The week in Small Caps: Poseidon takeover offer, Pancontinental set to spud, LandMark delivers dividends
WEEKLY MARKET REPORT
It was a bit of a rocky week with the price of base metals slumping mid-week but the Australian market resoundingly sent the bears back into hibernation on Friday, adding 60.8 points to close the week on a strong note.
The ASX 200 and All Ords both posted gains, despite a few days in the red.
The ASX 200 increased 0.97% to finish the week at 6,339.2, while the All Ords rose 0.93% to reach 6,426.2.
Everybody’s favourite whipping boy, Telstra (ASX: TLS), put in the hard yards to drag the index up by adding on an extraordinary 5.9 per cent to close at $3.09 – the biggest one-day gain for a decade.
Despite a fairly bleak outlook for the year ahead, investors seem to think the big telco’s market dive was overdone and have been piling back into the stock, which rose 8.8 per cent for the week.
5G could challenge NBN
The big positive for investors seems to be the focus on the ultra-fast 5G mobile network, with close to 200 sites expected to be online by the end of the year.
Some think the fast mobile network could provide some real competition for the NBN – the rollout of which has not been without trouble even as it decimates Telstra’s wholesale fixed line revenue.
CSL (ASX: CSL) was another strong performer on the back of a stellar profit result on Wednesday which beat even the most bullish predictions.
The vaccines and blood products company boosted net profit by 29 per cent to $US1.73 billion and forecast another double digit profit growth in 2019, causing its shares to rise 6.5 per cent to $215.67.
Origin suffers from weak forecast and falling power prices
Origin Energy (ASX: ORG) also had a strong net profit of $218 million for the year but unfortunately a weaker than expected profit guidance – and perhaps some sabre rattling in Canberra about the need for lower power prices – saw Origin shares close the week down 7.8 per cent at $8.88.
It was a similar situation for South32 (ASX: S32) shares which slid 7.7 per cent to $3.35 for the week due largely to the fall in commodity prices.
South32 has also just completed the $US1.3 billion ($1.8 billion) acquisition of Arizona Mining.
Not so unlucky on the acquisition front was Ausdrill (ASX: ASL) which returned from a two day trading halt after successfully completing its institutional entitlement offer.
The capital raising will allow Ausdrill to complete a takeover of underground mining contractor Barminco Holdings in a deal worth $271 million, subject to shareholder approval.
Ausdrill shares rose 15.5 per cent to $1.94.
Packaging company Pact Group’s (ASX: PGH) annual profit was a big disappointment with net profit down around ten per cent despite rising revenue.
Pact shares fell 20.7 per cent to $4.25 this week.
Small cap stock action
Small cap stocks pulled ahead into the green this week with the Small Cap index closing Friday up 0.68% to 2,833.1 points.
This week’s small cap stocks that announced notable news included:
Poseidon Nickel (ASX: POS)
Poseidon Nickel had big news out on Friday after emerging from a trading halt with an announcement that US-based Black Mountain Metals had made an informal bid for the company.
The bid values Poseidon at A$0.06 a share, which is a 53.8% premium to its last closing price of A$0.039 per share.
However, the proposed offer is significantly lower than Poseidon’s share price of A$1.46 at the end of July 2017, prior to the GFC and the nickel market bottoming out.
Poseidon advised shareholders to “take no action” and stated it will refrain from making any recommendations until it had received a formal offer.
The company is in the process of sourcing funding to restart its high-grade nickel sulphide operations in WA.
Pancontinental Oil & Gas (ASX: PCL)
Pancontinental Oil & Gas is about to spud its Cormorant-1 oil well in offshore Namibia in conjunction with its farm-in partner Tullow Oil (ASX: LSE).
The joint venture’s contracted drill ship Ocean Rig Poseidon is in Namibia and final preparations are underway to begin drilling the well next month.
Cormorant potentially contains prospective resources of 124 million barrels of recoverable oil on an unrisked best estimate basis.
The prospect is one of four large targets that have been mapped within the Tullow-operated Namibian offshore block PEL 37.
Nearmap (ASX: NEA)
Nearmap has officially entered the New Zealand market after establishing its aerial imaging operations in the country.
The company’s operations include sales, marketing, and product resources functions within the region which is based on its geospacial mapping technology and aerial imagery services.
Nearmap’s product gives users the ability to draw on its detailed aerial imagery for virtual site visits and analysis.
The Australian-based company is now looking to expand into a third region and position itself as at the forefront of the global intelligence market.
ResApp (ASX: RAP)
Digital health-focussed ResApp Health has teamed up with Lockheed Martin as part of US defence research initiative.
ResApp is developing an app that can detect respiratory diseases including pneumonia, asthma, croup and bronchiolitis among others.
The duo will work on the Warfighter Analytics using Smartphones for Health (WASH) program to build a software suite that can determine “warfighter readiness” in individuals.
WASH aims to use a smartphone to predict potential chronic and acute illnesses in various contexts, eliminating the need for expensive medical equipment.
Eden Innovations (ASX: EDE)
Eden Innovations has collared its biggest contract to-date after the US Federal Highway Administration and Georgia Department of Transportation agreed to purchase A$726,000-worth of Eden’s proprietary carbon-strengthened concrete additive.
The additive known as EdenCrete will be used in the replacement of more than 8,000 cubic metres of concrete pavement across 17km of the Twiggs County Interstate Highway I-16.
It is expected about 79,000 litres of EdenCrete will be needed for the project, which is scheduled for completion at the end of March next year.
When added to concrete, EdenCrete makes the material denser, stronger and longer-lasting.
