Good Evening,

Welcome to Equity Espresso's Daily Recap. Plenty of news to kick off the new week, but the negative sentiment continues despite overseas markets rising on Friday. ANZ was the latest bank to report, while Elders and Boral saw their share prices climb. Plus, an update on the Origin Energy proposed takeover and much more. Let’s jump in.

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The Recap

Pre-market signs pointed to a positive day, particularly after Friday’s bumper night on Wall Street. Markets had other ideas though, as the ASX200 index sunk 0.40% to 6,948.8, dragged down by ANZ Group (-2.8%) and Macquarie Bank (-2.4%). 10 of the 11 sectors ended the day lower, with Energy (-0.88%) and Real Estate (-0.56%) seeing the largest drops. Utilities (+0.34%) was the only sector that finished higher, thanks to a 1.6% rise in the Origin Energy share price.

ANZ shares fell after reporting full-year earnings that were slightly below analysts’ expectations. Here are some of the highlights:

• Cash profit jumped 14% to $7.4 billion, underpinned by stronger demand for its institutional banking services.

• Credit provision of $245 million as it expects credit losses to increase as economic conditions become more challenging in a higher interest rate environment.

• Found the second half challenging as its Net Interest Margin (NIM) declined by ten basis points to 1.65%, with 7 points attributed to the Australian and New Zealand housing market.

• Final dividend of 94cps, 56% franked

In other company news, Elders (+18.4%) was the big mover despite a 38% fall in statutory profit as it saw falling commodity prices in its fertiliser and Chemicals business. Boral (+5.1%) was another company that jumped after it upgraded its underlying EBIT guidance from $300 million to $330 million.

WTI crude futures dropped below $77 per barrel on Monday due to concerns over slowing demand in the U.S. and China, two of the world’s largest oil consumers. Iron Ore continues to climb, with futures crossing US$130.00/t. ⬇️ 

Economic Data

• U.S. Consumer Confidence decreased to 60.40 points in November from 63.80 points in October, well down from historical averages of 85.49.

• U.K. GDP growth stalled in Q3 with flat year-on-year growth, beating estimates of a 0.1% contraction.

• Japan Producer Prices rose by 0.8% YoY in October, slowing from a 2.2% gain in September and below forecasts of 0.9%. This was the lowest producer inflation read since February 2021

Wall Street

A bumper Friday on Wall Street, regaining the lost ground from Thursday, with the S&P 500 (+1.6%) and NASDAQ (+2.1%) higher, backed by mega-cap tech and growth stocks. The NASDAQ had its largest one-day increase since May. Apple (2.0%), Tesla (+1.9%) and Meta Platforms (+2.4%) were some of the big movers on the day.

Moody's on Friday lowered its outlook on the U.S. credit rating to "negative" from "stable", citing large fiscal deficits and a decline in debt affordability, which drew immediate criticism from President Joe Biden's administration.

In company news, Groupon shares fell by 34.8%, as the online marketplace company reported Q3 revenue of $126.47 million, which fell short of expectations. TKO Group - the parent company of the UFC and WWE dropped 6.6% after chairman Vince McMahan said he planned to sell 8.4 million shares of the company's stock

Outlook

It will be a busy week on the economic front, with Wage Price Index data for Q3 dropping on Wednesday and employment data released on Thursday. The Australian Unemployment Rate is expected to rise to 3.7%.

In China, New Loan data will be released tonight. Wednesday is the day to watch as Fixed Asset Investment, Industrial production and the Unemployment rate are all set to be reported.

Over in the U.S., October CPI is the key item on Tuesday, usually seen as a signal of what the Federal Reserve will do with interest rates, with economists forecasting a 3.3% rise. Some of the other data to watch include Retail Sales, PPI, Jobless Claims and Building Data.

Both the S&P500 (-0.43%) and NASDAQ (-0.48%) futures markets are trading much lower this afternoon, indicating a slow start on Wall Street.

Some of the key companies reporting earnings tonight include Mitsubishi Financial Group, Nu Holdings, Tyson Foods and Monday.com.

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Quick Singles

🪃 Local News

• Optus has said that last week’s nationwide outage was due to its routers receiving incorrect settings from overseas as part of a software upgrade. Technicians were required to physically visit its facilities across the country.

• Since Friday, a cybersecurity incident forced ports operator DP World Australia to suspend operations at parts of Brisbane, Sydney, Melbourne and Fremantle. It’s estimated that some 30,000 containers were held up in terminals due to the shutdown of operations. Operations were slowly coming back onboard this afternoon, but it’s expected to take around a week to clear the backlog.

• The Australian Financial Review has reported that Optus, Telstra, and other major telecommunication companies must sign off on a new or updated cyber risk management program every year. Home Affairs Minister Clare O'Neil will introduce this new law and classify telecommunications as "critical infrastructure" for the first time.

• Origin Energy’s largest shareholder, Australian Super, has reportedly rejected an approach from Brookfield and EIG in their proposed $20 billion takeover offer of the Electricity supplier.

🌏 Around The Globe

• China’s Singles Day Festival saw some of the country's largest e-commerce players, Alibaba Group and JD.com, reporting year-on-year growth in sales during the period. Data provider Syntun estimated that gross merchandising volume (GMV) sales across the major e-commerce platforms rose by 2.08% to 1.14 trillion yuan or US$156.40 billion.

• The U.S. financial services division of Chinese Bank ICBC was reportedly hit by a cyberattack that affected the trade of U.S. treasuries. The Industrial and Commercial Bank of China (ICBC) said it had experienced a ransomware attack.

