Market Recap: James Hardie Plunges on Merger Plans

Market Wrap

Good Evening,

Welcome to Equity Espresso’s Daily Market Recap. Markets traded like how most of us feel on a Monday, flat. Maybe we’re warming up before a busy 10 days with federal budgets, CPI and Liberation Day tariffs set to move markets. Today’s newsletter covers a beaten-down fund manager still expected to grow earnings. Plus, we’ll get you across all the news from James Hardie to Mineral Resources. Let’s jump in.

Local Market

Markets started the new week cautiously, with several key economic announcements in the coming days and weeks expected to drive significant market movements. The S&P/ASX 200 index was up and down, starting lower before creeping higher in the afternoon, ultimately finishing the session 5.7pts. (+0.07%) higher, with only three of the 11 sectors finishing higher.

This week, key items we’re watching include Tuesday night’s federal budget release and Wednesday's monthly CPI indicator figures for February. Overnight, Donald Trump announced plans for an April 2 "Liberation Day" rollout of reciprocal tariffs targeting countries with trade barriers against the U.S.

The day’s biggest story locally was James Hardie (-14.5%), who announced plans to merge with U.S. listed manufacturer AZEK in a cash and shares transaction totalling $US8.8 billion ($14 billion). AZEK closed on Friday at $41.39, with the deal giving shareholders a mix of cash and James Hardie shares worth $US56.88, with ownership of 26% of the combined new company. James Hardie shareholders didn’t seem too enthused by the deal, sending the share price lower.

Consumer Staples (-1.69%) was the day’s worst performer after Friday’s bumper session, while Technology (-1.07%) stocks also saw a fall due to share price drops from Wisetech Global (-2.66%) and Life 360 (-3.90%). Consumer Discretionary (+1.14%) was the day’s strongest performer, with wide-spread gains from Aristocrat Leisure (+1.80%), JB-HiFi (+0.40%) and Wesfarmers (+1.68%).

Gold prices fell slightly on Monday to trade at around US$3,019 after falling by 1% on Monday, weighed down by a strong U.S. dollar.

Global Markets

On Wall Street, the S&P 500 (+0.08%) rose slightly on Friday, breaking a four-week losing streak with a 0.5% weekly gain. The Nasdaq added 0.52% while the Dow Jones (+0.08%) also rose. Stocks initially dropped at the start of the season but recovered after President Trump indicated there might be "flexibility" on planned tariffs, set to begin on April 2.

FedEx (-6.45%) stock fell after it cut its earnings outlook, citing “weakness and uncertainty in the U.S. industrial economy.” Nike (-5.46%) shares fell to five-year lows after the shoe and apparel giant said sales this quarter would miss analysts’ expectations due to tariffs and falling consumer confidence. Lockheed Martin (-5.79%) shares fell on reports that President Donald Trump chose Boeing (+3.06%) for a contract to create the next-generation fighter jet.

European stocks declined for the second consecutive day, with the Stoxx Europe 600 Index (-0.6%) dropping, reducing weekly gains as market confidence remained shaky regarding trade tariffs and economic conditions. The travel and leisure sector suffered significant losses due to Heathrow Airport's closure, with IAG (-1.86%) falling, while telecom stocks performed well, with Tele2 AB rising 3.52%

The Shanghai Composite index was flat on Monday as Chinese markets await the outcome of the U.S. reciprocal tariffs on April 2. Chinese Premier Li Qiang called for greater market openness to counter rising global instability at the China Development Forum in Beijing on Sunday. In a mixed trading session, the Nikkei 225 Index traded higher on Monday, reaching above 37,700.

Global Indices

U.S. Fear & Greed Index

Economic Data

• Australia’s Manufacturing PMI increased to 52.6 in March 2025 from 50.4 in February, pointing to the strongest growth in the manufacturing sector since October 2022.

• Canadian Retail sales are expected to fall by 0.4% in February MoM, according to preliminary estimates.

• The Euro Area Consumer Confidence indicator dropped to -14.5 in March 2025, down 0.9 from February, worse than market expectations of an improvement to -13.0.

