Weekly review: Eon NRG revenue soars, Lithium Australia’s battery from mine waste, The Reject Shop takeover bid
WEEKLY MARKET REPORT
Australian investors were given an unexpected Thanksgiving present with the share market rising 25 points or 0.45 per cent to close the week out at 5716.2 on the ASX 200.
The Thanksgiving Day holiday in the US meant there was a lack of strong leads and gave the market the freedom to climb for a second day running.
Still, even that was not enough to overcome the poor results earlier in the week and the index still shed 0.25 per cent for the week.
Banks in the winners circle for once
The power behind the comeback came from the financials, with the big banks all rising.
ANZ (ASX: ANZ) led the charge, putting on 59c or 2.29 per cent to close at $26.34.
It was a similar story with the other banks, with Commonwealth (ASX: CBA) closing at $71.30 after adding 67c or 0.95 per cent, Westpac (ASX: WBC) closing at $26.04 up 36c or 1.4 per cent and National Australia (ASX: NAB) closed up 25c at $24.48 or 1.03 per cent.
Investment bank Macquarie (ASX: MQG) was also up 33c or 0.29 per cent to $114.53 and some of the fund managers were also stronger with AMP (ASX: AMP)up 4c or 1.65 per cent to $2.46 and Perpetual (ASX: PPT) up 44c or 1.27 per cent at $35.09.
Much of this was probably a bit of relief that another week of the Hayne Royal Commission was over and perhaps the final recommendations would not be as value destroying as feared.
Bluescope rebounds
Bluescope Steel (ASX: BSL) jumped an impressive 3.79 per cent or 46c to $12.60 after outlining a positive trading update which forecast a ten per cent improvement in underlying earnings in the first half of 2019.
Retailers were also stronger, with Woolworths (ASX: WOW) up 1.14 per cent or 33c to $29.24.
The new kid on the block – the spun out Coles (ASX: COL) rose 9c or 0.706 per cent to $12.84 and former parent Wesfarmers (ASX: WES) was also up 57c or 1.82 per cent to $31.89.
While the spin-out effectively means the same shareholders still own Coles and Wesfarmers as separate holdings, over time the companies will diverge as Wesfarmers eventually employs its cash in new businesses.
Kathmandu on an adventure
Adventure retailer Kathmandu (ASX: KMD) was a standout, zooming up 12.9 per cent or 30c to $2.62 after it announced same store sales growth of 6.3 per cent at a constant exchange rate for the 15 weeks to November 11.
Same store growth was an impressive 7.1 per cent in Australia and 5.2 per cent in New Zealand.
Bad news for CSL and Telstra
It wasn’t all sweetness and light on the market with the communications and healthcare sectors both shedding value.
Blood products group CSL (ASX: CSL) fell $2.49 or 1.35 per cent to $182.32 and the widely held telco Telstra (ASX: TLS) fell 5c or 1.68 per cent to $2.92.
Fortescue receives Twiggy boost
Founder and chairman Andrew ‘Twiggy’ Forrest bought over $23.1 million worth for Fortescue Metals (ASX: FMG) shares on the market this week.
This is in addition to the $15 million he had acquired late last month.
Fortescue this week also announced they will make a push to advance hydrogen technology in conjunction with the CSIRO.
Small cap stock action
The small cap index slid this week 2.39% and to finish Friday at 2,541.9 points.
As always several small caps bucked the trend, particularly, Eon NRG which closed the week at $0.018 – up 200%.
Small cap companies with notable news out this week include:
Eon NRG (ASX: E2E)
October heralded Eon NRG’s highest sales revenue to date with the oil and gas producer announcing notable revenue of nearly $1 million.
The company has taken advantage of the recent natural gas price rise, which in the past two months has increased by 66% from US$2.40 per thousand cubic feet to hovering above US$4.00/Mfc a significant improvement throughout the past six months.
Eon reported that 33% of the US$660,000 sales revenue came from production of natural gas at its Silvertip Field in Wyoming, US – selling 4,500 barrels of oil equivalent at an average US$3.39/Mfc with the remaining 66% revenue received from selling 9,260bbl of oil across its operations at US$69/bbl.
With the US winter likely to maintain higher gas prices, Eon plans to execute a further well recompletion next month in addition to carrying out an “aggressive” drilling program in 2019.
Lithium Australia (ASX: LIT)
Lithium Australia had huge news this week that could potentially change the way lithium-ion batteries are made.
Using its innovative SiLeach process, Lithium Australia has produced lithium-ion batteries from mine-waste in a world-first achievement.
In its Queensland lab, Lithium Australia’s 100% owned subsidiary VSPC transformed tri-lithium phosphate into lithium-iron-phosphate cathode material, this was then used to produce coin-cell lithium-ion batteries.
Upon testing it resulted in a comparable product to VSPC’s batteries produced using lithium carbonate, which is currently used in lithium-ion battery manufacturing.
