Good Evening,

Welcome to Equity Espresso's Daily Recap. We hope everyone enjoyed their cup day, particularly the Melbournites enjoying a rare warm summer-like day. It’s the first Tuesday of November, which for most means a horse race at 3 p.m., but market participants had their eyes on another event 30 minutes earlier. Let’s jump in.

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The Recap

The five-day positive streak ended on cup-day Tuesday, but markets did rise higher in the afternoon following the RBA’s decision to raise rates for the first time in five months. The ASX200 index finished the day down 20.3 points to 6,977.10.

The Reserve Bank of Australia (RBA) raised rates by 25 basis points to 4.35%, in line with expectations after holding rates steady since June.
Here are some of the highlights in the RBA’s statement:

• Whilst rates have passed their peak, they remain too high and remain more persistent than expected.

• CPI Inflation is expected to be around 3.50% by the end of 2024, which is at the top end of the target range of between 2.00 - 3.00%.

• Whilst goods price inflation has eased further, the prices of many services continue to rise.

• Since its August meeting, the Board has received updated information on inflation, the labour market, economic activity and the revised set of forecasts. The weight of this information suggests that the risk of inflation remaining higher for longer has increased.

• Employment is expected to grow slower than the labour force, and the unemployment rate is expected to rise gradually to around 4.25%.

• Concerning future rate hikes, the Board said it would "depend upon the data and the evolving assessment of risks".

Economic Data

• China exports dropped by 6.4% YoY to US$274.8 billion in October, after a 6.2% drop in September and well above estimates of a 3.3% decline.

• The HCOB Eurozone Composite PMI was 46.5 in October, down from September's 47.2 and the lowest since November 2020. A deterioration in the performance of service providers primarily drove the downturn in activity.

• The HCOB Eurozone Services PMI was 47.8 in October, a third consecutive month of falling services sector activity and the deepest contraction since February 2021.

• The S&P Global/CIPS UK Construction PMI rose to 45.6 in October, up from 45.0 in September but falling short of estimates of 46.0. However, it was still the second-lowest reading since May 2020, indicating a marked decline in total construction activity.

Wall Street

U.S. stocks closed higher again on Monday, building on last week’s rally as the NASDAQ (+0.3%) recorded its longest positive streak since January. The S&P500 (+0.2%) also finished in the green as markets continued to rally on the belief that the Federal Reserve is done with its rate hiking.

In company news, dating application Bumbles shares fell 4% after announcing its CEO will step down in January. Airliner Ryanair rose by 4% after reporting a 59% increase in Profit After Tax to €2.18 billion on the back of a 30% increase in revenue.

Outlook

Final Building approval data will be reported tomorrow after preliminary estimates showed a 4.6% drop in new approvals.

In the U.S., Trade Balance data gets reported along with Weekly Crude Oil Stock.

The positive run could be on pause tonight, with the S&P 500 (-0.26%) and NASDAQ (-0.22%) lower this afternoon.

Some of the companies reporting tonight include Bumble, Datadog, Realty Income, Rivian and Uber.

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Quick Singles

🪃 Local News

• The Institutional Shareholder Services (ISS) has recommended investors vote in favour of the Brookfield-led $US10.5 billion bid for Origin Energy (ORG), which AustralianSuper has rejected.

🌏 Around The Globe

• Elon Musk introduced Grok, a “rebellious'“ AI chatbot inspired by The Hitchhiker’s Guide to the Galaxy, last Sunday. The AI is currently undergoing testing on Musk’s X platform and will be made available to premium subscribers.

• Tyson Foods issued a voluntary recall of 30,000 pounds of its chicken nuggets. The recall comes after some consumers discovered small metal pieces in their patties.

• Telecom Italia (TIM) has approved the €19 billion sale of its fixed-line network to U.S. private equity firm KKR, becoming the first European telecom group to divest its landline grid. Shareholder Vivendi has criticised the decision and plans to challenge it.

