The week in Small Caps: Baby Bunting forecasts strong year ahead, AuMake steps into A1 & A2 milk market, Argosy produces lithium
WEEKLY MARKET REPORT
Once again the Australian share market has been resilient in the face of bad news, managing to rise 0.7 per cent for the week to finish at 6278.4 points, despite a retreat on Friday.
Most of the market movement centred around profit results with the most notable moves on Friday being the 38.5 per cent rise to $2.41 for Baby Bunting (ASX: BBN).
It wasn’t the 29 per cent fall in FY2018 profit that excited investors, it was the forecast of a strong start to FY19 sales with same store sales up 9.8 per cent in the first six weeks and a forecast recovery in gross profit margin to 34 per cent for FY19.
It was a similar situation for real estate advertiser REA Group (ASX: REA) which saw its shares up 3.6 per cent to $85.30 following a 23 per cent rise in full year net profit to $253.1 million.
It seems that nervous sellers are responding to falling prices for houses by advertising even more which boosted the result for the owner of realestate.com.au.
Even Commonwealth Bank (ASX: CBA), which has been in the wars at the Financial Services Royal Commission bounced back with 3.6 per cent rise for the week to $75.47.
Although Commonwealth’s cash profit fell for the first time since the GFC, investors seem to have been prepared for something worse so there was a relief rally built on the prospects of a recovery once the series of one-off hits to the bottom line are past.
Falls for energy companies
It wasn’t such a pretty picture for oil, gas and other energy stocks as oil prices continued to fall on concerns over demand brought on by US sanctions on imports from Russia and Iran.
Woodside Petroleum (ASX: WPL) fell 1.3 per cent to $35.95 and Santos (ASX: STO) fell 1.9 per cent to $6.36.
AGL Energy (ASX: AGL) investors may have enjoyed the profit result but they were disappointed by the company’s earnings outlook for the coming year.
The company’s guidance for the 2019 financial year came in 7 per cent below consensus forecasts as the retail business faces increased scrutiny from the competition regulator and its shares fell 5.3 per cent for the week to close at $20.67.
Amcor (ASX: AMC) shares disappointed with a 6.7 per cent fall for the week to $14.26 after it announced it would buy United States-based rival Bemis and move to a primary listing in the US, in a $6.8 billion deal.
James Hardie (ASX: JHX) shares were also whacked, falling 6.6 per cent to $21.70 after the building products group announced a 58 per cent rise in first-quarter net profit to US$90.6 million and issued FY19 profit guidance of US$300-$340 million.
Small cap stock action
The Small Cap index dipped 0.92% to end Friday at 2,813.9.
Despite the index ending in the red for the second week running, many small caps flew onto investors’ radars with positive news.
AuMake International (ASX: AU8)
AuMake International has teamed up with Pure Nutrition to create A1 and A2 beta-casein protein-based milk powdered formula for the Chinese market.
Pure Nutrition will develop the powdered formula from locally sourced New Zealand milk and send the final packaged goods to AuMake for distribution.
AuMake plans to launch the A1 product by November this year, with A2 goods to hit China’s market by May 2019.
Under the agreement, the initial target volume for A1 is 1 million units, while A2 products will be 600,000.
LandMark White (ASX: LMW)
LandMark White will be announcing its full year results on Tuesday 14 August, with the company offering a track record of positive performance and strong dividends during all property cycles.
Although Sydney and Melbourne markets may be cooling, LMW is likely to see improved market activity through the Perth, Brisbane and regional areas throughout Western Australia and Queensland on the back of a resurgent mining environment.
LMW’s government division is expected to see heighted activity in FY19 and is positioned to take advantage of any market cycle.
Additionally, insurance valuations and refinancing should see increases in activity, offering consistent revenue during property market downturns.
Based on LMW’s forecast EBITDA of $6.6m, it is expect the FY18 dividend yield to be greater than 10%, inclusive of franking credits.
Paradigm Biopharmaceuticals (ASX: PAR)
Paradigm Biopharmaceuticals has recruited all the patients it needs to participate in its phase 2b clinical trial on treating knee osteoarthritis with its injectable pentosan polysulfate sodium (iPPS) drug.
The trial will evaluate the effectiveness of its iPPS drug on knee pain and will take place at six Australian sites.
In studies to-date, patients have on average reported a 50% decrease in pain, with more than 370 osteoarthritis sufferers treated with iPPS so far.
Paradigm anticipates it will report the results of the pivotal phase 2b trial before the end of the year.
Altura Mining (ASX: AJM)
Altura Mining is a step closer to supplying the lithium market after it trucked its first batch of spodumene concentrate from its recently commissioned mine in WA.
