Weekly review: a year of growth beckons despite a market breather

The Australian share market moved one important step closer to completing a year of uninterrupted growth after the tenth straight monthly gain, despite taking a small step backwards.

By the end of the day the ASX 200 was down 0.3% on Friday and closed the week slightly lower as the miners finally ran out of puff and faded as Wall Street futures foreshadowed some hefty losses to come.

However, the index is still close to record highs and up 1.1% for July despite the 0.3% fall to 7392.6 points and the fall in iron ore futures could all be just a pause before the next unlikely push higher.

The sagging price of iron ore was enough to push the big miners Rio Tinto (ASX: RIO) and Fortescue Metals (ASX: FMG) lower while Afterpay (ASX: APT) once again led the technology sector lower by 5.28% to $96.66.

Elsewhere across the market the picture was mixed, including the banks.

NAB shines on buyback

NAB (ASX: NAB) added 0.62% to $25.93 after the bank announced a $2.5 billion share buyback in August, hot on the heels from ANZ’s (ASX: ANZ) $1.5 billion buyback last week.

The other banks are also expected to follow up with similar buybacks after massive capital buffers were built up to cope with the pandemic, although that money now seems surplus to requirements.

While widespread lockdowns have become tolerated by the market, with Sydney’s COVID restrictions tightening after a five-week lockdown which has still failed to dampen infection numbers that confidence seems to be waning a little.

Profit reports could restore waning confidence

That confidence might be renewed as Australian companies finally report some hopefully bumper earnings which begins in the coming week.

Rio Tinto showed just how profitable the resources sector will be with earnings around double the previous year with consensus forecasts looking for an overall 49% rise in earnings for 2020-21 and an even larger 56% rise in dividend payments.

Once those numbers firm up with the likes of GUD (ASX: GUD) and Resmed (ASX: RMD) reporting this week, then the market confidence could rally again.

Companies likely to be conservative on forward guidance

Counteracting that is likely to be some very cautious guidance, with the size and scope of the Sydney lockdown likely to temper any claims that companies make about the year ahead.

In company specific news, shares in Origin Energy (ASX: ORG) fell 7.9% after it said it expects to recognise non-cash charges of $2.2 billion in its FY21 results due on August 19.

In its quarterly update, Origin said production was down 1%, sales were up 5% with electricity sales rising 2% and natural gas sales up 40%, with subdued business activity but higher residential demand due to lockdowns.

Seven Group chief executive Ryan Stokes has been named chairman of Boral, while the investment firm added another board representative after upping its stake in the building materials company to nearly 70%

Origin Energy expects to recognise charges of $2.2b in its full-year report following a significant reduction in wholesale electricity prices, as well as lower gas earnings on higher costs and subdued business demand, with Origin shares down 7.9% to $4.11.

AMP (ASX: AMP) shares fell 2.4% after news that it is facing legal action from ASIC in the Federal Court over alleged breaches concerning historic fees charged without providing service.

Ampol (ASX: ALD) entered into a funding agreement with the Australian Renewable Energy Agency to deliver a national fast charging network to support the uptake of electric vehicles.

The petrol retailer will provide fast charging bays at more than 100 sites across its national retail network, including Sydney, Melbourne, Brisbane and Perth, with Ampol shares falling 0.8%.

After grabbing 70% of building company Boral’s shares (ASX: BLD), Seven Group (ASX: SVW) installed Ryan Stokes as the new chairman of Boral, with former chair, Ms Kathryn Fagg, retiring and two more retirements still to come.

Small cap stock action

The Small Ords index rose 0.11% this week to close on 3406.3 points.

Small cap companies making headlines this week were:

Wide Open Agriculture (ASX: WOA)

Regenerative food and farming company Wide Open Agriculture has heralded its eighth consecutive quarter of revenue growth.

The company’s revenue for the June quarter 2021 was $1.46 million, which was a 28% increase on the March period and 155% higher than the same period in 2020.

