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 today’s top stories:

1. 🍷 Pop the Cork on Wine Tariffs

2. 🔋 Another Lithium Takeover?

3. ⛩️ China's Graphite Move

4. 🛢️ Energy Sector Dips

5. 👀 All Eyes on CPI

The Recap

ASX Sinks To
November 2022 Lows

For the third consecutive day, the ASX200 index saw a significant decline, dropping 0.82% to close at 6,844.10, hitting its lowest point since November 2022.

The Energy (-3.1%) sector saw the biggest fall as Crude Oil prices retreated to US$87.00 per barrel today. Woodside (-3.6%), Santos (-2.4%) and New Hope (-8.5%) all finished lower.

Materials (-2.4%) also fell as Iron Ore prices dropped after cracking the US$120.00 barrier last week, with futures trading at U$116.00. Rio Tinto (-2.7%), BHP (-2.6%) and Fortescue (-2.7%) all fell.

Graphite mining companies rose on supply concerns after China announced plans to restrict the amount of graphite exports. Syrah Resources (+44.4%), Talga Group (+9.8%) and Novonix (+22.9%) all saw significant gains.
Syrah Resources was the 9th most shorted stock as of October 17, which likely exacerbated the sharp price increase.

Traditionally defensive sectors in Health Care (+1.5%) and Staples (+0.7%) were the areas to hide today.

Economic Data

• Retail Sales in Canada remained unchanged in September 2023. In August, retail sales decreased by 0.1% from July.

Outlook

An important week on the economic calendar locally, with the quarterly CPI read due on Wednesday, which will give markets an early indicator of the RBA’s next move on rates.

• Tuesday: RBA governor Michele Bullock speaks at an annual conference in Sydney.

• Wednesday: September Quarter Inflation Report. Australia’s headline and core inflation are forecast to increase by 1.1% in the September quarter from June. On an annual basis, headline CPI is expected to drop to 5.3% from 6% in June.

Some of the companies we’re expecting earnings updates from this week include Brambles, Champion Iron, ResMed, Woolworths and Zip Co.

Over in the U.S., September Quarterly GDP growth will be released on Thursday, which is expected to climb to 4.3%.

Meanwhile, the rest of the heavy hitters report this week, including Alphabet, Amazon, Cadence Design, Chevron, Coca-Cola, Exxon Mobile, Microsoft, Meta, and Visa.

Wall Street

U.S. stocks ended sharply lower for the day and week on Friday as investors worried about more interest rate hikes and the Israel-Hamas conflict spreading. The S&P 500 (-1.26%) and NASDAQ (-1.53%) both finished the day lower, as all 11 sector indexes finished in the red.

Sponsor

Empower Your Writing with
The Rebel Newsletter

The Rebel Newsletter guides authors in enhancing their literary and artistic endeavours, understanding the realm of publishing, and transforming their craft into a revolutionary act.

Signup for Free Today:

Sponsorship Opportunities

Do you want to advertise your business here?
Reach out to us at [email protected] 

Quick Singles

🪃 Local News

• China's commerce ministry will mandate export permits for certain graphite products in a bid to protect national security. The move aims to regulate the supply of critical minerals due to challenges over China's manufacturing dominance. China is the world's top graphite producer and exporter, refining over 90% of the world's graphite into material for virtually all EV battery anodes.

🌏 Around The Globe

• Ford Motor Co. has announced that it will lay off 364 additional employees in Michigan and Ohio from Monday onwards. The Sharonville Transmission Plant in Ohio will see 354 employees being laid off, while ten employees from the Rawsonville Components Plant in Ypsilanti will also be affected.

• Roblox CEO David Baszucki tells employees they must “come to the office three days a week or take a severance package.”

• OpenAI is reportedly discussing a share sale that would value the company at approximately $80 billion. This is three times more than the company's value only three months ago.

