Good Evening,

Welcome to Equity Espresso’s Daily Recap and a new week as markets try to continue November’s positive run. Optus CEO Kelly Bayer Rosmarin resigned today following the network outage saga earlier in the month. Meanwhile, oil prices might be back on the rise. Let’s jump in.

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The Recap

It was a choppy session on the market, with the ASX 200 index trading slightly above parity for most of the day, settling the start of the week 9.0 points or 0.13% higher to 7,058.4.

Despite the modest gain, only three sectors finished the day higher; Energy (+1.33%) saw a big jump after falling 3.5% in the back half of last week. WTI crude futures rose on Monday to $76/bbl as investors look ahead to next week's Organisation of Petroleum Exporting Countries (OPEC) meeting. OPEC and its allies are scheduled to meet next weekend to review the global crude market and decide on priorities heading into the new year. The group is expected to deepen supply cuts to increase the oil price.  

Woodside (+1.3%), Santos (+1.1%) and Ampol (+1.2%) all rose, while Discretionary (+0.6%) and Financials (+0.6%) were the other sectors that also finished the day higher. The Staples and Utilities (-0.7%) sectors fell the most.

Iron Ore continues to trade at 8-month highs, with futures currently priced at US$132.50/t. While Bitcoin’s upward momentum shows no signs of slowing, currently trading at around US$37,100.

Economic Data

• The Bank of China maintained the one-year loan prime rate at 3.45%, as was expected.

• U.S. Housing Starts rose by 1.9% in October to a seasonally adjusted 1.372 million - beating estimates of 1.35 million.

• Canada’s Industrial Producer Prices fell by 1% in October, well below market expectations of a 0.2% rise.

Wall Street

Global markets rose again on Friday. However, sentiment cooled in the afternoon as Federal Reserve Bank of Boston President Susan Collins said that while evidence is growing that inflation is easing, she was not yet ready to rule out more rate hikes should they be needed. The S&P 500 finished 0.13% higher, while the NASDAQ was up +0.08%.

Apparel retailer Gap surged 30.36% after reporting Q3 earnings on Thursday, which beat market estimates on the back of better sales from its Old Navy brand.

Spectrum Brands Holdings fell 11.8% after the home products company said revenue would decline year-over-year for the fiscal year ending September 2024, below analysts’ estimates.

Outlook

Locally, it’s tumbleweeds for economic news in Australia this week outside of the RBA minutes being released on Tuesday. Investors will no doubt be sifting through the commentary to find hints of an early indicator of what we might have in store for December’s meeting.

Over in the U.S., some of the key data released this week includes Home Sales, Durable Goods, Jobless Claims, Oil Inventories and Manufacturing PMI.

Futures markets are lower on Wall Street as of this afternoon:

• S&P 500 (-0.15%)

• NASDAQ (-0.34%)

In Australia, we’re expecting earnings from Technology One and Volpara Health tomorrow. Whilst overseas, companies with quarterly earnings expected to drop on Monday include Agilent Technologies, Keysight Technologies, Trip.com and Zoom. 

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Quick Singles

🪃 Local News

• Optus CEO Kelly Bayer Rosmarin resigned today following the mass network outage earlier in the month, saying it was in the company's best interest. Optus’s parent company, Singtel, announced her departure today, with chief financial officer Michael Venter becoming the interim CEO.

• A Fair Work Commission tribunal has ruled that salary packing company Maxxi had “reasonable business grounds” to reject a worker’s request to work from home exclusively. The tribunal said face-to-face office interactions helped improve productivity, training and general team culture.

• Macquarie launched Aula Energy, an investment arm of green energy initiatives, which has backed a $10 billion initiative to fast-track the expansion of Australia’s renewable sector. Aula Energy will initially focus on 4 gigawatts of large-scale wind, solar and battery projects to be rolled out across Australia starting in 2024.

🌏 Around The Globe

• Sam Altman, chief executive of ChatGPT developer OpenAI, was sacked on Friday, with the board citing a failure to be “candid in his communications”. Investors in OpenAI, including Microsoft, are pushing for him to return. Afternoon Update - Bloomberg reported this afternoon that OpenAI’s interim chief executive officer Mira Murati plans to re-hire Sam Altman but not in the position of CEO,

• In a world first, the U.K. medicines regulator has approved a therapy that uses the CRISPR–Cas9 gene-editing tool as a treatment. The therapy, called Casgevy, will treat the blood conditions of sickle-cell disease and β-thalassaemia.