Managing director Dr Ben Cole said the continuous growth was a result of the company’s successful commercial strategy.

Angel Seafood (ASX: AS1)

Another company with a successful June quarter was Angel Seafood which saw an all-time high in oyster sales for the period of 3.2 million.

This was up 50% of the June 2020 quarter. Record oyster sales drove revenue up to $2.8 million – a rise of 54% on the previous corresponding period.

Also during the period, positive net operating cash flow of $600,000 was achieved.

Deep Yellow (ASX: DYL)

Uranium explorer Deep Yellow debuted what managing director John Borshoff described as an “astounding” resource upgrade for the Tumas 3 deposit in Namibia.

The upgrade involved a 117% direct conversion of existing inferred resources to the indicated category.

All-up the Tumas 3 resource now totals 59.9Mlb at 308ppm uranium, with 54.9Mlb of that classified as indicated.

Wellnex Life (ASX: WNX)

A new liquid soft gel paracetamol range will be developed and sold as part of a 10-year agreement between Wellnex Life and Chemist Warehouse.

Wellnex is responsible for development, registration and commercialisation of the range, with Chemist Warehouse to undertake distribution and marketing.

It is planned the soft gel range will be available through Chemist Warehouse stores in September and will be sold under the brand Wagner Liquigesic.

Blackstone Minerals (ASX: BSX)

Aspiring integrated nickel miner and battery material developer Blackstone Minerals has delivered a technically and economically robust pre-feasibility study on developing a downstream nickel refinery in northern Vietnam.

The study confirmed the viability of the proposed hydrometallurgical refining process, which would upgrade nickel sulphide concentrate from the company’s Ta Khoa mine and third-party sources.

It would produce more than 85,000tpa of precursor battery-grade nickel-cobalt-manganese material for the lithium-ion battery market.

Blackstone is now progressing approvals to kick-off definitive feasibility work for its proposed business.

AD1 Holdings (ASX: AD1)

AD1 Holdings’ wholly-owned subsidiary Art of Mentoring has “delivered on expectations” that were set during the acquisition process.

Art of Mentoring achieved 35% year-on-year revenue growth with AD1 saying the business was “well positioned” to continue its “aggressive growth”.

For the year ending June 2021, Art of Mentoring’s client base grew 63% via the addition of 24 new customers – with 20 coming on board since AD1 acquired the mentoring SaaS business.

Caeneus Minerals (ASX: CAD)

Following the completion of all key surveys and obtaining regulatory approvals, Caeneus Metals is poised to begin a 20,000m maiden drilling program at its Roberts Hill gold project near Port Hedland in WA.

An aircore rig has been mobilised to site and will start drilling once final works have been completed.

Caeneus spent the June quarter progressing preparations for the drilling program including establishing new drill lines for heritage clearance and refining existing drill tracks.

Other work included mapping and prospecting.

Caeneus’ other Pilbara projects comprise Mt Berghaus, Yule River and Pardoo.

The week ahead

The biggest feature to look forward to this week is the Reserve Bank with the board due to give updates on its policy settings and latest economic forecasts.

That will be particularly important due to the very large lockdown in Sydney which threatens to plunge Australia back into a second COVID recession which may cause the bank to turn dovish and keep up bond purchases.

Similarly, US jobs data will be pivotal in continuing the mantra of strong economic growth emerging from the large amount of vaccination and opening up of major economies from the worst of the pandemic.

As mentioned previously, Australia’s company reporting season is getting into full swing which will begin to form a picture of how much profits have increased.

Other releases to watch out for locally include manufacturing, inflation, home prices, consumer confidence, building approvals, retail spending, trade, wages, lending indicators and regional internal migration figures.

Apart from the July jobs data in the US, there are also manufacturing, construction, mortgage, car sales and the trade deficit to look out for, with profit reports starting to wind down.

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