Good Evening,

Welcome to Equity Espresso. We’re here to catch you up on the day’s important stock market news in Australia and abroad. Here’s a sample of what you may have missed:

1. 🏦 Bank Stocks Rise

2. 📦️ Uber’s New Route 

3. 🛢️ Oil Continues Fall

4. 📉 Magellan Stock Plummets

5. 🏗️ A Deep Dive on SRG Global

The Recap

Oil Continues to Slide As
Banks Finish Higher

It was another positive day for the market as it regained lost ground after a tumultuous start to the week. The ASX200 index rallied in the afternoon to finish 28 points higher to 6,962.0. For the week, the index finished 1.33% lower.

The heavily weighted Financial (+1.21%) sector was the place to be today as the big four banks all finished over 1% higher, except ANZ (+0.9%). At the same time, Macquarie (+0.46%) and QBE Insurance (+2.7%) were also in the green. Iron Ore futures rose to US$119.50, which helped the Materials (+0.67%) sector finish higher.

Oil prices continue to plunge, with WTI crude currently trading at around US$82.0 a barrel, which drove the Energy (-0.7%) sector down again today,

In company news, one-time market darling Magellan Financial Group lost 18% today after reporting a 10% decline in Funds Under Management to $35.0bn at the end of September. The $4.0bn FUM drop includes $2.0billion in net outflows, with 85% coming from institutional investors. Mageallan’s closing price of $7.18 sees it trading at lows last seen in April 2013

Outlook

Investors will be awaiting the Nonfarm payroll data tonight as an early indicator of the Federal Reserve’s next move. The S&P 500 (-0.19%) and NASDAQ (-0.15%) futures market are trading lower.

Economic Data

• U.S. trade narrowed to a $58.3 billion deficit in August 23, the lowest since September 20, and below forecasts of a $62.3 billion deficit. Exports rose 1.6% to a five-month high of $256 billion, led by crude oil. Imports declined 0.7% to $314.3 billion.

• U.S. unemployment benefits increased by 2,000 to 207,000 for the week ending September 30, below estimates of 210,000.

• Continuing unemployment claims unexpectedly fell by 1,000 to 1,664,000 on the week ending September 23, below estimates of 1,675,000 and remaining close to the near-eight-month low recorded previously.

Wall Street

U.S. markets finished lower by the slightest of margins after bouncing off session lows as data on initial jobless claims point to a resilient labour market. Friday’s monthly payroll data will provide another critical economic news event as an indicator of the Federal Reserve’s next move.

The yield on the U.S. 10-year eased to 4.7% after hitting 16-year highs of 4.88% during the week. The 30-year yield, which recently crossed the 5% mark, was trading around 4.9% today.

E.V. car maker Rivian shares sunk 19% after the automaker announced plans to raise $1.5 billion in convertible notes. Rivian also guided revenue in Q3 to be in line with analysts’ expectations of between $1.29 billion and $1.33 billion.

Levi Strauss shares fell in after-hours trading after cutting its full-year forecast as it missed quarterly sales expectations. Levi said it expects net revenues to be flat to up 1% year-over-year compared to the previously guided range of 1.5% to 2.5% growth.

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Quick Singles

🪃 Local News

• The Australian Retailers Association (ARA) released a forecast predicting that Australians will spend $66.8 billion from November to Christmas Eve this year. This amount is only 0.1% higher than last year's spending.

🌏 Around The Globe

• A federal judge dismissed a lawsuit against Wendy’s and McDonald’s that claimed the fast-food giants engaged in falsely advertising their hamburgers that were smaller than advertised.

• Apple’s new one-touch contact-sharing feature, NameDrop, will let iPhone users share contact information by simply tapping their phones together.

• President Joe Biden has approved $9 billion in student loan forgiveness for 125,000 Americans.

• The British government is proposing banning younger generations from ever buying cigarettes. If passed into law, the smoking age would rise by one year every year, potentially phasing out smoking among young people almost entirely as soon as 2040.

• CitiGroup managers are reviewing staff rosters to determine who will stay, be reassigned, or be laid off during a major reorganization, according to a memo seen by Reuters.

• Uber is now offering to pick up and return packages, so you don’t have to. For a $5 flat fee, you can request a return package drop off at your local post office, FedEx or UPS outpost. Sorry Australian readers, this offer doesn’t appear to extend to us yet.

• Rewind is selling a $59 neck-worn pendant designed to record conversations and transfer them securely to a smartphone. Its A.I. software sorts through the audio information, creating a searchable database of your life's soundtrack.

₿ Crypto Corner

• Sam Bankman Fried’s defence lawyer started his opening statement by portraying his client as a “math nerd” who overlooked risk management in building FTX but did not steal customer money.

• Blackbird Labs has raised $24 million in a series A funding round for its crypto-powered app and loyalty program that aims to connect restaurants with customers.

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Markets

ASX200 Company Movers

Index & Commodity Prices

Sector

Bond Prices

ETF Watch

ASX News

ASX Company Announcements

Envirosuite (EVS) has secured $7.5 million in funding from Partners for Growth to support its growth initiatives.

