Good Evening,

Welcome to Equity Espresso’s Daily Recap. The Origin Energy takeover saga took another twist today, with today’s scheduled shareholder vote delayed till December after Brookfield put forward a new offer. Let’s jump in.

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The Recap

The ASX200 index continues to dance to its own beat, ignoring Wall Street’s gains overnight to finish Thursday’s session 0.63% or 44.2 points lower to 7,029.20 as the Materials (-1.4%) and Energy (-1.3%) sector saw big sell-offs. BHP Group (-1.4%), Fortescue Metals (-1.9%) and Woodside Energy (-1.7%) all finished the day lower.

Uranium prices surged past $80 per pound for the first time since January 2008, soaring past pre-Fukushima disaster levels amid high demand and risks to supply. A mixed session for Uranium explorers, with Boss Energy (+1.9%) higher while Paladin Energy (-0.5%) and Deep Yellow (-1.7%) finished the day lower.

Onto today’s top story:

Origin Energy received an updated, more complex proposal from the Brookfield-led consortium on Wednesday. Initially scheduled for today, the shareholder vote was adjourned until December 4 to allow shareholders time to consider the revised proposal. Origin said that based on the proxy votes received to date, the required 75% threshold vote would unlikely have been achieved. Should the vote fail, the new proposal includes an alternative or Plan B option. Here is a breakdown of the revised deal:

• In the first part of the revised offer, Institutional shareholders can re-invest in Origin’s energy markets business under the existing scheme after Brookfield acquires it. Shareholders will receive about $9.43 per share in cash.

• The alternative deal consists of selling Origin’s energy markets business to Brookfield for $12.3 billion - pending shareholder approval.

The alternative deal is a little convoluted but equates to a total of $9.30 per share broken down as follows:

• $5.25 per share via the energy market’s sale proceeds through dividends and capital return.

• $3.83 per share in cash from the EIG takeover, with the payment reduced by any dividends paid by Origin.

• $0.22 per share only if EIG receives at least 90% acceptance under its takeover proposal.

Reserve Bank governor Michele Bullock spoke at an Australian Business Economists Dinner last night, where she said inflation was a “homegrown” problem, pushing back on claims that global factors are driving price rises. “An important implication of this homegrown and demand-driven component to inflation is that getting inflation back to target will take time.”

Bad teeth and bad hair. That’s what we need to see more of to get inflation under control. Okay, not really. But, Ms Bullock said that prices in services continue to rise, contributing to the high inflation: “Hairdressers and dentists, dining out, sporting and other recreational activities – the prices of all these services are rising strongly.”

Economic Data

• The Judo Bank Preliminary Manufacturing PMI in Australia decreased to 47.7 points in November, down from 48.20 points last month.

• New orders for manufactured Durable Goods in the U.S. plummeted by 5.4% month-over-month in October 2023, reversing a 4.0% gain in September and well below expectations of a 3.1% drop.

• U.S. Unemployment Benefits fell by 24,000 to 209,000 for the week ending November 18, dropping sharply from the three-month high the previous week and well below market expectations of 225,000.

Wall Street

U.S. stocks ended higher on Wednesday as a slew of economic data showed that the economy is easing but may be strong enough to avoid a recession. The S&P 500 rose by 0.41%, while the NASDAQ was up 0.46%. Over half of the stocks trading on the New York Stock Exchange (NYSE) were up on Wednesday, as treasury yields briefly fell to two-month lows during the trading session.

Equity markets will be closed on Thursday for the Thanksgiving holiday and open for reduced hours on Friday. Markets will open at 9:30 am as usual but close at 1:00 pm rather than 4:00 pm.

Deere (DE) shares dropped 3% after the agricultural equipment maker issued disappointing guidance for fiscal 2024. Deere said it expects net income between $7.75 billion and $8.25 billion, short of the $9.31 billion.

Outlook

Eurozone and U.K. Manufacturing PMI data for November will be reported today. Both are expected to continue to be below 50, indicating contraction in the sector. Across the ditch, New Zealand reports quarterly retail sales data, while Japan will reveal its latest Core CPI figures for October.

Locally, Select Harvest is expected to report full-year earnings tomorrow.

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Quick Singles

🪃 Local News

• The Albanese government plans to expand its green energy generation and storage underwriting program significantly. This move is aimed at achieving its 82% clean energy goal. The new program, the Capacity Investment Scheme, will replace the Renewable Energy Target, which some wind and solar proponents currently favour.

• The Australian government has announced a new online safety plan to ensure social media platforms take greater responsibility for protecting children from harmful content. The plan also includes stricter regulations around the use of AI and deepfakes. During an address at the Press Club, Communication Minister Michelle Rowland stated that the government will invest more in developing age verification technologies.

• According to the Melbourne Airport, an underground train station at Tullamarine could be cheaper to build than the Victorian government sky rail plan

🌏 Around The Globe

• Let’s pretend that didn’t happen - Sam Altman has been reinstated as CEO of OpenAI. Less than five days after being fired on Friday, Sam is back heading up the company amidst a board shakeup. There will be a new initial board with Bret Taylor as Chair, with other members including Larry Summers and Adam D'Angelo.

