Weekly review: ScoMo win helps Australia outperform world markets

ScoMo Scott Morrison Australia stock market ASX
WEEKLY MARKET REPORT

It is not every week you can say that the Australian share market is a world beater but this week it is true, with the unexpected Coalition victory boosting share prices despite two bad days to end the week.

While the ASX 200 did suffer a 35 point or 0.6% fall to 6,456 points after losing 18 points on Thursday, it was still a strong week overall with the election bounce adding about 1.4% for the week.

We gained while they lost

This compared really well to the big markets in the rest of the world, which shed between 1% and 4.5% after concerns that the US-China trade war is becoming deeper and more intractable.

Australia is obviously not immune from the trade war, but at least our share market managed to retain some of the big gains made early in the week after the surprise Coalition win effectively scrapped a range of tax changes and the Reserve Bank signalled that it will cut official rates when its board next meets on 4 June.

By their actions, both the Chinese and US sides are acting in a way that does not look like bringing about a quick end to the trade war so it is only natural that some of the air will come out of world share markets that have been pumped up in the hope that a trade war deal can be reached soon.

Health and gold rally while oil stocks slump

That lack of confidence was shown on the Australian market on Friday in the form of a rally in safety-first stocks – healthcare and gold – which were among the only improvers.

Falling the hardest on Friday were the energy stocks as the price of oil plunged almost 6% on the back of rising US inventories and weaker demand due to falling global growth.

Woodside Petroleum (ASX: WPL) shed 3.5% to $35.70, while Santos (ASX: STO) fell 3.2% to $6.98.

Tech hit hard as well

There was similar carnage in the technology sector, with Afterpay Touch (ASX: APT) slumping 4.4% to $23.98. Despite this week’s fall the buy now pay later sector is growing with ASIC revealing that an estimated two million Australians have used such services.

Meanwhile, WiseTech Global (ASX: WTC) lost 2.9% to $22.63, mirroring losses in the US tech sector.

Sydney Airport (ASX: SYD) reported subdued passenger growth numbers in the first four months of this year and is not confident of any improvement in the rest of 2019.

It wasn’t all bad news though, with advertising revenue tipped to lift when the airport takes control of the Qantas terminal in July.

In the end, investors saw this as positive and boosted Sydney Airport shares by 1.3% to $7.61.

In other company news, the Federal Court approved Brookfield Asset Management’s $4.4 billion buyout of private hospital operator Healthscope (ASX: HSO).

That means the company, which operates 43 private hospitals in Australia and 24 pathology labs in New Zealand has been suspended from trading and will be replaced in the ASX 200 index by Cooper Energy (ASX: COE).

Estia Health (ASX: EHE) shares fell 3% to $2.90 after the company lowered its full year earnings guidance. The aged care provider is now expecting FY19 pre-tax earnings of between $92 million and $94 million.

Among a shopping list of problems leading to the lower earnings were additional funding costs, the Aged Care Royal Commission, and the rising cost of opening new homes.

Small cap stock action

The Small Ords index ended the week down 0.39% to close on 2,833.6 points.

ASX 200 vs Small Ords index May 2019
ASX 200 vs Small Ords

Among the companies making headlines this week were:

LBT Innovations (ASX: LBT)

The US FDA has granted Australian medical technology company LBT Innovations pre-market 510(k) clearance for its Automated Plate Assessment System, also called APAS Independence.

FDA clearance was the final regulatory hurdle for APAS Independence, with LBT’s joint venture entity Clever Culture Systems now clear to ramp up commercial sales of the device to more than 5,000 clinical laboratories across the US.

Clever Culture Systems has already reached out to over 800 laboratories and received positive initial interest.

APAS Independence incorporates artificial intelligence, software and imaging and takes the manual work out of culture identification by automatically screening, interpreting and sorting culture plates.

CCP Technologies (ASX: CT1)

It was a busy week for CCP Technologies which secured its largest purchase order in the US to-date for its internet of things refrigeration monitoring technology and revealed its IoT solution could now monitor extreme temperatures – expanding its product offering and market reach.

The largest US purchase order was from a new Massachusetts casino with the deal expected to boost CCP’s current subscription revenues by 10% once the monitoring solution has been installed in July.