Outlook

U.S. Futures are trading higher this afternoon, with the NASDAQ (+0.71%) and S&P500 (+0.61%) indicating positive starts at the open.

The Federal budget for 2025/26 will be released Tuesday evening, with Australia expected to record a budget deficit. On Wednesday, we will get the monthly CPI indicator figures for February, expected to be 2.50%.

In the U.S., the February PCE report will be released on Thursday. Both headline and core PCE price indices are expected to rise by 0.3%, the same as in January. Thursday, we will also see the release of the Q4 GDP, which is expected to grow by an annualised 2.3%.

Over in Europe, March flash PMI data will be released for the Euro Area on Monday, with the services sector expected to expand further. In the U.K., February inflation figures will be released on Wednesday, along with PMI data on Monday.

Company Spotlight

❗️ASX Company Announcements

A snapshot of some of the companies out with news today

• Mineral Resources resumed haulage operations on the Onslow Iron dedicated haul road on March 21, 2025, following productive discussions with WorkSafe WA about risk controls. The ongoing haul road upgrade program remains on track for completion in Q1 FY26.

• Amplitude Energy has formed a 50/50 joint venture with O.G. Energy to supply gas to the East Coast market. O.G. will immediately pay $25 million to cover historical costs. The project aims to produce up to 90 terajoules daily by 2028 through Amplitude's Athena Gas Plant, enough for over 600,000 Victorian homes.

• Opthea's shares remain suspended following disappointing clinical trial results for its flagship drug OPT-302. The treatment, tested alongside Aflibercept for wet macular degeneration, failed to meet its visual acuity improvement targets.

• Catalyst Metals will sell its Tasmanian Henty gold mine to Kaiser Reef as it focuses on its core Plutonic mine operations. The deal includes $15 million upfront cash plus $4 million in environmental bonding reimbursements.

• Helia Group has been informed that Commonwealth Bank of Australia has entered exclusive negotiations with an alternative provider for Lenders Mortgage Insurance services. This follows CBA's Request for Proposal issued in June 2024. If these negotiations succeed, Helia anticipates its current Supply and Service contract with CBA will not be renewed beyond its December 31, 2025 expiration date.

• James Hardie will acquire NYSE-listed AZEK in a cash and share transaction valued at US$8.8 billion (A$14 billion). Under the agreement, James Hardie shareholders will own approximately 74% of the combined company, with AZEK shareholders holding 26%. James Hardie shares will also be listed on the NYSE following completion.

• Synlait Milk reported a 105% increase in interim profit to $4.8 million, driven by stronger demand for Advanced Nutrition products and improved cost management. The company's EBITDA jumped 217% to $63.1 million, slightly exceeding January's guidance range.

• Kelsian subsidiary Transit Systems West is negotiating with Transport for NSW to extend its Sydney inner west bus services contract for another year until June 30, 2026.

• The Lottery Corporation CEO, Sue van der Merwe, will retire by the end of the year after three years in the role and a 35-year career in the lottery industry. The company will begin searching for her replacement, with van der Merwe assisting in the transition.

Company Deep Dive

GQG Partners: Quality Fund Manager
Available at a Discount?

We looked at recently beaten-down companies with potential buying opportunities due to attractive valuations and expected financial growth. We used the software tool Tikr to set up screens and find potential buying opportunities.

We looked at companies that had grown by less than 5% in the last month (or fell), were expected to increase revenue and EPS in the next fiscal year and had a Price/Earnings (P/E) of <30.

We then screened for companies that had grown over the last 3 years, meeting the criteria below:

• Revenue: 3-Year CAGR of >8%

• EPS: 3-Year CAGR of >10%

• Free Cash Flow: 3-Year CAGR >10%

We were left with eight companies on the ASX with a market cap of over $400 million. Today, we will examine GQG Partners in detail. If you want to see the other seven, jump to the bottom.

Company Overview

GQG Partners is a global asset management firm focused on active equity portfolios through four primary strategies. In other words, it invests money for people and institutions in shares of companies worldwide.

