Weekly review: lots of unpleasant distractions lead to an indecisive market

Indecisive market weekly review August 2021 Small Caps
WEEKLY MARKET REPORT

Indecision has been the order of the week for the Australian share market, which managed to eke out a small 0.3% weekly gain despite some terrible distractions.

The deadly suicide bombing in Kabul which killed at least 60 Afghans and 13 US troops understandably led to a down day on the US market in the lead in to Friday’s trading in Australia.

There were unknowns at the other end of the day too, with the market unsure of what guidance would emerge from the US Federal Reserve, with hints about stimulus and tapering sure to emerge from the Jackson Hole virtual symposium of central bankers after the close of trade.

The looming address by US Federal Reserve chairman Jerome Powell provided one heck of an overhang.

So, a flat finish that was just 2.4 points lower at 7488.3 points for the ASX 200 was probably a reasonable outcome given a world of uncertainty.

Some good news fails to buoy shares

In different circumstances there was plenty of welcome news with the surprise decision by retailer Wesfarmers (ASX: WES) to return a healthy $2.3 billion of capital to investors after an excellent year in which profits rose by 16%.

That means shareholders are in for a $2 a share payment plus a $1.78 dividend thanks to an exceptional performance by Bunnings, K Mart and Officeworks during the Covid-19 pandemic.

Despite these payments and having lifted profit and revenue, Wesfarmers shares closed down 2.8% on Friday at $62.20.

Payday for beauty entrepreneur

There was a lot of good news for beauty entrepreneur Zoë Foster Blake with listed skincare company BWX (ASX: BWX) announcing it was taking a $90 million controlling stake in the Go-To brand she founded and owned a 40% stake in.

The deal will see BWX own 50.1% of the company, valuing Go-To at $177 million.

Foster-Blake founded the company in 2014 and will still retain a 23% stake in the business and remain chief creative officer and on the board.

Her husband and fellow tourism campaign ambassador, comedian Hamish Blake, will struggle to crack a joke about that pay day!

Strong year for rare earth minerals

Rare earth company Lynas (ASX: LYC) also announced a positive result with high rare earth prices and tight cost controls, delivering a record $157 million net profit for Lynas.

Lynas shares closed down 3.6% at $6.42 and the company decided against paying a final dividend.

Another company that produced a solid result was Bega Cheese (ASX: BGA), which enjoyed a strong lift in profitability.

Revenue jumped 39% to $2.1 billion, while statutory profit surged 239% to $72.2 million following the acquisition of Lion Dairy and Drinks, which includes the Dairy Farmers, Dare & Daily Juice brands.

Bega shares started the day stronger but ended flat at $5.51 after reporting a strong lift for its FY21 results.

Small cap stock action

The Small Ords index rose 0.97% this week to close at 3506.3 points.

2021 August ASX 200 chart small ords
ASX 200 vs Small Ords

Small cap companies making headlines this week were:

Credit Clear (ASX: CCR)

Disruptive technology provider Credit Clear reported an increasing amount of companies are adopting its digital receivables solutions.

The fintech company has achieved a 147% rise in digital revenue for the 2021 financial year (FY 2021) of $3.5 million compared to the previous corresponding period – driven by 82 new clients adopting its digital communication and payment management platform.

Total revenue for FY 2021 was up 70% at $11 million compared to FY 2020 levels.

Credit Clear’s platform uses AI and machine learning to boost customer engagement and improve debt management.

Blackstone Minerals (ASX: BSX)

Aspiring nickel miner and precursor battery material supplier, Blackstone Minerals has unearthed 375m nickel intersection starting at 2m below surface.

The near-surface drill intersection was returned at the Ban Phuc deposit within the company’s Ta Khoa nickel-copper-PGE project in northern Vietnam.

The 375m intersection graded 0.3% nickel, 0.01% copper, 0.01% cobalt and 0.07 grams per tonne PGE, including 49m at 0.45%, 0.04% copper, 0.01% cobalt and 0.17g/t PGE from 2m.

In parallel with firming up a mining operation at Ta Khoa, Blackstone is evaluating a downstream refinery to producer precursor battery materials.

The company revealed this week it had appointed the Korea Development Bank to work with BurnVoir Corporate Finance to advise on securing development funding for the proposed mining operation and refinery.

DC Two (ASX: DC2)

DC Two will supply data centre co-location services worth about $1.78 million over 36-month after it secured new agreements.

Data centre, cloud and software business DC Two noted that customers from these agreements will be some of the first in house to utilise its in-house developed, high density and transportable centres that are being deployed at sustainable power generation sites Australia-wide.

These data centres come in the size of a shipping container and only require power and data connectivity and can be used for high performance of supercomputing specific workloads.

DC Two chief executive officer Justin Thomas said the latest agreements show increasing demand for the company’s transportable centres, which are a viable revenue source for the business.

Aldoro Resources (ASX: ARN)

With the Chinese Government placing importance on the mineral rubidium in recent years, Aldoro Resources revealed this week it had identified potential for the mineral at its Niobe prospect, which is part of its Windimurra project in WA.

The company has developed an exploration target between 330t and 1,500t of contained rubidium.

A reverse circulation drilling program has been pencilled in to begin late next month once requisite approvals have been received.

In parallel, Aldoro is building momentum at its Nanrdee Igneous Complex nickel-copper-PGE project in WA after identifying more targets.

Western Mines Group (ASX: WMG)

Ahead of a maiden drilling program, Western Mines has kicked-off high-resolution surveys across its Mulga Tank nickel-copper-PGE project in WA.

3D modelling has also been planned with all results to feed into generating targets for drilling later this year.

Over at the company’s Rock of Ages project, a reverse circulation rig is on its way to site with drilling planned to begin over the weekend.

This program will comprise 800m and test a trend hosting historical high-grade gold workings.

Angel Seafood (ASX: AS1)

With strong domestic demand for its sustainable oysters, Angel Seafood has posted record half year revenue of $3.6 million.

This record 2H 2021 revenue was up 46% on the previous corresponding period.

The company was also profitable during the period, revealing a net after tax profit of $489,000 compared to a $160,000 in 2H 2020.

EBITDA rocketed 178% to $1.3 million on 2H 2020 levels.

Angel chief executive officer Zac Halman said sales through the company’s retail channels continued to grow during 2H 2021.

He noted there were “good recovery” signs in the restaurant channel before lockdowns returned.

The week ahead

While the bulk of the Australian profit reports have now been delivered, there are still a handful to finish off in the coming week.

Probably the biggest names to look out for are Fortescue Metals (ASX: FMG), Harvey Norman (ASX: HVN), and the troubled Crown Resorts (ASX: CWN).

It is a big week for statistical releases with the biggest being the June quarter GDP figures which are out on Wednesday and will be a guide to how the beginnings of lockdowns which spread across NSW, the ACT and Victoria have impacted the economy.

Other figures out during the week include consumer confidence, business indicators, building approvals, the balance of payments, home prices, international trade, retail trade and car sales.

Overseas, the main things to watch out for include Chinese purchasing manager surveys which should highlight faltering growth due to rising COVID-19 infections.

The services index may also show the effect of government restrictions.

In the US, the main thing to watch for is the jobs numbers but there is also a range of other releases including manufacturing, home sales and prices, consumer confidence and car sales.

This week’s top stocks

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