The spodumene concentrate was trucked to Port Hedland in readiness for export to Altura’s China-based offtake partner Lionenergy.
Altura produced its first spodumene concentrate last month, with production ramping up to produce 220,000 tonnes per annum by the end of the year.
At full operational capacity, Altura’s haulage contractor Qube Logistics will truck about 18,000t a month of the spodumene concentrate from the mine to Port Hedland.
Esports Mogul (ASX: ESH)
Esports Mogul has gained Marian Kaufmann as its chief marketing officer, who will lead the company’s ongoing marketing activities for its flagship tournament gaming platform Mogul Arena.
Mr Kaufmann was previously the marketing lead for learning and consulting company AVADO Learning.
He was also Razer’s online marketing specialist for almost two years and introduced Google’s training program Squared Online to Germany, Switzerland and Austria.
Esports anticipates Mr Kaufmann will assist with extending its brand into additional markets around the world.
Immutep (ASX: IMM)
Immutep provided investors with an update this week on its clinical trials for its immunotherapy product eftilagimod alpha “efti”.
The company has recruited the final patient needed for its part B ongoing TACTI-mel phase I clinical trial in Australia, which is evaluating efti and pembrolizumab drug combinations in metastatic melanoma patients.
Interim data from the previous three cohorts indicated treatment was generating “long-lasting and durable responses in a subset of patients”.
Immutep is also advancing regulatory and ethics approvals necessary to begin the TACTI-002 phase II clinical study, which is due to begin later this year in collaboration with US pharma giant Merck & Co.
The company has also secured a Canadian patent for its IMP731 antibody for treating organ transplant reject and autoimmune disease.
Argosy Minerals (ASX: AGY)
It was a landmark moment for Argosy Minerals this week, with the company announcing it had produced its first battery grade lithium carbonate equivalent from its flagship Rincon project in Argentina.
About 30kg of battery grade lithium carbonate equivalent was generated in the company’s stage one pilot plant and graded 99.6%, which is in line with battery grade specifications.
Argosy will send samples to cathode and battery manufacturers for evaluation and quality testing.
The company’s next steps will involve consistently producing battery-grade lithium carbonate equivalent while refining its processing methods to ensure it is efficient, cost-effective and scalable.
Canyon Resources (ASX: CAY)
Canyon Resources has been awarded the Minim Martap bauxite project in Cameroon from the country’s government.
The permitting process has spanned three years, with the Cameroon Government finally granting three exploration permits which cover a three-year period.
According to Canyon, the project hosts two deposits Ngouandal and Minim Martap which are about 25km apart.
The project encompasses 1,349 square kilometres and previous drilling has identified high-grade, low impurity bauxite zones.
Impression Healthcare (ASX: IHL)
Impression Healthcare has secured a binding licensing deal with the Australian Football League, which is Australia’s leading professional competition and spectator sport organisation.
Under the agreement, Impression’s subsidiary Gameday International will manufacture and sell the AFL team-branded mouthguards through retail sporting stores, AFL club stores, online and other mass retail channels throughout Australia.
The mouthguards will be branded with names, logos and emblems of each of the league’s 18 clubs.
Impression collared a similar agreement with Australia’s National Rugby League in February this year.
BlackEarth Minerals (ASX: BEM)
It was a huge news week for graphite explorer BlackEarth Minerals, with the company unveiling a maiden resource and exploration target for its wholly-owned Maniry graphite project in Madagascar.
The maiden indicated and inferred resource now totals 11.2 million tonnes grading 7.1% total graphitic carbon for 795,200t of the contained mineral.
The initial resource is for the Razafy deposit, with mineralisation at the deposit remaining open in all directions.
BlackEarth has now calculated an exploration target for Maniry of up to 380Mt grading 6-8% TGC.
A scoping study is due to be completed before the end of the March quarter in 2019.
The week ahead
In Australia for the week ahead it is all about jobs and pay with the release of the June quarter Wage Price Index and the semi-annual update on average weekly earnings and the July jobs report.
Overseas investors will be looking for Chinese investment, production, retail sales and house price data and in the US data on retail spending, housing, industrial production and business and consumer activity.
A pile of Australian companies are due to report profit results in the coming week including Bendigo & Adelaide Bank, Bluescope Steel, Domain, JB Hi-Fi, Aurizon, Challenger, Cochlear, GPT Group, Whitehaven Coal, Aveo, CSL, Dexus, IAG, Iluka Resources, Wesfarmers, Woodside Petroleum, ASX, Computershare, Charter Hall REIT, Downer EDI, Origin Energy, OZ Minerals, Sonic Healthcare, Seven West Media, Telstra, Treasury Estate Wines, Breville Group, Goodman Group, Infigen Energy, IPH and Primary Health Care.