The company listed in October 2021, opening at $2.00 per share. It reached a high of $2.94 in August last year but has since fallen to $2.15. The company’s shares have dropped 15.8% in the last month.

GQG Partners earns revenue through management fees calculated as a percentage of managed assets, known as Funds Under Management (FUM). In 2024, GQG reported a weighted average management fee of 48.8 basis points (bps) or 0.488% of FUM.

The company reported full-year earnings as of December 2024:

• FUM was US$153.0 billion, +26.9% yoy

• Net Revenue was US$760.4 million, +46.9% yoy

• Net Operating Income was US$577.9 million, +50.4% yoy

• Dividend of $0.14 per share, +50.2% yoy

• Dividend payout ratio of 85.8% yoy

As of the end of February, FUM grew to US$160.5 million.

More notably, all four of the companies’ primary strategies have outperformed their benchmarks on a 3-year, 5-year and 10-year basis ⬇️ 

5-Year Performance as of 31 December 2024

Holdings

Here are the company's top three holdings across the different strategies as of the end of January 25. You can access their factsheet here.

The Positives

• Ownership profile: The company’s chairman and CIO, Rajiv Jain, holds 70.1% of the shares. During March, Mr. Jain bought stock at a rate of ~$250k daily. This was initially flagged in our Directors Transactions sector, which you can find later in the newsletter.

• Low P/E: The company trades at a historically low Forward P/E of 8.5x. Since listing, it has traded between 9x and 14x. The current P/E is below that of its listed competitors, Magellan (9.74x), Platinum (9.64x), and Pinnacle (26.2x).

The Negatives

• Market sell-off: March’s sell-off on global markets will likely negatively impact GQG’s FUM, even without clients withdrawing funds. Less FUM means fewer fees and revenue for the company. March’s FUM will be important for assessing the recent downturn's impact on GQG Partners.

Conclusion

Despite GQG Partners' 15.8% share price decline over the past month, this decline appears more reflective of the broader market downturn that typically impacts fund managers than any fundamental issues with the company itself.

While GQG has a relatively short public history since its October 2021 listing, it has demonstrated exceptional investment performance, with all four primary strategies consistently outperforming their benchmarks across 3-year, 5-year, and 10-year periods.

From a valuation perspective, GQG looks particularly attractive. Its forward P/E is just 8.5x, below its historical range of 9x-14x since listing and cheaper than its industry peers.

Additional Notes 

The seven other companies that met the initial filters were:

Headlines

📰 Local News

• The Albanese government will extend energy rebates until late 2025, providing another $150 relief for households and one million small businesses. Starting July 1, the rebates will be applied quarterly to electricity bills.

• The ACT government has introduced a bill to impose a 5% levy on short-term rental accommodation bookings through platforms like Airbnb and Stayz starting July 1.

 🌎️ Around The Globe

• The Boston Celtics sold for a record-breaking $6.1 billion yesterday to a group led by private equity executive Bill Chisholm, marking the largest sale in North American sports franchise history.

• Heathrow Airport partially resumed operations after an 18-hour outage caused by an electrical substation fire. The incident disrupted travel for 200,000 passengers at one of the world's busiest international airports.

• Nestle recalls some Lean Cuisine and Stouffer's frozen meals sold at major U.S. retailers between September 2024 and March 2025 after discovering a "wood-like substance" in products with best-before dates from September 2025 to April 2026.

• Softbank Group plans to acquire U.S. chip designer Ampere Computing Holdings for $6.5 billion, with Ampere becoming an independent subsidiary while keeping its Santa Clara headquarters.

• StubHub, the online ticket reselling marketplace, filed for an NYSE IPO on Friday under the ticker "STUB." The company reported a $2.8 million net loss on $1.77 billion in 2024, compared to a $405 million profit on $1.37 billion in 2023.

• Yahoo has sold TechCrunch to private equity firm Regent for an undisclosed amount. Regent is expanding its media portfolio, having also recently purchased Foundry, which owns PCWorld, Macworld, and TechAdvisor.

