Weekly review: Nuix float pushes market higher

Share market floats have roared back into life with data analytics company Nuix (ASX: NXL) shooting out the lights with a spectacular debut.

Nuix shares managed to add a rapid-fire $1 billion to the company’s already lofty valuation, with investors cheered by a strong first quarter which boosted hopes that it would meet or even exceed its prospectus forecasts.

Those lucky enough to buy shares in the float at $5.31 would have been more than happy with a 60% boost to a close of $8.50 a share.

Strong first quarter points to good Nuix results

Nuix has forecast in its prospectus that it will reach revenue of $193.5 million for the financial year and a pro forma net profit of $20 million.

There is a chance those targets could even be passed, given that the first quarter is traditionally tough and Nuix chief executive Rod Vawdrey indicated the first quarter had gone well, although he did not go into specifics.

Nuix boosted bookings and increased customers numbers as sales of its products increased across a range of industries, including health, legal offices and government departments, with more than half of the company business in the US.

The Nuix float was a remarkable one given the problems of the COVID-19 pandemic which throttled back the flow of floats in the first half of the year but the second half has seen a rush of large and high-quality listings.

Other floats doing well too

Construction materials company, Maas Group Holdings Limited (ASX: MGH), also made an impressive 35.5% debut rise on Friday with the $2 shares rising solidly to close at $2.71.

Next week coal transport company Dalrymple Bay Infrastructure is set to float as well.

The Nuix float is a big help for major shareholder investment bank Macquarie with the sale proceeds expected to prop up earnings that have been slashed by the pandemic.

In September, Macquarie said it expected to report a shock 35% slump in net profit for the current half year.

Macquarie’s Nuix stake was entirely owned by the bank so the sale profits come back to Macquarie – profits which are currently running around $1 billion since Macquarie bought Nuix in 2011.

Macquarie can also continue selling down its stake to boost revenue in the future.

Five weeks of gains for market

The float successes helped to propel the Australian share market to a 0.3% rise to 6634.1 points on Friday, capping off five straight weeks of gains.

The rise followed a slow start before BHP (ASX: BHP) and Rio Tinto (ASX: RIO) erased early losses and joined with the rising banks and Macquarie Group (ASX: MQG) which increased 2.3%.

The big banks were among the largest contributors in helping drive the market higher, with Commonwealth Bank (ASX: CBA) up 0.8% and ANZ Bank (ASX: ANZ) up 1.2%.

Shares in retail group Premier Investments (ASX: PMV) rose 0.75% after the owner of brands including Smiggle, Peter Alexander and Jay Jays told shareholders about 70% growth in online sales.

Cannabis sector benefits from loosening regulations

Medicinal cannabis stocks stand to benefit from a recent EU Court of Justice ruling and the United Nation’s decision to reclassify cannabis as a less dangerous drug this week.

The UN has voted to remove cannabis from the Schedule IV of the 1961 drug convention treaty which is for the “most dangerous and addictive drugs”.

Cannabis will now be reclassified as a Schedule I substance which is the least restrictive drug classification – unlocking opportunities for medicinal cannabis producers.

The UN decision followed the Court of Justice of the European Union’s ruling that EU member states must not prohibit the marketing of lawfully produced cannabidiol products.

This represents a regulatory shift in the favour of medicinal cannabis companies with growth opportunities across the EU.

Small cap stock action

The Small Ords index rose 1.45% this week to close on 3078.8 points.

Small cap companies making headlines this week were:

Blue Energy (ASX: BLU)

Gas explorer Blue Energy secured a heads of agreement with EnergyAustralia, which will lay the groundwork for a proposed pipeline from Blue’s coal seam gas tenure in Queensland’s North Bowen Basin.

The agreement paves the way for Blue to supply 100 PJ of gas over 10 years and will enable northern Bowen Basin gas to be delivered into the east coast domestic market.

Blue managing director John Phillips said it was “very encouraging” federal and Queensland governments recognise the gas potential of the North Bowen Basin and provided gas buyers the confidence to seek long-term supply agreements.

Piedmont Lithium (ASX: PLL)

A definitive feasibility has begun on developing a 160,000tpa spodumene concentrator as part of  Piedmont Lithium’s strategy to become the first integrated mine to lithium hydroxide producer outside of China.

The study is due to be completed by mid-2021 with a final investment decision to be made shortly after.

Meanwhile, Piedmont’s lithium hydroxide plans are advancing with the company securing a permit from US environmental authorities to build and operate the planned 22,700tpa chemical plant at Kings Mountain in North Carolina.

Duke Exploration (ASX: DEX)

All holes drilled to date at Duke Exploration’s Mt Flora prospect within its Bundarra project have hit visible copper mineralisation.

Five holes were drilled at Mt Flora for 1,295m where all known historic lodes were intercepted, and visible mineralised widths were similar to those in historic drilling.

All-up, 15 holes were completed out of the planned 43 hole campaign at the project, with assays due later this month.

Meteoric Resources (ASX: MEI)

Meteoric Resources’ recently acquired Palm Springs project in WA has continued to impress with latest assays from drilling at the historic Butchers Creek open pit returning thick zones of gold mineralisation.

Highlight assays were 69m at 4.4g/t gold and 55m at 3.2g/t gold.

Meteoric claims the results confirm the wide high-grade gold mineralisation extends southwest of the pit.

Further assays are due before year-end.

Vintage Energy (ASX: VEN)

Oil and gas explorer Vintage Energy plans to begin production from its Vali gas discovery next year, which will also begin generate its first cash flow.

Vintage holds a 50% interest in the Vali Field within Queensland permit ATP 2021, where it is looking to develop up to nine wells.

The company also has a 50% interest in PEL 155 in the South Australian side of the onshore Otway Basin, where it plans to begin flow testing at Nagwarry-1 early next year.

The week ahead

Locally there are a few things to watch for in Australia.

Business and consumer confidence surveys will be released along with job advertisements, credit and debit card lending and property prices data.

RBA governor Dr Philip Lowe is also giving the keynote address on Innovation and Regulation in the Australian Payments System – to the Australian Payments Network on Monday.

Overseas, inflation reports are the biggest things to watch out for, with both China and the US releasing data which will show.

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