• Singapore plans to improve the stability and security of its power sector by centralising natural gas purchases. The country will aggregate demand from generating companies, enabling the government to negotiate more favourable gas contracting terms and procure fuel from diverse sources.

• Stonepeak Partners has secured an agreement to purchase Textainer Group Holdings Ltd. The deal will give the container leasing company an enterprise value of about $7.4 billion.

Enjoying The Recap?

Forward this email to a friend, family member, or work colleague who would benefit from getting caught up on the day’s news.

They can sign up with the link below. ⬇️ 

Markets

ASX200 Company Movers

Index & Commodity Prices

Sector

Bond Prices

ETF Watch

ASX News

🗞️ Company Announcements

Azure Minerals (AZS) went into a trading halt today, pending an announcement regarding a takeover offer.

Centuria Office REIT (COF) reconfirmed its guidance for FY24 in a Q1 trading update today, guiding for Funds From Operations (FFO) to be 13.8 cents per unit and a distribution guidance of 12.0 cents.

DroneShield (DRO) reported a record cash receipts quarter of $10.2 million during the September quarter, up from $8.2 million in June. YTD revenues of $43.3m as of 20 October 2023 are 2.5x more than the fiscal year 2022.

HelloWorld (HLO) reaffirmed its full-year guidance after reporting a revenue increase of 67% for the September quarter to $53.6 million as Total Transaction Value jumped by 120% as the company experienced high demand for leisure travel in Australia and New Zealand.

ProMedicus (PME) has signed a $16 million, 8-year contract with South Shore Health, the largest independent health system in Southeastern Massachusetts.

Propel Funeral Partners (PFP) confirmed media speculation that it had received inbound interest regarding a potential change of control transaction from multiple parties.

South32 (S32) released its September quarterly update, reaffirming its FY24 production guidance across all its operations. The miner reported production increases in its manganese and alumina sites. However, there was a decrease of 33% in the production of Illawarra Metallurgical Coal as the operation began an extended planned longwall move at the Dendrobium mine.

Synlait Milk (SM1) chairman Simon Robertson has resigned, with independent director Paul McGilvary acting as the new chairperson until the conclusion of a search to fill the role.

Treasury Wines (TWE) plans to rebuild its business in China should Australian tariffs be removed as part of a review announced yesterday. This includes rebuilding distribution for the Penfolds Australian entry-level luxury portfolios in China–including Penfolds Max’s, Koonunga Hill and One by Penfolds.

Viva Energy (VEA) reported a 4.7% increase in Q3 fuel sales against the same quarter last year, with increased commercial and industrial fuel volumes.

 📱 Post of The Day

Deep Dive

Australia and China To
Revisit Wine Tariffs

The Australian government announced that it would be entering into discussions with China about removing wine tariffs. China has agreed to review the tariffs it placed on Australian wine producers, with discussions expected to take around five months.

The news will be a welcome relief to local growers after China unexpectedly slapped tariffs on wine imports in 2020 under anti-dumping duties.

The history of how we got here:

1. May 18, 2020: China imposes anti-dumping duties on Australian wine due to below-cost prices found in an investigation by the Chinese Ministry of Commerce. Duties range from 107% to 212%.

2. November 26, 2020: China announced that it would be suspending its barley imports from Australia. The decision comes after a Chinese Ministry of Commerce investigation, which found that the Australian government was subsidising barley production.

3. March 26, 2021: The Australian state of Victoria cancelled its involvement in the Belt and Road Initiative, a Chinese-led infrastructure development program. The move came after concerns were raised about the potential for Chinese influence on Australian infrastructure.

4. June 10, 2021: Australia takes China to the World Trade Organisation (WTO) over wine tariffs. Australia argues that the tariffs are unjustified and against WTO rules.

5. September 2, 2021: China requests consultation with Australia at the WTO over anti-dumping measures imposed by Australia on Chinese wind towers and stainless steel sinks.

6. April 29, 2022: Australia files its first written submission in the WTO dispute over China's wine tariffs. The submission argues that the tariffs are based on "flawed" findings and are inconsistent with WTO rules.

