Weekly review: broad rally adds cheer to a downbeat week

A nice broad Friday rally was enough to bring some cheer to market players but couldn’t overcome three down days to bring the share market its third weekly fall in a row.

By the close the ASX 200 had added 21.6 points, or 0.3%, to reach 7307 points as 10 out of 11 index sectors were flashing green for a change.

The outlier was the materials sector which weakened on falling iron ore futures, although the iron ore story for the week was positive with prices rising for the first week this month on the back of stronger Chinese demand.

Miners soften

Friday was soft for the big miners though, with BHP (ASX: BHP) shares down 1.6%, Fortescue (ASX: FMG) shares down 1.7% and Rio Tinto (ASX: RIO) shares down 3.65%.

For a nice change of scene, it was the technology sector that led the market gains on Friday with a combination of good profit results and some cheer from Wall Street inviting growth investors back for the party.

Block (ASX: SQ2) shares rallied an impressive 5.9% after the company said Afterpay was performing strongly in the fourth quarter with sales up 19%.

The dual listed payments giant showed great resilience amid an economic slowdown, although it did flag rising delinquencies for Afterpay at a time when the buy now, pay later (BNPL) sector faces potential new regulations.

Afterpay helps Block

All told, tech entrepreneur Jack Dorsey’s fintech company recorded a US$1.6 billion (A$2.4 billion) gross profit for the fourth quarter which was up 40% year-on-year and revenue of US$4.7 billion.

Afterpay was bought by Block for US$29 billion and was the biggest transaction in Australian business history.

For the quarter it generated nearly US$100 million in advertising revenue and contributed US$264 million in revenue and US$196 million gross profit in for the quarter – up from US$150 million in the previous quarter.

Blowing away the Brambles

Another positive story came from pallets giant Brambles (ASX: BXB) with its shares flying up 7.5% to a year high of $12.97.

Brambles lifted its full year guidance and is rewarding shareholders with a higher interim divided after its first half operating profit exceeded analyst estimates.

The logistics company said that its operations were helped by less hoarding of pallets across the world and it has also managed to lift pallet prices by 14%.

Share buy-back a sure bet

Shares in poker machine maker Aristocrat Leisure (ASX: ALL) went for a 2.8% run after it announced plan to buy back $500 million of its own shares by May 2024.

Share buybacks have been well received by investors in the latest earnings season, with the opportunity to boost earnings per share seen as a reliable and efficient way to reward shareholders.

There were some big profit jumps reported in the lithium sector with Mineral Resources (ASX: MIN) shares down 0.1% to $84.91 after a slightly disappointing result that still saw net profit after tax leap to $390 million.

Fellow lithium player Allkem (ASX: AKE) saw its shares jump 3.7% to $11.88 as its profit grew ten-fold to $US180.4 million on the back of hefty price rises for battery materials.

Pilbara Minerals (ASX: PLS) shares rose 1.1% after it announced a maiden dividend of 11c a share.

Shares in EML Payments (ASX: EML) fell a hefty 9.5% after it tumbled out of a trading halt after the Central Bank of Ireland said that subsidiary PFS Card Services has made limited remediation progress to date.

Mortgage insurance pays off

It was a different story for shares in mortgage insurer Helia Group (ASX: HLI) which soared 17% after the company returned capital to shareholders and said it was benefiting from historically low mortgage delinquencies.

Previously known as Genworth, Helia provides insurance that protects banks against the risk of customers defaulting on their loans which is paid for by the borrower.

Helia said claim costs had been unusually low, but could rise as more customers default on their loans due to rising interest rates, falling house prices and rising unemployment.

Small cap stock action

The Small Ords index fell 0.73% for the week to close at 2876.8 points.

Small cap companies making headlines this week were:

Magnis Energy Technologies (ASX: MNS)

Magnis Energy Technologies has signed a fixed-price deal with Tesla to supply anode active materials (AAM) for lithium-ion batteries starting in February 2025.

The agreement requires Magnis to supply Tesla with at least 17,500 tonnes per annum of AAM – up to a maximum of 35,000tpa over three years. The agreement is conditional on Magnis securing a US location for its commercial AAM manufacturing plant by 30 June and production by February 2025.

