Good Evening,

Welcome to Equity Espresso's Daily Recap. Welcome back to online civilisation to our readers with an Optus connection. We’ll catch you up on all the day’s stock market and business stories you may have missed. Unsurprisingly, #OptusOutage was trending all day on X, with plenty of memes ensuing. Let’s jump in.

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The Recap

The ASX200 index traded in positive territory for most of the day, edging out a slight 0.26% gain to finish at 6,995.4 despite another strong night on Wall Street. The Materials (-1.05%) sector finished lower despite Iron Ore futures remaining elevated at US$126.50/t. Rio Tinto (-2.0%), BHP Group (-1.9%) and Fortescue Metals (-1.1%) all ended the day lower. Tech (+1.86%) and Real Estate (+1.18%) were the big movers of the nine sectors that finished the day in the green.

As Optus customers would be frustratingly aware, the country’s second-largest telco., experienced a network outage this morning, which affected phone and internet services. The outage is believed to have started around 4:00 a.m. AEDST, with fixed line calls to 000 unable to be made. The outage also knocked out some train services in Melbourne, which resumed mid-morning.

The outage is estimated to have affected millions of customers and businesses who had to resort to cash only. As of this afternoon, Optus had started gradually restoring services, stating in a post on X: “Some services across fixed and mobile are now gradually being restored. This may take a few hours for all services to recover, and different services may restore at different sites over that time.”

There was no official word on what caused the issue, but CEO Kelly Rosmarin said that there is no indication the company’s outage was from a cyberattack. There was speculation that it had to do with a software update usually happening overnight, hence the outage at around 4:00 a.m. this morning.

In other company news, James Hardie (JHX) shares rose 13.7% after posting a 2% rise in Net Income to $US178.9 million during Q2 from sales of $US998.8 million, driven by an increase in the prices of materials sold. The company also announced a new US$250 million share buyback program while setting Net income guidance for the third quarter to be in the range of US$165 million to US$185 million.

The other big story overnight was the sharp drop in Crude Oil prices, with West Texas Intermediate sliding 4.3% to settle near $US77 a barrel, the lowest point since July 21. The fall comes after data showed that U.S. crude inventories jumped by almost 12 million barrels last week.

Economic Data

• Total dwellings approved in Australia fell by 4.6% month-on-month to 13,144 units in September 2023, in line with preliminary data released last week. This was well down from a 7% rise in August and defying expectations for a 1.3% gain.

• The U.S. Trade Deficit widened to $61.5 billion in September, higher than an upwardly revised $58.7 billion in August and market forecasts of $59.9 billion. Imports were up 2.7%, the highest level in seven months, while exports rose at a slower rate of 2.2%

• U.S. Household Debt rose by 1.3% to $17.29 trillion in Q3, a new high, as mortgage balances increased to $12.14 trillion.

• Industrial producer prices in the Euro Area fell by 12.4% YoY in September, following an 11.5% decline in August and market consensus of a 12.5% decrease.

• U.S. crude oil stocks jumped by 11.9 million barrels in the week that ended November 3, following a 1.347 million barrels increase in the previous week.

Wall Street

The S&P 500 (+0.28%) and NASDAQ (+0.90%) rose again, marking the longest positive streak in two years as U.S.10 Treasury yields continue to fall. The S&P 500 rose for a seventh consecutive day, the first time since an eight-day win streak in November 2021, while the Nasdaq posted eight days of gains for the first time since an 11-day run in November 2021.

In company news, Datadog rose 28.5% after beating quarterly results estimates and offering a strong earnings outlook, which exceeded analysts’ expectations. Uber also rose 2% after reporting third-quarter bookings of $35.3 billion, beating the company’s guidance of $29 billion to $30 billion.

Outlook

Another bank reports tomorrow, with NAB earnings set to be released. Orica, Xero and Sezzle are also expected to report.

Key items to watch tomorrow are the Chinese CPI and PPI data for October, which are expected to be lower YoY.

A big night for U.S. earnings tonight, with Disney, Arm Holdings, Roblox, AMC, Warner Bros Discovery and Affirm all reporting.

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🪃 Local News

• PwC Australia will cut approximately 338 roles, around 4% of its workforce, as the consulting firm deals with the fallout from the tax leaks scandal.

• Global wine production is expected to hit a 60-year low in 2023 due to extreme weather conditions. A recent report projects that the global wine production rates for the year are anticipated to reach their lowest point since 1961. The countries and regions most affected this year are predominantly in the southern hemisphere, including Australia, Argentina, Chile, South Africa, and Brazil — all of which show year-over-year dips between 10 and 30 per cent.

🌏 Around The Globe

• The World Bank has issued a cautionary statement regarding the ongoing Israel-Hamas war and its potential impact on oil prices. According to the report, if the conflict escalates further, there is a possibility that oil prices could soar to a record high of $150 per barrel.