• Amazon will allow auto dealers to sell cars through its site, starting with South Korean automaker Hyundai in 2024.

• Apple says its iPhones will finally support RCS messaging in 2024. The change will potentially allow iOS and Android users to text with read receipts, high-res media, and other features.

• Pet food and confectionery giant Mars will acquire U.K. chocolate business Hotel Chocolat in a $663M deal.

Markets

ASX Company Movers

Commodity Prices

Bond Prices

ETF Watch

ASX News

🗞️ Company Announcements

• ASX Limited (ASX) has hired TATA Consultancy to design its’ ASX CHESS share settlement system replacement. The ASX will opt for a ‘product-based solution’ to replace the 29-year-old CHESS system, which facilitates millions of daily trades. The project's first release is estimated to cost $105 million and $125 million and is scheduled to be completed in 2026.

• Brambles (BXB) has announced the appointment of Xavier Garijo as the new head of its Americas pallet business. The president of Brambles' CHEP North America subsidiary, Dan Nador, will resign at the end of this year. However, Nador will work with Brambles until June 30.

• Droneshield (DRO) reported a ‘surge’ in cash receipts, with $12.9 million received last week, taking the year’s total to $62.9 million, four times more than the entire FY22.

• Healius Limited (HLS) went into a trading halt today, pending an announcement related to the company’s debt financing and capital structure.

• Peninsula Energy (PEN) shares sunk by over 30% after the Uranium explorer completed a $50 million capital raise at $0.075 per share.

• Stockland (SGP) announced several leadership changes. Chief Executive Louise Mason will depart from the group’s commercial property segment in late December. Andrew Whitson, CEO of Stockalnd’s communities segment, will become CEO of development. Kylie O’Connor will join to take on the new role of CEO of investment management.

• Universal Store Holdings (UNI) shares rose today after a trading update, where it said that total sales were 14.7% higher to $11.3 million, primarily attributed to the Cheal Thrills Cycle acquisition partway through FY23. Like-for-like sales are 6.4% lower than the pcp but have improved to -4.4% in the most recent seven weeks.

• XTEK Ltd (XTE) received a new $2.8 million Ballistic Armound Order from an undisclosed international customer, adding to a string of new order requests in the last two months.

Technical Analysis

Chart Watch

A bearish chart to watch - Brambles (BXB)

Notes

• The share price of Brambles looks set to fall lower.

• A potential short trade setup looked valid if the price made a dead cat bounce to the 200 EMA, which it did.

• If the ~$13.00 support price breaks, the February gap will likely be filled.

Social Media

 📱 Post of The Day

Broker Research

Servcorp Limited

Code: SRV | Market Cap: $294.8m  | Current Price: $3.38
Price Target: $6.00 | Sector: Financials | Broker: Shaw & Partners

Overview

Servcorp provides office space solutions and virtual office services, including office business addresses and telephone answering services.

Broker Highlights

• Servcorp increased its FY24 guidance by ~10% after strong growth in the first four months of FY24. NPAT guidance has risen to between $50m and $55m (previously $46m to $49m), and underlying free cash of more than $70m (previously more than $65m).

• The broker says that Servcorp has begun FY24 with strong momentum, with year-on-year improvement in key indicators of its business, evidenced by the earnings upgrade.

• Servcorp announced plans to unlock value in the Middle East. The company is exploring the possibility of dual listing its Middle East operations in Saudi Arabia. Preliminary valuation work suggests a valuation multiple of 13-18x profit.

Recommendation

The broker sees value in Servcorp, estimating it trades at less than half the multiple of UK-listed competitor IWG Plc. The broker maintains a BUY rating, increasing its price target from $5.60 to $6.00.

You can access the full version of the report here.

Newsletter Recommendation

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Daily Quiz

❓️ Test Your Knowledge

Last Week’s Question. Which Asian country banned Tiktok this week?

Answer: Nepal. Nepal has banned the social media app, saying it disrupts social harmony. This was the second most popular (27%), with Vietnam being the most popular answer. In October, Vietnam found TikTok guilty of violating the country’s information, security and child protection laws. It requested that TikTok remove content and ban accounts of kids under 13.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of November 14

📊 Broker Ratings

What do the brokers have to say?

1. Accent Group (AX1) - Downgrade to Neutral from Buy (Citi)

Full commentary for Accent Group

👨‍💼 Director Transactions

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

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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.