Additionally, the contract is also subject to the completion of a pilot plant by 31 March 2024 and customer qualification.

Magnis plans to source graphite feedstock for its lithium-ion battery AAM manufacturing plant from its wholly-owned Nachu project in Tanzania.

Vintage Energy (ASX: VEN)

The much-awaited maiden gas production has begun at Vintage Energy’s 50%-owned and operated Vali field in Queensland’s Cooper Basin.

Maiden production marks Vintage’s first revenue from the field just three years after it was discovered.

Gas from the field is being supplied to energy retailer AGL Energy under an earlier agreement, which allows it to purchase between 9-16PJ of gas from now until the end of 2026.

Vali has independently certified proved and probable gas reserves of 101PJ.

Vintage’s nearby Odin field is certified as containing a 2C resource of around 40PJ of gas.

Aston Minerals (ASX: ASO)

Aston Minerals has debuted a maiden resource for its Boomerang target – making it one of the world’s largest nickel-cobalt deposits.

Boomerang lies within Aston’s wholly-owned Edleston project in Canada and has a maiden resource of 1.044Bt grading 0.27% nickel and 0.011% cobalt.

Aston’s executive chairman Tolga Kumova said Boomerang could help address a growing supply shortfall for raw materials in the electric vehicle market. The company’s managing director Dale Ginn added the find had “incredible growth potential”.

BluGlass (ASX: BLG)

The first commercial orders have been received for BluGlass’ single-mode gallium nitride (GaN) lasers.

BluGlass’ first orders come from two original equipment manufacturers and follow an official product launch last month at the Photonics West conference.

The lasers are intended for use in quantum and robotic applications. Revenues from the initial low-volume orders are considered immaterial, but the company anticipates larger-volume purchases from the customers once the lasers have been qualified.

BluGlass is a global supplier of GaN laser diode products to the photonics industry, and its technical innovations are internationally protected by 93 granted patents and 17 trademarks.

New Century Resources (ASX: NCZ)

In the merger and acquisition space, New Century Resources received an off-market takeover proposal from major shareholder Sibanye-Stillwater, which aims to alleviate the company’s financial issues.

New Century’s balance sheet is under strain due to amortisation requirements of an environmental bond facility, as well as potential funding needs for growth projects. Sibanye’s offer of $1.10 per share represents a 42.9% premium on the closing price of New Century shares before the announcement.

The takeover will be conducted by Sibanye-Stillwater’s subsidiary Sibanye Resources Australia Pty Ltd. As well as the takeover offer Sibanye-Stillwater will place an on-market buy order is expected to be placed for 14.3 million shares.

Regardless of the outcome, Sibanye will continue advocating for New Century to focus on a tailings assessment management service.

Inca Minerals (ASX: ICG)

Inca Minerals has reported “outstanding” bonanza grades of copper, silver, and lead, plus zinc, lithium, tantalum, tungsten and tin from recent field exploration at its MaCauley Creek project in northeast Queensland.

Assays from surface rock chip sampling revealed several occurrences of high-grade copper, lead, zinc, silver, and other “new economy” metals across its tenement package. More than 35% of the 70 samples collected and analysed contain ore-grade copper, silver, lead and zinc.

Best results were 49% copper, 2,430g/t silver, 43.3% lead, and 1.33% zinc.

The high-grade surface samples are coincident with significant geophysical anomalies, which will now become the focus of future exploration.

The week ahead

The corporate profit reporting season reaches an interesting stage this week as the final company reports roll in.

Often some of the last results can be very disappointing as companies try to delay the inevitable but that isn’t always the case so there can be a mix of the good, the bad and the ugly.

Economic data will also play a big part in setting the market direction with the December quarter release of the national accounts the big one.

Economic growth as measured by gross domestic product (GDP) could show the first sign of flagging due to rising interest rates – as could some of the other releases such as retail spending, monthly inflation, building approvals, credit growth, car sales and building approvals.

There are some international releases to an eye on as well with the Chinese purchasing manager’s index being a good indicator of how the country is coming out of its Covid dramas and Lunar New Year holidays.

A string of US releases should also indicate if the world’s biggest economy remains surprisingly resilient in the face of harsh economic headwinds.

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