• Chinese electric carmaker Nio has announced that it will be cutting 10% of its workforce due to intense competition in the industry, according to CEO William Li. The job cuts are expected to be completed by November. Despite these obstacles, Nio has seen significant growth in vehicle deliveries, with 16,074 cars delivered in October, a 60% increase compared to last year.

• OpenAI launched a platform for creating custom AI chatbots called GPTs, with no coding required. Creators will be compensated based on usage.

• YouTube is reportedly testing a “play something“ button on its mobile app, allowing users to be directed to a random video when unsure what to watch. The feature appears to offer both YouTube Shorts and full-length videos, though it is unclear if users’ watch history is taken into account, and the extent of its rollout is unknown.

• Nike filed federal lawsuits last Monday against New Balance and Skechers, alleging that the companies have infringed on Nike’s patented “Flyknit“ technology for producing sneakers.

• US wheat exports have reached unprecedented lows due to a shrinking Mississippi River and competition from global grain supplies, while falling pork prices in China could lead to deflation and impact the country’s economy despite unexpected growth in imports.

• China’s GDP growth forecast for 2023 has been upgraded to 5.4% by the IMF, attributed to a solid post-COVID recovery, while growth is expected to slow down to 4.6% in 2024 due to weaknesses in the property sector and subdued external demand.

Markets

ASX200 Company Movers

Index & Commodity Prices

Bond Prices

Sector

ETF Watch

ASX News

🗞️ Company Announcements

• Ardent Leisure (ALG) had their AGM today, where the company said that operating revenue and total ticket sales for Q1 FY24 continued to grow. While Theme Parks & Attractions EBITDA during the quarter has been positive.

• Domain Group (DHG) reported positive trading results for FY24 Q1 at its AGM today, with digital revenue up around 7.8% YoY and total revenue up around 7.5% YoY. Strong recovery in new ‘For Sale‘ listings in Sydney and Melbourne markets drove the growth, but national volumes were impacted by weakness in Queensland and Western Australia.

• James Hardie (JHX) announced a record adjusted net income of US$179 million and a record first-half operating cash flow of US$459.1 million for the second quarter of FY24 while announcing a new US$250 million share buyback program.

• Galileo Mining (GAL) said that Geophysical IP surveying has commenced at its Norseman project in Western Australia, aiming to identify new areas of mineralisation within the 20km Callisto discovery and Mission Sill prospect, with initial survey data expected in five weeks.

• Skyfii (SKF) has appointed Billy Tucker as the new Chief Effective Officer, effective from November 13, 2023, replacing interim CEO Tony Karp.

• Westpac (WBC) has initiated a tender process to select a new external audit service provider, ditching PricewaterhouseCoopers (PwC), the bank’s auditor since 2002.

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Analyst Report

Lindsay Australia

Code: LAU | Market Cap: $313.4m  | Current Price: $1.08
Price Target: $1.60 | Sector: Industrials | Broker: Shaw & Partners

Overview

Lindsay Australia provides transport, logistics and rural supply services through its Transport and Rural segments. The company had its AGM last Friday, where commentary suggested that FY24 is tracking broadly in line with expectations.

Highlights

Lindsay has several significant projects underway, including enhancements to its software systems, which aim to improve the customer experience, provide enhanced data and reduce non-value-added tasks. The rollout date of the software is set for December 2023. the company is also investing in its strategic assets, with property upgrades and expansions underway in Melbourne and plans being finalised for Adelaide and Perth.

In July 2023, Lindsay announced the acquisition of WB Hunter, a rural retailer with eight branches in Victoria and NSW. Lindsay will see a positive benefit of 11 months in FY24 due to the acquisition.

On the Transport side of the business, the broker says that customer enquiries remain strong and tender conversion is positive. Despite market pressures, LAU continues to win work due to its scale, reach and ability to deliver rail and road solutions in full or part loads.

FY24 Guidance

Based on the current volume and market conditions, Lindsay expected EBITDA for FY24 to be between $102 million and $108 million - a 16% rise from FY23. The broker believes there is some degree of conservativeness in the guidance.

Recommendation

The broker believes Lindsay is ideally positioned for long-term profitable growth with an attractive Total Addressable Market. The valuation of the company is seen as attractive, with an FY24 PER of 7.4x, a significant discount to the average on the ASX of 13.7x

Daily Quiz

❓️ Test Your Knowledge

Yesterday’s Question. In the context of stock markets, what is a 'Dead Cat Bounce'?

Answer: A brief recovery in a declining trend. Derived from the idea that "even a dead cat will bounce if it falls from a great height". 33% of respondents got the one correct

A Little Extra

📉 Going Down?

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

Broker Ratings

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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.