Weekly review: rare positive week comes from strong energy and retail sector

Retail energy ASX May 2022

Like the appearance of a rare jewel, a Friday rally on the Australian market led it to a skinny weekly gain of just 0.5%.

It was a close-run thing though, with the 1.1% Friday rise of 76.8 points on the ASX 200 to 7182.7 points doing most of the heavy lifting for the week.

It wasn’t difficult to see where the rise came from with the energy sector up 2.3% on a rising oil price.

Among the winners was Woodside (ASX: WPL) which saw a 3.6% jump in its shares to $30.08, while Cooper Basin player Beach Energy (ASX: BPT) shares leapt 3.8% to $1.64.

While inflation might be bad news for some companies, for energy stocks price rises have been a panacea as accusations about being “old economy” companies melt like morning mist in the face of strong demand after the Russian invasion of Ukraine.

Retailers follow a strong offshore lead

Consumer discretionary shares also rode on the back of a strong performance overseas with the sector up 2% after ABS figures showed retail sales jumped 0.9% in April.

Price rises for the big four banks also drove the financials sector up 1.1%.

Companies surfing the renewed interest in retailers included City Chic Collective (ASX: CCX), with shares up almost 8% to $2.44, Accent Group (ASX: AX1) up 4.2% to $1.38, JB Hi-Fi (ASX: JBH) shares up 2.5% to $46.42, Super Retail Group (ASX: SUL) up 2.1% to $9.41 and Premier Investments (ASX: PMV) shares rose 1.8% to $22.29.

Other than stronger sectors, there were some company specific moves – the main one being a big rise in the share price of Pointsbet (ASX: PBH), up 16.4% to $2.85.

Pointsbet rallies hard while Appen shares are crunched

Pointsbet shares were buoyed by a quarterly update which showed strong growth in its sports betting business, with turnover up 54% to almost $1.4 billion, due to a 37% rise in Australian turnover to $579.4 million and a 70% jump in US turnover to $818.6 million.

The biggest loser of the day was Appen (ASX: APX) shares which crunched 20.9% lower to $6.54 after big Canadian suitor Telus unexpectedly walked away from talks on a proposed $1.2bn takeover.

Small cap stock action

The Small Ords index fell 1.13% this week to close at 3014.8 points.

May 2022 small ords ASX 200 chart
ASX 200 vs Small Ords

Small cap companies making headlines this week were:

Wide Open Agriculture (ASX: WOA)

This week Wide Open Agriculture unveiled what may be its biggest milestone yet after Monde Nissin Australia agreed to purchase up to 60% of its regeneratively-farmed lupin-based Buntine Protein over two years.

Monde owns Nudie, Black Swan and Peckish brands, among others, and plans to use Wide Open’s Buntine Protein as the main ingredient in a variety of plant-based food and beverages it is developing.

Wide Open managing director Dr Ben Cole said Monde was the company’s preferred partner to commercialise its Buntine Protein, which is manufactured from Australian sweet lupin that has been regeneratively grow in WA’s Wheatbelt.

The company followed up this major milestone with news it had inked a deal to market its carbon neutral oat milk in Taiwan.

DKSH Taiwan has agreed to distribute, market and sell Wide Open’s oat milk, which is sold under its Dirty Clean Food brand.

Wide Open anticipates DKSH Taiwan will generate around $650,000 from annual sales of its oat milk in the region.

Thomson Resources (ASX: TMZ)

An earn-in agreement between Thomson Resources and White Rock Mineral regarding the Mt Carrington gold-silver-base metals project has been amended.

The agreement for the Queensland-based project has a two-staged earn-in approach, which will give Thomson 70% equity, and capture the polymetallic value of the deposits, which lie in the New England Fold Belt.

Thomson’s earn-in expenditure will focus on exploration and development at Mt Carrington, with a priority of integrating the known gold-silver-zinc-copper mineralisation into its wider New England Fold Belt mineral resources where it aims to build more than 100Moz of silver equivalent.

Under the first earn-in stage, Thomson can acquire 51% of the project by spending $5 million on exploration and development. The second stage will give Thomson a further 19% by spending an additional $2 million.

BPH Energy (ASX: BPH)

BPH Energy emerged from a trading suspension this week with news it was moving into the hydrogen space through a strategic investment in US-based Clean Hydrogen Technologies Corporation.