• Saudi Arabia is considering purchasing a significant stake in the Indian Premier League (IPL), a move discussed during Crown Prince Mohammed bin Salman’s visit to India. The proposed investment is up to $5 billion to expand the league internationally, according to Bloomberg News sources.

• WeWork has filed for Chapter 11 bankruptcy protection in the U.S., with reported liabilities ranging from $10 billion to $50 billion. WeWork will keep its Australian portfolio of 15 co-working hubs up and running despite its US parent entering bankruptcy.

Markets

ASX200 Company Movers

Index & Commodity Prices

Bond Prices

Sector

ETF Watch

ASX News

🗞️ Company Announcements

• 92E Energy (92E) - announced assay results confirming uranium and high-grade copper mineralisation in its Summer Exploration Program in Canada.

• Chalice Mining (CHN) fell 5.5% after providing an update on its flagship Gonneville Project. The company said it had commenced the pre-feasibility study (PFS) for the project, with a targeted completion date of mid-2025

• Chrysos Corporation (C79) will raise $75 million in an institutional placement at an offer price of $6.60 per share following its global partnership with Barrick Gold and MSALABS. The funds will enable the potential deployment of up to 13 PhotonAssay units to Barrick mine sites across four continents by the end of 2025 and strengthen the company’s capital position for future growth.

• GQG Partners (GQG) reported $103.9 billion in Funds Under Management (FUM) as of the end of October, with net inflows of $8.5 billion for the first ten months of 2023. This was down $1.9 billion from September.

Social Media

 📱 Post of The Day

Technical Analysis

Chart Watch

A short-term bullish chart to keep an eye on - Coronado Group (CRN)

Notes

• The share price has reclaimed a critical $1.70 mark.

• The 100 and 200-day EMA are acting as support, and selling is being absorbed, with multiple wicks in this area.

• Closely watching the longer timeframe to see if the share price can break through the $1.75 level and move toward the upper diagonal trend line.

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Analyst Report

Pioneer Credit Limited

Code: PNC | Market Cap: $38.6m  | Current Price: $0.33
Price Target: $1.58 | Sector: Financials | Broker: RaaS

Overview

Pioneer Credit Limited (ASX: PNC) is one of the leading acquirers and managers of impaired credit in Australia. The company acquires and services debt portfolios, working with banks, financial institutions and utility providers.

Pioneer purchases debt from 18 different Australian vendor partners with long-term partnership purchasing arrangements with the Commonwealth Bank of Australia.

AGM Update

The broker points to the recent AGM, which highlighted Pioneer’s strong position in the marketplace, with an NPAT result that exceeded expectations. The Chairman and the CEO expressed a high level of confidence in the outlook for PNC’s business, with solid cash collections and a PDP investment target of $60m for FY24. Negotiation of a refinancing package with a substantial reduction in funding cost is expected to be finalised in the December quarter of 2023. A drop from an interest rate of (currently) 12.99% to 7% would be a $16.2m benefit in FY24.

Recommendation

The broker’s valuation of $1.58 per share is based on a discount rate of 16.5%. The broker modelled three cases, differentiated by finance margin, PDP price and cash collection performance, and included a cyclical component in their estimates. Base-case valuation is $177m or $1.58/share. Downside case values PNC at $146m ($1.30/share), with an estimated upside of $236m ($2.11/share).

Daily Quiz

❓️ Test Your Knowledge

Yesterday’s Question. Where was the first stock exchange in Australia located?

Answer: Melbourne. Ten years after the official advent of the Gold Rush, Australia's first stock exchange was formed in Melbourne in 1861. 39% of you got this one correct.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of November 1

📊 Broker Ratings

What do the brokers have to say?

1. Integral Diagnostics (IDX) - Upgrade to Equal-weight from Underweight (Morgans)

2. Integral Diagnostics (IDX) - Upgrade to Buy from Accumulate (Ord Minnett)

3. Matrix Composites & Engineering (MCE) - Upgrade to Speculative Buy from Speculative Hold (Bell Potter)

4. Westpac (WBC) - Downgrade to Hold from Add (Morgans)

Updated broker ratings for Goodman 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.