CCP’s IoT technology provides real-time monitoring and alerts, and in the extreme temperature field can monitor temperatures to minus 80°C and further.

The technology can monitor and continuously report on extreme low-level temperatures required for storing high-value biological material. CCP will roll-out the solution across Monash University with 120 monitoring points identified.

Phoslock Environmental Technologies (ASX: PET)

Phoslock Environmental Technologies has achieved “excellent” results during a trial of its patented Phoslock application on a heavy polluted lake in China’s south west.

A 75% reduction in phosphorous was achieved using the patented application within four days – with Phoslock noting it was also safe for fish, plant life and humans.

The positive results have led to an initial $1 million order for the material.

Phoslock’s namesake product permanently binds with excess phosphorus in water and sediments to inhibit the harmful growth of algal blooms which negatively impact aquatic and human life.

IDT Australia (ASX: IDT)

Pharmaceutical manufacturing company IDT Australia has been given the green light to manufacture medicinal cannabis in Australia.

The approval comes almost 12 months after IDT lodged its application with the Australian Office of Drug Control and authorises IDT to manufacture extracts and tinctures of cannabis and cannabis resin.

IDT’s manufacturing and packaging facilities already have a Good Manufacturing Practice licence and the company has a long history of producing active pharmaceutical ingredients and finished doses.

Using its new licences, IDT will provide manufacturing support to Cann Group to produce medicinal cannabis products for domestic and export markets.

FirstWave Cloud Technology (ASX: FCT)

Cloud security company FirstWave Cloud Technology has confirmed its “first significant win” under a OEM agreement with Cisco Systems that was inked in July last year.

Cisco confirmed earlier this week it had signed its first customer under the OEM agreement, giving the new customer access to FirstWave’s cloud service orchestration platform for differentiated email, next generation firewall and web security.

The company followed the news by reporting a contract win on Friday under its reseller agreement with SHELT Global.

This second win is with African headquartered tier one service provider Telecel RCA. The provider expects to use FirstWave’s platform for its customers and associated companies throughout Africa with billing to begin this month.

ASX floats this week

Small Caps readers who want to view upcoming IPOs or see the performance of stocks that have listed in 2019 can now do so.

The latest companies to make their way onto the ASX this week were:

Teaminvest Private Group Powerwrap ASX TIP PWL IPO

Powerwrap (ASX: PWL)

Powerwrap joined ASX ranks on Thursday after raising $17.4 million through an initial public offering valued at $0.35 per share.

The company is a wealth management platform that offers investors administration, investment and shared services.

“Listing provides the capacity for Powerwrap to pursue the tremendous opportunities that are unfolding in the platform industry,” Powerwrap chief executive officer Will Davidson said.

Powerwrap closed its first week on the ASX at $0.42 – up 20% on its IPO price.

Teaminvest Private Group (ASX: TIP)

Private equity firm Teaminvest Private Group’s securities began trading on Friday after the company raised almost $4 million via the issue of 3.97 million shares at $1 each.

The company was spun out of the Teaminvest group in 2012 and has since provided 51 directors and $39 million in funding to small and medium enterprises.

Teaminvest’s strategy is to help successful businesses grow by mentoring the next generation of leaders and providing funding.

The company ended its first week on the ASX at $0.90 – down 10% on its IPO price.

The week ahead

Australia will go into next week with a bit of trepidation given that the Memorial Day public holiday in the US on Monday means their share market will be closed for the day.

There are still plenty of US releases to look forward to, with an updated estimate of US economic growth, US income and spending including the US Federal Reserve’s key inflation measure and China’s official factory gauge all helping to add some real numbers to the ongoing trade war.

British Prime Minister Theresa May resigned overnight following a failure to negotiate Brexit. How this will impact the UK remains to be seen as we are now almost three years on from the historic referendum which saw 51.9% of people vote to leave the EU.

Here, in Australia, we can look forward to updates on business investment, building approvals and credit growth, which will give us some clues about how economic growth is faring in the March quarter.

This week’s top stocks

John is a highly experienced business journalist and formerly chief business writer for the Herald Sun. He has covered Federal politics in Canberra, was Los Angeles Bureau chief for News Limited and was also chief of staff for the Herald Sun. He has covered a wide range of small and large cap ASX stocks and has a special interest in mining, technology and biotech.