By using its SiLeach process, Lithium Australia has bypassed the most difficult and costly hurdle in current manufacturing, the need to create lithium hydroxide or lithium carbonate.
Lithium Australia also reported “outstanding” lithium recoveries from the pilot trial at ANSTO Minerals’ facility in NSW.
The Reject Shop (ASX: TRS)
After Allensford investment group lobbed a $78 million takeover offer for The Reject Shop, the company’s board told investors to sit tight on Wednesday.
Allensford’s unconditional on-market offer valued The Reject Shop at a $2.70 per share – which is a 19% premium to the company’s one-month volume weighted average of $2.27.
In the last 12 months, The Reject Shop has watched its share price plunged from $5.26 to a low of $2.02 earlier this month.
While The Reject Shop’s board stated it would “carefully assess the offer”, it also said its preliminary view was the offer was “opportunistic” and “undervalued” the company.
Purifloh (ASX: PO3)
Purification specialist Purifloh now has its hands on free radical generator technology after converting a previous heads of agreement with Somnio Global Holdings to a binding agreement.
Somnio developed the technology, and under the binding agreement, Purifloh will now hold the rights to the technology for treating water, fluids, air purification, disinfection, facility sterilisation and biofilm disinfection.
Purifloh will also have access to Somnio’s technical and product develop services through a research and development plan, which aims to expand and commercialise the free radical generator technology.
The agreement included a payment structure based on royalties, which provides both companies the incentive to commercialise the technology as quickly as possible.
Stanmore Coal (ASX: SMR)
As the merger and acquisition space heats up, Stanmore Coal became another takeover target after one of Indonesia’s largest coal producers Golden Energy and Resources’ 51%-owned subsidiary Golden Investments launched an offer valuing Stanmore at $0.95 per share.
Golden Investments told Stanmore shareholders its offer was “attractive” and provided “immediate value”, without further exposure to the current energy market, which it describes as “volatile”.
Stanmore’s board responded with take no action, but indicated it would evaluate the offer and provide a recommendation to shareholders in due course.
The board also pointed out the offer was only 6.4% premium to Stanmore’s five-day volume weighted average price and not the 14.5% premium as Golden Investments stated.
MOD Resources (ASX: MOD)
Visible copper was seen in drill intersections at MOD Resources’ T23 Dome target within its T20 copper project in the Kalahari Copper Belt.
The copper was visible in the first two diamond core drill holes from an ongoing exploration program at the project.
T23 Dome was the first prospect to be drilled within the project’s northern tenements and the sixth substantial copper discovery at the project.
According to MOD managing director Julian Hanna, the immediate success of finding copper near surface at T23 Dome confirms its prospectivity and opens up the “wider potential” of T20 as a whole.
MOD is looking to list on UK’s AIM market as early as next week, after publishing its prospectus on Monday.
Tando Resources (ASX: TNO)
Tando Resources had a big news week after reporting it had secured the exploration licence for the Mt Sydney zinc-lead project in WA.
Preliminary exploration at the project has returned 17 near-surface anomalies for further evaluation.
Meanwhile, as part of its strategy to fast-track its flagship SPD vanadium project in South Africa, Tando has mobilised a fourth rig to site, which will drill the high-grade vanadium pipe Cluster 5.
Previous sampling at the pipe returned numerous rock chips grading in excess of 2% vanadium. A phase two drilling campaign is also underway at the project’s primary SPD deposit where a maiden resource estimate is imminent.
IPOs this week
Small Caps readers who want to view upcoming IPOs or see the stocks that have listed in 2018 and how they are performing can now do so.
The latest company to make its way onto the ASX this week was:
Shekel Brainweigh (ASX: SBW)
Weighing technology stock Shekel Brainweigh starting trade on Tuesday after raising $10.15 million through an oversubscribed IPO.
More than 55% of the funds raised was via Australian and international institutional investors, with 92% of shares on issue held by the top 20 holders.
Shekel creates advanced weighing solutions for retail, healthcare and manufacturing sectors and generated more than $24 million in revenue during 2017.
Companies worldwide use Shekel’s weighing technology including Toshiba, Fujitsu, Datalogic, Diebold-Nixdorf, and GE Healthcare.
IPO proceeds will fund research and development of Shekel’s product aware surface technology, which is a combination of weighing technology and artificial intelligence for the autonomous retail market.
With its share price valued at $0.35 in its IPO, Shekel closed its first week on $0.36.
The week ahead
We are in for a relatively quiet week of new economic data with business investment, construction work done and private sector credit figures.
It will also be worth keeping an eye on a Monday morning speech by the Reserve Bank Governor, Philip Lowe, titled “A Journey Towards a Near Cashless Payments System.’’
In the US the minutes from the last Federal Reserve meeting will be of interest because it will indicate the proximity and extent of interest rate rises.
There will also be an estimate of September quarter US economic growth, while the G20 Summit in Buenos Aires could generate some news.