Weekly review: choked airports bring a positive Easter surprise for investors
WEEKLY MARKET REPORT
Those massive lines snaking out of Australia’s airports have finally produced a silver lining in the form of much stronger travel shares.
While the lines were terrible news for everybody stuck in them waiting to get away for Easter, investors finally connected the dots and marked up travel stocks as share market trading came to an early weekly close on Thursday.
Those massive lines mean Australians are straining at the leash trying to get away on holiday and with COVID-19 restrictions now winding back in many countries, travel companies look set to rapidly move from bust to boom.
Travel stocks achieve lift-off
Qantas (ASX: QAN) shares were a key recipient, up a healthy 7% or 36c to $5.45 while Webjet (ASX: WEB) shares jumped 7.5% or 41c to $5.85. Flight Centre (ASX: FLT) shares firmed by a robust 5% or $1.01 to $21.18 as packed flights and strained security gates pointed to stronger activity to come.
With household savings still strong after repeated lockdowns, investors grasped the message that rising prices will not prevent a massive spring back in travel for the remainder of this year.
It wasn’t just travel stocks that were responsible for the ASX 200 adding a solid 0.6% or 44 points, to 7523 points after major US indices also turned up.
Tech stocks finally break out
Technology stocks finally snapped out of their funk, following a 2% rally on the tech-heavy Nasdaq with a 1.3% rally of their own to break a six-day losing streak.
That and a weekly 1.6% rally in material stocks erased nervousness from earlier in the week and led to an overall 0.6% gain for the four-day, holiday shortened trading week.
Small caps outperforming the broader market
One of the more interesting features of the week’s trade was the renaissance of small cap shares, which have carried a disproportionate share of sell off pressure in recent months.
That underperformance position began to unwind significantly as the ASX Small Ords outperformed the broader index, adding an impressive 1.6%.
Considering trading days were lost for the Easter holidays, there was also a lot of stock specific news for investors to consider.
Improved offer for Uniti creates share price record
Investors cheered on an improved $5 a share takeover offer for Uniti (ASX: UWL), with shares climbing 2.9% to a record high of $4.96 after the company agreed to the sweetened $5-per-share offer from a group including The Morrison & Co Infrastructure Partnership, Commonwealth Superannuation Corporation and Brookfield Australia.
The original bid of $4.50 was offered on 29 March.
Margins falling for Bank of Queensland
It was a less sunny response for Bank of Queensland (ASX: BOQ) holders, with shares down 6.3% after the company released mixed results.
While the bank posted a 44% increase in revenue and a 38% jump in profits, a 12-basis point drop in its net interest margin was met by caution from investors.
The bank attributed the lower margins to “price competition, customers switching to fixed rate loans, higher swap rates and liquidity”.
Electric cars push lithium stocks upwards
Allkem (ASX: AKE) shares hit record highs following a 2% rise after the company announced plans to triple lithium production by 2026 and maintain a 10% share of the global lithium market over the next decade.
With strong revenue and a good cash position, the company seems well positioned to continue to surf the wave of demand coming from the electric car revolution.
Woodside Petroleum (ASX: WPL) shares rose 1.1% after the company said it planned to list American Depository Shares on the New York Stock Exchange after the completion of its merger with BHP’s petroleum assets.
Small cap stock action
The Small Ords index rose 1.59% this week to close on 3368.2 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
AD1 Holdings (ASX: AD1)
Software technology company AD1 Holdings’ subsidiary Art of Mentoring (AoM) has continued to beat revenue records and exceed expectations.
AoM’s revenue for March 2022 was 400% higher than March 2021 levels, while for the entire March quarter, revenue was up 38% on the December quarter.
The record performance was attributed to growing subscription sales, strong renewals and recent onboarding of five new customers.
AD1 chief executive officer Brendan Kavenagh says AoM’s is “beautifully positioned” in a market in great need for mentoring platforms and content.