The company plans to invest US$800,000 in Clean Hydrogen, which will give it an 8% stake. Additionally, BPH’s 36%-owned investee Advent will secure 2% of Clean Hydrogen for US$200,000.

BPH and Advent also have the right to purchase a further US$1 million of Clean Hydrogen shares under the same terms by the end of December, which would give BPH a 16% interest and Advent 4%.

Clean Hydrogen has developed a technology that produces hydrogen from methane without burning it or generating carbon dioxide emissions.

BPH says the technology can be deployed at scale and within existing supply chains at costs comparable to current processes.

Aston Minerals (ASX: ASO)

Metallurgical testing on samples of ore taken from the Boomerang target within Aston Minerals’ Edleston project in Canada has generated a saleable nickel concentrate.

The company undertook early-stage flotation testing on a 30kg sample from the Barwell prospect, within the wider Boomerang target.

This showed the ore is amenable to conventional processing techniques.

Aston managing director Dale Ginn said the recoveries during the testing were comparable to other nickel sulphide deposits globally.

Open circuit evaluation produced a concentrate grading 11.29% nickel, 0.37% cobalt, 24% sulphur, 38.2% iron and 8.2% magnesium.

Investigator Resources (ASX: IVR)

Advanced explorer Investigator Resources has uncovered more potential close to its Paris silver project in South Australia.

The company’s drilling at the Apollo prospect 4km away has unearthed the highest-grade silver intersection outside of the primary Paris deposit.

Highlight results were 7m at 700g/t silver from 150m, and 4m at 1,170g/t silver.

Investigator managing director Andrew McIlwain said the assays demonstrate the “significant potential” for additional silver resources to be discovered proximal to Paris.

These assays were fast-tracked after pXRF readings returned significant silver readings in the drill core samples.

Vintage Energy (ASX: VEN)

First gas from Vintage Energy’s 50%-owned Vali field in the Cooper Basin is expected from late September to mid-October.

Construction of the operation is due to finish in September, with all wells to be online in October followed by first gas.

Vintage anticipates cash flow from initial Vali gas sales in the first half of FY2023.

Meanwhile, Vintage and its joint venture partners Metgasco and Bridgeport have secured ministerial approval for acquisition of Beach Energy’s 15% interest in PRL211, which is adjacent to the Vali field and hosts the Odin gas discovery.

Ownership of PRL is now the same as the Vali field – Vintage holds 50% and is operator, while Metgasco and Bridgeport both retain 25% each.

Odin will undergo well completion during the same upcoming campaign for the Vali field.

Galileo Mining (ASX: GAL)

The discovery of platinum group elements, including the valuable mineral rhodium at Galileo Mining’s Norseman project spurred its share price to rocket more than 50% this week.

Drilling at the Callisto target intercepted 33m at 2.05/g 4E (1.64g/t palladium, 0.28g/t platinum, 0.09g/t gold and 0.05g/t rhodium).

Rhodium is considered the rarest of the six PGE and also attracts the highest price.

Step out drilling is scheduled to begin next week and Galileo will also target rhodium in this campaign.

“Based on the six drill holes completed so far at Callisto, we anticipate more sulphide intersections in the next drill program and are hopeful that an increase in sulphide content will be matched by an increase in metal content,” Galileo managing director Brad Underwood said.

The week ahead

After a relatively quiet week, we are in for many more announcements in the coming week with the big local one being the release of GDP figures.

As well as the significant compression in price earnings ratios on many stocks, the chances of further big share price falls centre around lower economic growth numbers both here and in the US.

While most analysts expect the Australian figures to be reasonably healthy around the 1% mark for the March quarter, any signs of a growth slowdown will not be seen kindly by share markets.

Other domestic releases to look out for include the balance of payments and government financial statistics for the March quarter, building approvals, private sector credit, consumer sentiment, manufacturing, house prices, retail trade, construction and new car sales.

Looking overseas, the big releases in the US include jobs data, home prices, chain store sales, new car sales, mortgage applications and unemployment numbers.

However, the really big offshore announcement could be coming out of China where a series of large-scale lockdowns of major cities including Shanghai and Beijing are set to show up in manufacturing and services figures and also measures of factory activity.

While big declines are expected, getting a better picture of how China is coping with severe supply chain constraints could easily move markets in either direction.

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