GQG Partners (GQG) recorded US$105.8 billion ($166.1 billion) in Funds Under Management (FUM) in its September 30 update. This was down 1.4% from August’s US$107.4 billion. Net inflows during the quarter were US$1.8 billion, up from $7.1 billion during the same period in 2022.

Magellan (MFG) recorded $35 billion in FUM as of September 29 - down 10% from August’s figure of $39 billion. Magellan recorded net outflows of $2 billion, mostly from institutional investors ($1.7bn). Magellan is now down 89% from its all-time high share price in February 2020.

Paradigm Biopharmaceuticals (PAR) went into a trading halt today pending the release of new clinical data from a Phase 2 clinical trial investigating “iPPS”, which may slow disease progression in knee osteoarthritis.

United Malt Group (UMG) provided an update on its takeover by French malting company Malteries Soufflet. The takeover still requires a couple more regulatory hurdles before it’s given the green light. A decision will be made by The Foreign Investment Review Board (FIRB) regarding the takeover on October 12. The Anti-Monopoly Committee of Ukraine (AMCU) will decide whether they are open to a “Phase II” transaction review by October 19.

Post of The Day

Deep Dive

SRG Global Locks in
NZ$130 Million Contract Renewal

SRG Global (ASX:SRG) is a services company providing infrastructure maintenance, access solutions, and asset repair services to sustain critical industries and infrastructure. Yesterday, SRG Global announced it had secured a 10-contract renewal with Transpower New Zealand, valued at NZ$130 million. The contract is initially for five years with the option to renew for another five years starting on July 1, 2029.

SRG Global will provide specialist industrial services, including removing existing coatings through specialist blasting, applying industrial protective coatings and minor steel replacement.
The contract renewal builds on SRG’s 30-year relationship with Transpower and affirms its industry-leading position for maintenance services in
New Zealand.

The extended contract is the latest in a series of wins, including a $25 million deal with Multiplex in August and approximately $30 million with Lendlease in July.

Financial Highlights & Current Valuation

SRG Global reported what seemingly looked like a strong FY23 financial result; however, the share price dipped from $0.75 at the time of the release to currenlty trade at $0.61. An outlook of 20% EBITDA growth, which was below analysts’ expectations, may have been the catalyst for the recent price weakness.

The company reported that it has ‘Work in Hand’ of $1.9 billion as of the end of June, up 46% from last year. The exciting part is the $6.5 billion pipeline of opportunities with exposure to government-backed infrastructure investment that SRG seeks to win.

Growth Estimates

Below are the consensus growth estimates of SGR for the next three years.
This data was sourced from Tikr - a free resource you can sign up for here.

SRG Globals one-year price chart - down 10.1%.
Performance over 3-years (+97.3%) and 5-years (10.5%) fares better.

Insider Ownership

These SRG Global executives have the below ownership stakes in SRG Global:

• Peter McMorrow (Chairman) - 2.4%

• David MacGeorge (Managing Director) - 1.0%

• Paul Dawson (Executive GM Building) - 1.1%

Perennial Value Management (6.9%), First Sentier Investors (5.7%), and Colonial First State Investments (5.7%) are the majority shareholders of the company. Managing Director David MacGeorge sold 2.5m shares in May, totalling
$1.7 million.

Broker Rating

Shaw and Partners cover SRG Global and have placed a Buy rating with a price target of $0.15. The broker believes SRG is trading at an FY24 EV/EBITDA multiple of 3.0x, which is a material discount on their price valuation.

They believe SRG will continue to win more work given its ~$6.5 billion pipeline of opportunities in a growth sector worth over $120 billion.
Following the 20% EBITDA growth in FY24, they forecast a further 8% growth in FY25 and 4% in FY26.

Daily Quiz

Pulse Check

Yesterday’s Daily Quiz Question. Which company was listed as the Australian Gas Light Company on the Sydney Stock Exchange in 1871?

Answer: AGL Energy. Most of you know your history, with 68% getting that correct. The Australian Gar Light Company was the second company to list on the Sydney Stock Exchange in 1871, after forming in 1837.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of October 2

1. Pilbara Minerals (PLS) - 11.49%

2. Flight Centre (FLT) - 9.58%

3. Genesis Minerals (GMD) - 9.31%

4. Syrah Resources (SYR) - 9.27%

5. IDP Education (IEL) - 8.94%

6. Core Lithium (CXO) - 8.55%

7. Sayona Mining (SYA) - 8.16%

8. Select Harvests (SHV) - 7.85%

9. Appen (APX) - 7.72%

10. Mesoblast (MSB) - 7.56%

📊Broker Ratings

What do the brokers have to say?

1. Carnarvon Energy (CVN) Downgraded to Underperform from Neutral (Macquarie). Target price $0.10

👨‍💼 Director Transactions

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

💲Dividends

Companies trading ex-dividend today

📅 Economic Calendar

Data to keep an eye on this week

DISCLAIMER: 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.