LandMark White (ASX: LMW)
LandMark White has boosted its 2018 full year profit before tax by 143% compared to 2017, with the profit rising to A$5.8 million.
Additionally, the company’s after-tax profit surged 155% on 2017 levels to reach A$4.1 million.
The property valuation and consulting company pointed to its acquisition of MVS National as a strong contributor to the result.
Additional factors pushing up profits were an increase in market share, diversification, cost savings and higher growth margins.
LandMark has more than 40 offices and 400 staff throughout Australia and has forecast a further 17% increase in before tax profit for 2019 of A$6.8 million.
Infomedia (ASX: IFM)
Global automotive parts and software as a service company Infomedia has posted a 7.9% net after tax profit of A$12.9 million for the 2018 financial year.
The after tax profit compares to A$11.9 million in 2017, with EBITDA up 15.2% to A$29.1 million.
Infomedia chief executive officer Jonathan Rubinsztein said the results were due to the company’s ongoing strategic investments since 2016.
According to Mr Rubinsztein, the company will continue pursuing new opportunities in 2019 that give it access into new markets.
Real Energy (ASX: RLE)
Halliburton’s Australian division has been engaged to undertake Real Energy’s planned fracture stimulation program at its flagship Windorah gas project in Queensland’s Cooper Basin.
Real Energy has appointed Halliburton Australia to carry out the two-week project, which is due to start at the end of September.
According to Real Energy, the fracking program will target the Toolachee-Patchawarra formation sections about 2,300m below surface and deeper.
The formations are within the company’s Tamarama-2 and Tamarama-3 wells, with Real Energy managing director Scott Brown saying the upcoming program will build on the excellent results achieved to-date at the project.
AusCann (ASX: AC8)
AusCann reported it had successfully completed its pilot study into its optimum final dosage for its proprietary cannabinoid capsules.
The study was completed over 10 months and AusCann hopes to launch its first medical cannabis products to world markets in the first half of 2019.
AusCann managing director Elaine Darby says its new cannabinoid capsules with optimum dosage solves problems that exist with current cannabis products, by strengthening the stability of the active cannabinoids.
Meanwhile, AusCann’s major shareholder and strategic partner Canopy Growth (TSX: WEED) has received news that Corona beer manufacturer Constellation Brands (NYSE: STZ) will shell out US$3.8 billion to up its stake in medical and recreational marijuana company.
3D Oil (ASX: TDO)
After Quadrant Energy discovered oil and gas condensate at Dorado-1 in offshore WA, 3D Oil is investigating whether its nearby wholly-owned exploration permit will hold similar potential.
3D Oil has finished sub-surface analysis of the WA exploration permit WA/527-P, with initial results revealing a geophysical response similar to the Caley and Milne sands throughout the permit’s south-western section.
The analysis indicates the excellent reservoir quality in the Caley and Milne sands and 3D expects this is similar to those encountered at Dorado-1.
3D is now developing a new thermal and migration model, with preliminary investigations predicting the likelihood of oil migrating to its permit’s western side.
CCP Technologies (ASX: CT1)
CCP Technologies received the Food Safety Equipment and Materials Award at this year’s Food and Beverage Industry Awards.
The food industry internet of things company received the award as recognition for its innovative wireless products which help increase food safety standards in manufacturing facilities around Australia.
CCP’s technology enables food to be adequately refrigerated and provides in-depth tracking capabilities that monitor and maintain temperature records helping ensure food safety standards are adhered.
In addition to recording temperature, CCP’s technology provides real-time readings of energy and environment including: air and water quality, pH, chemicals, noise, acoustics and gases.
IPO tracker
Readers of Small Caps that 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 stocks to muscle their way onto the ASX this week include:
Tempus Resources (ASX: TMR)
Through its IPO, Tempus Resources hoped to raise A$5 million via the issue of 25 million shares at A$0.20 each and began trading on the ASX on Wednesday.
Investors bought in on the listing with the company’s share price surging more than 37% to peak at A$0.275, before closing its first day of trade at A$0.26.
The company ended its first week at A$0.24 – up 20% on its A$0.20 IPO price.
Tempus is an emerging exploration company which is acquiring the Montejinni project in the Northern Territory and the Claypan Dam asset in South Australia.
The projects are believed prospective for zinc, copper, gold and nickel, with the offer proceeds to be used to fund exploration across the projects.
Sultan Resources (ASX: SLZ)
Sultan Resources listed on Thursday this week after issuing a prospectus to raise up to A$5 million via the issue of 25 million shares at A$0.20 each.
However, the company’s share priced slipped to end the day at A$0.19 on its first day of trade.
Sultan didn’t fare much better in the remainder of the week, with its share price dipping further to close Friday at A$0.185.
The company is acquiring the East Tallering, Dalwallinu, Thaduna and Lake Grace project which comprise 946sq km of tenements prospective for gold, copper, nickel and cobalt in WA.
Offer proceeds will be used to begin exploration across its tenements.
The week ahead
The Reserve Bank is the focus in Australia with Governor Philip Lowe set to speak at a breakfast event on Tuesday to launch ASIC’s National Financial Capability Strategy in Canberra.
Deputy Governor Guy Debelle will also be worth listening to on Wednesday when he speaks in
Brisbane on the subject of “Low Inflation” – which is an interesting topic given there have been some calls for the RBA to lower its inflation target.
On the data side there is the release of the CBA’s Business Sales Indicator on Monday and on Wednesday the quarterly update on construction work.
In the US the release of minutes from the last Federal Reserve meeting will attract interest while later in the week the US Fed Chair Jerome Powell will be speaking at the annual Jackson Hole central banking symposium on August 24 and 25.
The main data interest in the US will be around a variety of housing statistics.