• Artificial intelligence startup Humane, founded by two former Apple designers, announced its first product on Thursday — a $699 pin you wear on your lapel. The Humane AI Pin is designed to replace your smartphone, allowing the user to make calls, send texts and look up information through voice controls. You can take a look at the device here.

• JP Morgan is testing A.I. applications to generate earnings summaries for companies it tracks and provide helpdesk support with problem-solving steps.

• Meta users can now link their Facebook and Instagram accounts to Amazon, allowing them to make purchases without leaving the app.

• According to a Bloomberg report, the Chinese government is considering unveiling a commitment for Boeing’s 737 jetliner during the APEC Summit in San Francisco as a signal of a recent thaw between the two nations.

Markets

ASX200 Company Movers

Index & Commodity Prices

Bond Prices

Sector

ETF Watch

ASX News

🗞️ Company Announcements

• ANZ Group (ANZ) shares fell as it reported a 14% lift in cash earnings underpinned by its institutional banking services division. ANZ increased its full-year dividend but did warn of likely credit losses in the coming year, given the high-interest rate environment.

• Boral (BLD) upgraded its underlying EBIT estimates to $300 - $330 million, up from the previous guidance of $270 - $300 million after a better financial result through the first four months of FY24.

• Elders (ELD) reported a 26% decline in EBIT to $170.8 million due to several headwinds, including lower input prices for chemicals and fertilisers, decreasing livestock prices, inflationary costs, and rising interest rates.

• Incitec Pivot (IPL) announced it will return $1.0 billion to shareholders in the form of a capital return ($500m) and a share buyback ($500m). Incitec reported a 40% decline in underlying EBIT, as commodity prices in its Fertilisers business sunk after elevated prices in FY22.

• Pro Medicus (PME) signed an 8-year $20 million contract with Oregon Health & Science University to implement ProMedicus Visage PACS.

• MA Financial Group (MAF) said it continues to experience positive underlying business momentum, reporting a 33% increase in gross fund inflows to $1.74 billion with Assets under Management of $9.2 billion as of November 1, 2023.

• Metcash (MTS) will fork out $101.5 million to increase its ownership stake in Total Tools Holdings from 85% to 100% in late November.

• Ramsay Health Care (RHC) will sell its Ramsay Sime Darby Health Care hospital unit to Columbia Asia Healthcare Bhd for approximately $2.0 billion. Ramsay expects to earn around $630 million in net profit after tax following the finalisation of the transaction.

• Seven West Media (SWM) has acquired a 14.9% stake in ARN Media (A1N), buying approximately $50.1 million A1N shares at $1.10. ARN owns 58 radio stations across 33 markets, including the digital platform iHeartRadio.

• Telix Pharmaceuticals (TLX) has dosed its first patient in its Phase III ProstACT GLOBAL study of its investigational prostate-specific membrane antigen (PSMA) targeting radio-antibody drug conjugate (rADC) therapy, TLX591.

• TPG Telecom (TPG) has ceased discussions with Vocus Group regarding Vocus’s bid to purchase TPG’s Vision Network and other enterprise assets. TPG said that the proposed transaction involved considerable complexity, and, ultimately, the parties have been unable to reach alignment on the operating model and commercial terms.

Social Media

 📱 Post of The Day

The top three performing sectors on the S&P 500 this year were the bottom three in 2022.

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Broker Research

Boab Metals

Code: BML | Market Cap: $22m  | Current Price: $0.13
Price Target: $0.52 | Sector: Materials | Broker: Shaw & Partners

Overview

Boab Metals Limited is a base and precious metals exploration and development company based in Perth, Western Australia, with 75% ownership in the Sorby Hills Lead-silver-Zinc Project.

Boab Metals released assay results last week following its recent drilling program. The results confirmed mineralisation at the Keep Seismic Target 2 km from the Sorby Hills Resource.

Broker Highlights

• Boab recently completed its Phase VII drilling program, which consisted of 2,634m of drilling over 22 drill holes.

• The high-risk drill hole into the conceptual Keep Seismic Target encountered 15m of visual mineralisation from 242m.

• The broker believes the supply outlook does not match the strong demand outlook for lead and silver and expects the Sorby Hills lead/silver concentrate to be highly sought after by global smelters.

• Boab is advancing its financing plans, including funding from the Northern Australia Infrastructure Facility (NAIF).

Recommendation

The broker maintains a BUY recommendation and price target of $0.52. The price target is based on a fully diluted DCF valuation. The broker sees several positive upcoming catalysts over the coming months, including the offtake agreements, a NAIF funding package, a commercial debt tranche to sit alongside NAIF, and FID.

You can access the full version of the report here.

Daily Quiz

❓️ Test Your Knowledge

Last Week’s Question. Which of these countries does REA Group not operate or own a commercial stake in?

Answer: Philippines REA Group holds a minority stake in Property Guru Group, an operator in Malaysia, Singapore, Thailand and Vietnam. They also have a controlling stake in REA India Pte. Ltd under the brands Housing.com, Makaan.com, and PropTiger.com.

A tough question, with only 25% getting that correct.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of November 6

📊 Broker Ratings

What do the brokers have to say?

1. APM Human Services International (APM) - Downgrade to Hold from Buy (Bell Potter)

2. nib Holdings (NHF) - Upgrade to Buy from Neutral (Citi)

3. nib Holdings (NHF) - Upgrade to Add from Hold (Morgans)

Further broker commentary for nib Holdings and REA Group.

👨‍💼 Director Transactions

What are the insiders doing? (On-market trade only)

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LAIMER: None of the information provided in this newsletter should be constituted as financial advice. This newsletter is strictly for educational purposes only. It should not be taken as investment advice or a solicitation to buy or sell assets or make financial decisions. Please do your research.