Weekly review: market overcomes rising rates thanks to BHP takeover
WEEKLY MARKET REPORT
Once again, the Australian share market has overlooked the fact that interest rates will continue to rise in the US, with the BHP takeover of OZ Minerals helping to produce a small rise.
A weak lead from the US courtesy of Federal Reserve Bank of St. Louis head James Bullard warning that US interest rates would need to rise as high as 5% to 8% to fight inflation wasn’t enough to contain the animal spirits of Australian investors who were cheered on by BHP’s $9.6 billion bid for OZ Minerals.
The deal helped push the ASX 200 up 0.2% to 7151.8 points, despite a 0.3% fall in the S&P 500 and marginal falls in the Dow Jones and Nasdaq indices.
Part of that was due to the direct result of the takeover, which saw OZ Minerals (ASX: OZL) shares rise almost 4% to $27.34 and BHP’s (ASX: BHP) shares gain 0.32% to $43.94.
While another part was due to the positive contagion from the deal, which saw nine of the 11 sectors finishing higher – ironically with materials and energy stocks being those that fell.
Even the financials finished higher, despite Westpac (ASX: WBC) trading ex-dividend – quite an achievement.
FTX crypto mess
There was no shortage of other gloomy offshore news either with bankrupt cryptocurrency group FTX’s new chief executive officer John Ray saying the company was ‘unprecedented’ mess.
In the UK, the biggest tax increases and spending cuts in a decade were announced adding to the dampened sentiment.
However, for every negative bit of offshore news there was a positive local one with Australia’s unemployment rate easing from 3.54% in September to a new 48-year low of 3.39% in October.
Employment rose by 32,200 people with full-time jobs up by 47,100, but part-time jobs fell by 14,900.
Travel profits on the rise
Shares in travel group Webjet (ASX: WEB) finished 10.1% higher after posting impressive first half results which saw revenue more than double to $175.5 million while expenses increased 43% to $101.8 million
The company had turned around from a $60 million loss to a net profit after tax of $4 million and bookings are now back to pre-pandemic levels with earnings rising even faster.
There was some bad news around with market operator ASX Ltd (ASX: ASX) pausing work on its Blockchain driven CHESS replacement project due to “technology, governance and delivery challenges” which will see cost of up to $255 million no longer recognised, sending shares down 0.2%.
Perpetual (ASX: PPT) and Pendal (ASX: PDL) revised the terms of Perpetual’s acquisition after a court decision that Perpetual would not be limited to a $23 million ‘break free’ clause if it decides to terminate the acquisition in the face of a separate bid to take over Perpetual.
Perpetual shares fell 12.6% after the decision while Pendal shares rose 10.5%.
Small cap stock action
The Small Ords index fell 0.84% to 2871.2 points for the week.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
Bass Oil (ASX: BAS)
Investors were impressed with Bass Oil’s “significant” gas resource announcement for its PEL 182 permit in South Australia’s Cooper Basin.
Fluid Energy Consultants undertook an independent geological assessment and identified a best estimate of 21Tcf gas in place along with 845MMbb in place of condensate/oil.
Bass managing director Tino Guglielmo said it was an “exciting development” for the company at a time when there is high demand.
The company will carry out further studies to determine the best commercialisation strategies.
MSL Solutions (ASX: MSL)
Pemba Capital Partners subsidiary Plutus Bidco will acquire MSL Solutions for $0.295 per share – giving it an implied equity value of $119 million.
The scheme of arrangement was announced on Tuesday and values the leading SaaS technology provider to sports, leisure and hospitality sectors MSL at a 63.9% premium to its last closing price of $0.18 on 14 November. It also represents an 80.7% premium to MSL’s one-month VWAP of $0.163.
MSL’s board has recommended shareholders vote in favour of the offer.
TZ Limited (ASX: TZL)
TZ Limited is on track to grow its monthly recurring revenue (MRR) by 50% in FY2023, with latest MRR hitting $308,000 – up 50% on the same time last year.
Underpinning the revenue growth are refined and new products in the pipeline, including the recently launched OPeL open software platform that can use other manufacturer’s hardware for smart metal lockers.
Sales of the platform have already begun with new and existing clients adopting the product.
“The more flexibility and increased product/services offering is designed to keep TZ ahead of its competition,” TZ chairman Peter Graham said.
Antilles Gold (ASX: AAU)
Following a recent drilling program, Antilles Gold has confirmed the discovery of high-grade copper porphyry mineralisation at the El Pilar oxide-sulphide project in Cuba.
Latest assays from a six-hole drilling program at the project revealed a 134m intersection grading 1.23% copper from 49m.
The intercept included an 18.5m oxide zone grading 5.52% copper from 59m, and a 5.5m sulphide zone grading 4.17% copper from 166.5m.
However, these results are preliminary because they were completed at a Cuban Government laboratory in Havana, which is not deemed JORC compliant.
The samples will be sent to a certified laboratory to ensure JORC compliance, but the preliminary results enable Antilles to kick-off a 50-hole program several months earlier.
Credit Clear (ASX: CCR)
Australian award winning fintech Credit Clear has processed its 1 millionth payment via its digital collections platform.
This compares to 570,000 payments processed in November 2021.
The news follows Credit Clear achieving its first full cash flow positive quarter in Q1 FY2023 – generating $531,000 from its operating activities.
Record September quarter cash flow was underpinned by revenue hitting an all time high of $8.9 million for the period, which was a 162% increase on the previous corresponding period.
The week ahead
The biggest local news in the week ahead will come with a speech from the Reserve Bank of Australia Governor Philip Lowe at a CEDA dinner in Melbourne on Tuesday.
You never know when a speech from a central banker is going to be pivotal, but with speculation the RBA might be slowing down its rate rises amid its aim to get inflation back to the desired 2-3% range, there is a good chance this could be a pivotal speech one way or another.
Other key local figures to watch out for include consumer confidence figures, skilled job vacancies, and purchasing manager indices.
Looking overseas, it is a fairly quiet week in prospect in the US and China, although it is dangerous predicting that just because it is the US Thanksgiving Holiday on Thursday.
In China the one and five-year loan prime rates will be announced while in the US there are releases of national activity, consumer confidence, jobless claims and home sales numbers to look out for.
Central bank observations will also be crucial with the minutes of the 8-9 November US Federal Reserve meeting will released on Wednesday with investors looking at the prospect of future rate hikes and confidence that inflation can be tamed in the commentary.
In New Zealand on Wednesday, we will find out if the early-acting Reserve Bank there will lift the cash rate by 50 or 75 basis points in what will be its last rate decision before February.