Market wrap: Wall Street record nudges local market higher

An amazing record on Wall Street as the S&P 500 index briefly crested 5000 points for the first time encouraged a third straight day of gains on Australia.

The benchmark index for the US market briefly touched a record high of 5000.4 points but was unable to hold that peak and closed with a still impressive 0.06% rise to 4997.91 points.

It was a similar story for the local market on Friday with the ASX 200 adding just 0.1% or 5.6 points to close at 7644.8 points.

Despite three straight days of gains, the ASX 200 index was still down 0.7% for the week, however the performance was mixed across the board with shares in the technology, communications and healthcare sectors rising but largely being offset by falls in the energy and mining sectors.

Boral digs deep for a strong result

By far the best performing large local stock was Boral (ASX: BLD), which added an impressive 8.3% to reach $5.86 after the building materials group had significantly raised guidance.

Rather than the previous expected level for earnings before interest and tax for the financial year 2024 of between $300 million and $330 million, Boral now expects pre-tax earnings to land somewhere between $330 million and $350 million.

It was an exceptional effort coming after an earlier upgrade just three months ago and despite a hefty equity multiple of around 30 times the shares rose strongly.

Cochlear produces music for investor’s ears, as uranium takes hit

Bionic ear company Cochlear (ASX COH) also had a great day, with its shares hitting a record closing high of $322.73 after it added 5.9% as investors continued to digest its upgraded profit guidance for the current financial year.

It wasn’t all great news locally though, with the uranium sector retracing a little after some excellent recent gains on the back of an announcement by large Canadian miner Cameco that it was planning to boost its uranium production.

Cameco is aiming to raise production from two existing brownfield mine expansions so the higher production could come on quite quickly with relatively low investment required.

The news sent shares in Boss Energy (ASX: BOE) sharply lower, down 12.7% to $5.23, with shares in Paladin Energy (ASX: PDN) also falling by 7% to $1.32.

Small cap stock action

The Small Ords index fell 0.39% for the week to close at 2960.6 points.

Small cap companies making headlines this week were:

Alliance Nickel (ASX: AXN)

Alliance Nickel has signed a non-binding term sheet with Samsung SDI for the supply of nickel and cobalt from its NiWest project in Western Australia, aiming for a six-year agreement.

Samsung SDI may also invest in a new company holding the NiWest project, aligning with Alliance’s strategy to secure offtake agreements and funding.

The partnership is seen as a validation of NiWest’s potential and strategic significance in supplying materials compliant with the US Inflation Reduction Act.

The definitive agreement’s execution depends on due diligence and standard closing conditions. NiWest, located near Leonora, WA, is poised to produce 100,000 tonnes annually of battery-grade nickel and cobalt for the electric vehicle market, with a feasibility study expected to complete by mid-year.

Ava Risk Group (ASX: AVA)

Ava Risk Group has secured a contract with Telstra for a two-year supply agreement, following 10 months of collaboration and product trials.

This agreement marks a pivotal achievement for Ava, reflecting its record sales and strong earnings in the first half. Chief executive officer Mal Maginnis emphasised the deal’s importance, showcasing Ava’s technology adaptability to telecommunications and other markets.

The partnership with Telstra, a leader in Australian communications, highlights the effectiveness of Ava’s sensing technology in monitoring fibre networks, including trials in Melbourne and Darwin.

This venture into the telecommunications vertical with Telstra promises to enhance Ava’s global client base, leveraging over 5 billion kilometres of global fibre optic cable for network protection.

Ava’s technology will focus on Telstra InfraCo’s vast infrastructure, including 250,000km of fibre optic cable and other assets.

Ava’s recent financial performance includes a record $12 million in Q2 sales and a 37% year-on-year increase in H1 sales, indicating strong growth and confidence in the future.

Janison Education (ASX: JAN)

Janison Education has secured an agreement with the New South Wales government and Cambridge University Press & Assessment to transition the state’s selective education placement tests from paper-based to a digital format.

This digital assessment platform will service over 30,000 high-potential students annually, enhancing efficiency, security, and the overall testing experience.