Nimy Resources (ASX: NIM)
A second hole at the Godley prospect within Nimy Resources’ Mons nickel project has intercepted a 438m nickel-copper sulphide zone.
The zone was identified using a pXRF and is larger than the first hole at the prospect that hit 275m last month.
Assays are pending for both holes, with Nimy chairman Simon Lill saying the company will now prioritise down hole electromagnetic survey along with a moving loop EM survey across the target.
Kalamazoo Resources (ASX: KZR)
Multiple lithium pegmatites have been discovered across Kalamazoo Resources’ Marble Bar project in WA’s Pilbara where Chilean lithium giant Sociedad Quimica y Minera de Chile (SQM) is earning a 30% stake.
SQM is also earning 30% of Kalamazoo’s nearby DOM’s Hill project under a recent joint venture.
Field reconnaissance activities using pXRF across Marble Bar have identified numerous pegmatite dyke outcrops, with many of these containing visible lepidolite lithium.
Given the project’s proximity to other known lithium deposits and world-renowned operations, Kalamazoo chairman and chief executive officer Luke Reinehr said the company considers the likelihood for lithium-caesium-tantalum pegmatite mineralisation in the immediate area is “very high”.
Kalamazoo has also increased its footprint in the region with the grant of two new exploration licences.
Blackstone Minerals (ASX: BSX)
Advanced nickel explorer Blackstone Minerals has inked a cooperative framework agreement with Vietnam’s Son La Province authority to facilitate development of the Ta Khoa nickel mine and downstream refinery in the province.
“Vietnam, and the Son La Province, is blessed with mineral potential, excellent infrastructure, loyal people and has all the key ingredients to be at the forefront of the movement towards electrification of transport,” Blackstone managing director Scott Williamson said.
The memorandum of understanding between Blackstone and Son La Province builds on the Australian and Vietnamese government commitments to deepening trade between the countries and promoting investment in Vietnamese project.
Earlier in the week, Blackstone’s wider collaboration with the Vietnamese Government’s General Department of Geology and Minerals to identify new nickel opportunities entered a new phase.
The duo had completed modelling of the Chim Van target, which has been likened to Blackstone’s Ban Phuc disseminated sulphide nickel deposit, within Ta Khoa.
A drill rig has been mobilised to Chim Van to begin the first priority hole.
LiveHire (ASX: LVH)
SaaS developer for the recruitment sector LiveHire has secured a contract with UK-listed SERCO Group’s subsidiary SERCO Australia.
Under the deal, LiveHire will provide recruitment services to SERCO for three years, with the contract valued at about $500,000 over three years.
The contract news followed LiveHire reporting record performance for the March quarter.
Cash receipts for the period reached $2.5 million, which was a 64% increase on the previous corresponding period.
The company closed out Q3 FY2022 with $9.3 million in cash to fund its accelerated expansion strategy in North America.
The week ahead
Once again, the continuing Easter break will reduce trading days and the volume of news hitting the market.
There are signs, however, that even shocking news will be taken in its stride with the unprecedented 11.2% annual jump in the US producer price index (PPI) in March – the highest on record – being accompanied by a rising market.
Rising prices and inflation seem to have been factored in and continuing reminders – even if they are unprecedented – seemed to have lost their shock value.
In the US, the concentration in the coming week has moved to company profit results with market players now measuring the pricing power of individual companies rather than the existence of strong price inflation.
In that context, company results are likely to take precedence over data such as housing starts, manufacturing and global purchasing managers releases – all of which are bound to confirm rising prices.
It is probably a similar situation here in Australia with the only possible exception being the release of the minutes from the April Reserve Bank board meeting on Tuesday.
There is a growing consensus that official rates will be rising at the May meeting so any confirmation of that would inform rather than surprise markets.
It is unlikely that consumer confidence and purchasing manager releases will do anything other than add emphasis to the inflation story, although Chinese quarterly economic growth numbers out on Monday might show some damage from extensive COVID-19 lockdowns there.