operations in Australia in 2012 and expanded to Malaysia in 2015, Singapore in 2018, and recently also Indonesia.