7. September 6, 2022: Australia delivers its opening statement at the first substantive meeting with the parties in the WTO wine dispute. The statement reiterates Australia's arguments that the tariffs are unjustified per the WTO rules.

8. November 28, 2022: Australia files its second written submission in the WTO wine dispute. The submission responds to China's arguments in defence of the tariffs.

9. February 28, 2023: Australia delivers its opening statement at the second substantive meeting with the parties in the WTO wine dispute. The statement highlights the impact of the tariffs on the Australian wine industry.

10. April 4, 2023: Australia files its executive summary in the WTO wine dispute. The summary summarises Australia's key arguments in the case.

Newsletter Reccomendation

One-click subscribe

Analyst Report

Paladin Energy - Buy

Code: PDN | Market Cap: $2,831m | Current Price: $0.95 | Price Target: $1.15
Sector: Materials & Mining | Broker: Shaw & Partners

Paladin Energy develops, explores for, and operates uranium mines in Australia, Canada, and Africa. Its flagship project is the Langer Heinrich mine located in the Namib Desert in Namibia

Paladin announced last week that it has moved to 100% ownership of the Michelin Uranium Project in Labrador, Canada. This clears the way for Paladin to advance the project, and the broker expects the company to move relatively quickly.

Broker Highlights:

• Through its subsidiary Aurora Energy, Paladin holds rights to 52,250 hectares of mineral claims within the Central Mineral Belt of Labrador (CMB), Canada. The Michelin Project contains a JORC resource of 67.7Mt @ 860ppm U3O8 for 127.7Mlb of contained uranium.

• In 2009, Aurora released a Preliminary Economic Assessment of the project. While the economic parameters are now all out of date, at the time, the project generated a positive IRR of 19.2% with a payback of 4.7 years.

• The broker believes Paladin Energy is the stand-out in the sector on a risk-reward basis as the pathway to production for Langer Heinrich is well-defined and relatively low-risk.

• The broker views the restart at the Langer Heinrich as lower risk compared to its peers, including Honeymoon (Boss Energy), Kayelekera (Lotus) and Lance (Peninsula)

Recommendation

Paladin is the premium and most liquid name in the sector; it remains the broker’s preferred exposure to an improving uranium market. Shaw & Partners maintain their valuation of $0.85 and a Buy recommendation.
The $1.15 price target is based on a 1.3x valuation multiple in line with other uranium coverage.

Send us an email if you would like access to the full report ⬇️ 
[email protected]

Daily Quiz

❓️ Test Your Knowledge

Last Week’s Daily Quiz Question. Which financial market operates 24 hours a day?

Answer: Foreign Exchange. The forex market is open 24 hours a day, five days a week. Forex exchanges in North America, Europe, Asia, and Australia are open to trade at staggered and often overlapping times.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of October 17

📊 Broker Ratings

What do the brokers have to say?'

1. ARB Corp (ARB) - Upgrade to Buy from Sell (Citi)

2. Alumina Ltd (AWC) - Upgrade to Accumulate from Hold (Ord Minnett)

3. BlueScope Steel (BSL) - Upgrade to Hold from Lighten (Ord Minnett)

4. Cleanaway Waste Management (CWY) - Upgrade to Hold from Lighten (Ord Minnett)

5. Liontown Resources (LTR) - Upgrade to Outperform from Neutral (Macquarie)

6. Reckon (RKN) - Upgrade to Equal-weight from Underweight (Morgan Stanley)

7. Transurban Group (TCL) - Upgrade to Hold from Lighten (Ord Minnett)

8. Whitehaven Coal (WHC) - Upgrade to Accumulate from Hold (Ord Minnett)

👨‍💼 Director Transactions

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

💲Dividends

Companies trading ex-dividend today

1. New Hope Corporation (NHC) - $0.30

2. Lion Selection Group (LSX) - $0.015

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.