🤖 All About AI

• Anthropic has integrated web search capabilities into Claude 3.7 Sonnet, enabling the A.I. assistant to access real-time information automatically when needed, closing a significant feature gap in its functionality.

• The UAE has committed to a $1.4 trillion, 10-year investment framework in the U.S. in a deal that will boost UAE's investments in American A.I. infrastructure, semiconductors, energy and manufacturing sectors.

• Yum Brands is partnering with Nvidia to introduce AI-powered ordering systems and performance tracking across its Taco Bell, KFC and Pizza Hut restaurants, which is Nvidia's first restaurant chain collaboration.

Technical

Data Points

A list of companies hitting 52-week highs/lows. Companies hitting significant technical indicators:

A Death cross is a technical analysis signal that occurs when a stock's short-term moving average (50-day) crosses below its long-term moving average (200-day). It’s typically seen as a bearish signal. A golden cross is a technical analysis signal that occurs when a stock's short-term moving average (50-day) crosses above its long-term moving average (200-day). It’s typically seen as a bearish signal.

Brokers

Research Report

Investment research firm Corporate Connect believes Nico Resources Limited (NC1) represents an exceptional opportunity as the owner of the Wingellina Nickel-Cobalt Project, which they identify as development-ready and superior among Australian nickel assets.

Wingellina boasts impressive characteristics, including a 1% nickel grade, globally competitive low operating costs, a favourable strip ratio of 0.5:1, and optimal mineralogy for HPAL processing. This combination suggests profitability even at cyclical low nickel prices of US$16,000/t.

The firm believes Nico shares trade at a substantial discount to peer valuations and Corporate Connect's $0.54 fair value estimate. Compared to similar pre-development nickel-cobalt companies listed on the ASX, Nico's valuation ranges from $0.26 to $0.81 per share, with a weighted average of $0.54, presenting a significant upside from the current $0.08 price.

You can access the report below:

Daily Broker Moves

• Morgans upgrades Cleanaway Waste Management to Add from Hold, raising its target to $2.95. The broker views the $377m debt-funded Contract Resources acquisition as attractive despite preferring expansion in solid waste. The deal, expected to be EPS accretive with cost synergies, lifts Morgans' FY27 profit forecast by 4% and awaits ACCC approval by late 2022.

• Ord Minnett downgraded Premier Investments to Accumulate following a 7% miss on 1H25 profit due to one-offs, despite retail EBIT meeting expectations. While Smiggle performed well domestically, international results were disappointing. The broker remains optimistic about management rebuilding and M&A potential with $268m in cash but reduced its target to $23.60 on higher costs and a weaker sales outlook.

• UBS upgrades Fortescue to Neutral from Sell, viewing the recent share price decline as excessive. The broker forecasts iron ore prices remaining in the US$90-100/t range over the next five years. Despite increasing its low-grade discount projection to -16% from -15% to account for potential steel production cuts, UBS still considers market concerns about discounts overblown. Target price reduced to $16.70 from $17.30.

• UBS downgraded South32 to Neutral from Buy and lowered its target to $3.70 from $4.00, seeing a balanced risk/reward profile as the company shifts from restructuring and cash returns toward organic growth. The broker notes South32's growth pipeline, particularly Hermosa, is long-dated and offset by Cannington's depletion, while projected cash returns over the next two years lack appeal.

A Little Extra

 ⬇️ Short Data

Top 10 shorted stocks on the ASX - as of March 18

The Insiders

Director buying and selling.
On-market and Off-market trades only.
Net Buy/Sell positions from February 27 - March 21

💵 Dividends

Companies who traded ex-divided today

1. Lycopodium

2. Naos Emerging Opportunities Company

3. NRW Holdings

4. New Hope Corporation

5. Civmec

6. Southern Cross Electrical Engineering

7. Cash Converters International

8. Adrad Holdings

9. Mader Group

10. Atlas Arteria

The Last Word

DISCLAIMER: Please note that the information provided in this newsletter is for educational purposes only and should not be considered financial advice. It is not intended to encourage you to buy/sell assets or make economic decisions. We strongly recommend conducting your own research before making any investment.