The five-year contract, starting in 2025, could yield up to $45 million in revenue for Janison, with a potential extension for another five years.

This partnership not only strengthens Janison’s longstanding relationship with the NSW education department but also marks its largest contract to date, underscoring the significance of its digital assessment technology.

Development efforts are set to begin this year, focusing on digitising test procedures and creating an on-demand practice environment, with full implementation scheduled for 2025.

Red 5 (ASX: RED) and Silver Lake Resources (ASX: SLR)

Red 5 and Silver Lake Resources have announced a merger valued at $2.2 billion, aiming to create a mid-tier gold producer with an annual output of approximately 445,000 ounces.

This merger, facilitated through a scheme of arrangement, will see Red 5 acquiring all Silver Lake shares, with Silver Lake shareholders receiving 3.434 Red 5 shares per Silver Lake share.

Post-merger, Red 5 and Silver Lake shareholders will own 51.7% and 48.3% of the new entity, respectively, which will be led by Russell Clark as chair and Luke Tonkin as chief executive officer.

The merger is highlighted as a strategic consolidation of assets, expected to result in a diversified gold producer with significant reserves, resources, and a strong balance sheet, including a net cash position of $378 million.

Both companies emphasise the merger’s potential for sustainable production, strong cash flow, and growth opportunities, despite mixed market reactions with Red 5’s stock price increasing and Silver Lake’s decreasing following the announcement.

Spirit Technology Solutions (ASX: ST1)

Spirit Technology Solutions is set to enhance its cybersecurity capabilities through a $34.6 million acquisition of InfoTrust, significantly expanding its presence across Australia.

This move positions Spirit’s cybersecurity division as its largest business unit and among the top in the country, with the merger expected to solidify partnerships with key cybersecurity vendors and realise synergies of $1.4 million in the 2025 financial year.

The acquisition includes a mix of cash, shares, and deferred payments, bringing InfoTrust’s co-founders onto the Spirit board.

Funding for the deal will be partially raised through a share placement to 263 Finance, a major shareholder, along with issuing shares to InfoTrust shareholders and deferred payments.

This strategic acquisition aims to broaden Spirit’s product offerings and strengthen its market position in Sydney and Melbourne, aligning with the company’s growth strategy and ambition to be a leading provider of secure digital workplaces in Australia.

The week ahead

The biggest announcement in Australia this week will be the jobs figures which are out on Thursday and have thrown up some seasonal quirks in recent months.

The jobs market appears to have been weakening although December’s surprise loss of 106,600 full-time jobs might well correct upwards.

Changing seasonal influences mean that averaging the numbers out over several months give the most reliable results so the January numbers will probably give the most meaningful results when averaged across November and December as well.

Economic releases in the US are plentiful with several releases around inflation, retail sales and production expected.

However, by far the biggest influence locally and offshore will continue to be profit results with more significant global companies set to reveal how they have been trading and what the trading outlook looks like.

Some of the US companies reporting include Airbnb, Avis Budget, Coca Cola, Shopify, Barrick Gold, Kraft Heinz, Cisco Systems, Occidental Petroleum, Coinbase Global, Deere & Co, Liberty Global and The Trade Desk.

Here in Australia, the reporting season will hit full speed with just some of the companies reporting including ANZ Group, Aurizon, Beach Energy, JB Hi-Fi, Breville, CSL, Challenger, James Hardie, Macquarie Group, Seven West, Seek, Temple & Webster, Commonwealth Bank, Dexus, AMP, Seven Group, GUD, Evolution Mining, Domain, Downer EDI, Telstra, Wesfarmers, Whitehaven Coal, Goodman, Magellan, Origin Energy, South32, Pro Medicus, Beacon Lighting, ASX, QBE Insurance, Inghams, IAG and Cleanaway Waste Management.

Lots of large stock specific movements are to be expected and will also spill over into pushing the index around given the weighting of some of the larger stocks such as Commonwealth and CSL.

THIS WEEK’S TOP STOCKS