• In other A.I. news, X’s chatbot Grok will be rolled out to Premium+ subscribers sometime next week. Elon Musk described Grok as edgy and “rebellious” compared to other A.I. bots.

• Warren Buffett is donating about $870 million to four family-run foundations before the Thanksgiving holiday, continuing a tradition of giving away his massive wealth of about $120 billion.

• Mastercard has been approved to enter China's payment market and will launch a bank card business in a joint venture with NetsUnion Clearing Corporation.

• NASA and the Japan Aerospace Exploration Agency (JAXA) plan to launch and test a wooden satellite in 2024. Unlike metal, wood burns up when re-entering the Earth’s atmosphere, potentially reducing space junk.

• Sony must face a mass lawsuit worth up to £6.3 billion over claims the PlayStation maker abused its dominant position, leading to unfair customer prices, a London tribunal ruled.

Markets

ASX Company Movers

Commodity Prices

Bond Prices

ETF Watch

ASX News

🗞️ Company Announcements

• AFT Pharmaceuticals (AFP) grew operating revenue by 27% to $84 million during the six months ending September 2023, with product sales and royalties growth across all channels and territories.

• AMP Limited (AMP) has reached a $100 million settlement agreement related to a class action bought against it in 2019. AMP shares ended the day almost 6% higher.

• Appen (APX) shares sunk 36% after it completed the $30 million Institutional component placement of its capital raise at $0.55 per share.

• Austal (ASB) has signed a Heads of Agreement with the Commonwealth of Australia to establish a Strategic Ship Building (SSA). If selected, Austal would be the shipbuilder at Henderson, Western Australia.

• Clover Corporation (CLV) warned that demand from China had been impacted in the short term as the country’s birth rate has fallen by around 35% over the past few years. Clover shares ended the day over 4% lower.

• Jayride Group (JAY) withdrew previous guidance that it will be cashflow positive in FY24 as the company’s search for a CEO continues.

• Kogan Group (KGN) said that gross sales returned to year-on-year growth in October 23, the first time this has occurred since January 2022.

• Nick Scali (NCK) founder and CEO Anthony Scali has sold down 4.6 million shares worth around $50 million at a discounted price of $11.00. Mr Scali remains the company's largest shareholder, with approximately 8% ownership.

• Propel Funeral Partners (PFP) confirmed media speculation that it has received inbound interest regarding a potential takeover offer from multiple parties. Propel said that the proposals had not been compelling and had elected not to engage with any of the parties.

• Telstra (TLS) secured 110MHz of additional ‘mid-band’ spectrum at the Australian Communications and Media Authority (ACMA) auction, which finished on Tuesday. Telstra invested $546 million in this spectrum, which it says will deliver better 5G experiences to mobile customers across most parts of Australia.

• TPG Telecom (TPG) has acquired new licences in the 3.7 GHz spectrum bands across metropolitan and regional areas for $128.2 million as part of the ACMA spectrum auction. “Once deployed, this spectrum will deliver a huge capacity boost for our 5G mobile and fixed wireless services, providing greater speeds and better performance for new and existing consumer and business customers,” chief executive Iñaki Berroeta said.

Social Media

 📱 Post of The Day

Too many memes to choose from regarding the OpenAI merry-go-round.

Broker Research

Wrkr Limited

Code: WRK | Market Cap: $32.7m  | Current Price: $0.026
Price Target: $0.08 | Sector: Technology | Broker: RaaS

Overview

Wrkr Ltd (ASX: WRK) offers compliance solutions for Australian superannuation contributions and payroll, including member onboarding, super payments, messaging and employee validation. The company operates under three separate products which serve different parts of the Australian superannuation sector.

The company held its AGM last week.

Highlights

• Wrkr is guiding for FY24 revenue to be between $9.0 million - $10.0 million, slightly below the broker's estimates of $10.2 million.  

• Q1 FY24 activity report showed a 43% increase in cash receipts and revenue compared to the previous corresponding period (pcp). The cash burn runway is eight quarters before any R&D tax rebates or new customer transactions are considered.

• Positive EBITDA is expected in FY25 as transactional revenue from Link clients commences and the further migration of ART customers to the Wrkr platform.

Recommendation

The broker believes that the near-term multiples of Wrkr do not reflect the medium-term revenue and earnings potential from the Link customer migration.

You can download a full copy of the Wrkr Limited Research Report here.

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Daily Quiz

❓️ Test Your Knowledge

Yesterdays Question. Which of these companies is NOT in the ASX top 10 by market cap?

Answer: Woolworths Group (26%) Woolies ranks 14th on the ASX with a $42bn market cap. Fortescue Metals was the most popular answer (37%) but is, in fact, #5 with a market cap of $78bn. Woodside Energy ($60bn) and Wesfarmers ($59bn) round out the top 10 of the ASX.

A Little Extra

📉 Going Down?

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

📊 Broker Ratings

What do the brokers have to say?

No rating changes today, but updated price targets and commentary for Webjet, Karoon Energy and Lovisa.

👨‍💼 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.